Business Strategy Analysis

ELEPHANT HOUSE,
Sri Lanka
Table of Content

1. Introduction of Elephant House in Sri Lanka

2. PESTEL Analysis

3. PORTER’S FIVE FORCES ANALYSIS

4. COMPETITOR ANALYSIS

5. Value chain Analysis

6. SWOT Analysis

7. TOWS Analysis

8. VRIN Model

9. Ansoff Matrix

10.Recommendation

11.Conclusion
Introduction of Elephant House in Sri Lanka

Ceylon Cold Stores (CCS), trading as Elephant House, is a Sri Lankan company which
produces carbonated drinks, ice cream and processed meat products. Elephant Soft Drinks
remains the market leader in Sri Lanka.
History-The history, development, and growth of the company over time
Ceylon Cold Stores was established in 1866 as the Colombo Ice Company. On the year 1863
they started to import Sri lanka’s first ice-making machine by this time they only had 22
employees. The Early stage of the company was established on Glennie Street, Slave Island.
First manager Arthur Kurt Von Possner who was a German engineer of the
company, introduced aerated water (water with air added into it, also known as
carbonated water) with the "Elephant" trademark on the bottles, which later
became "Elephant House".
Soda and lemonade were the first two carbonated drinks Elephant house started
to produce, In Melbourne and Calcutta these two drinks were very favorable and
as a result this company was able to receive awards.
Colombo Ice Company was bought and merged with two companies by Tom Walker on May
8th 1894 who was a owner of a competitive company and named the new company as “New
Colombo Ice Company”. This happened due the liquidation of the Colombo Ice Company.
In 1910, The Galle Face Ice company which was a competitor was bought by New Colombo Ice
company for Rs.45,000.
In 1919, Von Possners British Aerated and Mineral Water Company was
also bought for Rs.175,000.
In 1921, Introduction of crown corks to the Aerated Water business
In 1923, A new ice manufacturing plant was purchased which ran an internal
combustion engine replacing its old ten-ton steam-driven plant.
On December 1st 1925, the company decided to build cold storage for frozen products of all
kinds which they started opening new cold stores in Colombo. In the same year the company
purchased another smaller rival, the Pure Ice and Aerated Waters Manufactory.
In 1932, Ceylon Creameries Limited was acquired to produce and distribute reconstituted
fresh milk and ice cream.
In 1934, Rs.850,000 was spent in order to purchase Ceylon Ice and Cold Storage Company.
Carbonic acid gas plant being installed in 1935 to make Carbon dioxide and dry ice . Ice
Cream in bulk form was produced in four gallon buckets. Even bread was baked and sold by the
company with the purchase of a break making machine and a modern oven.
In 1941, New Colombo Ice Company changed its name to Ceylon Cold Stores Limited.
By 1950, Ceylon Cold Stores Limited started a new factory for soft drinks.
In 1964 Mallory Wijesinghe became its first Ceylonese chairman.
John Keells Holdings Limited with the acquisition of the Whittalls Group in 1991 took
Ceylon Cold Stores Limited under their ownership(John Keells Holdings has a 54% majority
shareholding in the company).
In 1998 with the installation of modern bottling plant at Kaduwela factory, the production
capacity increased considerably.
On 2010 December, KIK Cola was introduced.
In 2011, New bottle shape was designed and introduced.
In 2014, Nexus Mobile was launched which was Sri Lanka's first
and only independent card-less lifestyle loyalty programme. On the
same year, they introduced soft drink vending machines too.
Until Now CCS celebrates its 150th Anniversary
 PESTEL Analysis
Every business organization needs to ensure their long term survival within the volatile business
environment. Survival of the business organization will highly depend on the changes in the
external and internal environment.
To get better understanding about the external environment we can use the PESTEL analysis

Political  Political view of the opposition party is more favorable to business development. But
they can give limited impact for businesses. (positive low impact)
 Stable political situation will lead to fluctuation of governmental policies which is
more favorable to businesses where they can forecast. (positive, high impact)

