Organizational Structure Of Engro Foods Marketing Essay

Organizational Structure Of Engro foods merchandise EssayNow companies be improving their takings by adopting contrasting strategies in which gameward desegregation is iodin of them. slow Integration is a type of perpendicular desegregation in which a friendship gets manoeuvre oer its suppliers to improve the aptitude and save the cost which improves its profit gross profit margins and make the firm much competitive. Backward desegregation occurs by dint of getting input suppliers, establishing semipermanent contracts with existing suppliers or investing in unfer workforceted input intersection cognitive content by internal corporate growth.The main advantages of feebleminded consolidation regardless of the assiduity argon decreased grocery storeing expenses, the stability of motions, the certain(prenominal)ty of supplies of materials, much control on the diffusion of harvest- terms, tighter fictitious character control, the on time review of lying an d ein truthocation policies, more control over inventory, and additional profit margins or the ability to charge light pr nut cases on final products. These advantages must be weighed against the disadvantages which normally are disparities among productive capacities at a range of stages of manufacturing, political pressure, lack in interest of specialty, the firmness of operations, the extension of the management team and lack of direct competitive influence on the costs of transitional products.BackgroundThis report luxuriouslylights the comparison of two companies from Pakistan Food assiduity the ENGRO FOODS and nestle PAKISTAN, which are applying averse desegregation to enhance their production capability. In Pakistan these are the top some companies which are playing a vital mathematical function in the feed patience through their dairy call forth and beverage products. nose is a subsidiary of Swiss origin beau monde which head fundament is rigid in vevey, Swit zerland. come on Pakistan started its operations in 1988 with the collaboration of Milk Pak Ltd in Pakistan which is however took over add control in 1992. In Pakistan, its head quarter is fit(p) in Lahore and the company lively operating quadruplet production facilities. Two of its factories are located in sheikhupura and Kabirwala darn integrity in Islamabad and one in Karachi. It has besides the biggest draw appeal operation in Pakistan through which they collects milk from an estimated 190,000 farmers and from their dairy farms located in different areas of Pakistan. nestle Pakistan is currently the leading sustenance beverage company of Pakistan. epoch Engro regimen is an a nonher(prenominal) biggest and fastest growing company in Pakistan. In 2005 Engro Foods limited was established and it is 100% owned by Engro Corporation. Engro Foods limited began their operations in 2006 and indoors 5 classs they make realization to their antagonist by change magnitude th eir mart carry on gradually. At the end of 2010 Engro Foods bound took control in the mart of Ultra High Temperature by incomingway new products including ice cream, juices, powder milk and flavoured milk which contain bulky potential to compete in future. The Company is give carewise incoming into spheric food markets. Its offshoot mission is that to administer a Halal food melody in North America k like a shotn as Al-Safa, which was deep acquired by Engro Corporation at a gibe cost of 6.3 mn dollars. constancy OVERVIEWRecently a seminar Current Status of Foods Industry in Pakistan Threats and Challenges was held at Lahore on September 07, 2012 in which different analysts of PCSIR and Federal Minister of cognition and Technology addresses that food manufacturing in Pakistan has beat the second largest industry by participating with 17% share in gross domestic product and in Pakistan it is now become just about consuming industry because people fatigued 42% of t heir earnings in foods products. And at the end of the session umteen analysts degree out weak point of the food industry that the in appropriate management of food products and the large harvest losses in vegetables, harvest-festivals and grain execute a food shortage in market. on that point are several welkins of food industry musical composition some are disposed below which are related to the project report, we depart primarily focus on these. These sectors are as followsdairyJuicesIce creams2.1 dairy dairy farm sector is one of the or so great sectors of Pakistan which affects more than 10 mn families. There are a lot of companies in Pakistan who are purchasing milk from farmers for their satisfaction. The dairy industry is providing jam-packed milk to its consumers in the shape of UHT, Pasteurized, Tea Whitener and Flavored milk. The industry is also producing Ice lap up, Yoghurt, Cheese, butter and miscellaneous food accompaniments for childrens.Milk is the most consumable food item having a life of 4 hours nether at a certain temperature level of room. Pakistan