Project PresentationBusiness policy and strategy Group members • • • • • AHSAN ROUF OSMAN QADIR KANWAL EJAZ SHEHAR BANO HASAN NASIR L1F08MBAM0089 L1F08MBAM0081 L1F07MBAM2083 L1F07MBAM2041 L1F05BBAM2050 History of Qarshi • Conceptualized by Allama Iqbal • Hakim M. Hassan Qarshi established a herbal clinic in the heart of Lahore Beadon rd • M. Iqbal Qarshi carried the torch in form of “Qarshi Dawakhana” 1968. • Later it evolved into “Qarshi industries”. chronological EVOLUTION OF QARSHI WHAT’S QARSHI ALL ABOUT? Product portfolio Introduction ORGANIZATIONAL STRUCTURE Locations in Lahore • Head Office Jam-e-Shirin Boulevard, 15-G, Gulberg-III, Lahore, Pakistan Ph: +92-42-111 200 300 +92-42-5831924 - 5 Fax: +92-42-5834057 Email:
[email protected] • Research & Development P.O. Qarshi New Shalimar, Multan Road, Lahore, Pakistan Ph: +92-42-7463134 - 7463135 Fax: +92-42-7463137 Email:
[email protected] Number of Total Employees There are more than 1600 Workers who are currently working in Qarshi industries all over Pakistan. Nature of business • Natural Medicines • Health Supplements • Refreshing Syrups • Natural Mineral Water • Food and Farm products Type of ownership • A 100% privately owned organization Capital structure Equity financing financing 100% debt 0% VISION STATEMENT • “To be the leader in Natural Medicines, Health Supplements, Refreshing Syrups, Natural Mineral Water, Food and Farm Products in our region by the year 2010.” MISSION STATEMENT To become a brand of choice by: • Conducting goods manufacturing practices to the entire satisfaction of our National and International customers, and providing them with quality products. • Bringing about continuous improvement in all areas through a dedicated, sincere and competent workforce, supervised by a team of highly qualified and committed professionals. GOALS & OBJECTIVES • Establish qarshi products as an all-round-the-year products • Increase qarshi product acceptability in the new generation • Remind and reassure our existing customers • Counter growing competition from allopathic • Target newer potential TM segments and increase consumer base • Modify attitudes of non-users of Qarshi products and encourage trial • Maintain strategic business partnership with Metro Core competencies • • • • • • • • • • Production capabilities of producing at high volumes. Ability to highly diversify the product portfolio. Background from tib. Good will and good brand image in market. Springley is the only natural mineral water available in market. Ability to produce herbal medicine. Favorable capital structure (zero liabilities). Research and development capabilities. Ability to maintain high quality in their products. State of the art machinery and equipment. Key success factors • Expertise and proficiency in herbal medicine • Plants and equipments for appropriate production levels • Reputation in fair dealing ‘b to b’ • Financial resources • Strong continuous research and development • Favorable capital structure ‘Culture’ as defined by management • • • • Ownership Cleanliness Competition Productive Hard Work Culture reflected by practices • • • • • High centralization Entrepreneurial ‘Seth’ culture Human resources head cannot use his authority Lack of authority/empowerment at all levels Everything is being controlled and interfered in by C.E.O • Extensive job bindings (pay less work more) Strategic head MAIN STRATEGIES UNDER TAKEN: At corporate level • The main objective of the business is to earn high revenues and high financial growth. • The firm applies an aggressive strategy based upon “push strategy” mainly focusing on the distribution efficiency. • Being the market leaders for their main products Qarshi industries use build and grow strategy on corporate levels. At business unit level: • On the business unit level Qarshi is applying ‘diversification strategy’ • ensures many products to be ‘order qualifiers’ and most of them are sliding towards ‘order winners’. At Functional level • Two way relationship with distributors • Based upon ‘SCMC’ which stands for ‘sales channel and marketing control’. • coordinate all the marketing activities and sales channel • Ensure maximum efficiency in the operation of the distribution channel. • Extensive job rotation and duty assignment, in order to ensure the involvement External And Internal Assessment STEPLE analysis Social analysis: • Huge number of people living under the poverty line • single mothers or fathers are in insignificant number • Cultural values and norms are highly celebrated and it creates a high demand for goods and services during any nearing event. Cont.. Technological analysis: • For Qarshi technology plays a vital part since it is in manufacturing sector. • The world is technology driven nowadays • Another perspective is in medicine