UNIVERSITY OF MANAGEMENT AND TECHNOLOGY

DR. HASAN MURAD SCHOOL OF MANAGEMENT

[MG-585] BUSINESS POLICY & STRATEGY
MBA-P
SECTION: C SEMESTER: SPRING 2023
DELIVERABLE TYPE (CHECK MARK):

ASSIGNMENT WAC ACTIVITY PROJECT OTHERS: _______

DELIVERABLE FULL TITLE:

SHEZAN INTERNATIONAL-MANAGING GROWTH

DATE OF SUBMISSION: JULY 1ST, 2023

SUBMITTED BY:
GROUP:
FULL ID FULL NAME Keep Blank
(As per attendance sheet-In ascending order) (For Official Use)
F2022270012 Hira Tariq

F2022270008 Ramsha Razzaq

F2022270020 Sadia Umar

S2023270007 Usama Hameed

F2022270002 Zahra Batool

 Table of Contents
Introduction................................................................................................................................4
Time of Case...........................................................................................................................4
Company Established.............................................................................................................4
Geographical Location...........................................................................................................4
Key Players.............................................................................................................................4
Key Competitors.....................................................................................................................4
Product & Services.................................................................................................................5
Industry of Operations............................................................................................................5
Section I: External Analysis.......................................................................................................6
Template 1: DEEP-LIST Analysis..........................................................................................6
Template 2: Porters 5 Forces Model.......................................................................................9
Template 4- Strategic Group Mapping.................................................................................15
Template 5-Key Success Factors..........................................................................................16
Template 6: External Factor Evaluation Matrix [EFE]........................................................18
Section II: Internal Analysis.....................................................................................................21
Strategic Orientation.............................................................................................................21
Corporate Level Strategy..................................................................................................21
Business Level Strategy....................................................................................................21
Functional level Strategy..................................................................................................22
Template 7: Firms Objectives...............................................................................................23
Template 8: Firms Resources...............................................................................................23
Template 9: Criteria for SCA & Implications.......................................................................25
Template 10: Value Chain Analysis......................................................................................26
Template 11: Value Chain & Resource Base View...............................................................27
Template 12: Competitive Profile Matrix.............................................................................28
Template 13: Competency Tree............................................................................................29
Template 14: TOWS Matrix.................................................................................................30
Template 15: Internal Factor Evaluation Matrix [IFE].........................................................34
Financial Analysis....................................................................................................................36
Income Statement-Vertical Analysis.....................................................................................38
Balance Sheet- Vertical Analysis..........................................................................................40
Income Statement- Horizontal Analysis...............................................................................43
Balance Sheet- Horizontal Analysis.....................................................................................45
Ratio Analysis.......................................................................................................................48
Short Term Solvency/Liquidity Ratio...............................................................................48
Long Term Solvency/Financial Leverage Ratio...............................................................48
2
 Asset Utilization/Turnover Ratio......................................................................................49
Profitability Ratio.............................................................................................................49
Market Value Ratios..........................................................................................................50
Overall Remarks...............................................................................................................52
Remaining Steps of WAC........................................................................................................52
Issues....................................................................................................................................52
Main Opportunity.................................................................................................................52
Main Problem or Opportunity..............................................................................................52
1 Sub Problem + 2 Sub Opportunities..............................................................................52
Strategic Alternatives............................................................................................................53
Alternative 1: Expansion strategy.....................................................................................53
Alternative 2: Market Development/ Growth Strategy.....................................................53
Alternative 3: Product development.................................................................................53
Evaluation of Alternatives....................................................................................................53
ALTERNATIVE 1: Expansion Strategy................................................................................53
ALTERNATIVE 2: Market Development/ Growth Strategy................................................54
ALTERNATIVE 3: Product Development............................................................................54
Selection of Best Alternative....................................................................................................55
Qualitative Analysis for Market Development/ Growth Strategy........................................55
Quantitative Analysis for Market Development/ Growth Strategy......................................56
Projected Net Income...........................................................................................................57
Hattar Value Chain Analysis.................................................................................................58

3
 Introduction

Time of Case

This case was written by Assistant Professor Syed Mubashir Ali and Research associate
Terence Hibbert and illustrated either effective or ineffective handling of an administrative
situation.

Company Established

In May 1964, Shezan International was formed as a private corporation, and was the first
company in Pakistan to produce fruit juices. It was formed as a joint venture between Amcor
Corporation, an American company that specialised in fruit processing and fruit products, and
a Pakistani investment group led by Chaudhary Shahnawaz, each party holding 50% of the
firm’s equity.

Geographical Location

There were 27 factories producing 286 million containers of juice. Most of the factories were
located in Punjab province with minimal representation of other provinces. Karachi was the
largest consumer market for juices with almost 50% while Lahore and Islamabad almost 20%
of total fruit juice consumption. Company set up their processing bottling plant and head
office in Lahore. In 1982, the company established a new plant and office in Karachi. The
Karachi office also allowed the company to establish an export capability within the
company. The export potential of the product was being evaluated by Shezan as many Middle
Eastern countries produced little fruit and even fewer fruit products.

Key Players

Mr. Isa Dard Director of marketing at Shezan international. He had to make some decisions
on where and how to expand Shezan production, continuously rising demand. HE created
new technology, a more efficient process with less wastage. Mr Munir Shahnawaz Chairman
of Shezan also contributed as a key player, in financial decision consideration along with
policies in reference to equity and loan. The financial projections have to be provided by the
vice president Finance, which was needed to be approved with the board of directors who
made the final decision.

Key Competitors

Shezan International national competitors are Benz Industries, Murree Brewery, Packages
Limited, Bambino Food Ind, Malik Food Industries. In regional competitors Pak Fruit Juice
Co, Kamran Distributors Karachi and Fruit Sap Limited are squeezing the market share of
Shezan.

4
Product & Services

Products of the Shezan company are mango, orange, apple, guava juices and lemon squash.
Company ventured into fruit-based production. Moreover, they added Lemon Barley (mixture
of lemon juice and barley water) to their product line. Diversification of Shezan products via
squashes, jams, marmalade, tomato ketchup followed by canned fruits and vegetables were
added to the product line too.

Industry of Operations

Shezan was the first company in Pakistan to produce fruit juices. Fruit juices were extremely
popular nationwide. In the growing product line Shezan found that mango juice was still the
biggest seller.

5
 Section I: External Analysis

Template 1: DEEP-LIST Analysis

Demographic Risk Impact Time- OPP

Level Level frame /TH

Most of the factories were located in Punjab

H - LT
province hence, slow growing industry TH

Karachi was the largest consumer market with

approximately 50% of the total fruit juice H + MT OPP
consumption

Lahore and Islamabad were the second largest

consumer market with approximately 20% of the H + MT OPP
total consumption

Minimum representation of other provinces in food

and beverage industry H + LT OPP

Economic Risk Impact Time- OPP

Level Level frame /TH

Rising input prices/ rising cost of production

H - MT
TH

Increasing competition in the market H - LT TH

With an increasing capacity the industry was

experiencing shortage of fruit juice supply H - MT TH

Competition in the industry limited the transfer of

H - MT
high cost to consumer TH

Companies borrowing more than Rs 40 million had TH

H - MT
to pay 21% interest rate

Ecological Risk Impact Time- OPP

Level Level frame /TH

6
Lack of capacity and poor storage facilities led to H - LT LT
spoilage and wastage of various fruit crop on a large
scale throughout the industry

Political Risk Impact Time- OPP

Level Level frame /TH

Special tax incentive at Hattar of 5-8 years holiday H + LT OPP

on 35% income tax

Relief on electricity bill in Hattar region H + MT OPP

Government took back privileges and incentives M - MT TH

from the companies who were abusing

National investment trust (NIT) received 20% of H - LT TH

purchasing right on all new shares

Legal Risk Impact Time- OPP

Level Level frame /TH

No Import duties in Hattar on capital equipment H + MT OPP

used in factories

In order to receive incentives in Hattar companies H + LT OPP

had to be a new venture and publicly listed

Informational Risk Impact Time- OPP

Level Level frame /TH

Mango and lemon juices are the most popular in the H + LT OPP
summer month & Oranges & Guava in winters.

