STRATEGIC MANAGEMENT

MAN612(SU-2022/MWE-14037)

Project Term Report

Submitted By:

Muhammad Faraz Qazi 20201-28048

Azka Rehman 20201-27853

Joti Bai Lohana 20201-28180

Shahar Yar Khan 20191-25565

Hira Naz 20212-29384

Submitted To: Sir Naveed Muhammad Khan

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 LETTER OF ACKNOWLEDGEMENT

August 13th, 2022

Sir Naveed Muhammad Khan
Institute of Business Management, Karachi.

It is our immense pleasure for having the opportunity to Submit a report on “Strategy
Management of Friesland Campina Engro Pakistan Limited” It was a pleasure creating such a
report, on a topic so informative and practical. We would like to express our deepest appreciation to
all those who provided us the possibility to complete this report.
A special gratitude our instructor Sir Naveed Muhammad Khan, whose guidance in stimulating
suggestions and encouragement, helped us to complete our project especially in writing this report
and in the presentation
Therefore, we would like to place this report for your kind opinion and valuable suggestion hope
you find this report Satisfactory.

Yours Sincerely,

Muhammad Faraz Qazi 20201-28048

Azka Rehman 20201-27853
Joti Bai Lohana 20201-28180
Shahar Yar Khan 20191-25565
Hira Naz 20212-29384

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 Table of Contents

Acknowledgement ......................................................................................................................... 3

Introduction to Engro Pakistan .......................................................................................................5

Company Information ……………………………………………………………………………6

Diversified Portfolio of Engro Pakistan ....................................................................................7-10

Vision .......................................................................................................................................10-12

Internal Factor Evaluation Matrix ................................................................................................ 13

External Factor Evaluation Matrix ............................................................................................... 14

Competitive Profile Matrix (CPM) .............................................................................................. 15

Evaluation Business Model ………………………………………………………………...……16

SWOT Matrix for Engro foods. ...............................................................................................17-18

Space Matrix ……………………………………………………………………………...….19-21

BCG Matrix Model ................................................................................................................. 22-24

Porters 5 Forces Model …………………………………………………….….….………….25-26

ERRC Grid …………………………………………………………………….………………...27

Strategy canvas..............................................................................................................................28

FINANCIAL RATIO ANALYSIS ..........................................................................................29-35

SUGGESTIONS AND RECOMMENDATIONS ................................................................. 36-37

Conclusion …………………………………………………………………………………...….37

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FRIESLAND CAMPINA ENGRO PAKISTAN AT A
GLANCE

Friesland Campina Engro Pakistan Limited is a Pakistani Dairy Company and a subsidiary of the Dutch
multinational corporative Royal Friesland Campina. The organization’s inception dates back as Engro
Foods in 2005 with first production plant in Sukkur, Pakistan along with the inauguration of flagship
UHT milk brand: Olper’s.

After the significant performance in the category of tea whitening i.e., Tarang in 2007, and the ice-
cream market with Omoré in 2009, Friesland Campina collaborated in a strategic partnership with
Royal Friesland Campina of Netherlands in 2016. This partnership allowed to gain access to more than
150 years of dairy expertise, technology, and R&D. Furthermore, the company has made immense
efforts towards the Sustainable Development Goals as the company acknowledges the significance of
sustainable environment, gender equality and poverty hunger alleviation to name a few.

Along with two robust production facilities in Sukkur and Sahiwal followed by a dairy farm in Nara,
over 1,300 milk collection centers and a resource network encompassing thousands of individuals, the
wide-ranging and robust imprint certifies a sustainable, competent supply chain, knowledgeable
farmers, and empowered communities. Dairy farmers are the strength of FCEPL’s supply chain.

Moreover, the company’s major revenues bangs on Dairy Development Program. The program is
designed to share knowledge and best practices for dairy farming, providing training on animal health,
housing and barn design, feed and water, milk hygiene, farm economics, calf rearing and the
environment that has steered to growth and profitability. Along with this program, there are various
other initiatives that facilitate farmer communities in obtaining acquiring loans for working capital.

Our innovations draw upon our deep, global dairy expertise and are tailored specifically for local
preferences and cultural adoption. With this outlook and our unique position, we are combining
enterprising talent with emerging methodologies to set the foundation for the next chapter in the food-
safety and nourishment story in Pakistan.

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Vision:
Vision
Statement
“Our purpose, our plan is to revolutionize the dairy landscape in Pakistan. We will lead a white
revolution to provide safe, healthy & affordable dairy nutrition to Pakistan.”