Economical  Low interest rate leads to getting more loans from banks to develop businesses.
(Positive high impact)
 After the civil war in North Province In SL, Economic is gradually increasing
 Increasing the gross domestic production of the country (positive, high impact)

Social  Increasing the Islamic population significantly. Those people have positive mindset
related to the carbonated drinks. (positive high impact)
 Increasing the density rate from rural areas to urban areas. (positive high impact)

Technological  Availability of new machineries in production process. It will lead to increase the
efficiency and reducing the time taken to complete the production processes. (positive,
High impact)
 Converting the industry from labor intensive to machine intensive where business can
reduce the labor cost. (positive, High impact)
Environmental  Geographical location of Sri Lankan (North Province) is nearby the equator. So
temperature of the country is high. People are using chilled carbonated drinks based
on climate conditions. (Positive, high impact)
 Inside the country have different climate conditions. As example villages such as
Hambanthota, Anuradhapura, Pollannaruwa etc. is having high temperature. So
possible sale growth in those areas. (Positive, high impact)

Legal  Complying the tight regulation of food and drug administration department including
the manufacturing of the bottle. (negative, high impact)
 Regulation related to the Consumer protection authority including the display the
price, volume, labels in the bottle etc. (negative high impact)

PORTER’S FIVE FORCES ANALYSIS

 Competitive Rivalry within the Industry – Medium
As there are lot of companies actively engaged in this industry Cargills seemed to have a high
competition. But as they have 151 years of experience and the brand loyalty they have achieved
more market share in the industry. Nowadays the competition among local Sri Lankan ice
creams and beverages producing companies such as Kotmale productions, Pelwatta productions
is increasing rapidly as well as Coca cola Pepsi and etc. Due to the DCD problem the
competition among imported products collapsed as the consumers refused the demand for
imported products. These companies spend a lots of money on advertising to create brand
awareness to increase the sales volume.
Elephant House Company gained competitive advantage over other companies as the
demand for their products increased rapidly after the DCD problem. But the competitive rivalry
seemed to be in a medium level as the other competitive companies have the market capacity to
produce more because although Cargills company has a high demand but they produce less.
 Bargaining Power of Suppliers – High
The bargaining power of suppliers is high as there are selective supplierswho have the quality
standards that the organization expects. Also the raw materials are purchased by a few selected
suppliers. The company provides fertilizer, manure and subsidies to their suppliers and in return
they provide the Cargils Company with the raw materials (ice creams and beverages) but incase
another company agrees to pay the suppliers of Cargils a higher amount of money in this case the
supplier might provide the other diary company with their raw materials, this will reduce the
amount which the Cargils company can purchases from their suppliers. The cost of switching
from one to another would come in to effect in the long run.
 Bargaining power of customers – High
The bargaining power of the customers stays at high level, since there are lot of companies
actively engages in the ice creams and beverages producing industry. In addition the company
has a higher demand their production level is below the demand so the customer has the power to
switch to new products as there are lot of similar products available in the market.
 Threat of new Entrants – Medium
In Sri Lanka there are no significant regulations to open up new ice creams and beverages
factories. So the competitors and new companies can easily enter into the Market. It will create a
barrier for Cargills to collect quality raw materials as the new companies are also demanding for
raw materials (ice creams and beverages).
 Threat of Substitutes – Medium
In the ice creams and beverages production industry all the products are relatively similar. So
there is a medium level of substitution affect for the company as other competitors are also
engage in producing similar products such as ( beverages & ice creams and beverages) etc. so the
threat of substitution affects the company in two ways. Substitution affect within company
products and substitution affect by competitors products.
Company’s overall main competitor is Cargills Company but there is a product to product
competition as well.
 Elephant House Ice Cream – Cargills Ice Cream, Lucky Lanka Ice Cream, Alerics Ice
Cream are the main competitors.
 Elephant House beverages – Coca Cola, Pepsi, Smack are the main competitors.
To overcome the threat of substitution it would benefit if they come up with more categorized an
innovative product range.
 COMPETITOR ANALYSIS

Competition for the Elephant house Company occurs within the industry and also product to
product competition also takes place. In the case of Elephant house ice creams some of its
competitors are Cargills, highland, pelawaththa, kothmale. When it comes to soft drinks some of
their competitors are Coca cola, Pepsi and etc.

