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Final assignment

PRODUCT LEVEL PLANNING
ORDINARY PORTLAND CEMENT (GREY CEMENT) KOHAT CEMENT COMPANY

Submitted to the respected & honorable

The SIR OWAIS MUFTI

BY

QAISER ABBAS SHAH ZAMAN KHAN
MBA GENERAL 2ND SAMESTER GROUP C

INSTITUTE OF MANAGEMENT SCIENCES PESHAWAR

TABLE OF CONTENTS
1|Page

..................................... 19 1..........................................……………………................ 3 Market Analysis..................................................................................................................................... 15 Marketing Strategies………………............................... 19 References…………………………….......................................................................................................................................................................................................................Executive Summary.............. 17 Projected Profit and Loss Statement................................................................ 18 Feed Back And Control ........................ 4 Opportunities and Threats Analysis.................................................................................................................................................................................................................................................................................... 10 Objectives……………………………….........................................................................….............................................................................................. EXECUTIVE SUMMARY: 2|Page .................................. 16 Action Program…....................................18 Crux………............................................................

In this report we have selected Ordinary Portland Cement (OPC) of Kohat Cement Company simply called grey cement and we will describe how they do product planning for that? Kohat Cement Company Limited was incorporated in 1980. They have two main head offices in Kohat and Lahore along with other regional offices in many big cities of Pakistan. 3|Page . listed on Stock Exchanges of Pakistan and engaged in manufacturing of Grey and White Cements. bringing foreign reserves and help in up lifting Pakistan’s GDP. is an ISO 9001-2008 certified company. Although cement industry of Pakistan has witnessed its ups and down in recent past but in last decade it has recovered and now it’s a self-sufficient industry of Pakistan not only fulfilling domestic needs of Pakistan also exporting a huge of amount of cement to other countries. Pakistan is currently operating at their maximum capacity due to the boom in commercial and industrial construction within Pakistan. The plant is located in Kohat on Rawalpindi road about 60 kilometers from Peshawar.Cement industry is highly important segment of Pakistan’s industrial sector and plays a vital role in socio-economic development.

North zone have 19 units situated in Punjab and KPK while south zone have 10 units (mostly situated in Sindh) striving for the current domestic market of over 22. CURRENT MARKET SITUATION: This portion presents the data on the following factors. According to APCMA (All Pakistan Cement Manufacturers Association is the apex body of the cement manufacturers of Pakistan). Iron ore) easily for the production of grey cement.2. Due to this the sales of cement manufacturers will also rise every year. MAEKET SITUATION: Pakistan cement industry comprises of 29 firms dividing into 2 zones.5%.5 million tons of cement. most of the cement industries in Pakistan are located near/within mountainous regions that are rich in clay. The boost in cement sector is because of the rising construction activity in the country. 2003 to 2007 cement industry of Pakistan had registered an average growth rate of 20%. North and South zones. Kohat cement installed capacity for grey cement is 2. 4|Page . Following table shows info regarding production. The market or industry growth will be up to 15-20% annually for the next few years. Another 20-25 % growth is expected till the end of the current year. iron and mineral capacity so Kohat Cement is situated near to the mountain region of Kohat to get raw materials (Limestone 80%. requiring sophisticated infrastructure and production location. reconstruction activity in Afghanistan and increasing development expenditure by the government. PRODUCT SITUATION: Since cement is a specialized product. So.85million tons per annum while production for the fiscal year 2011 was 1. sales and export. Clay 20%.49million tons with the market share of 4.

Following charts show the revenue and cost distribution of the company.7 million after accounting for all charges inclusive of depreciation of Rs. 5|Page . 125.Clinker is a semi finished raw material used in the production of cement.562 million. Kohat Cement is producing grey cement in 50kg paper bag or polypropylene@ Rs. The company has earned a pre-tax profit of Rs.400 /bag (20 bags to a metric ton). Following table shows financial performance of company regarding grey cement.310. Increase in the profit is due to increase in demand locally and abroad as compare to last year when the company was going in loss and also increase in the prices of the cement.