Analysis of Vision Statement:

Brevity:
The vision of Friesland Campina is good as it is succinct as it is easy to remember and
communicate to the employees and stakeholders. It is neither too short which makes it
incomplete, nor it is too long to remember.

Clarity:
It has clarity as it does not have jargons which is why it is easy to comprehend. It incorporates
inspirational and aspirational goals.
Challenging:
The vision statement has a level of aspiration, yet it is challenging as the vision is to
revolutionize the dairy industry at state level. Since the vision is it a larger scale, it ultimately
caters the organization goal as well.

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Focused on future:
The vision caters long term approach elaborating the organization’s desired end-state into the
future. It has clarity that what the company wants to become and what company desires to
achieve in the future.

Purpose:
“The pursuit of a healthy and nourished Pakistan is a core driving force for our success. It is
our promise to make the grass greener for the cows, yields higher for the farmers, growth
stronger for the milk industry and a glass of milk full of natural goodness for every Pakistani.
Simply put, our purpose is to transform the health and wellbeing of Pakistanis now and for
generations to come, by nourishing them through unlocking the goodness of milk from grass
to glass, as well as by enhancing the livelihood of farmers.”

Philosophy:
 Elements included: To uplift the livelihood of farmers, core value to make Pakistan
healthy and nourished

Survival growth profit:

 Element included: suppliers and producers are included in the purpose statement such
as green grass for cows and higher yields for farmers.

 Elements missing: R&D, profit for shareholders innovation and diversification

Technology:
 Element included: the value chain of technology is included in the purpose statement
as the technological process would transform the milk from farm to consumer-end
glass. Moreover, their promise is to increase the productivity of the milk i.e., higher
yield to farmers.

Self-concept:
 Elements missing: the competitive advantage of the company is missing in the purpose
statement.

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Public image:
 Elements missing: The element of public image which include CSR and public safety
is not talked about in the purpose statement.

Employees:
 Elements missing how organization will take care of employees is missing in the
purpose statement

Customer:
 Elements included: There is no targeted customer for milk therefore the purpose
statements cater the word every Pakistani as nourishment and wellbeing via milk is for
everyone.

Markets:
 Elements included: The market of Pakistan has been clearly discussed in the purpose
statement.

Analysis of the purpose statement:

The purpose statement of Friesland Campina Pakistan is descriptive but at the same time it’s
repetitive to an extent. It covers many attributes that makes a mission statement which includes
philosophy, survival growth profit, technology, customer, and market. However, it has many
important elements missing that are of utmost significance such as employees, public image,
the competitive advantage that the company has, R&D and return of shareholders. Since these
are important elements in the mission/ purpose statement, so it is suggested that the company
revises its statements and incorporates all the important elements as mission remains
underutilized when the company seeks to improve the organization’s success, productivity and
performance without focusing on the mission. When the company fails to unite brand and
culture with mission, it ultimately fails the employees and customers.

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 INTERNAL FACTOR EVALUATION MATRIX
STRENGHTS WEIGHT RATING WEIGHTED
(4-3) AVERAGE
1 Huge Geographical reach in overall world (36 Countries) and 10% 4 0.4
huge Consumer and Professional Customer base (provide dairy
products to Bakeries, Chefs, pharma and food industry)

2 Strong Brand Name, Image and identity 6% 4 0.24

3 Strong market position and sustainable development goals 6% 3 0.18

4 Wide and diversified Product portfolio (diversified risk & 8% 4 0.32

return) and Increasing number of Dairy Industries and Olper’s
Economy pouch innovation
5 Strong Financial position, health and stability 4% 3 0.12
6 Market innovation, research and development and strong plan 8% 3 0.24
for risk mitigation
7 Strong Supply chain management and PR with Farmers 2% 3 0.06
8 Well-developed and efficient integrated IT infrastructure 6% 4 0.24

9 Great brand loyalty through high product quality (Olper’s 4% 3 0.12

Happy morning campaign) and sustainability and Strong
relationship with customers
10 Accelerated implementation of company strategies and 4% 3 0.12
competitive, qualified and trained Human Capital

WEAKNESSES WEIGHT RATING WEIGHTED

(1-2) AVERAGE
1 Asia specific value-added products (Infant nutrition formula) 4% 2 0.08