The production capacity of fruit juice has grown H + LT OPP

faster than that for beverages at a rate of 22%

The land in Hattar was to be depreciated using the H - LT TH

declining balance method at a rate of 10% with no
residual.

All fruit juice production equipment in Hattar was to H - LT TH

be depreciated using the declining balance method
at a rate of 25% with no residual.

Social Risk Impact Time- OPP

Level Level frame /TH

7
 Fruit juices had become extremely popular nation- H + LT OPP
wide

Technological Risk Impact Time- OPP

Level Level frame /TH

Not Applicable

Template 2: Porters 5 Forces Model

THREAT OF NEW ENTRANTS

SR DEFINING QUESTION YE MO NO NA
# S D (-) (X)
(+) (~)

1] Do large firms have a cost or performance advantage in your

+
segment of industry?

2] Are there any proprietary product differences in your industry?

~

8
 3] Are there any established brand identities in your industry? +

4] Do your customers incurs any significant costs in switching

-
suppliers?

5] Is a lot of capital needed to enter your industry? +

6] Is serviceable used equipment expensive? +

7] Does the newcomer to your industry face difficulty in accessing

+
distribution channels?

8] Does experience help you to continuously lower costs? +

9] Does the newcomer have any problems in obtaining the

~
necessary skilled people, materials or supplies?

10] Does your product or service have any proprietary features that
-
give you lower costs?

11] Are there any licenses, insurance or qualifications that are

+
difficult to obtain?

12] Can the newcomer expect strong retaliation on entering the

+
market?

TOTAL
8 2 2 0

RESULT: As there are 8 favourable 2 moderate 2 unfavourable and 0 non applicable

factors, it is favourable for the industry therefore the power is low.

BARGAINING POWER OF BUYER

SR DEFINING QUESTION YE MO NO NA
# S D (-) (X)
(+) (~)

1] Are there a large number of buyers relative to the number of

+
firms in the business?

2] Do you have a large number of customers, each with +

9
 relatively small purchases?

3] Does the customer face any significant costs in switching

-
suppliers?

4] Does the buyer need a lot of important information? -

5] Is the buyers aware of the need for additional information? X

6] Is there anything that prevents your customers from taking

+
your function in-house?

7] Your customers are not highly sensitive to price? X

8] Your product is unique to some degree or has accepted

+
branding?

9] Your customer’s business is profitable X

10] You provide incentives to decision makers X

TOTAL
4 0 2 4

RESULT: As there are 4 favourable 0 moderate 2 unfavourable and 4 non applicable

factors, it is favourable for the industry therefore the power is low.

THREAT OF SUBSTITUTES

SR DEFINING QUESTION YE MO NO NA
# S D (-) (X)
(+) (~)

1] Substitutes have performance limitation that do not X

10
 completely offset their lowers priced. Or, their performance
is not justified by their higher price.

2] The customer will incur costs in switching to a substitute -

3] Your customer has no real substitute -

4] Your customer is not likely to substitute -

TOTAL 0 3 1
0

RESULT: As there are 0 favourable 0 moderate 3 unfavourable and 1 non applicable

factor, it is unfavourable for the industry therefore the power is high.

DETERMINANTS OF RIVALRY AMONG EXISTING COMPETITORS

11
 SR DEFINING QUESTION YE MO NO NA
# S D (-) (X)
(+) (~)

1] The industry is growing rapidly? -

2] The industry is not cyclical with intermittent overcapacity -

3] The fixed costs of the business are a relatively low portion of -

total costs

4] There are significant product differences and brand identities ~

between the competitors

5] The competitors are diversified rather than specialized ~

6] 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.

7] My customers would incur significant costs in switching to a -

competitor

8] My product is complex and requires a detailed understanding -

on the part of my customer

9] My competitors are all of approximately the same size as I -

am

TOTAL 0 2 7 0

RESULT: As there are 0 favourable 2 moderate 7 unfavourable and 0 non applicable

factors, it is unfavourable for the industry therefore the power is high.

12
 BARGAINING POWER OF SUPPLIERS

SR DEFINING QUESTION YE MO NO NA
# S D (-) (X)
(+) (~)

1] My inputs (materials, Labor, supplies, services, etc. (are -

standard rather than unique or different

2] I can switch between suppliers quickly and cheaply X

3] My suppliers would find it difficult to enter my business or +

my customers would find it difficult to perform my function
in-house

4] I can substitute inputs readily -

5] I have many potential suppliers X

6] My business is important to my suppliers +

7] My cost of purchases has no significant influence on my -

overall costs.

TOTAL 2 1 3 2

RESULT: As there are 2 favourable 1 moderate 3 unfavourable and 2 non applicable

factors, it is unfavourable for the industry therefore the power is high.

13
 OVERALL INDUSTRY ATTRACTIVENESS RESULT:

Based on the above analysis we can see that:

Power High/Low Positive/Negative for

company

Bargaining power of Buyer is low therefore, it Positive

is

Bargaining power of Supplier high therefore, it Negative

is is

Rivalry or competition is high therefore, it Negative

is

Threat of New Entrants is low therefore, it Positive

is

Threat from Substitutes is High therefore, it Negative

is

Final Conclusion:

From a company’s stand point,

2 forces are Positively affecting the industry,
whereas 3 forces are negatively affecting the company,
Therefore, the overall industry is unattractive.

14
Template 4- Strategic Group Mapping

Strategic group Map 1:

The map has been created by taking the data from Exhibit 2 where, Distribution on the x-axis
with companies operating on both the regional and national level. While the production in
ML has been taken in the y-axis.

15
Template 5-Key Success Factors
KSF 1: Quality and Sustainability

Logic: Quality and sustainability is necessary to survive in the market. It will also help to
create customer loyalty. When new and more companies will provide identical products,
then all companies will try to improve quality in order to attract a greater number of
customers. Sustainability will reduce the wastage of resources and it will improve the
efficiency of company. All companies will try to get competitive advantage in the market.

Maintaining quality of product will make the survival of company easy. Number of
customers of company will increase if the quality of product is better. For example, juice
manufacturing industry. Quality and sustainability also increase the profit of companies.

KSF 2: Taste and Food Preservation

Logic: In beverage industry taste is the first priority of customers. It is necessary that
products should remain preserve for longer duration of time. Better taste will create good
impression on customers.

As consumers are becoming health conscious as compared to past, so beverage

manufacturing companies must focus on adding natural ingredients in their products for
example the amount of sugar used in drinks has become low.

KSF 3: Innovation and Product Development (Range of Products)

Logic: Innovation is necessary to compete with rival companies. Recent innovations are
focusing on using technology in beverage manufacturing. This will help companies to gain
more control on product manufacturing process and enable a company to achieve product
differentiation.

Companies usually face the problem of choosing the correct idea to develop their product
due to limited availability of resources. The companies must provide value added products
to the customers, with limited or one product it is difficult to attract a greater number of
customers.

Many beverage industries conduct test marketing of their drinks, in order to check the
response of customers. Test marketing will give more accurate results about customers
response towards their product.

KSF 4: Distribution

Logic: In order to increase market share and to reach a greater number of customers,
proper distribution of products is necessary. Companies use different distribution methods
for example, intensive distribution, indirect distribution and selective distribution to reach a
target market.

KSF 5: Production Level

16
Logic: Scale of Production plays important role in the success of any beverage
manufacturer.
In beverage industry there will large scale production, if any company is manufacturing
juices or drinks at smaller scale then it will not be able to capture huge market share. In
beverage industry competition is usually high.