North Zone As on November 2011 COMPETITAVE SITUATION: In competitive situation we will describe all the competitors of Kohat Cement producing Gray cement.G Khan Cement Companies are the market leaders with having majority market share in Pakistan and in foreign market as well. All these companies are using different marketing tactics to grape as much market share and sales as possible but they are acting like a cartel under the tree of APCMA. Lucky and D. All are using same bulk and penetration strategies to cover major portion of the market. 6|Page . Bestway. They are producing same quality of cement with all most same price and features that’s why competition in the market is very tough for local as well as foreign market. Maple Leaf. Some are using cost leadership strategy but due to cartel act behavior they are not getting the target results that they want to achieve. There are 29 firms in the market along with Kohat Cement Company producing grey cements in Pakistan with installed capacity of 44million tons per annum fulfilling 25million tons of local needs and exporting 10-15million tons in 2011.

Thatta Sub Total (South Zone) Grand Total (North+South) 540.000 1.912.Khan D.000 3.050.010.170.000 480.500 819.500 1.000 1.000 1.600.210.Wah Askari Cement .Pezu Maple Leaf Cement Factory Limited .575.725.571 42.000 2.035.382.Chakwal Fauji Cement Company Limited .000 2.000 3.000 44.000 1.000 1.000 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Askari Cement Limited .Daudkhel Lafarge Pakistan Cement Company Limited .571 300.010.550.217.500 3.428 567.G.000 Market shares of different companies according to their sales in Pakistan are given below: 7|Page .Sangjani Flying Cement Limited .047.Lilla GharibWal Cement Limited .102.000 750.Khan Cement Limited .050.Kohat Lucky Cement Limited .500 2.Jehlum Dewan Hattar Cement Limited .728. Name Of Unit Operational Capacity Clinker Cement 1.250 37.750 1.677.571 1.D.857 South Zone 1 2 3 4 5 Al-Abbas Cement Limited .G.000 3.G.500 3.500.Khushab Sub Total (North Zone) 1.000 2.000 1.500 3. Lasbela Dewan Cement Limited .Nizampur Bestway Cement Limited . No.000 7.000 1.428.110. Karachi Thatta Cement Limited .600.000 1.086.000 1.270.500 787.030.571 35.500 2.000 3.000 1.Khan Cement Limited . .Fateh Jang Fecto Cement Limited .Hattar D.000 3.000 2.000 780.000 315.111.197.795.134.Sr.110.000 2.Chakwal Bestway-Mustehkum Cement Limited .500 3.228.102.Indus Highway.950.710.Dhabeji Lucky Cement Limited.080.010.Nooriabad.428. Dadu Attock Cement Pakistan Limited .000 1.Hattar Bestway Cement Limited .933.433.140.Hub Chowki.714 3.065.500 2.500 2.500 504.Chakwal Pioneer Cement Limited .152.000 6.Hattar Cherat Cement Company Limited-Nowshera Dandot Cement Limited .Jehlum Kohat Cement Company Limited .000 1.370.000 2.000 1.110.

Following chart shows the exporting ratio of grey cement competitors according to their ratio of exports Lucky Cement with leading the market and KCC with 2% share almost. DISTRIBUTION SITUATION: 8|Page .

KCC ► WHOLE SALERS► RETAILORS►CUSTOMERS  KCC►RETAILORS (BULKS)► CUSTOMERS  KCC► CUSTOMERS (BULKS)  KCC► REGIONAL OFFICES►W/S or RETAILORS  GEOGRAPHICAL SITUATION: OPC (Ordinary Portland Cement) Grey cements are being distributed to all the parts of Pakistan but they have covered the major portion of KPK. According to their given information out of 78%. In Pakistan they are using 4 different channels of distributions with up to 5-10% of commission given to distributors depending upon their size and purchase. Micro-environment factors are the forces that are not under the control of the company. They are exporting 24% (389788 tons) to Afghanistan. Iraq and India but majority of portion goes to Afghanistan. KCC distributes their 78% of production in local market and 23.Kohat Cement Company uses different channels of distributions to transfer the gray cement from company to the different parts of the Pakistan. their 30_40% of sales revenue comes from KPK and the remaining from other parts of the country.5% of their production are being export to Afghanistan via land and 0.5% to other countries. MACRO-ENVIRONMENT SITUATION: Macro-environment factors directly or indirectly effect the production of OPC or the performance of the company. They give majority of their cement production to wholesalers directly or through regional offices present in different parts of Pakistan. These factors are         Political stability Laws of the country Terrorism Cultural values Technology Demographic Trends Economic Conditions Inflation 9|Page .