Most of the competitors are carrying out importing and packaging activities with their products
which means that they import the main requirements which is the ice creams and soft drinks
products from other countries and just provide the packaging, then the products are distributed
into the market for consumers to purchase.

AS hidden local companies started emerging, it created competition for the ice creams and soft
drinks products produced by Elephant house Company. But due to the goodwill, brand loyalty
and good brand image of the Elephant house Company products, They have been able to
withstand the competition in the market and have a stable position in the market.

Coca Cola Pepsi

Company & American owned Multinational company where PepsiCo Inc. is an American
Size products are sold in more than 200 countries. In multinational where products are
Srilanka they have over 700 employees. distributed over 200 countries. In
Srilanka, Pepsi has over 600 employees.
Reputation One of the most recognized brands worldwide. Reputation is comparatively low in
One of the world’s valuable brands. Well known comparison to Coca Cola. But well
brand name in Srilanka. known in most households in Srilanka.
Sales Force & Excellent work force management. Incentives to Motivated sales force, Attractive
Their Expertise motivate sales force Sales force development incentives.
programs
Coca Cola has a 37% market share globally and Financially stable, Continuous growth in
Financial 45 % market share in Srilanka, With continuous market share and sales. Holds 18%
Strength improvements of sales and revenue.Hence it has market share in Srilanka and 30.2 %
a strong financial position globally. Very Strong financial position.
Technology Democratizing technologies for masses by Always follows and benchmark the
Used bringing alive affordable innovative products competitors.
Positioning With the slogan ‘Open Happiness’ by Coca With the slogan “Refresh yourself”, Pepsi
Cola targeting the mass market both youth and goes to the mass market targeting both the
adult markets. Also associates with food with youth and adult markets.
slogans such as ‘things go better with Coke’
Value chain Analysis

Purchasing Finding new vendors with same quality or better of ingredients with a cost
benefit.

HRM Hire, train, and develop adequate man power to successfully create the end

Support Activities
products. Currently lack of expertise in Customer complaints not attended with
priority due to nonavailable of staff. (Currently HR dept. handling complaints)
Lack of strategic support

Technology Monitoring the trend of new technology on machinery for production and
updating the systems. Sales field officers are given SPC system (Sales Progress
Coverage) to their smart phones which is linked to Head office and monitored by
IT dept. Outdated printing machines used for printing of packages
Infrastructure Distribution network costs very high at current scenario. (11% of the operational
cost). Waste managements is not in practice. Line of authorization is followed
which at times result in delays for quick decision making. Top to bottom
communication layers in practice.
Inbound Operation Outbound Sales and Services
Receiving and Process of Warehousing of Marketing Customer care