sector which is something that always needs to be improved Cont.. Economical analysis: • Recession stage of economical cycle • High inflation rates • 80/20 rule is valid for such economy • Economy is witnessing a shift from agro based to industry based Cont.. • Political analysis: – Pakistan is politically an unstable territory – Government still swings between military dictatorships and democratically chosen parliamentarians. – Foreigners are reluctant to invest in Pakistan Cont.. Legal issues: • Alcoholic element in any beverage, or soft drink. • Proper tax laws • Property, intellectual property and patents. Environmental analysis: • Green house gases. • disrupting noise pollution. • Environmental safety and sensitivity. Porter’s 5 Forces Model • • • • • Threat of New Entrant Threats of Substitutes Bargaining Power of Consumers Bargaining Power of Supplier Rivalry among Competing Firms Low High Moderate Low High to moderate overall industry= mature and competitive External and internal assessment S.W.O.T MATRIX FOR QARSHI INDUSTRIES Strengths: 1. 2. 3. 4. 5. Backward integration Research and development Brand recognition Largely diversified High Environmental concerns Weaknesses: 1. 2. 3. 4. Lack employee motivation High centralization Pursuing with failures Lack customer driven approach Opportunities: 1. 2. 3. 4. 5. 6. Trend for consuming natural products Increasing demand for herbal medicine Health consciousness New SBUs (juices) Market potential Ecological organizations S.O strategies 1. 2. Enhance the operations in foreign markets.(s1,o1,o2) Carry out a marketing awareness campaign for addressing to health conscious market segment.(s5,o3) W.O strategies 1. Abandon failed products and deploy resources in new attractive SBUs. (w3,o4) Threats: 1. 2. 3. 4. 5. Competition Price war Economic downturn Low entry barriers of industry Continuous increase in prices, taxes and labor cost S.T strategies 1. 2. W.T strategies Improve internal organization structure and accompany it with suitable culture. (w1,w2,t1) Use differentiation strategy for 1. products. (s2,t1,t2) Use push strategy for SBUs which are less profitable by producing in bulk. (s1,t5) External and internal assessment BCG MATRIX FOR QARSHI External and internal assessment C.P.M- COMPETITOR PROFILE MATRIX No. Core Industry competencie weight age s Qarshi industries Hamdard industries Marhaba industries rating Research 0.17 and development Backward vertical integration 0.05 4 total 0.51 rating 4 Total 0.68 rating 2 total 0.34 0.2 3 0.15 3 0.15 Brand image 0.18 Promotional 0.07 activities 2 3 0.36 0.21 3 3 0.54 0.21 2 1 0.36 0.07 Human 0.13 resource management 1 0.13 3 0.39 2 0.26 External and internal assessment THE SPACE MATRIX Axis X Internal Strength Position Competitive Advantage (Worst -6, Best -1) Product Quality Market Share Brand Image Research and development -2 -1 -3 -1 External Strength Position Industry strength Growth potential Entry of new firms Access to Financing Competition pressure (Worst +6, Best +1) +3 +4 +3 +3 Average Score = -1.75 Total X-Axis Score = +1.5 Average Score = +3.25 Financial Strength Axis y ROI Leverage Liquidity Cash Flow (Worst +6, Best +1) +1 +2 +3 +2 Environment Strength (Worst -6, Best -1) -6 -4 -3 Inflation Technology Demand Elasticity Taxation -4 Average Score = +2 Total Y-Axis Score = -2.25 Average Score = -4.25 +6.00 Conservative Aggressive 1.5 -6.00 +6.00 -2.25 Competitive Defensive -6.00 External and internal assessment EFE - EXTERNAL FACTOR EVALUATION MATRIX Factors Weight Rating Weighted Score Opportunities: Trend for consuming natural products Demand for herbal medicines increasing 0.10 0.10 4 4 0.1 0.4 health consciousness new SBUs, as to juices market potential Ecological organization 0.05 0.10 0.10 0.05 2 3 2 4 0.1 0.3 0.2 0.2 Threats: competition Price war Over diversification Economic downturn Low entry barriers of the industry Continuous increase in prices, taxes and labor cost 0.15 0.10 0.05 0.10 0.05 0.05 1 2 3 2 3 4 0.45 0.4 0.05 0.2 0.15 0.1 1 2.65 External and internal assessment THE GRAND STRATEGY MATRIX Rapid market growth Quadrant 2 Quadrant 1 Weak competitive position Quadrant 3 Quadrant 4 Strong competitive position Slow market growth Marketing head MARKET ANALYSIS Methods of Segmentation • Demographic Segmentation: – Religion: – On the basis of cure: – For profession and life styles: • Psychographic Segmentation: – Like customer needed a quality refreshing beverages Cont.. Behavioral Segmentation • Behavioral Occasions • Behavioral Segmentation • Benefits • User Rate • Loyalty Status • Readiness Stage • Attitude toward product Target Market: • Families of urban population. • Concerned about their health and preferring quality natural products. • School/college/university students engaged in sports activities. • Professional