raw materials. exports and profits etc of Kohat Cement while producing or selling of OPC. Rs. Weak infrastructure is also the cause of high price of OPC. distribution. But many of these factors are directly affecting the strategies regarding price.All the above mentioned factors should be clear and supportive for the best performance of any product or company. Like         60% of cost of OPC is due to fuel and electricity prices 16% of sales tax is also affecting OPC Terrorism is the hurdle in expanding the cement businesses in remote areas KCC is paying Rs. OPPERTUNITY AND ISSUE ANALYSIS: After completing the market analysis now we will do analysis of opportunities and issues for the OPC of Kohat Cement Company.750-900/ton export duty is very high and affecting the exports of OPC Political instability is also a problem for the growth of KCC 15% of inflation is directly affecting the industries along with KCC. cost. 3.62million in the form of taxes. STRENGHTS OF KOHAT CEMENT: Strengths are the internal positive factors or advantages that a company possesses.8million tons per annum and they are producing 1. Following is the strengths of OPC Kohat Cement: o Installed Capacity: Installed capacity of company for OPC is 2. For this purpose we have to do SWOT analysis of Kohat Cement. 10 | P a g e .47millon tons per annum so they can exceed the OPC production easily by proper implementing their marketing mix strategies and it will directly increase profits of the company. Opportunity is a chance for progress or advancement that is available in the market and the company has to avail it for the progress and profitability while issues are the weaknesses or threats for the company to avoid or settled down.

So they can easily avail the huge reserves of raw materials with a very low cost as compare to other competitors as their cost of raw materials is 7% of cost of production. o High Quality Of OPC: Quality of Kohat Cement is much better than the standards set by Pakistan and Importer. As KPK is in rich of coal so they can get coal on low prices. They can also increase their exports to Afghanistan through roads because it is the nearest cement company to Afghanistan and they can easily transfer or sale out their OPC to Afghanistan by less distribution charges. 11 | P a g e . o Domestic and Foreign Market: As they have captured up to 40% of KPK market so they can improve it more than that by implementing proper strategies and programs. o Coal: They can easily avail coal reserves of KPK which is in abundance in these areas. Along with this they can easily captured the other markets of Pakistan through their quality. They can reduce the fuel expenses which is 47% cost of goods now. So over all KCC is enjoying good environment created by Government. standards and price. Company is certified by ISO 9001-2008 which is an edge for the company. Quality of product is better than approved British and Pakistan Standards. o Cheap Labor: They are using the cheap labor market of Pakistan which is strength of them and due to this their price is low as compare to otter competitors. o Good Govt: Policies: Local and federal govts: policies are supportive and favorable to the cement sector.o Raw Materials: Kohat Cement Company is situated in Kohat near the mountain regions on Rawalpindi road. They are getting many benefits in term of gas and electricity from KPK Government.

Following are the negative factors of OPC: o Not Utilization Full capacity: KCC is not utilizing its full capacity of production of grey cement. So they should introduce competent personals in the company for the growth.WEAEKNESES OF KOHAT CEMENT: Weaknesses are the internal negative factors of a company that should be avoided or to be controlled. They can convert their system to coal or can generate their own electricity by investing in this sector. So they should minimize these expenses as much as they can. o Freight Charges: Freight or transportation charges to other parts of the country are also a problem for them which should be settled down as soon as possible. It can really help them in uplifting their market share and growth and profit as well. o Management: Kohat Cement major boards of directors are from the same family which is also a negative factor of them. OPPERTUNIITES: 12 | P a g e . o Fuel and Electricity Charges: Kohat Cement cost comprises 68% costs of fuel and electricity. They can produce 1. They should minimize their expenses to avail greater markets present in other parts of Pakistan.4million tons per annum extra cement besides their current production. So not utilizing their full capacity is also their disadvantage which they should convert it into opportunity.