2 Impact of currency devaluation on Import of raw materials 6% 2 0.12

3 Not certified by ISO and Certain regions have underdeveloped 8% 1 0.08
raw milk collection infrastructure and lack of technical
resources
4 Poor Waste management practices 4% 1 0.04
5 Liquidity Issues and scarcity of funds for priority investments 6% 2 0.12

6 Poor Inventory Management practices and underutilization of 6% 2 0.12

Capacity
7 Insufficient budget for promotion and marketing 4% 1 0.04

8 Lack of organizational commitment and employee turnover 4% 2 0.08

TOTAL 100% 2.72

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 EXTERNAL FACTOR EVALUATION MATRIX
OPPORTUNITIES WEIGHT RATING WEIGHTED
(1-4) AVERAGE
1 Increasing population in Pakistan 10% 4 0.4
2 Emergence of E-Commerce and Social media marketing 6% 2 0.12

3 Global Expansion (Expansion in number of products and 10% 4 0.4

number of markets) and new market segments

4 Innovation and investment in nutritional aspect of product 8% 3 0.24

development and packaging and joint business partnership
with OMC’s
5 Increased demand for dairy products globally (specially in 6% 2 0.12
Asia, Africa and Middle East) specially on festivals and
special occasions
6 Exporting opportunities such as butter nutrition for the 4% 1 0.04
world
7 Animal Production technology and Investments in farm 6% 3 0.18
services, laboratories for quality testing and Breakfast
stations
8 Lenient Govt. policies for food industry 4% 1 0.04

THREATS WEIGHT RATING WEIGHTED

(4-1) AVERAGE
1 Increasing duties and taxes on imports 8% 3 0.24

2 Fluctuating exchange rates 4% 1 0.04

3 Political instability 4% 1 0.04

4 Increasing Inflation and devaluation of currency, decreasing 6% 1 0.06

GDP per capita and low purchasing power
5 Intense domestic and international Competition and new 4% 2 0.08
startups (Dairy milk, Haleeb)
6 Infrastructure (Roads, electricity), Environmental Issues 8% 3 0.24
(Bad Impact on Brand, Global warming)
7 Large number of product substitutes 4% 2 0.08

8 Increase in prices of raw material 8% 4 0.32

TOTAL 100% 2.64

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 CPM - COMPETITIVE PROFILE MATRIX

FRIESLAND HALEEB FOODS

CPM – Competitive Profile Matrix NESTLE
CAMPINA Ltd.

Weighted Weighted Weighted

Critical Success Factors Weight Rating Rating Rating
Score Score Score

Market Share 0.15 4 0.6 3 2 0.3

0.45
Brand value 0.08 4 0.32 3 2 0.16
0.24
Financial Strength 0.08 4 0.32 3 2 0.16
0.24
Profitability 0.08 4 0.32 3 2 0.16
0.24
Sales & distribution 0.52 0.39
0.13 4 3 3
network 0.39
Price Competitiveness 0.1 3 0.3 4 4 0.4
0.4
Research & Development 0.03 4 0.12 3 3 0.09
0.09
Customer Loyalty 0.04 4 0.16 3 2 0.08
0.12
Advertising and branding 0.04 4 0.16 3 2 0.08
0.12
Product Quality 0.1 4 0.4 3 2 0.2
0.3
Environmental Supports 0.08 2 0.16 2 2 0.16
0.16
Global Expansion and 0.15 0.1
0.05 3 2 2
presence 0.1
Production Capacity 0.04 3 0.12 2 4 0.16
0.08
Total 1 3.65 2.93 2.44

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Evaluation of Business Model
A business model explains how an organization generates, distributes and captures values and
competes in a better way. Evaluation of Business Planning Model is the Part of Planning Process,
which evaluates if the current model is supporting that desired growth. If not, you have to take
corrective action and change the model accordingly.

Business Model Elements Friesland Campina

Customer Segmentation Public marketing in Europe
Extending Farmers shops' and reach geographic areas
China and other Asian markets to be highlighted
Value Proposition Fresh, natural, and localized goods from new farmers'
markets
Innovation and novelty
Customer reaction and experiences
Channels Existing dealers, associates, and distributors
Brand-new Farmers markets and FC shops

Customer relationship Engaging closely with new stores

Product accessibility for FC

Revenue Streams Income from the present channels of distribution

Inflows from FC-branded shops and Farmers Markets
Key resources Better utilization of farmers, human capital, and Asian
partners Branded stores to increase brand recognition