is 3rd leading milk producing estate in the founding with more than 47 billion litters production and 11.30% contribution in GDP and a milk economy that in survey terms is 27.7% of the total agriculture sector. According to analysts the milk production is expected to grow at 2% annually, however the impact industry is only 7% of operated milk. The milk, remain wastages and farmer preservation is 20.7 bn liters of which 1.4 bn goes into processing and the rest is sold as a commodity in retail outlets and through door to door Gawala outline. So, at that place is an immense prospect and +prospective to grow the processed milk business.The processed milk has segmented into three categories namely close UHTPowder2.1.1 Ambient UHTAs of 2010, Ambient UHT constitutes only 4% of the total Tradable Milk segment. Industry intensivenesss nonplus self-aggrandizing 10% from 2006-2010 a nd the market size was 790 cardinal liters as of December 2010.2.1.2 Powder soon, the size of the branded powder market is rough 57,000 stacks, which uses approximately 540 mn liters of milk and 3% of tradable milk. Powder market size has grown 17% from 2006 to 2010 and it is expected to grow 14% in the succeeding(a) five twelvemonths receivable to economy that powder offers as ripe(p) as its specialize use as growing up and sister nutrition source. nose Pakistan is the market leader in this segment.2.2 JuicesThe Juices, Nectars and S work on drinks market are of 507 Million Liters which has total market value of PKR 31 Billion. This market is subdivided into Juice and Nectar and Value added Still Drinks. Juices contain 100% harvesting substance, Nectar contain 25% to 99% fruit substance while still drinks contain 0 to 24 % fruit substance value added still drinks have innovative package or addition of bod etc. come on Pakistan is the market leader in this segment.2. 3 Ice CreamThe Ice Cream sector of Pakistan has growing constantly and registers a peck growth of 20% in 2010 as compare to 2009. The overall volume of ice cream sold in 2010 was 71 Million liters while the total market value was PKR 8.8 billion. The industry volumes have grown 11% over the plump four years. However, it is expected that growth will be utmoster in next five years on the back of significant investment by the industrys key players. Walls are the market leader in this industry which is followed by Omore.COMPANIES PROFILE3.1 Engro FoodsEngro Corporation curb initially introduced with Engro Chemical Pakistan which rapidly built their growth in chemical industry and after few years Engro Chemical become Engro Corporation particular(a) by making diversified investment in different sector like Foods, Energy, Fertilizer and course solutions. It started operations in 1957 as an Esso/Mobil conjunction venture which discovered the Mari Gas field near Daharki.Engro food is now becoming the biggest and fastest growing company in Pakistan. From the beginning till date Engro Foods special 100% owned supplementary company of Engro Corporation. Engro Foods Limited operations began in the year of 2006 and within 5 years company started to climb the ladder of growth rapidly. It has manage to be the market leadership in Ultra High Temperature (UHT) Industry at the end of 2010 and has launched ternary new products including Ice Cream, Flavoured Milk, Fruit Juices and Milk Powders, that show coarse potential for future. In order to back these products and to achieve high quality standards Engro Foods Limited made backward integration strategy in which they heavily invested in milk processing and collection infrastructure. The Company has innovated by venturing out of the dairy sector and stepping in the Beverage Industry by launching Olfrute and ice cream industry by launching Omore.The Company is also entering into the international markets. Its first mi ssion is to manage a Halal food business in North America known as Al-Safa, which was recently acquired by Engro Corporation at a total outlay of 6.3 mn dollars.PRODUCTION FACILITIESDairy PlantsEngro Foods has two UHT processing shews which are located in Sukkur and Sahiwal with total filling capacity of 1.1 cardinal liter per day. Sukkur Plant capacity is 400,000 liter per day whereas Sahiwal found knack is 700,000 liter per day. Engro Foods also has a powder plant at Sukkur with a capacity of 24 tons per day. Covered area of freehold land of Sukkur is 27 acres and Sahiwal production initiation is 33 acres freehold land. These production sites are equipped with plant and machinery of European origin. Sukkur Production site started its operation in Feb 2006, whereas Sahiwal plant started its operation in December 2007.Ice Cream PlantThe ice cream plant was set up in the same facility as the Dairy Plant. The total manufacturing capability of Sahiwal is 33 acres of free holding l and. This supports contend advantage to the Company in terms of the give of raw material, the utilities, and hands and warehousing. The ice cream plant has total capacity of 22 million liters per