17
Template 6: External Factor Evaluation Matrix [EFE]
Opportunities Weight Rate
Minimum representation
of other provinces in
food and beverage
industry.
Karachi was the largest
consumer market with
approximately 50% of
the total fruit juice
consumption.
Lahore and Islamabad
were the second largest
consumer market with
approximately 20% of
the total consumption.
Special tax incentive at
Hattar of 5-8 years
holiday on 35% income
tax.
Relief on electricity bill
in Hattar region
Mango and lemon juices
are the most popular in
the summer month &
Oranges & Guava in
winters.
Fruit juices had become
extremely popular
nation-wide.
No import duties in
Hattar on capital
equipment used in
factories.
The production capacity
of fruit juice has grown
Scor Comments
e
0.04 4 0.16 Shezan has set up their fruit process,
bottling plant and head office in
Karachi, and was looking to expand in
the northern areas of Pakistan.
0.07 4 0.28 Company established its plant and
office in Karachi, which gave access
to large farms and better quality of
fruit.
0.07 4 0.28 Shezan was catering to an increasing
demand of the second largest
consumer market via their Lahore
process and bottling plant to increase
the sales and grow business.
0.08 3 0.24 An expansion opportunity for Shezan
in Hattar to receive incentives as a
means to make the region attractive
for expansion.
0.08 3 0.24 For Shezan a contribution towards
decline in companies’ overall
expenses.
0.05 4 0.20 Shezan was providing a range of
flavours to cater to the demand of the
season to increase sales.
0.05 4 0.20 Shezan has the first mover advantage
in setting up first fruit juice plants in
Pakistan providing customers with
diverse flavours.
0.08 3 0.24 Shezan is considering the opportunity
to expand in the Hattar region where
there are no import duties facilities
more equipment to be purchased hence
increasing the efficiency of production
plants.
0.04 4 0.16 Shezan was increasing its production
capacity by tripling it in 1978 and
18
faster than that for
beverages at a rate of
22%.
Threats
Rising input prices/
rising cost of production.
Increasing competition in
the market
Most of the factories
were located in Punjab
province hence Slow
growing industry
With an increasing
capacity the industry was
experiencing shortage of
fruit juice supply
Competition in the
industry limited the
transfer of high cost to
consumer
Companies borrowing
more than Rs 40 million
had to pay 21% interest
rate
Lack of capacity and
poor storage facilities led
to spoilage and wastage
of various fruit crop on a
doubling it in 1987 to keep with the
fast-growing market.
0.08 3 0.24 As the price of raw material was
increasing Shezan was considering
increasing prices per case by 5% in the
following years. Moreover, the
company was looking to expand in
Hattar region to reduce cost of
production.
0.08 3 0.24 Increasing competition leading to a
division of market share among
competitors resulting in lower sales
and declining market share for Shezan,
hence the company was opting for
expansion and adding more product
lines.
0.07 3 0.21 Shezan has set up their fruit process,
bottling plant and head office in
Karachi, and was looking to expand in
the northern areas of Pakistan.
0.06 3 0.18 Shezan was increasing its production
capacity by tripling it in 1978 and
doubling it in 1982 and 1987 to keep
with the fast-growing market.
0.03 1 0.03 Increasing cost to the company as they
were bearing the cost of consumers
resulting in lesser profit margin for
Shezan.
0.05 3 0.15 Shezan was opting for purchaser
finance so that at the time of
repayment the company would pay
them back with product at a 5%
discount to their current price.
Moreover, Shezan already had 50%
funds generating from equity from
operating profit or supplied by
company owners.
0.07 1 0.07 Incapabilities at the end of Shezan as
they only used 30% of the total fruit
juice in their production resulting in
demand not fulfilled and
19
 large scale throughout environmental degradation.
the industry

Total 1 3.12

Since, the score 3.12 is greater than 2.5, hence, it represents that the company has responded
efficiently, and effectively towards the external market factors, which has resulted in
increase in its Sales and the company’s footprint across Pakistan.

Section II: Internal Analysis

20
Strategic Orientation
Corporate Level Strategy
1. Related Diversification
Related diversification is the process by companies will introduce new products
which are similar to the existing products. Shezan also went through related
diversification by introducing new flavours of juices and other food products. For
example, from 1965 to 1969 company introduced different flavours like orange,
grapes, plum and lemon barley. In 1970 mango lemon and orange squashes and in
1971 marmalade and ketchup was also introduced.
2. Expansion Strategy
This strategy involves adding new facilities to existing location in order to increase
its capacity and capabilities. Due to rapid increase in the demand of Shezan products
the expansion was necessary, although the company was increasing its capacity but to
cater to an increase there was a need for additional facility hence, the company was
focusing whether to expand in the existing location or enter a new geographic region
in the north to cater to an increasing demand.
3. Market Development/ Growth Strategy
Growth strategy is an organization`s plan to expand its business like acquiring new
assets and improving organizations products or services. Shezan massively focused on
rapid expansion. In 1982 Shezan opened a new plant at Karachi which helped the
company to target a greater number of customers. This plant also helped the company
to reduce its transportation cost. Later expansions were made in Karachi and Lahore
plants in 1987.
4. Public/ Direct Offering
Public offering is the sale of shares and other financial instruments. Shezan
international went public in early 1989 at Rs 38. The dividend of 1989 was paid on
September 1 at Rs 3 per share. Later the company focused on strictly following the
dividend policy by providing dividend at the same rate as income growth.
5. Financial Strategy
Shezan has developed its financial strategy where the funds needed came 50% from
loans and 50% from the equity generated by the firms operating profits or supplied by
the company owners. The other financing options for Shezan included bank financing
in which they had to pay interest and purchaser financing where they could borrow
money from distributor and pay them back with 5% discount to the current price.

Business Level Strategy

1. Cost leadership (best value)
The company is focusing on reducing the cost of production via expansion and
standardization of products however, it is also focusing on providing the customers
with the best value products. Shezan has established a research and development
laboratory to improve quality and development of new fruits products. They are
working continuously to improve the products being provided to the customers by
incorporating new packaging such as tetra pack to prevent spoilage and wastage of
end products. Moreover, they are also focused towards adding new products that are
highly demanded by the customer.

Functional level Strategy

1. Market Penetration

21
 Market penetration is the process which will measure that up to which extent the
companies offered product is used by the target customers. Shezan used different
strategies to capture the market like increasing production capacity. Shezan
intensively focused on quality of product and continuous growth, other then juices
Shezan also offered different products like squashes and marmalades and tomato
ketchup.
2. Product Development
Product development is the process of designing and marketing of newly created or
redesigned products. In the beginning the company introduced orange juice but faced
different problems like poor shelf life. Then company overcome these problems by
preserving juice into different packaging and they also introduced different flavours.

22
Template 7: Firms Objectives
Financial Objectives

1. Working capital needed for expansion in form of loan and advances, deposit and
repayment proportional to the current production of 27 million litres.

2. Increasing domestic sales in Hattar in year 1 by 1 million cases and in two to five;
1.25, 1.5, 2.0, and 3.0 million cases.

3. 30% of the cost was contributed to trucks travelling back and forth, with expansion
in Hattar the cost was estimated to reduce by 60%.

4. Arranging finances of 40 million from banks at 18% per annum, and purchaser
financing repayment at 5% discount.

5. Cost cutting by reducing the cost of production from 60% to 50.75% of sales in
Hattar after expansion.

6. Increase dividend at the same rate as company and income growth rate by 30%.

Strategic Objectives

1. Establishing export capabilities in the middle eastern countries.

2. Deal with competition to reduce the market share squeeze and suffering
profitability.

3. Cater to an increasing demand in the market by increasing production capacity.

4. Expanding in Hattar region to cater to the demand of Northern Region and decrease
transportation costs.

5. Product Development by including syrup, jams, marmalades, bottle and tetra pack
juices and squashes in different packaging.

Template 8: Firms Resources

Tangible Resources

Financial Firms’ ability to raise equity, firms borrowing capacity from banks and
purchasers, stock in trade, payment of dividends, trade finance
certificates.