Key Activity Deliver products globally

Enhanced benefit packages for farmers
Sponsorship opportunities
FC stores and branded farmer stores
Development of the Asian market

Key Partnership Distributors and retailers

Farmers play a significant part in the business.
Collaboration and partnerships
Sponsorship opportunities

Cost Structure Decreased cost of transporting

Cost of the sponsorship
Increased expenses of marketing and advertising
Asian markets have higher fixed costs

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 SWOT Matrix

INTERNAL FACTORS
STRENGTHS (+) WEAKNESSES (–)
1-Huge Geographical reach in overall world (36 Countries) and huge Consumer and
Professional Customer base (provide dairy products to Bakeries, Chefs, pharma and 1-under-utilization of the capacity.
food industry)
2-Strong Brand Name, Image and identity 2-Impact of currency devaluation on Import of raw materials

3-Strong market position and sustainable development goals 3-very low market share in powder milk domain

4-Wide and diversified Product portfolio (diversified risk & return) and Increasing
4-heavily Dependent on Tetra pack.
number of Dairy Industries and Olper’s Economy pouch innovation

5-Strong Financial position 5- competitor offer similar product

6-Market innovation, research and development and strong plan for risk mitigation 6-Lack of owned dairy farms largely depend on farmers

7-Strong Supply chain management and PR with Farmers 7-Insufficient promotion and marketing for all exiting product range
8-Well-developed and efficient integrated IT infrastructure 8-people perception about unhealthy pakage food

9-Great brand loyalty through high product quality (Olper’s Happy morning campaign)
and sustainability and Strong relationship with customers
10-Accelerated implementation of company strategies and competitive, qualified and
trained Human Capital

EXTERNAL FACTORS
OPPORTUNITIES (+) STRENGTHS (+) / OPPORTUNITIES SO WEAKNESSES (-) / OPPORTUNITIES WO

Product innovation and expansion can be done in the matter of keeping up with Associate brand image with the healthy nutricious products,Special awareness Campaigns can also be
1-Increasing population in Pakistan
changes in customer perception and life style. (S4,S6 O4,O1) launched and can help portray a better image of the product in front of the customers (W8,O2)

Utilize eco-friendly package by their own, contribute in the cost and build company
2-Emergence of E-Commerce and Social media marketing Should build its own packaging plant (W4, O6)
brand image as first mover advantage using eco friendly packaging (S2,S10 O2,O7)

3-Global Expansion (Expansion in number of products and number of

Should cater the niche market focus (Low-fat milk, calcium ) (S1-O9) Enhance the operational activities to cater the new markets.(W1,W7 O3,O1)
markets) and new market segments

4-Fast changing trends amoung the customers Increase production of quality milk to cater the unsatisfied demand (S2,S3, O3) Strong distribution system to cater to avail the full benefit of the growing market.(W3,O2)

5-Increased demand for dairy products globally (specially in Asia,

Africa and Middle East) specially on festivals and special occasions
6-Research and development for low cost production support and
develop dairy industry

7-Animal Production technology and Investments in farm

services,institutes, laboratories for quality.

8-Lenient Govt. policies for food industry

THREATS (–) STRENGTHS (+) / THREATS ST WEAKNESSES (–) / THREATS WT

1-Food companies are required in accordance to government rules
Should focus on the low-cost leader and differentiation strategy (T6,T5-S6,S10) Go for backward integration to build Engro’s packaging plant (W4,T5)
and regulations
Manufacture high quality Cheese which meets international standard to meet the domestic
2-Increasing duties and taxes on imports Introduce new technology for quality assurance and better productivity(T1,S3)
demand and export so that it can be helpful in saving the foreign exchange (W5,W2-T2,T5)
3-Fluctuating exchange rates

4-Political instability

5-Increasing Inflation and devaluation of currency, decreasing GDP

per capita and low purchasing power

6-Intense domestic and international Competition and new startups

(goodmilk, dayfresh)

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SWOT Strategies

SO Strategies:

 Product innovation and expansion can be done in the matter of keeping up with changes in
customer perception and lifestyle. (S4, S6 O4, O1)
 Utilize eco-friendly package by their own, contribute in the cost and build company brand
image as first mover advantage using eco-friendly packaging (S2,S10 O2,O7)
 Should cater the niche market focus (Low-fat milk, calcium) (S1-O9)
 Increase production of quality milk to cater the unsatisfied demand (S2,S3, O3)

WO Strategies:

 Associate brand image with the healthy nutritious products, Special awareness Campaigns
can also be launched and can help portray a better image of the product in front of the
customers (W8,O2)
 Should build its own packaging plant (W4, O6)
 Enhance the operational activities to cater the new markets. (W1, W7 O3,O1)
 Strong distribution system to cater to avail the full benefit of the growing market. (W3,O2)

ST Strategies:

 Should focus on the low-cost leader and differentiation strategy (T6,T5-S6,S10)

 Introduce new technology for quality assurance and better productivity(T1,S3)

WT Strategies:

 Go for backward integration to build Engro’s packaging plant (W4,T5)

 Manufacture high quality Cheese which meets international standard to meet the
domestic demand and export so that it can be helpful in saving the foreign exchange
(W5,W2-T2,T5)

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SPACE MATRIX
The SPACE matrix is a management tool used to analyse a company. It is used to determine what
type of a strategy a company should undertake. The Strategic Position & Action Evaluation matrix
or short a SPACE matrix is a strategic management tool that focuses on strategy formulation
especially as related to the competitive position of an organization. The SPACE matrix can be used
as a basis for other analyses, such as the SWOT analysis, BCG matrix model, industry analysis, or
assessing strategic alternatives (IE matrix). The SPACE matrix calculates the importance of each
of these dimensions and places them on a Cartesian graph with X and Y coordinates.

Financial
Position
+7
+6
+5
Conservative +4 Aggressive
+3
+2
+1
Competitive Industry
Position Position
-6 -5 -4 -3 -2 -1 +1 +2 +3 +4 +5 +6
-1 Competitive
-2
Defensive -3

-4
-5
-6
-7
S
Stability
Position

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 INTERNAL STRENGTH POSITION EXTERNAL STRENGTH POSITION
Competitive Position(CP) Industry Position(IP)
(Worst -7,Best -1) (Worst +1,Best 7)

-1 Product Quality +5 Barriers to entry

-1 Product Life Cycle +4 Growth Potential
-3 Market Share +4 Access to Financing
-2 Brand and image +6 Consolidation

Average Score =-1.75

Average Score =4.75
Financial Position (FP) Stability Position(SP)
(Worst +1,Best +7) (Worst -6,Best -1)

+5 ROA -2 Inflation
+5 Leverage -1 Technology
+4 Leverage -2 Demand Elasticity
+6 Cash Flow -4 Taxation

Average Score = 5 Average Score =-2.5

X-Axis

FrieslandCampina ENGRO Foods Limited SPACE MATRIX

CP = -1.75

FP = 5

SP = 2.5

IP = 4.75

X- Axis
-1.75 + 4.75 = 3
Y- Axis
-2.5 + 5 = 2.5

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Analysis
This SPACE matrix tells us that our company should pursue an aggressive strategy. The company
has a strong competitive position it the market with rapid growth. It needs to use its internal
strengths to develop a market penetration and market development strategy. This can include
product development, integration with other companies, acquisition of competitors, and so on.

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BCG Matrix Model
The BCG matrix or also called BCG model relates to marketing. The BCG model is a well-known
portfolio management tool used in product life cycle theory. BCG matrix is often used to prioritize
which products within company product mix get more funding and attention.

The BCG matrix model is a portfolio planning model developed by Bruce Henderson of the Boston
Consulting Group in the early 1970's.

The BCG model is based on classification of products (and implicitly also company business units)
into four categories based on combinations of market growth and market share relative to the
largest competitor.

Stars
In the BCG matrix, we have placed two products in the star categories that are Omore and Tarang
as the growth rate of these two products is quite high as you can see in the table 1. Beside this the
market share is also increasing. As both products are relatively new in the market as compared to
its competitors and the market share is not so well but still in this shortage period this growth rate
and the market share are incredible. There is a lot of potential in both of these products and
company can increase its market share by massively investing in these two products. Investing
Strategy must be used in order to constant the growth, the company must constantly invest in order
to grow the current level of market share.

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Cash Cows
Olper is one of the well renowned brands by Engro foods and this has led to a drastic change in
the dairy industry of Pakistan. Before Olper, haleeb and milk pack had the monopoly in the tetra
pack diary industry but after the olper success a lot of other brands like goodmilk, nurpur etc got
enter into the market. Now the market of the Olper has a relatively high market share and the third
largest milk producer in Pakistan. Olper milk and cream come under the same umbrella of brand
name Olper. Harvesting Strategy should use and Engro should milk its cow for the Omore and
Tarang in order to increase them current market share.