Athletes • Club-level Athletes • Field Workers Marketing MARKETING MIX Marketing mix of Qarshi • Product • • • Quality Features Brand Name Price List Price Discount Allowance Place Channel Location Transportation Promotion Advertising Personal Selling Sale Promotion Marketing head MARKET SHARE Market share in red syrup market 60 50 40 30 20 10 0 Rooh Afza All other red syrups Jam-e-Shirin Market share in johar joshanda market 120 100 80 60 40 20 0 Jul-07 Aug- Sep- Oct-07 Nov- Dec- Jan- Feb- Mar- Apr-08 May- Jun- Jul-08 Aug- Sep- Oct-08 Nov- Dec07 07 07 07 08 08 08 08 08 08 08 08 08 TOTAL JOSHANDA OTHERS (SACHET PAPER) Qarshi Johar Joshanda Hamdard Joshina Qarshi Johar Joshanda Ahmed Joshanda Total Werrick Pharma Qarshi Pura (POLYTHYLENE) Marhaba Joshanda Unique selling points • 100 % pure and natural products • Positioned as differentiated products as to quality and wholesomeness • Trustworthy brand name Competitive analysis COMPETITORS Competitive Analysis • In red syrup market: – Hamdard – Lifestyle • In herbal and natural medicine market: – Hamdard – Marhaba – hashmi Other competitors • Mineral water: – – – – Nestle purelife Coca cola kinley Pepsi aquafina And many others. Financial issues FINANCIAL STRATEGIES The core strategy “milk and invest” According to this strategy is to get share of profit from one business unit and finance other SBUs. Qarshi industries income statement For the years 2009-10(1st qrtr) particulars sales cost of sales gross profit operating cost operating profit Rs $4,838,635,742 $967,727,148 $3,870,908,594 $486,404,004 $3,384,504,590 2008-09 Rs $3,701,435,578 $899,986,248 $2,801,449,331 $428,035,524 $2,373,413,807 2007-08 Rs $3,155,784,214 $676,789,658 $2,478,994,556 $385,231,971 $2,093,762,585 administrative cost net profit before interest and tax interest Net profit before tax Income tax (@ 16 %) net profit $1,211,885,542 $2,172,619,048 0 $2,172,619,048 $347,619,048 $1,825,000,000 $1,156,138,807 $1,217,275,000 $0 $1,217,275,000 $167,900,000 $1,049,375,000 $1,080,989,785 $1,012,772,800 $0 $1,012,772,800 $139,692,800 $873,080,000 Qarshi industries balance sheet as on 31st,march 2010 Assets intangible fixed assets tangible fixed assets current assets quick assets total Rs Liabilities Rs $3,928,564,884 $255,356,718 owner's equity $2,298,210,458 $903,569,923 $471,427,786 $3,928,564,884 Total $3,928,564,884 Financials FINANCIAL EVALUATION Ratios turnover ratios fixed asset turnover Total Asset Turnover Rs 1.89 1.23 profitability ratios Profit Margin 38% 46% ROA ROE 46% solvency ratios Equity Multiplier 1 interpretation • Liquidity ratios and solvency ratios: Since liquidity ratios are calculated relatively to current liabilities owed by the business and in Qarshi’s case there are no current liabilities, which makes liquidity ratios impossible rather unimportant. • EPS Being a private limited company Qarshi has no shares in the market. Asset utilization ratios • Fixed asset turnover=1.89: Qarshi in 2010 first quarter the fixed asset turnover ratio is 1.89 reflecting the high efficiency of revenues as to the investment in fixed assets. • Total assets turnover =1.23: it shows that Qarshi’s investment in it’s assets is returning high sales and adding value to the organization. Profitability ratios • Net Profit Margin = 37% the firm is having a ratio of 37 % from total sales as net income and remaining 63% of sales are accounting for costs and taxes. • ROE=46% Qarshi a healthy ratio of 46 % shows an above par rating for return on equity proving Qarshi to be a growing organization. Profitability ratios (cont..) • ROA=46% • 46% is the return on assets for Qarshi industries which is more than good rate of growth NOTE: It’s the same as return on equity because of the capital structure being composed of just equity. Long term solvency • Equity Multiplier=1 • Equity multiplier or financial leverage shows the ratio of assets which are being acquired from equity. The higher it is the lower will be the interest expense and consequently the costs for the firm. • just equity and no debts as Qarshi has and that’s why equity multiplier is 1. Strategic head MANAGEMENT STRATEGIES UNDER TAKEN: Human Resource Management • headed by Brig.