Physical Plant in Karachi, Equipment for bottling and packaging, water

treatment unit, turbines, refrigeration unit, air compressors, blending
and syrup tanks, pump, pipes and fixtures, boiler and pasteurisers.

Technological Refrigeration, electricity line, Research and Development laboratory

for quality improvement and new products development.

Organizational Efficient decision making of Directors, Vice president and Chairman,

Excellent evaluation and control system, market expansion,

23
 diversification of product line, planning for debt repayment,
procurement plan for equipment, cost analysis for expansion.

Intangible Resources

Human Experienced management team suitable for expansion, skills of

directors, companies’ contribution to provident funds, salaries, wages
and amenities provided to employees.

Innovation & Diversification of product line, new packaging for fruit juice i.e., tetra
Creativity pack, testing and modification of new equipment.

Reputation Biggest seller of mango fruit juice, first mover advantage in fruit juice
production, new corporate culture, donations.

Organizational Capabilities

1. New product diversification.

2. Cater to an increasing demand of market.

3. Export capabilities to middle eastern countries.

4. Research and development for new product development and quality

improvement.

5. Ability to cater to untapped market and conduct cost analysis for expansion.

Sustained Competitive advantage of the firm includes:

 Shezan has the first mover advantage in fruit juice production and became the best
seller of mango juice.
 They were rapidly solving their production and preservation issues of product by
focusing on Research and Development.
 The company was listed on Karachi stock exchange enabling it to establish its
export capabilities with in the country and later in middle eastern countries.

Template 9: Criteria for SCA & Implications

24
 Substitutable
Competitive Performance
Valuable?

Costly to
Imitate?
Rare?

Non-
Consequences Implications

YES YES NO NO Temporary Competitive Average to Above

Advantage Average Returns

Reason or Logic for Selection

After performing the value chain analysis in combination with Resource Based View, it has
been concluded that the company is falling under the Temporary Competitive Parity,
where the results of VC activities are giving Average to above Average returns, hence,
the company's competitive consequence is Not a Sustained Competitive Advantage.

25
Template 10: Value Chain Analysis

General Expansion Planning (P+), Cost Cutting Planning (P+), Working Capital (P+), Organisational Repute (P+), Dividend
Administration Payment (P+)
Infrastructure

HRM Salaries, Wages and Amenities (P+), Insurance (P+), Travelling and Conveyance (P+), Provident Funds (P+),
Competent Employees (P+), Donation & New Corporate Culture (P+)

Technology Research & Development (P+), State of Art Facility and Equipment (P+), Creativity & Innovation(P+), Production
Development Capacity (P+), Diverse Product Range (P+)

Procurement Capital Equipment (P+), Cost of Equipment(P+), Cost of Fuel and Power (P+), Cost of Bottle Breakage (P-)

Distribution Testing (P+), Trucking System to Deliver Identification Of Quick

Facility in Lahore Machining (P+), R Product (P+), Quality Customer Response to
and Karachi(P+), & D To Improve Material Handling to Demand(P+), Effective Market
Procurement of Quality (P+), Repair Reduce Breakage (P+), Pricing Strategy(P+), Demand
Fruits at Low Cost and Maintenance Fuel and Power (P+), Export Capabilities for (P+)
(P+) (P+) Travelling and Distribution (P+),
Conveyance(P+) Sampling (P+)

Inbound Operations Outbound Logistics Marketing Services

Logistics

26
Template 11: Value Chain & Resource Base View

Resource/activity Is it Is it rare? Difficult to Few Competitive Performance

valuable? Yes/No/NA imitate? substitutes? Consequences Implications
Yes/No/NA Yes/No/NA Yes/No/NA

Inbound Logistics Yes No Yes No Temporary competitive Above average-to-

advantage average returns
Primary Activities

Operations Yes No Yes Yes Temporary competitive Above average-to-

advantage average returns

Outbound Logistics Yes No No No Competitive parity Average returns

Marketing and Sales Yes No Yes No Temporary competitive Above average-to-

advantage average returns

Service Yes No No No Competitive parity Average returns

Procurement Yes No No No Competitive parity Average returns

Support Activities

Technology Development Yes No Yes No Temporary competitive Above average-to-

advantage average returns

Human Resource Yes No Yes No Temporary competitive Above average-to-

Management advantage average returns

General Administration Yes No Yes Yes Temporary competitive Above average-to-

advantage average returns

27
 Results:

As most elements of the value chain are falling under Temporary Competitive
Advantage, there the results of VC activities are giving Above average-to-average
returns, therefore VC is Not a sustained competitive advantage to company

Template 12: Competitive Profile Matrix

Company Competitor 1 Competitor 2

Name of Companies Shezan Packages Bambino Food

Limited. Ind.

Critical Success Factors Weight Rate Score Rate Score Rate Score

Production 0.40 3 1.2 2 0.80 4 1.6

Company Age/Established 0.10 4 0.40 3 0.30 2 0.20

In

Distribution 0.20 4 0.80 4 0.80 4 0.80

Size 0.30 3 0.90 3 0.90 4 1.2

TOTAL 1.00 3.3 2.8 3.8

Final Result:

Since, the total value of Bambino Food Industries is 3.8 as compared to Packages Limited
(2.8), and Shezan International (3.3), it can be said that Bambino Food Industries is better
positioned in the market.

28
Template 13: Competency Tree

Juices and Canned Jams and Ketchup and Pickles and

Syrups Fruits and Marmalades Sauces Chutneys
Vegetables

Shezan International

CORE PRODUCTS

Syrups

Beverages

Sauces

Competency 1 Competency 2 Competency 3 Competency 4

Leadership Capabilities Financial Management Innovation and R & D Distribution

Conclusion: Shezan international is a well-established brand, since it is managing its core competency to provide core products to the customers
under their brand name.

29
Template 14: TOWS Matrix
Opportunities Threats

O1: Minimum representation of other provinces in T1: Rising input prices/ rising cost of production.
food and beverage industry.

O2: Karachi was the largest consumer market with T2: Increasing competition in the market.
approximately 50% of the total fruit juice
consumption.

O3: Lahore and Islamabad were the second largest T3: Most of the factories were located in Punjab
consumer market with approximately 20% of the province hence Slow growing industry.
total consumption.

O4: Special tax incentive at Hattar of 5-8 years T4: With an increasing capacity the industry was
holiday on 35% income tax. experiencing shortage of supplies.

O5 Relief on electricity bill in Hattar region. T5: Competition in the industry limited the transfer
of high cost to consumer.

O6: Mango and lemon juices are the most popular in T6: Companies borrowing more than Rs 40 million
the summer month & Oranges & Guava in winters. had to pay 21% interest rate.

O7: Fruit juices had become extremely popular T7: Lack of capacity and poor storage facilities led
nation-wide. to spoilage and wastage of various fruit crop on a
large scale throughout the industry.

O8: No import duties in Hattar on capital equipment

used in factories

O9: The production capacity of fruit juice has grown

faster than that for beverages at a rate of 22%.

30
 Strengths

S1: Research & development S1+O2+O3= Launch new flavours, cater to expand S1+T1+T2= Reduce additional expenditure, benefit
laboratory to improve quality in other regions → product development/ market sought marketing → differentiation, cost leadership
and development of new fruit development.
products.

S2: Shezan found that mango S2+O6+O7= Advertisement via TVC + billboard → S2+T2+T3+T4+T7= Vendor relationship
juice was still the biggest market penetration/ IMC. management, expansion into new region, increase
seller. production capacity → integrated supply chain
strategy, growth strategy.

S3: Karachi's new location gave S3+O1+O2=Spending on advertisements, increase S3+T4+T1= Vendor managed inventory, contract
Shezan access to large farms production capacity to cater to increasing demand by buying → supply chain management.
with better quality and low expanding →market development/growth strategy.
price.

S4: Export capabilities within S4+O7+O9=Brand awareness, line extension, S4+T2+T3= Expand to new region, launch new
the country with diverse introduction of new products → brand positioning, product → growth strategy, product development.
product line. market penetration, market development.