Question Marks
At the end of year 2010, FrieslandCampina Engro Foods Limited has launched its first juice brand
name Olfrute. Olfrute has relatively low market share, but the growth potential is quite high.
Olfrute is facing a tough competitor with a strong brand name of Nestle. The initial promotion and
the sales figures depict that it can be a successful product but still the results of this brand have yet
to come. In this period FrieslandCampina Engro Foods Limited has also launched flavoured milk
with brand name Owsum. Though the experiences of haleeb in the case of Candia was bitter, now
just see what Engro will do in order to make this brand a success.

Dog
FrieslandCampina Engro Foods Limited has launched a brand with the name Olwell with high
calcium and low fat. This has got a great failure and the market share of Olwell as compared to
Nesvita is quite low beside this its sales are started decreasing as compared to the previous year
figures. Divesting Strategy can be used as from the past two years the market share has been started
losing and also, the three is slow market growth for this product.

Analysis overview of BCG Matrix

1. Star products of Engro Foods is Omore and Tarang, and these are the leaders of the business.

2. The Cash Cow Engro foods are Olper’s milk, which functions as the foundation of the company.

3. The Question Marks of Engro foods are Olfrute and Owsum, and the investment is high on these

products.

4. The Dog of FrieslandCampina Engro Foods Limited is Olwell that is the cash traps of the

company.Star Strategy: FrieslandCampina Engro Foods Limited should consider investing

more in Omore and Tarang for boosting the profits in future growth, and to earn more market share

and profits.

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Cash Cow Strategy: FrieslandCampina Engro Foods Limited can use the profits to finance
new growth and products in more industries. The company has expanded its name to Engro
Fertilizers in the past.

Question Mark Strategy: FrieslandCampina Engro Foods Limited should invest heavily on
Olfrute and Owsum to push them to the star status and avoid becoming a dog.

Dog Strategy: For FrieslandCampina Engro Foods Limited, the retraction of Olwell from the
market is a valuable step. The investment may be stopped.

The BCG matrix is one of the best methods for a business portfolio analysis and can help
FrieslandCampina Engro Foods Limited in implementing the right investment actions.

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Analyzing the Competition with Porter's Five Forces.

1.THREAT OF NEW ENTRANTS: (Moderate to Low)

In every business there is always a threat of the new entrants but in this business threat of entrants
is not high because companies are fearful of being squeezed out by the big player, Production of
packed products requires huge investment of financial, human, technical, and marketing resources.
Now Friesland have some threats like from new entrant’s example: goodmilk, Dayfresh

2.BARGAINING POWER OF SUPPLIERS: (Low)

The suppliers of food might not pose a big threat, because of the reasons.

Number of suppliers Raw milk is standard commodity and is available in the open market from
many milkmen. If anyone refuses to sell its product, then company can buy it from others who are
already willing to sell to company. Suppliers also have less leverage to bargain over price because
the company is purchasing the large volume of their milk and suppliers don’t have much option to
sell milk to others.

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3.BARGAINING POWER OF BUYERS: (High)
There are many other similar product availabilities in the market, so the bargaining power of
buyer is high if price of the products is hight people go for the low-price substitutes.
Large clients have a lot more bargaining power with food companies. Large corporate clients
like airlines and retailers pay millions of dollars a year.
4.AVAILABILITY OF SUBSTITUTES: (High)
This one is straight forward, for there are plenty of substitutes in the industry. Most large food
companies offer similar suites of services. Companies focusing on niche areas usually have a
competitive advantage, but this advantage depends entirely on the size of the niche and on whether
there are any barriers preventing other firms from entering.
5.COMPETITIVE RIVALRY: (Moderate)
The food industry is becoming highly competitive, as a result, food industry has become more like
a commodity – an area in which the food company with the low-cost structure, greater efficiency
and better customer service will beat out competitors. In case of Engro foods so far nestle and
haleeb are the only diverse rival and another player that has just joined the UHT Milk sector is
goodmilk, no doubt the competition between Engro foods and Haleeb is quite intense both are
engaged in consistent homework just to break and attract the customer towards each other but
goodmilk is adding to the competition between the sectors.

BLUE OCEAN STRATEGY:

 The strategy aims to capture new demand, and to make competition irrelevant by
introducing a product with superior features. It helps the company in make huge profits.