13 | P a g e . Gawadar Port and many other big projects are going on in the country. So KCC can avail these opportunities by responding on time to these projects. India. These are positive external factors. Iraq. o Domestic Development in Pakistan: Domestic development works has been going on in Pakistan from the last two three years after the big floods. Russia. Following are the opportunities available for Koaht Cement: o Government Development Expenditures: Govt: is spending huge amount on developmental projects like roads. construction of Bhasha Dam. Lawari Tunnel in Chatral. hospitals. o Demand Of Pakistani Cement: Recently Pakistani cement demand is increasing day by day in Afghanistan. schools. o Growth And Development In China And Other Countries: There is a rapid growth going on in China and other countries of the world so Kohat Cement Company can also avail these opportunities because it is fulfilling all the requirements of these new markets. Middle East and many other countries so KCC can improve its foreign market share from 2%. dams and infrastructure etc.Opportunities are chances for progress or advancement that is available in the market and the company has to avail it for the progress and profitability. o Construction Of Big Projects: Recently there are many big projects are going on in Pakistan like construction of GHQ in Rawalpindi. This will be very favorable and profitable for them. So KCC should explore all these opportunities to increase its market share. up-rising of Mangla Dam project. So demand of cement in local market is on boost so company should avail these opportunities. Africa. Sri Lanka.

THREATS FOR KOHAT CEMENT: Threats are the negative factors that are available in the external environments. o Competitors: There are 29 firms in cement industry which make the competition very tough. OBJECTIVES: 14 | P a g e . Al Qaida and other militants groups in Pakistan and KPK specially is affecting the sales and production of grey cement. Each firm is striving to get as much share as they can and they are using different tactics to excel their sales. So govt: should take constructive steps for the development of the industries. These are unhidden threats that are waiting for KCC and they should be ready or be prepared to tackle down all these threats for their existence and survival. So company should be aware of it and they should make their planning accordingly. So it will directly affect Kohat Cement prices and profit ratio. So KCC should take proper steps for its growth while taking into consideration all the competitors. Following are the threats available for Kohat Cement Company: o High Energy Prices: Energy prices are constantly increasing in Pakistan and worldwide which is directly affecting the profitability of KCC because major portion of OPC cost consists of fuel (furnace oil) and energy expenses so they should find out alternative source of energy to minimize the cost of goods. 4. o Political Instability: It is also a main threat for Kohat Cement Company because it brings changes in laws and regulations accordingly. o Terrorism: The threats of terrorism from Taliban. o High Level Of Taxes and Custom duty: In Pakistan sales tax is charged @ 16% which is very high and Govt: is paining to take it to 19% which will be devastating for all industries in Pakistan. Custom duty is being charged @ Rs.750-900/ton on export of cement.

3 million tons should be achieved in 2012. 15 | P a g e .500 million MARKETNG OBJECTIVES: Financial objectives should be convertible to marketing objectives.10billion Exports should be Rs.After analyzing all the factors now we will set the objectives or targets we can say.10 billion Average price should be up to Rs420/ bag Sales of 2. Following are the marketing objectives of Kohat cement Company: Sales should be Rs. for Kohat Cement Company that is going to be achieved in the next financial year of the company. Marketing objectives are related to market or overall industry.3billion out of Rs. Following are the financial objectives that we will set for Kohat Cement Company for 2012: Profit after taxes should be Rs. Expand the number of dealers 10% Market share should be up to 7%.340 million Cash flow should be Rs. Our objectives should be o o o o o Specific Measureable Achievable Realistic Time bound There are two kinds of objectives which are:  FINANCIAL OBJECTIVES  MARKETING OBJECTIVES FINANCIAL OBJECTIVES: Financial objectives are related with the financial performance of the company or simply objectives that relate to finance.