S5: Rapid demand growth for S5+O6+O7+O9= Benefit sought marketing, S5+T7= Purchase warehouse for storage, take
Shezan products leading to advertising, bundle offers, customer centric approach initiative to avoid spoilage and wastage, manage
diversification. → IMC, differentiation. demand forecasting →growth strategy, internal
development.

S6: Four acres of land required S6+O3+O6= Expand into region→ market S6+T6=Raise capital from external finances →
for the new building was development/ cost leadership, internal development. growth strategy
available in Lahore.

S7: Working capital required S7+O4+O5+O8+O9= Expansion to new market, S7+T9+T6+T5= Production planning for sourcing
was expected to be proportional increase production capacity→ market development, of funds → growth strategy, cost leadership, asset

31
to current Shezan production. growth strategy. management, internal development.

S8: Shezan could borrow S8+O4+O5+O8= Good relations with authorities, S8+T6+T5= Production planning for sourcing of
money from the distributors in integrated supply chain network → growth strategy. funds → growth strategy, cost leadership, asset
the northern region. management, internal development.

S9: Shezan’s new technology S9+O8=Import of new state-of-the-art machinery S9+T1+T7= Focus on sustainable practices, vendor
created more efficient processes and bottles → cost leadership, differentiation. managed inventory → cost leadership, supply chain
with less wastage. integration.

S10: Islamabad & Rawalpindi S10+O1+O3= Mass marketing, TVC ads, bundle S10+T2+T3+T4= Brand advertising, customer
accounted for 25% of Shezan offers, expansion in north → IMC, differentiation, centric approach, benefit sought marketing,
sales. growth strategy. expansion to new regions→ brand positioning,
growth strategy.

Weakness

W1: Many trucks were forced W1+O1+O2+O3+O9= Focus on expansion, increase W1+T2+T3+T4= Increase capacity, expand benefit
to wait or return with only a production capacity, increase raw material storage → sought marketing → differentiation, cost leadership,
portion of the order. growth strategy, Product development. growth strategy.

W2: Expansion will increase W2+O4+O5+O8=Minimise cost in other W2+T6= Production planning for sourcing of
staff costs by 10% and new components i.e., transportations, target wider funds, → growth strategy, cost leadership, asset
facility costs would increase by customer base, expand to Northern region→ cost management.
20%. leadership, growth strategy.

W3: Dividend policy was not W4+O9= Increase sales efforts, R&D for risk W4+T2= Focus on increasing sales, R&D for risk
strictly adhered. management, mass marketing and advertising→ management, demand forecasting → market
market development, IMC. penetration.

W4: Arranging for banks W4+O4+O5+O6+ O7= Good relations with W4+T6=Raise capital from external finances,
financing was a slow process government, production planning, demand forecast, focus on R & D, operational efficiency →growth

32
and the project was delayed if
the banks were not cooperative.
W5: Cost of production was
over 60% of the sales.
W6: Between training of new
staff production would be low.
expansion in Hattar region→ internal development,
growth strategy.
W5+O4+O5+O8= Expand to new region → market
development/ growth strategy, product development,
market penetration.
W6+O7+O9= Marketing of available flavours,
increase production capacity, add more machinery to
reduce production lead time → IMC, market
penetration, response strategy.
strategy.
W5+T1+T2+T4= Reduce overall expenditure,
focus on R&D for risk management, increase sales,
reduce wastage → growth strategy, cost leadership.
W6+T1+T2= Marketing of available flavours,
increase production capacity, add more machinery
to reduce production lead time, R&D for risk
management → IMC, market penetration, response
strategy.
33
Template 15: Internal Factor Evaluation Matrix [IFE]
Strengths
Research & development
laboratory to improve
quality and development
of new fruit products.
Shezan found that mango
juice was still the biggest
seller.
Karachi's new location
gave Shezan access to
large farms with better
quality and low price.
Export capabilities
within the country with
diverse product line.
Rapid demand growth for
Shezan products leading
to diversification.
Four acres of land
required for the new
building was available in
Lahore.
Working capital required
was expected to be
proportional to current
Shezan production.
Shezan could borrow
money from the
distributors in the
northern region.
Shezan new technology
created more efficient
processes with less
Weight Rate Score Comments
0.04 4 0.16 In 1970, the company created an R&D
laboratory to work towards providing
improved quality and new products to
the customers.
0.08 4 0.32 To keep up with an increasing demand
the production capacity was tripled by
the company.
0.06 4 0.24 Shezan was expanding in Karachi in
1982 which provided them with cost
opportunities than Lahore’s location
which they further expanded in 1987
to include production of mango,
lemon, apple, guava juices, squashes,
jams, and syrups.
0.04 3 0.12 Within the country, exports provided
Shezan with an opportunity to expand
into international markets where there
were little fruit juice or fruit products.
0.07 4 0.28 In 1987, both the plants in Lahore and
Karachi were expanded to cater to an
increasing demand, and the capacity
was doubled.
0.04 4 0.16 As the land was already available with
Shezan the cost of infrastructure was
10% lower than building a new
facility, however there as still cost of
staff and new equipment.
0.06 4 0.24 The company does not require excess
financing from banks and purchasers’
finances, the sales itself are sufficient
for the expansion however, there was
a need to take government's
permission in all approvals.
0.04 3 0.12 Shezan has an opportunity to take
finances from purchasers with a
repayment at 5% discount and also
from the banks at 18% per annum.
0.06 4 0.24 The new plant was more efficient than
Shezan’s previous plant as the
machinery was imported, wastage was
34
 wastage. reduced, production capacity was
increased creating a culture of
achieving goals.

Islamabad & Rawalpindi 0.08 4 0.32 The new expansion would reduce cost
accounted for 25% of transportation, and enabled Shezan
Shezan sales. to increase their sales which are 25%
of the total.

Weakness

Many trucks were forced 0.10
to wait or return with
only a portion of the
order.
1 0.10 As there was no production the trucks
had to leave empty due to which
Shezan was catering towards
expansion to increase capacity with an
increasing demand.

Expansion will increase 0.07 1 0.07 The expansion was adding cost for
staff costs by 10% and staff and facility meanwhile already
new facility costs would available land for expansion was
increase by 20%. reducing cost for Shezan.

Dividend policy was not 0.04 2 0.08 Previously there was no strict policy
strictly adhered. of dividends, but Shezan was working
to increase the dividend at the same
rate as income growth rate.

Arranging for banks 0.06
financing was a slow
process and the project
was delayed if the banks
were not cooperative.
1 0.06 The company has to pay up bank at
18% per annum half inform of loan
and trade finance certificate to raise up
to 40 million.

Cost of production was 0.09 1 0.09 Shezan was working to reduce the cost
over 60% of the sales. of production to 50.75% in the new
expansion.

Between training of new 0.07 1 0.07 This was increasing the burden on
staff production would be Shezan finances and production in the
low. short-run while in the long-run it
provided the company with an
opportunity to increase sales each
year.

Total 1 2.67

Since, the value calculated is 2.67 which is greater than 2.55, this means that the company
has responded well to its internal strengths, and weaknesses, in order to gain the maximum
out of its resources, and available opportunities, as well as to tackle the impending threats.