annum.Organizational Structure of Engro FoodsPresident/CEOSecretarySecretary wickedness President ManufacturingVice President MarketingManager Public strifeManager Internal AuditSpecial ProjectsVice President HRVice President HRCompensation BenefitsSalesProduction accountingRecruitmentPlanning emergenceMaintenance treasuryTraining teachingTechnical ServicesProcess EngineeringIndustrial Trade slavish/FleetPurchasingAdministration levelheadedBrands of Engro FoodsThe product portfolio of Engro Foods comprises some of the countrys biggest and topper selling brands which includeOlpersOlpers LiteOlfruteOmoreOmungOmung LassiTarang.3.2 nuzzle Pakistan nest is basically a Swiss company and their head office is situated in Vevey, Switzerland. And clutch Pakistan is one of it supplementary company. Since 1988 nestle Pakistan is working with the alliance of Milk Pak Ltd and within short time period Nestle Pakistan took over Milk Pak Ltd. It is also listed in Karachi and Lahore Stock Exchange. Nestle Pakistan is one of the most prominent company which run intos it place among top 25 companies who are registered at Karachi stock transfer for last couple of years.The Headquarter of Nestle is located in Lahore and the Company operates four fabrication facilities. In which the factories located in Sheikhupura and Kabirwala are producing different products nether same umbrella. The other factory is present in Islamabad and one in Karachi produce packed water. Nestle Pakistan now operates the biggest milk collection process in Pakistan. At present, Nestle Pakistan gathers milk from a intercommunicate 190,000 farmers. At present Nestle is market leader in dairy and beverage industry of Pakistan because they are very keenly focusing on Nutrition and health by covering al most at all locations throughout Pakistan to serve the consumers. Nestle Pakistan distinct feature is that they are the leaders in Nutrition.PRODUCTION FACILITIESSheikhupura grinderThe factory located at sheikhpura produces many most popular products s of Nestle Pakistan much(prenominal) asMilkpak UHT milk, Nevistaproducts,Nestle pure water,Cerelac and yogurt. The factory starts operation as part of Milkpak Ltd in 1981. formerly it produced only UHT milk but in 1988 it had expanded to produce butter, cream, ghee and fruit drinks as well. But with the passage of time Nido powder milk also started to produce in this factory.Kabirwala FactoryMilk Pak took over this factory which is located in Khanewal district of the Punjab in 1990. In 1997 Nestle Pakistan got 100% share of that unit.After acquiring it Nestle upgraded its capacity and in 1992 they added Maggi Noodleplant to the factory. Over the years past the Kabirwala factory was constantly enhanced as Everydaytea whitening powder was introduced in 2002 .Islamabad FactoryIn Islamabad Nestle purchased the AVA water plant in year 2001. And in 2003 Nestle fully owned that unit. Gradually Nestle upgraded and introduced machineries to become more economic in production through which they was able to provide differentiated products to their consumer with good packaging.Organizational Structure of Nestle PakistanChief decision makerWater GroupCorporate personal businessHuman Resource turn in ChainMilk Collection Agriculture ServicesNestle Business ExcellenceTechnical OperationsFinance Control UnitMarketing and Sales DivisionNational Sales ManagementLegal AffairsTechnical PurchasingFinancial AccountingCorporate purchaseTreasuryNational BrandManagementBudget ControlInformation schemaTaxationBrands of Nestle PakistanNestle Pakistan has a lot of top most brands of Pakistan which added a lot of value to Nestle Pakistan over a last couple of years likeMilkpakNevistaNidoEverydayMilkpak CreamNestle cast off creamNes tle yogurtNestle fruit vitalsNestle Zeera RaitaActiplus YogurtNestle Rawaiti MazaNestle MiloNestle Nescafe4. FUNCTIONAL comment OF ORGANIZATIONS (BACKWARD INTEGRATION)Nestle Pakistan and Engro Foods are currently doing backward integration to enhance their production efficiency by creating their own dairy farms and taking control of transportation. Currently they are focusing of creating their own farms to get control over their suppliers. twain the companies are also now directly approaching to the farmers and collecting milk form them as the old concept of middle man and gawala system has start perishing. The main advantage of creating own farms is that both the companies get on time delivery of their material, which help them to enhance their production and deliver their product on time to the end consumers. The details of Engro Foods and Nestle Pakistan farms are thrustn below4.1 Engro Foods Dairy levyEngro Food has selected the Nara Canal collectable to the figurehead of its outstanding water, farming land availability and suitable weather for its Dairy do work. The company has launched a comprehensive vaccination programme with the provision of sporting water and balanced nutrition to have infection free, strong and bright zoologys at all times. The Companys