 FrieslandCampina (Engro Foods) has explored the new market spaces and untapped market
territory not explored by competitors. (Manufacturing of high-quality cheese)

 And for that reason, the company has been able to cater the demand of the masses by
proving excellent quality, premium product, cost effective and environmentally friendly
variants through innovation.

 The company ensures that the product offering are the exceptional utilities to the buyer and
consumers. It is also one of the many reasons that their repeat purchase is higher than the
competition.

 FrieslandCampina (Engro Foods) focus on Lean manufacturing or just in time gives them
the competitive advantage and help them ease the price points with quality products.

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Eliminate: excluding some unnecessary elements, this exclusion will reduce costs and do not
affect sales or quality levels. For example, the elimination of the products sale in one market
location or the elimination of certain workers who slows the work process and work at high wages,
as well as the elimination of some expenses which can reduce the costs of the production process.
Thus, the goal of the organization is to eliminate what is considered unnecessary and has no effect
on the work processes competitors in the market.

Raise: represent some things that will have the ability to increase and improve quality in the
products required for the consumer, such as increased sales premises, demands, increase the
quality level, seeking to meet customers’ needs. In this way, the organization seeks to achieve
competitive superiority over it.

Reduce: reducing some non-work-related actions, which will contribute to reducing costs. Many
companies are overstating their customer service, which raises costs without profit, thus, the
company reduces the volume of its investment to a certain extent such as downsizing ideas or
applications that are harmful to the environment and the development of ideas that stimulate the
application of environmental ideas. This can distinguish the organization from its competitors in
front of its customers and stakeholders.

Create: Creating new ideas, finding ways to deliver and offer goods and services to satisfy
customers or create new systems or practices that help organizations to improve its product.
Innovative organizations can transform creative ideas into useful outcomes, and managers who
talk about making the organization more creative usually want to stimulate innovation. The Blue
Ocean organization seeks to create new business and products, as well as create an innovative
working environment and innovative production and marketing methods

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FINANCIAL REVIEW

1. Total Revenue in year 2021 was 52 billion
billion
2. 90 % of Total Revenue from Dairy and Beverages
and Beverages
3. 10 % from Ice cream and frozen desserts
1. Total Revenue in year 2020 was 44
2. 92 % of Total Revenue from Dairy
3. 8 % from Ice cream and frozen

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Reason For Sales Decline in 2019
• Local demand contraction
• Covid-19 lockdown
• Fierce price war in the industry
• slowdown in global economy due to Covid 19

Reason For Decline in Profits

• Higher prices of bought in raw materials
• Higher transportation cost on input material
• Increased packing material prices and adverse rupee exchange parity
• Manufacturing Cost increased
• Challenging Market
• Economics Dynamics
• Increased Selling and Administrative expenses due to inflation effect
• Increase in Financial Expenses

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Actual production Vs.
Production Capacity (‘000 liters)

ANALYSIS OF FINANCIAL RATIOS

Profitability Ratios Analysis

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 The reasons for decreasing gross margin are the decline in sale due to COVID-19,
continuous cost pressure, tough price wars and decline in exports.

 Operating profit and Net Profit margin are better in year 2021 than 2019, it because their
sales were increasing, and they have control on their operating cost and on their operating
expenses. that’s why their gross and operating profit margin was increasing after covid 19
slowdown economy which is positive sign.

 The Return on Equity of the Organization have also declined in years 2019 mainly due to
covid 19 impact and decrease in Market Value of Investment whereas they have bounced
back in the year 2021 and have met industry average that should be around 15%-20%.
 Negative ROE in 2019 shows that company incurred a loss, hence no net income and not
investing capital efficiently as they are not investing in appropriate investments.
 But after 2019 company is good at generating shareholder value as it knows how to reinvest
its earning wisely to increase profitability and profit after tough times of COVID.

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Liquidity Ratios Analysis

• The current and Quick ratio of the company has declined in the years 2019 and 2021 which
is a bad sign for the company.

• Also, the ratio is almost near to 1 which shows companies financial liquidity is towards a
declining trend. Current ratio should be above 1.50 to be able to pay and come out of the
border line.

• Quick Ratio shows that in 2018 company have slow Inventory Turn Over.

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Solvency Ratio Analysis

 As company have Debt to equity ratio Less than 50% or < 0.5 in ratio represents good
Company
 The Debt-to-Equity ratio is decreasing which means they are taking less loans to finance
for their assets and operations shows effective strategies used by the organization

Activity Ratios

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  In these years, to generate sales, company is utilizing their assets effectively.