Financial Analysis

35
 Income Statement (000)
1989 1988
Sales 327357 300908
Cost Of Sales 216592 196640
Gross Profit 110765 104268

Operating Expenses 79001 68373

Administrative And General Expenses 10184 9621
Selling And Distribution Expense 54106 46939
Financial Charges 1762 2567
Other Expenses 12949 9246

Operating Profit EBIT 31764 35895

Other Income 7400 3128
Profit Before Taxation EBT 39164 39023
Provision Of Taxation 14000 15200

Profit After Taxation NI 25164 23823

36
 Balance Sheet (000)
1989 1988
Total Assets 177137 153819

Current Assets 129869 106158

Stock In Trade 82458 65052
Stores And Spares 13058 12037
Trade Debts 6905 4115
Loan And Advances 8731 994
Deposits And Repayments 5159 2050
Sales-Tax Refundable 112
Cash And Bank Balances 13446 21910

Tangible Fixed Assets 47268 47661

Operating Fixed Assets 46979 43405
Capital Work in Progress 289 4256

Total Liabilities and Owners Equity 177137 153819

Total Liabilities 69980 56826

Current Liabilities 61783 44022

Short Term Loan and Running Finances 7606 6790
Creditors, Accrued and Other Liabilities 29533 24731
Provision For Income and Super Tax 9644 12501
Proposed Dividends 15000

Long-term Liabilities 8197 12804

Long-term Loan 3397 8004
Deferred Taxation 4800 4800

Owners Equity 107157 96993

Share Capital 50000 50000
Revenue Reserve and Unappropriated Profit 57157 46993

37
Income Statement-Vertical Analysis
1989 Percentage 1988 percentage
Sales 327357 100.00% 300908 100.00%
The sales are 100% as it is taken as a base year to make comparison with other
components.

Cost of sales 216592 66.16% 196640 65.35%

Each year the cost of sales values is approximately 65% or above, in year 2 the value is
increasing as raw material consumed, factory expenses i.e., salaries, general expense,
repair and maintenance are increasing.
Gross Profit 110765 33.84% 104268 34.65%
The gross profit margin is 33.84% in year 2 which is decreasing as the cost of sales have
increased by 0.81%.
Operating Expenses 79001 24.13% 68373 22.72%
Administrative And General Expenses 10184 3.11% 9621 3.20%
Selling And Distribution Expense 54106 16.53% 46939 15.60%
Financial Charges 1762 0.54% 2567 0.85%
Other Expenses 12949 3.96% 9246 3.07%
The operating expenses is 24.13% of sales in year 2 which has increased by 1.41% as the
administrative and general expenses have decreased by 0.09%, while selling and
distribution by 0.93% and other expenses by 0.89% have increased.

Operating Profit EBIT 31764 9.70% 35895 11.93%

EBIT is 9.70% of sales which has, declined with an increasing impact of cost of sales
and operating expenses by 2.23%.
Other Income 7400 2.26% 3128 1.04%
This shows the interest earned is reported in the income statement under other Income
which consists of interest expense as well, the value has increased as Shezan has added
income from other sources such as rent and interest on fixed assets.
Profit Before Taxation EBT 39164 11.96% 39023 12.97%
The EBT is 11.96% of sales in year 2, which is experiencing a decline by 1.01%
however, the other income has increased by 1.22% as a percentage of sales but operating
expenses too have increased.
Provision Of Taxation 14000 4.28% 15200 5.05%
The tax is 4.28% of sales in year 2 which has declined as the company is receiving
incentive.
Profit After Taxation NI 25164 7.69% 23823 7.92%
The net income in only 7.69% of the sales which has decreased as compared to last year
due to an increase in expenses.

38
39
Balance Sheet- Vertical Analysis
Percentag Percentag
1989 e 1988 e
17713 15381
Total Assets 7 100.00% 9 100.00%
The total assets are 100% as it is taken as a base year to make comparison with other
components.

12986 10615
Total Current Assets 9 73.32% 8 69.01%
Stock In Trade 82458 46.55% 65052 42.29%
Stores And Spares 13058 7.37% 12037 7.83%
Trade Debts 6905 3.90% 4115 2.68%
Loan And Advances 8731 4.93% 994 0.65%
Deposits And Repayments 5159 2.91% 2050 1.33%
Sales-Tax Refundable 112 0.06%
Cash And Bank Balances 13446 7.59% 21910 14.24%
The total current assets are 73.32% of total assets where stock in trade is 46.55%, stores
and spares are 7.37%, trade debt are 3.90%, loan and advances are 4.93%, deposits and
repayment ae 2.91%, sales-tax refundable are 0.06% and cash and bank balances are
7.59%. This shows that most of the component is taken by illiquid assets such as
inventory.

Total Tangible Fixed Assets 47268 26.68% 47661 30.99%

Operating Fixed Assets 46979 26.52% 43405 28.22%
Capital Work in Progress 289 0.16% 4256 2.77%
The total fixed assets are 26.68% of total assets where operating assets are 26.52% and
capital work in progress is 0.16%. The major portion is taken by operating fixed asset
which consists of long-term equipment such as machinery to keep the plant running.

17713 15381
Total Liabilities and Owners Equity 7 100.00% 9 100.00%

Total Liabilities 69980 39.51% 56826 36.94%

Current Liabilities 61783 34.88% 44022 28.62%

Short Term Loan and Running Finances 7606 4.29% 6790 4.41%
Creditors, Accrued and Other Liabilities 29533 16.67% 24731 16.08%
Provision For Income and Super Tax 9644 5.44% 12501 8.13%
Proposed Dividends 15000 8.47%

Long Term Liabilities 8197 4.63% 12804 8.32%

Long-term Loan 3397 1.92% 8004 5.20%
Deferred Taxation 4800 2.71% 4800 3.12%
The total liabilities are 39.52% of which the current liabilities are 34.89% of total

40
liabilities and owners’ equity, where short-term loan is 4.29%, creditor, accrued and
other liabilities are 16.67%, provision for income and super tax is 5.44% and proposed
10715
Owners Equity 7 60.49% 96993 63.06%
Share Capital 50000 28.23% 50000 32.51%
Revenue Reserve and Unappropriated
Profit 57157 32.27% 46993 30.55%

The owner’s equity is 60.48% of total owner’s equity and liabilities where share capital
is 28.22%, revenue reserve and unappropriated profit is 32.26%. The major portion is
taken by revenue reserves which are needed to be invested back to business.

41
42
Income Statement- Horizontal Analysis
1989 % change 1988
Sales 327357 8.79% 300908
The sales have increased by 8.79% due to an increase in domestic sales and exports.

Cost Of Sales 216592 10.15% 196640

The cost of sales has increased by 10.15% as raw material consumed, factory expenses
i.e., salaries, general expense, repair and maintenance, traveling and conveyance, fuel
and power, bottle breakage have increased.

Gross Profit 110765 6.23% 104268

The gross profit has increased by 6.23% only as the increase in sales in lower than an
increase in cost of sales.

Operating Expenses 79001 15.54% 68373

Administrative And General Expenses 10184 5.85% 9621
Selling And Distribution Expense 54106 15.27% 46939
Financial Charges 1762 -31.36% 2567
Other Expenses 12949 40.05% 9246
The operating expenses have increased by 15.54% as administrative and general
expenses have increased by 5.85%, selling and distribution expense increased by
15.27%, other expenses by increased 40.05% and financial charges have decreased by
31.36% depicting that the company is expanding its operations where there are lower
financial charges.

Operating Profit EBIT 31764 -11.51% 35895

The EBIT has decreased by 11.51% as a result of increasing operating expenses.

Other Income 7400 136.57% 3128

Income from other sources have increased by 136.57% which also depicts a portion of
income earned from other sources such as rent and interest on fixed assets.
Profit Before Taxation EBT 39164 0.36% 39023
The EBT has increased by 0.36% due to an increase in other income.

Provision Of Taxation 14000 -7.89% 15200

Taxes paid have declined by 7.89% as the company is receiving tax incentive.

Profit After Taxation NI 25164 5.63% 23823

The NI has increased by 5.63% as sales, other income has increased and taxes have
decreased.