Nara Dairy Farm continued to remain a rich and nutritious source of raw material for its dairy section. The Nara Farm formed over 5.8 mn liters of milk in 2011 with a total herd size of over 3,000 animals. But in 2012, Dairy Farm produced 26,979 liters of milk per day. At March 31, 2012 Dairy Farm herd increase to 3,204 animals. Through it the profit after tax stood at Rs. 5 million versus loss of Rs. 19 million in March 2011, primarily due to higher yield and production.4.2 Nestle Dairy FarmsNestle Pakistan manages the project nether its Agricultural Division. Over 75 professionals are currently associated with these services guess to help inincreasing the sustainability of the dairy segme nt in Pakistan. They give the farmers with free technical assistance and veterinary services to build the skills of the farmers in best farming practices and improved livestock management and link them to wee businesses and to the dairy market.For this purpose,Nestle has built two demonstrations and teachingfarms, one of which is still under process. The main training facility is the Sarsabz Demonstration and TrainingFarmwhichis located on Multan Road, near Okara. Thesecond training Sukeki Farm,is under in make process near Lahore. At the farm, there are more than 250 cows, animal huts,milking machinery, a teaching centre, and hostel forthe farmers, management office and demand farm equipment and highly qualified instructorswho train farmers on high quality dairy farming and livestock management. Nestle Pakistan has established this training facility over 103 acres of leased land as an investment for the development ofthe dairy sector and towork towardssustainable farming and an improved rural economy.5. belles-lettres REVIEWThe concept of vertical integration is very old and we precept a lot of academic and legal debates over the costs and benefits of vertical integration. McGee, Bassett and Williamson (1975, 1985, 1989) give tongue to that vertical integration is a mean of reducing proceedings costs, assuring supply, reducing risk and alleviating the efficiency losses.But on the other side, economists see vertical integration as a means for firms to bring down competition or extract market rents (Scherer, Perry 1978, 1989).Perry, Hart and Tirole (1978), said that most discussions have focused on the cause of forward integration into a competitive product market and little work exists on the put togethers of backward integration into a competitive input market. However, Knoeber and Thurman (1996) further said that backward integration is of growing importance in many rustic and natural resource industries.According to Azzam (1996), backward integra tion occurs through acquiring input suppliers, establishing long-term contracts with existing suppliers or investing in new input production capacity through internal company growth. In some businesses, there is growing concern about the effects of such integration on remaining un- combine input suppliers. First he said that backward-integrated dominant firm benefits from production efficiency gains. Second he further adds that backward-integrated dominant firm whitethorn benefit from a lower acquisition price for externally supplied raw inputs.As per Blois (1972), the biggest advantages of backward integration are to lower down transportation and marketing expense, production or operation stability, timely supplier services, high quality control, necessary revisions in production and execution policies, hold uped inventory control, and high profit margin able produces to charge lower prices on finished products.While Williamson (1971) do non consider supply dependability as a ne cessary advantage and point out the interests harmonization and efficient utilization in process of decision making as the core advantages of backward integration. As per Williamson (1971), backward integration allows management to easily harmonized interest as possible differences can be resigned.As per Lambertini and Rossini (2008), backward vertical integration is indirectly proportional to producers and suppliers. As compare to forward vertical integration, backward vertical integration provides large incentives in investment to the manufacturer. The biggest disadvantage of backward integration for trader is that it discourages them for inception, on the other hand forward integration discourages producers to innovate. This theory is not parallel to transaction cost theory which does not consider forward and backward integration as a pause concept.Many questioners like Armour, Teece, Langlois, Robertson, Gopala Krishnan, Bierly (1980, 1989, 1992, 1996, and 2001) have stated t hat vertical integration facilitates the development and implementation of systemic regenerations. Further, Armour and Teece (1980) argue that if the innovation at one stage involves adaptation in a preceding or a consequent stage, then the usual ownership of the various stages i.e. vertical integration enables the necessary adaptations and adjustments to be made in a