 Compared to past years, company is taking greater time to sell out their inventory. Reason
is their production capacity has increased in 2019 than selling out their inventory which
indicates that business is slow moving after 2019.

Investment / Market Ratios

 EPS in 2021 is higher than 2019 and 2020 which indicates that company has higher
earnings per share to pay out dividend to their shareholders as well as to retain their
earnings for future expansion/investment.
 In 2019 there was loss per share which is -1.25 per share which is due to pandemic,
Devaluation of local currency in international market, increase in Financing and other costs
etc.

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RECOMMENDATIONS:
 FrieslandCampina (Engro Foods) should focus on Market Penetration (Reach in all urban
areas within country) Market Development (international market expansion across
borders) and Product Development (Introducing New product lines) Backward
integration by building their own Dairy farms and packaging plant these strategies with
more efforts to be the market leader.

 FrieslandCampina (Engro Foods) should go expand its capacity to enter in international

market like Nestle. should expand its dairy farms so that they can get competitive
advantage. Induction of diversified bi-product line of dairy products like Nestle & Haleeb.
Butter\Yogurt\cheese\ flavour yogurt\ ready to use Raita\frozen desserts. add new spectrum
of products to their portfolio in ice-cream unit. should also focus on their other products
like flavoured milk, lassi, powder milk, cream, desi ghee.

 Better awareness of UHT treated milk and is helping them improve their sales and Milk
with its basic benefits has helped improve the image and more usage. Special awareness
Campaigns can also be launched and can help portray a better image of the product in front
of the customers. The attitudes of the people are also changing with the passage of time so
as a result the usage of open gawala milk is changing and people are opting out the usage
of standardized packed milk.

 Dairy science including animal breeding and genetics, dairy nutrition, dairy management,
and dairy technology to support and develop dairy industry, presently no under-graduate
program is available in the country to support this sector. In conclusion, research and
educational institutions could perk up rural oriented dairy sector to market oriented dairy
industry that guaranteed food security social and economic growth in Pakistan.

 FrieslandCampina (Engro Foods) can easily afford research and development costs must
introduce new products. It can also distribute the brand through better channels because of
its long-term relationship with distributors in the agriculture sector. PR with farmers
ENGRO has been interacting with the farmers for fertilizers and has gained quite a good
reputation over the years. It has led to a strong bond and long-term relationship with the
farmers who are willing to supply milk to the company. This is an added advantage and
strength for the company because it will never be short of milk production. The farmers
also won’t have to look elsewhere to sell their milk.

 FrieslandCampina (Engro Foods) must enhance the operational activities to cater the new
markets. Should focus on the low-cost leadership and differentiation strategy to take the
market of Guwala, Development and implementation of milk standards is also essential to
define milk price based on quality.

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  FrieslandCampina (Engro Foods) should introduce new promotions to get customers’
attention. Use powder milk relate with the everyday by nestle, Co-branding with other
brands like Olper’s\Tarang with Tea brands, Omore with different biscuits etc. to increase
their sales.

 FrieslandCampina (Engro Foods) should also start to manufacture high quality Cheese
which meets international standard to meet the domestic demand and export so that it can
be helpful in saving the foreign exchange that is expensed in importing the cheese from
foreign countries. The company should explore the market potential in a way, so that it can
utilize its full capacity to gain economies of scale in the production.

 Now the company is using focus marketing approach that only that segment is approached
which highly attractive for the company, but it should also develop the marketing program
that distinguishes the characteristics of existing available substitutes to their highly quality
& hygiene-oriented product. The company should also develop an integrated awareness
plan to aware the people about the quality of the UHT milk as compared to other
pasteurized or loose/fresh milk.

CONCLUSION:
FrieslandCampina obtains key position in central Asian dairy market through strategic partnership
with Engro Foods acquisition of majority stake in Pakistan’s dairy producer Engro Foods
completed brands in Pakistan in the milk sector. Their products OLPERSMILK, OLPERS
CREAM, AWSUM FRUIT MILK, OLWELL, TARANG TEA and OMORE ICE CREAM
purchased heavily by customers.
This is due to marketing Strategies, Promotion, price and quality of their products. Above
mentioned are the Strategies of their products due to which their Revenues increases day by day.
They provide the customers what they want; their distribution channels are vast and their prices
are nominal. These are Reasons for the success of their brands in Pakistan and in Asian Industries.

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