43
 Chart Title
1 2 3 4 5 6 7 8
20.00%

15.54%
15.00%

10.15%
10.00% 8.79%

6.23%
5.63%
5.00%

0.36%
0.00%
le
s
le
s fit se
s IT
EB
T on NI
Sa a Pro en EB ati n
fS s p fit on ax tio
to os Ex Pr
o ati T ax
a
Co
s Gr g ax of T
-5.00% tin tin
g T n er
er
a a re i sio ft
Op per e fo ov t A
O tB Pr ofi
ofi Pr
Pr -7.89%
-10.00%

-11.51%

-15.00%

44
Balance Sheet- Horizontal Analysis
1989 % change 1988
Total Assets 177137 15.16% 153819

Current Assets 129869 22.34% 106158

Stock In Trade 82458 26.76% 65052
Stores And Spares 13058 8.48% 12037
Trade Debts 6905 67.80% 4115
Loan And Advances 8731 778.37% 994
Deposits And Repayments 5159 151.66% 2050
Sales-Tax Refundable 112
Cash And Bank Balances 13446 -38.63% 21910

The current assets have increased by 22.34% as stock in trade by 26.76%, stores and
spares are 8.48%, trade debt are 67.80%, loan and advances are 778.37%, deposits and
repayment ae 151.66%, and cash and bank balances have decreased by 38.63%. This
shows that most of the component is taken by loans and advances taken by company to
expand.

Tangible Fixed Assets 47268 -0.82% 47661

Operating Fixed Assets 46979 8.23% 43405
Capital Work in Progress 289 -93.21% 4256
The total fixed assets have declined by 0.82%, where operating fixed assets have
increased by 8.23%, while capital work in progress has decreased by 93.21% due to the
inability of the company to meet full capacity to fulfill demand.

Total Liabilities and Owners Equity 177137 15.16% 153819

Total Liabilities 69980 23.15% 56826

Current Liabilities 61783 40.35% 44022

Short Term Loan and Running Finances 7606 12.02% 6790
Creditors, Accrued and Other Liabilities 29533 19.42% 24731
Provision For Income and Super Tax 9644 -22.85% 12501
Proposed Dividends 15000

Long Term Liabilities 8197 -35.98% 12804

Long-term Loan 3397 -57.56% 8004
Deferred Taxation 4800 0.00% 4800

45
The current liabilities have increased by 40.35% where short-term loan have increased
12.02%, creditor, accrued and other liabilities are increasing by 19.92%, provision for
income and super tax have decreased by 22.85% as the value of tax paid has declined
due to incentives provided by government. While in the long-term liabilities long-term
loans have decreased by 57.56% while deferred taxation remained the same.

Owners’ Equity 107157 10.48% 96993

Share Capital 50000 0.00% 50000
Revenue Reserve and Unappropriated Profit 57157 21.63% 46993

The owner’s equity has increased by 10.48%, where share capital by stakeholder is same,
revenue reserve and unappropriated profit has increased by 21.63% for reinvestment in
business

46
47
Ratio Analysis
Short Term Solvency/Liquidity Ratio
Ratio Formula 1989 1988
Net Working Capital CA-CL 68086 62136
Depicts the amount left with once done spending on all current obligations. It is the current assets,
that are readily converted to cash minus current liabilities that must be paid off in a year. The
larger your net working capital balance is, the more likely it is that your company can cover its
current obligations. The ratio has increased, showing companies’ capabilities to meet term short-
term obligation.

Current Ratio CA/CL 2.102 2.411

The current ratio has decreased from 2.4 to 2.1 which is a good indicator, for every Rs 1 in
current liabilities Shezan has 2.1 current assets however, the value of stock in trade has increased
depicting more money tied up while cash and bank balance have decreased showing little liquid
assets.

Quick Ratio (CA-Inventory)/CL 0.767 0.934

After subtracting the illiquid asset inventory, the ratio has decreased by 0.16 times showing that
for every 1 Rs of current liabilities, Shezan has 0.767 current assets. The value of Current
liabilities has increased greater than current assets as short-term loan, creditor accrued and other
liabilities have increased while, the company has also proposed dividend of Rs 15000.

Cash Ratio Cash/CL 0.218 0.498

The cash Ratio shows the companies capacity to pay off short-term debt obligation with its cash
and cash equivalents, the ratio is declining as the cash company is holding is decreasing due to
their spending on operating expenses such as salaries, wages, provident funds while current
liabilities are also increasing.

Long Term Solvency/Financial Leverage Ratio

Ratio Formula 1989 1988
Total Debt Ratio (TA-OE)/TA 0.395 0.369
The total debt ratio has increased which is a bad indicator as the company is taking more debt for
its creditors.

Debt to Equity Debt/Equity 0.032 0.083

The ratio shows how much debt a company has compared to its assets, Shezan has a decreasing
debt to equity ratio which shows that the company may have been covering its liabilities, their
long-term debts are decreasing by 57.56% hence making them efficient.

Equity Multiplier TA/TOE 1.653 1.586

It measures companies financial leverage, which is the amount of money the company has
borrowed to finance the purchase of assets. Both total assets and owners’ equity has increased but
the increase in total assets is by 15% as compared to owners’ equity by 10%.

48
 Asset Utilization/Turnover Ratio
Ratio Formula
Inventory Turnover COGS/Inventory 2.627 3.023
The ratio has decreased as the value of inventory has increased by 26% while cost of sale has
increased by 10%. This shows that how much time the company is taking to convert its inventory
to Cost of sale. For every 1 Rs Shezan is selling 2.62 cases.

Days Sales in Inventory 365/Inventory Turnover 138.96 120.75

This ratio shows the number of days it takes for the firm to produce and sell its inventory. The
ratio has increased to 139, as the company is not managing its inventory properly and have idle
cash build up.

Total Asset Turnover Sales/TA 1.85 1.96

The sales are increasing by 8% while total assets are increasing by 15% due to which the ratio is
decreasing. For every 1 Rs in asset, Shezan is generating 1.84 Rs of sales, this decline is a bad
indicator as the company is not using its assets effectively to generate sales.

Capital Intensity TA/Sales 0.5411 0.5112

Shows how effectively a company operates, a low ratio is better as it shows the tendency of
utilizing assets to make profit and over the year the ratio has increased which is a bad sign as total
assets have increased by a larger percentage than total sales.

Profitability Ratio
Ratio Formula 1989 1988
Profit Margin Net Income/Sales 0.077 0.079
The profit margin ratio has decreased as net income increased by 5% while sales by 8%. Shezan
is generating 7% in profit for every 1 Rs in sales.

Gross Profit Margin Gross Profit/ Sales 0.338 0.347

The gross profit margin shows the percentage of revenue that exceeds the cost of sale. Here the
ratio has declined as the cost of sale have increased by 10.15% as compares to sales that increased
by 8.79%. The company is incurring more cost in form of factory expenses.

Operating Profit Margin Operating Profit/Sales 0.097 0.119

The operating profit margin ratio indicates how much profit a company makes after paying for
variable costs of production such as wages and raw materials. The ratio has declined as the
companies operating expenses in form of administrative and general expenses etc. has increased
by 15.54%.

Return On Asset (ROA) NI/TA 0.142 0.155

It shows how profitable a company in relation to its total assets, the ratio is declining as assets
have increased by 22% while net income only increased by 6%. This is a decreased indicating the
company has more debt and its not managing its assets effectively.

Return On Equity (ROE) NI/OE 0.235 0.246

49
 A lower value indicates that company is not efficiently using shareholders equity to generate
income. The net income increased by 5.63% while equity increased by 10% which shows that
although the investors are adding more money but the company is inefficient in generating
revenue.

Market Value Ratios

Ratio Formula 1989 1988
Price Per Share/Earning Per
Price Earning Ratio Share 9600.293 4095.931
NI - Dividend/ Shares
Earning Per Share Outstanding 0.001 0.002
The price earning ratio shows stock is undervalued or overvalued, a higher value depicting that
that the earning per share of the company is quite low as the number of share outstanding are
high. A higher ratio is bad for Shezan as more shares are kept with shareholders and not bought
back by the company since it is affecting the price volatility of Shezan stocks.

50
 Overall Remarks

 Shezan International is managing its assets and liabilities efficiently, as evident from
the financial analyses performed.
 Shezan has been successful in utilizing its resources i.e., assets, equity, etc. to
generate sales, and make revenues.
 Company’s liquidity ratios have increased, depicting that the company is taking more
loans for expansion purposes.