 SALES FORCE: Sales force or sales agents should also be hired in remote areas with 5-8% commission. customer behavior and new markets.  ADVERTISEMENT: 2% budget should be allocated for advertisement campaign on bill boards and certain media channels.  LOW PRICING STARTEGY: Low pricing strategy should be adopted as compare to competitors. Following are the marketing strategies that should be used:  NEW MARKETS: New markets in KPK.  LOWER COST OF GOOOS STRATEGY: Cost of the cement should be low down to earn maximum profit. Sindh and other parts should be achieved also in India and Afghanistan. 6. Iraq and UAE.  ALLIANCE STRATEGY: Alliances should be made with distributors and realtors in important markets and preference should be given to them. MARKETING STARTEGIES: Strategies are the game plan or road map to achieve the objectives set by the company by utilizing its resources. Punjab. ACTION PROGRAMS: 16 | P a g e .  MARKET RESEARCH: 10 % budget should be allocated to market research to know competitors.  DISTRIBUTION OUTLETS: Distribution outlets or big distributors must be located in all the targeted and new markets with commission @ 12% of sales.5.

75 million tons after every 4 months. Production department have to produce 0.Marketing strategies should be supported with action programs or day-to-day plans. It tells us that which marketing strategy is to be completed by whom.3o millions as compare to last year (20 million) in the whole year. FEED BACK AND CONTROL: 17 | P a g e . Other incomes should be increased up to Rs.PROFIT OTHER EXPs FINANCAIL COSTS OTHER INCOME PROFIT BEFORE TAXES 9875 (8200) 1675 (38o) (820) 32 507 (250) 257 TAXES NET PROFIT 8. how and what will be the cost of that?       Sales department have to do 3. Marketing department should achieve their target within given budget on the basis of six months. when. PROJECTED PROFIT AND LOSS STATEMENT: Following is the projected profit and loss statement of Kohat Cement Copmany: In millions SALES Increase 62% 36% 81% 258% 15% 60% 100% 315% CGS G. Purchase department should purchase furnace oil and raw materials 5% less as compare to previous year. 7.5billlion sales after every 4 months. Each strategy should be broken down in to small programs or actions that can easily be implemented. Management should reduce unproductive expenses @ 10% as compared to last year.

 STRATEGIC CONTROL: 18 | P a g e . Internal audit is carried out by the internal auditors usually on interim and half yearly basis to find out the weaknesses and strengths of the company. External Audit is carried out by external auditors of the company. Even more fruitful results have been achieved.  AUDIT CONTROL: Usually two kinds of audit are carried in KCC. KPMG Taseer and Hadi Company to point out defects in the company. They have properly implemented the planning as compare to previous year so they have achieved the level of performance what they want. In this step we will actually that does the company have achieved it objectives or not that were set in the planning stage. According to the above results and figures KCC has achieved all the targets and goals efficiently and effectively. if found any and then will fix it down in the upcoming period. market share and growth etc. In this step we will compare the actual results with the standards set out there in the planning stage. One is Internal Audit and other is External Audit.It is the last stage if product level planning. Usually Kohat Cement Company carries out three types of controlling strategies which are as under:  ANNUAL PLAN CONTROL: Kohat Cement Company usually do audit or check up at the end of year that whether that have achieved their annual goals/ objectives or not regarding sales. They want to know the gap between actual and standards. If they have performed much better then they watch out the reasons behind that to implement forever in the organization. profits.

References:     Main office. City Tower . Peshawar www.apcma. If not they do changes in it to make implementable in the market. All the above discussion gives us a bird eye view regarding a good product planning that a marketer can do. CRUX: From the above discussion we can easily conclude that how a company usually does their product or marketing planning.Lahore Regional office.com www. Gulberg 2.kohatcement. It also gives a path to the student that how to use the data for the production of product level planning.Strategic control is the step of the last section. We pick Kohat Cement product (OPC) collect the data from different sources and then make the palling for them accordingly. In strategic control usually they evaluate whether the Kohat Cement Company marketing strategy is appropriate to the market conditions or not. They change their strategy according to the market situation that changes so rapidly.com 19 | P a g e .