Primary Service
storing raw Transforming Finished goods. Advertising hotline to attend to
material, inputs And Arrange goods per used to issues due to the
ingredients in manufacturing of local and maximize the consumption of the
production the end product. deliveries. Awareness to product. Suggestion
factory Sampling, Quality Distribution of urban and rural box at head office
in Ranala SL survey, Health and bottles to Vender territories. for developments.
Standard machines, super Dealer Social media
inspection. market chains and promotions use involvement to read
Testing, filling retail points to increase sales customer responses
bottles and finalize through volume. and act on it.
for distribution. distribution
 SWOT Analysis
Strengths Weaknesses
 Heritage of Lemonade (110 years)  Strong labor unions (Sub brand
 Strong distribution network production will be affected due to union
 Trained Staff and less rate of employee turn actions)
over( e.g.: Quality and marketing)  Inefficiency of mature workforce
 Amount of glass bottles in the market place  Machine breakdowns
 Parent Brand name already market leader in the  High production ingredient wastage.
Carbonated Soft Drink industry  Non compliance of Health and safety
 Use of Advanced advance technology for • Added Sugar
production. (steady increase in health conscious
 Economies of scale consumers)
 Subsidiary company of Srilanka’s largest
conglomerate -John Keells Holdings.
 Wider product portfolio.
 R & D (Due to the innovation of Lemonade, the
launch)
Opportunities Threats
 Growing Market place.  Water management (Water scarcity).
 Unique taste compared to competitor.  Legal requirements to disclose negative
 Entering to the global market place that other information on product caps/ crowns and
sub brands of Elephant House already hold. labels.
 Up and coming younger generation with a  Strong and well reputed international
stronger spending power. brands as competitors.
 Increase of raw material prices
 LKR Currency value fluctuating affecting
import costs and taxes of material such as
glass from manufacturers and ingredients.
 TOWS Analysis

Strengths Weaknesses
S1. Parent Brand name (Elephant W1. Lack of island wide
House) already positioned in the availability of distribution
Carbonated Soft Drink industry channels
S2. Use of advance technology W2. Low promotion activities
for production. towards distribute network.
S3. Economies of scale W3. Formal culture does not
S4. Subsidiary company of support with positioning
Srilanka’s largest conglomerate - strategy
John Keells Holdings. W4. Lack of invest in R & D
S5. Wider product portfolio. W5. Senior staffs lack
of interest and ability to
update themselves with
new technologies while
new staff lack hands on
practical experience.

Opportunities S-O Strategy W-O Strategy

O1. Growing Market place.
O2. Unique taste compared to SO1Introduce new products to the WO1Catering to the untapped
competitor. market (S2,S5;O1) area(North Province in SL)
O3. Entering to the global market SO2Identify new attractive (W4;O1,O3,O4)
place that other sub brands of market (S2,S3;O3,O4) WO2.Establish vending
Elephant House already hold. machine in public places(Bus
O4. Up and coming younger stands & Railway stations)
generation with a stronger spending
power.
O5.A lot of Bus stands and Railway
stations Island wide

Threats S-T Strategy W-T Strategy

T1.Water management (Water
scarcity). ST1Innovate new products to the WT1Innovate new products by
T2.Strong and well reputed market (S2;T3) demand of the market.
international brands as competitors ST2Increase the efficiency of (W4;T2)
innovate new products. production (S3;T4) WT2Enhance the awareness by
T3.Increase of raw material prices ST3Training on waste advertising to compete with
T4.LKR Currency value fluctuating management (S2,S3;O1) rivals(W2;T2)
affecting import costs and taxes of WT3 Increase training
material such as glass from and focuses on
manufacturers and ingredients. individual needs
(W3,W5;T2)

VRIN Model
Resources/Capabilities Valuable Rare Inimitable Non
Substitutable
Brand yes yes Yes Yes
Diversified Company yes yes Yes Yes
Distribution Network Yes Yes No No
Product development Yes Yes No No
Ansoff Matrix
The Ansoff Matrix was introduced by H. Igor Ansoff and first printed in the Harvard Business
Review in 1957, in an article titled "Strategies for Diversification." It has given eras of marketers
and business leaders a quick and simple way to consider about the risks of growth.
Elephant House should operate in all 4 quadrants of the Ansoff Matrix. However, the growth
strategy should focus primarily on the Market Penetration , Market Development sections .
Nevertheless, efforts must also be placed towards New Product Development in order to
effectively create a successful and innovative product for the premium segment

Existing product New product

MARKET PENETRATION NEW PRODUCT
Products - Cream Soda, Necto, DEVELOPMENT
Orange Crush Products-Jelly Ice cream, Rocky
Existing Market