timely and efficient fashion.Similarly Langlois, Robertson (1989) and Langlois (1992) propose that vertical integration is the most appropriate organisational structure for integrative systemic process innovations because the necessary learning and start out proceed faster amidst functions in a vertically integrated environment. Furthermore, Teece (1996) explains that vertical integration enables the successful development and implementation of systemic innovations by facilitating information flows and coordination and removing institutional barriers such as cost and benefit allocation. Similarly, Gopal krishnan an d Bierly (2001) point out that open exchange of information is easier and safer in house than between different organizations because each firm wants to gain more from the innovation and thence unwilling to share information freely.Teece (1996) however adds that while systemic innovations choose vertically integrated structures from the coordination point of view and some relevant scientific or other capabilities needed in the development and implementation of the innovation may exist outside of the vertically integrated firm. Therefore, larger firms may still have an advantage by using their scale to occasion sufficient momentum and attract smaller firms to get involved with the innovation or simply by be able to secure minority investment positions in smaller firms that have the necessary capabilities needed in the innovation.6. ANAYSIS6.1Swot AnalysisStrengths Of Engro FoodsStrengths of Nestle PakistanBrand AssociationEngro being a far-famed and well established brand in f ertilizers, infrastructure and IT solutions, it creates a great brand association and consumers can relate to Olpers as a high quality and premium product. This is evidence that Engro Food in its first year crossed 1.4 billion sales figure.Financial BackingEngro being famous brand and can attract foreign investors, which enable them to compete with ball-shaped brands like Nestle. They can afford high costs for research and developments for their current products and in introducing new products.Strategic RelationshipEngro has been creating business relationship with farmers who supply milk to them which enables them to secure the supply and to solve shortage issues. Engro also has created long-term business relationship with distributors this help them to ensure smooth distribution through better channels to make sure that there are no shortages for their product.Research and DevelopmentEngro for Olpers precisely has done strong consumer and product research before launching the pr oduct and are continuing this practice status launch. This has helped them to emerge as a strong brand in food industry. To further development and new products, they have engaged various global research partners Mindshare, AC Nielsen, JWT Asiatic and MARS marketing and advertising agency. country of the Art plantsOnly Engro Foods has the 3rd generation UHT milk plant in the country. It is the only plant that uses Bactofuge technology to virtually eliminate bacteria and ensure premium quality and hygiene.Parent CompanyNestle has a global presence and is recognized as a huge name worldwide. Nestle Pakistan has a strong support from its parent company, which is the worlds leading processed food and beverage company.Company ImageNestle has been doing business since many years. It has created an minute image and reputation in consumers mind all around the world. This helps them to take market even in unfavorable conditions.High Quality ProductsNestle always ensure to produce good qua lity products. Nestle being worldwide renowned company creates high quality product to book that image and to attain consumer loyalty. It cannot compromise on quality as consumers at once are more quality conscious.Market ShareNestle has the highest market share almost in every SBUs line, like as in Milk pack Nestle pure life.Brand strengthNestle Pakistan has created some very strong brands like Nescafe, Milpak , Everyday, Nestle water and most of these brands have become generic to their product category. When a brand becomes generic it creates a strong presence in minds of consumer.Research Development aggroupResearch and development is a continuous process at Nestle. It gives updated info on consumer behaviors, changing trends and consumer demands this helps Nestle to adapt to changing trends. weakness of Engro FoodsWeakness of Nestle PakistanPackagingEngro Food is dependent on Tetra Pak for packaging of its intact dairy products. It is the only option for them as Tetra pa ck has monopoly in packaging sector. This cause higher production costs.Distribution costAbout 85% milk collection centers of Engro Foods are located in Punjab, and its processing facility is in Sind. This huge distance increase distribution cost and increasing overall cost of production. Also it increases the chances of milk getting spoiled due to long travelling time.Narrow Product LineSince the launch of its first dairy product, Engro Foods has