 MARKET RESEARCH: 10 % budget should be allocated to market research to know competitors.  DISTRIBUTION OUTLETS: Distribution outlets or big distributors must be located in all the targeted and new markets with commission @ 12% of sales. Iraq and UAE. Sindh and other parts should be achieved also in India and Afghanistan.  SALES FORCE: Sales force or sales agents should also be hired in remote areas with 58% commission. customer behavior and new markets. .  ADVERTISEMENT: 2% budget should be allocated for advertisement campaign on bill boards and certain media channels.  LOW PRICING STARTEGY: Low pricing strategy should be adopted as compare to competitors.  ALLIANCE STRATEGY: Alliances should be made with distributors and realtors in important markets and preference should be given to them. NEW MARKETS: New markets in KPK. Punjab.

when. PROJECTED PROFIT AND LOSS STATEMENT: In millions SALES Following is the projected profit and loss statement of Kohat Cement Copmany: Increase 9875 62% 21 | P a g e .3o millions as compare to last year (20 million) in the whole year. Other incomes should be increased up to Rs. Marketing department should achieve their target within given budget on the basis of six months. 6. • • • • 7. Management should reduce unproductive expenses @ 10% as compared to last year. Production department have to produce 0. how and what will be the cost of that? • • Sales department have to do 3.5billlion sales after every 4 months. Each strategy should be broken down in to small programs or actions that can easily be implemented. Purchase department should purchase furnace oil and raw materials 5% less as compare to previous year.75 million tons after every 4 months. LOWER COST OF GOOOS STRATEGY: Cost of the cement should be low down to earn maximum profit. It tells us that which marketing strategy is to be completed by whom. ACTION PROGRAMS: Marketing strategies should be supported with action programs or day-to-day plans.

profits. TAXES NET PROFIT 315% 8. In this step we will actually that does the company have achieved it objectives or not that were set in the planning stage. They want to know the gap . Even more fruitful results have been achieved.PROFIT OTHER EXPs FINANCAIL COSTS OTHER INCOME PROFIT BEFORE TAXES (8200) 36% 1675 81% (38o) 258% (820) 15% 32 60% 507 (250) 100% 257.CGS G. According to the above results and figures KCC has achieved all the targets and goals efficiently and effectively. Usually Kohat Cement Company carries out three types of controlling strategies which are as under: • ANNUAL PLAN CONTROL: Kohat Cement Company usually do audit or check up at the end of year that whether that have achieved their annual goals/ objectives or not regarding sales. market share and growth etc. FEED BACK AND CONTROL: It is the last stage if product level planning. In this step we will compare the actual results with the standards set out there in the planning stage. They have properly implemented the planning as compare to previous year so they have achieved the level of performance what they want.

Internal audit is carried out by the internal auditors usually on interim and half yearly basis to find out the weaknesses and strengths of the company. External Audit is carried out by external auditors of the company. In strategic control usually they evaluate whether the Kohat Cement Company marketing strategy is appropriate to the market conditions or not. They change their strategy according to the market situation that changes so rapidly. • STRATEGIC CONTROL: Strategic control is the step of the last section. 23 | P a g e . If not they do changes in it to make implementable in the market. if found any and then will fix it down in the upcoming period.between actual and standards. One is Internal Audit and other is External Audit. If they have performed much better then they watch out the reasons behind that to implement forever in the organization. KPMG Taseer and Hadi Company to point out defects in the company. • AUDIT CONTROL: Usually two kinds of audit are carried in KCC.

It also gives a path to the student that how to use the data for the production of product level planning.kohatcement. References: • • • • Main office. We pick Kohat Cement product (OPC) collect the data from different sources and then make the palling for them accordingly. Peshawar www. All the above discussion gives us a bird eye view regarding a good product planning that a marketer can do.com .CRUX: From the above discussion we can easily conclude that how a company usually does their product or marketing planning.apcma.com www. City Tower . Gulberg 2.Lahore Regional office.