+ Increase usage rate of existing Road, Bitter Lemon

customers + Create new product(s) for the
+ Gain customers from competition premium range
+ Increase outlet penetration + Develop product based on
customer needs and trends

MARKET DEVELOPMENT DIVERSIFICATION

Product - Twistee + Increase product range
New Market

+ Cater to health conscious + Cater to new customers, desires,

consumers (Green Tea based and evolving trends
beverage)
+ Create awareness on health benefits

Market Penetration
A strategy that the organization tries to expand or increase the market share with in the current
market with existing products offered to customer by the company.
Product Development
Product Development is a strategy to develop or modify the existing product to create new
products at the existing market or current market.
Elephant house has introduced new ice creams to the market with different flavors
Diversification
Diversification means introducing new product in to entirely new market.
In 1886, Elephant house started out as an ice manufacturing company, with the introduction of
carbonated water, Elephant House diversified into manufacturing carbonated drinks such as
lemonade and soda.
Market development
Market development is a strategy to develop new market segment for current product. Main target
is non-buying customers in currently targeted segments. It also targets new customers in new segments.
Elephant House introduces new product which call Twistee for health conscious consumers
Porter’s Generic Strategy
Elephant House must adopt Porter’s Differentiation strategy as it should cater to the broader
market by providing unique and high quality products. Each product should have its own
distinctive brand personality, target group, USP, platform and values which are crafted
specifically and accordingly, in alignment with the product nature
Strategic Recommendation
1. Introduction of new products to the market,
The world is changing with the advancement of technology, with this advancement even humans
change very frequently regarding to their preferences and specially about their health (health
conscious) therefore in order to maintain and develop further improvements for the company we
recommend that Elephant House should focus with customers who go through sickness who are
unavailable to have the privilege to even taste one of their products. In order to overcome these
types of issues sugar level and coloring should be reduced with production of new products
separated from the standard ones. Natural ingredients are highly recommended rather than
artificial chemicals. This could result as an advantage for the company since there are various
brands produced for various customers with different requirements which could result an
enhancement in sales.
2. Catering to the untapped area (north province in Sri Lanka),
As we all know the war Sri Lanka faced for many years (around 30 years) there are still many
areas which have missed or haven’t been able to reach the latest products which have been
introduced. Especially Northern province has to be focused here since the war ended lastly there.
Northern province is a very dry conditioned environment therefore Elephant house has a huge
advantage with products such as ice cream and soft drinks. As for transportation for the
distribution there would be fuel consumption cost and maintenance.
3. Establishing vending machines in public areas,
As the world is a busy place for all humans, the time for them is limited in order to be concerned
with their needs therefore with the introduction of vending machines elephant house could easily
gain sales and even expand/spread their marketing. Vending machines could be placed in public
locations such as bus stations and railway stations. There would be a difficulty with the cost
management for such expensive machinery and maintenance.
4. Training on waste management,
Scarcity of resources is a major consideration in the daily world and due to this issue elephant
house has to reduce their wastage cost. In order to do so training programs could be organized.
With the reduction of such wastage resources there will be an opportunity for creating extra
products which could result an increase in sales.
5. Innovative new products by demand of the market,
Without change the customers couldn’t bare with the purchase of the same product since the
taste would be the same this could result a decrease in sales and reputation. Elephant house could
change the size of their products, taste, appearance and structure of those products in order to
maintain their sales and to overcome competition. There would be a huge disadvantage since
now the rival companies are even maintaining their competition.

Conclusion
In Sri Lanka there are wide variety of milk products and beverage products available in the
market. Elephant House is a 100% local company, hence Elephant House holds a main position
in the beverage and ice cream industries of Sri Lanka.

After the analysis of the business strategy of Elephant House, we came to a conclusion
that they don’t give much priority in fighting with their competitors, but due to their low price
and high quality in the products produced, they are yet table in the Sri Lankan beverage and ice
cream market.