only extended to very few products, where as its competitors like Nestle has diversified and extensive product lines.Owning Red ColorEngro Food like its competitors has not owned colors that identify its products. Colors trifle products, like green represents Milkpak. There is no color connection devoted to Olpers which creates problems for consumers in remembering the product.Less ProactiveNestle being a huge company is very less proactive to the demands. Unless competitors initiate a campaign or come up with new strategy, Nestle does n ot bring changes.Limited Distribution ChannelA major weakness of Nestle is their limited distribution channel as compared to their competitors. Nestle contend their products to whole sellers in their own factory vehicles.Stock outsDue to their in-efficient distribution channels, Nestle has experienced stock outs on regular basis. This had adverse effect on companys image and consumer base. It also gives chance for competitor to penetrate into market and capture large market share.Premium BrandCommon men generally perceive Nestle as a premium brand, and have perception that all Nestle products would be highly expensive.Opportunities for Engro FoodOpportunities for Nestle PakistanGovernment FundingGovernment has provided increased funds to farmers. This has allowed farmers to invest in better storage facilities to save milk for longer period of time and to cope bad weather conditions.AwarenessExtensive awareness programs for health and hygiene has created awareness among consumers f or the benefits of processed milk. More and more consumers are devious from loose milk to processed milk. This will create higher demands and employment of processed milk. This is a great probability for growth and to gain more market.Fifth Largest producer of milkPakistan is the 5th largest milk production country in the world, the country is blessed four seasons and high quality crop, good species of buffaloes and cows and largest canal system. However it is only obtaining 2500ltr of milk per annum from an animal in comparison with 18000ltr per animal in developed countries. This is a good opportunity to increase production significantly by adopting best practices and modern techniques. obligate from Foreign InvestorsGovernment is supporting overseas outlay in Pakistan which is a great opportunity for Nestle to expand its business in Pakistan and to run large markets.Enhance Distribution ChannelNestle should work on its distribution channel to make it efficient in order to mai ntain supply of their products. This will not allow consumer to shift to competitors brand in case of stock outs.Changing accessible TrendConsumers, especially junior generation are hugely influenced by western societies. This has changed the trends for packed pose to use products. This changing social trend has created large demand and opportunity to increase market share.Best Practices and AssistanceNestle should invest in educating the farmers for best practices and providing them resources and assistance to create greater value and to ensure high capitalization and quality.Threats for Engro FoodThreats for Nestle PakistanCompetitionEngro foods biggest competitors like Nestle has been in market since very long. For its brands it might be difficult to penetrate in the market where these brands have created loyalties and presence in mind of consumers.Perceptions and Price DifferentialsConsumer preferences and perceptions plays very important role in success of a brand. It is ver y important for Engro to understand and come up with ways to meet consumer expectations and provide quality that a brand promises. Price factor is also a very important factor, as still consumers prefer loose milk as it is cheaper than processed milk.EconomyHigher inflation rates is eroding get power of consumers, making products more expensive to use.No Entry hindranceIndustry is growing at rapid rate,very low entry barriers making it attractive for new competitors.DependencyNestle is dependent on whole sellers and super market shelves which can be influenced by the competitors. waiver of Market ShareWhen the market drenches the loss of the market share of Nestle products is the major threat to them.Differentiated productsConsumers are indifferent to buying Engro products or Nestle. It is a threat to Nestle that consumers can easily shift to Engro products in case of any unfavorable condition.6.2 Pest AnalysisPEST analytic thinking is used to determine and understand external fa ctors such as Political, Economical, Social and technological, and their effect on business. For understanding Nestle and Engro foods position in market, we will carry out PEST analysis to understand the external forces.6.2.1 Political, Legal Economic FactorsPakistan current fiscal year inflation rate has been grown to 7.7% which decreases the purchasing power of consumers as a whole and which also create higher impact on those products which transform from another products like packed milk powder milk because these is