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  Profitability, and firm’s overall performance is also improving.
 On the contrary, the cost of production is also increasing which means that quantity
supplied at a given price will decrease.

Remaining Steps of WAC

Issues
1. In 1965, the first starting problem was the shelf-life of the fruit juices because in
summer the weather was hot. But in 1966, they solved the problem but still later in
1967, the company expanded the production in which fruit juices (including plum
grapes, apple and grape) were removed from shelves because they found that the fruit
juices had fermented and started selling as alcohol.
2. In the early stage, their financial performance was not good because the starting three
years they were not showing the profit and drew on owners’ equity to fulfil the
financial responsibilities. Later, the company in 1969 showed their first operating
profits in which the company was seen profitable.
3. Shezan did not fulfil the demand because they did not have enough production of fruit
juices. Due to not having enough production of fruit juices to service all orders, a lot
of trucks have to wait and fill only a few portions of orders.
4. Managing the bank financing was the main issue because the process was slow and if
banks were not collaborative that result could be delayed in projects and if the Shezan
company wants more money they can get a loan from banks but at a higher interest
rate.
5. A lot of fruits crops was experiencing wastage and breakdown because they have less
capacity and bad storage system on a large scale and also their cost of production is
high leading to increase in the price of fruit juices.

Main Opportunity
After performing WAC analysis, the main opportunity was to take decision whether to
expand in Lahore or Hattar in order to meet continuously increasing demand.

Main Problem or Opportunity

1 Sub Problem + 2 Sub Opportunities

 Problem
Many trucks were forced to wait or return with only a portion of the order.
 Opportunity
Special tax incentive at Hattar of 5-8 years holiday on 35% income tax.
 Opportunity
Relief on electricity bill in Hattar region along with No import duties on capital
equipment used in factories.

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Strategic Alternatives

Alternative 1: Expansion strategy

Expanding the existing facility in Lahore to cater to an increasing demand of the market.

Alternative 2: Market Development/ Growth Strategy

Expanding in the Hattar region to setup a new plant to cater to an increasing demand of
northern region as well as reducing transportation cost.

Alternative 3: Product development

Adding new range of diverse flavors of juices and beverages, syrups and sauces.

Evaluation of Alternatives

ALTERNATIVE 1: Expansion Strategy

Pros Cons

 Increase production capacity  High capital investment

 Operational efficiency
 Geographic reach
 Improved customer service
 Project management challenges
 Operation disruption in existing work
 Market demand uncertainty
 Regulatory and environmental
consideration

ALTERNATIVE 2: Market Development/ Growth Strategy

Pros Cons

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 Increased market share  Uncertainty in market
 Competitive advantage by focusing  Resource allocation
on a segment that has been  Operational challenges
previously untapped
 Increase revenue potential
 Economies of scale

ALTERNATIVE 3: Product Development

Pros Cons

 Expanded market opportunities  High development cost

 Competitive advantage  Intensive time and resources required
 Increasing customer satisfaction
and loyalty
 Brand enhancement
 Diversification opportunities

Selection of Best Alternative

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Qualitative Analysis for Market Development/ Growth Strategy

Lahore Hattar

 Expansion in Lahore meant a  Hattar was a newly declared industrial

continuation of Shezan's
operations.
 It does not require an entirely new
management team.
 Four acres of land already existed
in Lahore for expansion or new
setup.
 Lahore has existing infrastructure
to support further expansion.
 Utilities required for the new plant
could be added at a negligible cost.
zone in NWFP region.
 Companies planning to set up plants
or factories in Hattar region were to
receive special tax incentives
including 5-8 years holiday on 35%
income tax.
 There were no import duties on
capital equipment used in factory.
 Companies would get a relief on their
electricity bill.
 In order to receive these incentives
companies had to be a new venture,
and publicly listed which Shezan
would be.
 Setting up plant at Hattar would
reduce transportation costs by 60%.
 It would cater to the demand of the
northern regions of Pakistan, as well
as, it would meet the demand of
Rawalpindi/ Islamabad which
accounted for 25% of Shezan's sales.
 It would expand the current capacity
of Shezan by 4.5 million cases.

Quantitative Analysis for Market Development/ Growth Strategy

Existing Lahore Hattar

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 Fixed Costs
Land Required 66000 Square Foot On 4 Acre 1760000
Land Clearing Cost Rs 10000 Per Acre 40000
Cost Of Building Rs 151.5 Per Square Foot 8999100 9999000
Less Accumulated Depreciation of Building
@ 10% -999900
Bottling Equipment Cost 2000000
Boiler And Pasteurisers 500000
Water Treatment 2000000
Blending And Syrup Tank 2000000
Water Pipes 1000000
Miscellaneous Equipment 1000000
Less Accumulated Depreciation of
Equipment @ 25% -2125000
Office Equipment 1500000 1500000
Miscellaneous Costs 1000000 1000000
Management And Administrative Payroll 7000000 7700000 8400000
Administrative And General Expenses 10184000 10184000 10184000
Salaries, Wages and Amenities 12573000 12573000 12573000
Total Fixed Cost 29757000 41956100 50831100

Variable Costs
Cost Of Production 60% Of Sales 327357000 196414200 166133677.5
Distribution Cost @ 12.2% In Lahore, @
9.8% In Hattar of Sales 327357000 39937554 32080986
Wages Utilities, Equipment Expenses and
Wastage @ 6.5% Of Sales 21278205
Total Variable Cost 654714000 236351754 219492868.5

Total Cost 684471000 278307854 270323968.5

Suitable Option P
Difference
7983885.5

Projected Net Income

Y1 Y2 Y3 Y4 Y5
Cases 1000000 1250000 1500000 2000000 3000000
Price Per Case Rs 60 63 63 65 65

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Revenue 60000000 78750000 94500000 130000000 195000000

Financial Charges 2500000 2000000 1500000 1000000 500000

Other Costs 1800000 2100000 2500000 3000000 3600000

Total Costs 4300000 4100000 4000000 4000000 4100000

Net Income 55700000 74650000 90500000 126000000 190900000

% Change 34.02% 21.23% 39.23% 51.51%

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General Expansion Planning (P+), Cost Cutting Planning (P+), Working Capital (P+), Organisational Repute (P+), Government
Administration Tax Incentives (P+), Relief on Electricity Bill (P+), Dividend Payment (P+), Shares Issues as A Result of Expansion
Infrastructure (P+)

HRM Salaries, Wages and Amenities (P+), Insurance (P+), Travelling and Conveyance (P+), Provident Funds (P+),
Competent Employees (P+), Donation & New Corporate Culture (P+)

Technology Research & Development (P+), State-of-Art Facility and Equipment (P+), Creativity & Innovation(P+), Production
Development Capacity (P+), Diverse Product Range (P+)

Procurement Capital Equipment (P+), Cost of Land (P+), Cost of Equipment(P+), Cost of Fuel and Power (P+), Cost of Bottle
Breakage (P-), Cost of Transportation (P+)

Distribution Facility in Testing (P+), Machining Trucking System to Identification Of Quick

Hattar (P+), (P+), R & D To Improve Deliver Product, Customer Response to
Procurement of Fruits Quality (P+), Repair and Quality Material Demand(P+), Market
at Low Cost (P+), Raw Maintenance (P+), Handling to Reduce Effective Pricing Demand
Material for Plant from Capacity Expansion By Breakage (P+), Fuel Strategy(P+), (P+),
Abroad (P+), 4.5 million Cases (P+), and Power (P-), Export Capabilities Discounts
Discounts to Suppliers Cost of Production (P+), Travelling and for Distribution (P+)
(P+), Plant Layout Operational Efficiency Conveyance(P-) (P+), Sampling
66000 Square Feet (P+) (P+)
(P+)

Inbound Logistics Operations Outbound Logistics Marketing Services

Hattar Value Chain Analysis

58