(Rtd) Taimur, • It administers various benefit programs (health insurance and medical allowances) as well • – – Equal Employment Laws and Occupational safety Laws • • • • • • • Recruitment Strategy Recruit as needed Job Orientation and Training Strategy An initial orientation Time to time training of communication skills. Performance Appraisal The employees work performance is measured against the set objectives and are graded and rewarded annually according to their performance Administration • Coordination among different departments • Make tactical plans for implementation of strategies at the final level • Act as a support to workforce Decision Making • centralized decision making process, where most of the decisions can be overridden by the Chief Executive Officer • Majority of the decisions taken by the chief executive officer Total Quality Management “Tradition of Research, Assurance of Quality” • To become No.1 Quality Brand, was an important vision set out in 2005, • Taking care of quality at every stage of production • Extensive checking and testing to assure quality Motivation and Incentive Techniques • The company is limited in terms of employee motivation incentive plans • small incentive plans are made for the sales team based on achieving annual objectives. – Ummrah tickets – Facilities, allowances etc are also provided Strategic head OTHER STRATEGIES R&D • Qarshi has always been emphasizing on quality which lead to research and development. • R&D Department has developed a complete profile of 207 products based on indigenous knowledge of Tibb-e-Islami and ayurveda • Main role is to provide lead to production dept to pursue business level strategy procurement • headed by DGM Admin and Commercial. • Packaging, bottling are outsourced • Long term and consolidated relationship with supplier to avoid conflict and costly delays. Production • three different plants for processing: – natural medicines – Jam-e-Shirin – farm products like jams and juices • All these production facilities are located in HATTAR Industrial Estate, NWFP. Management control CONTROL PROCEDURES Marketing control • Marketing is not considered as the guiding philosophy for the organization as a whole rather its importance is limited to advertising. • use sales as marketing appraisal procedures. • outsource all the A.T.L (above the line) marketing activities to an advertising agency named as “MANHATTON US BROTHERS”. Production control • The production department is using “LEVEL STRATEGY” for production. • it carries “batch production”. • The C.E.O himself gives a detailed visit once a month to ensure the operation to be working as planned. Quality control • Qarshi industries has been awarded with 7 certificates in the past acknowledging a superior level of quality maintenance. – ISO-9001: 2000, Quality Management System – ISO-14001: 2004, Environmental Management System. – HACCP, Food Safety System. • As the product is in the development process continuous checks and laboratory testing is done on different sample units out of a test batch. Human resource control • from recruiting to exit interviews all are conducted by the human resource department. • selects appropriate employees out of the pooled talent, and alongside provide training to employees. • C.P.A: CPA stands for “cost preventive actions” which is an allegation on those employees which take any action which is not favorable for the organization. Finance control • Along with capital budgeting and structuring the department is also charged with the responsibility to set prices of the products – C.E.O’s involvement – Internal audit Main issue IF EVERY THING’S GOING WELL WHAT’S THE ISSUE? Problems (management) • • • • • • • • High employee turnover Weak lines of authority High job bindings High frequencies of meetings Barriers for implementation of new ideas Lacks employee empowerment Over interference of C.E.O Overtime without pay Group analysis WE SAW SOMETHING ELSE!! Qarshi through my lens • • • • Managers lack authority entrepreneurial (Saith) culture Lacks marketing as a guiding philosophy Lacks integration between departmental goals and objectives • Management by tactics rather strategies (short term management) • Using management by extrapolation • Human resource policies lack any incentives or financial motivation for employees The way out? STRATEGIC ALTERNATIVES Solutions to problems • • • • • • • • Empower managers. Integrate the goals of all the departments. Marketing importance. Encourage creativity and performance. Remove operational bottle necks. Improve incentive and promotion policies. Change of culture. Rationalization + intuition In a nut shell • Application gaps of performance from theory. • Absence of strategic nature of management. • culture or orientation of organization is mechanistic. Recommendations • Apply strategic management process (from vision till implementation). • Carry out differentiation along with image building branding. • Deal with marketing dilemma of pricing. • Balance the culture between mechanistic and organic. Our words of advice THE GAME PLAN FOR FUTURE 2010 to 2011 • The organization must instantly take a feedback from its employees regarding human resource issues. • Listen to their concerns as to package, job specifications and their commitment to organization. • Promote consumer orientation by delegating authority to marketing department. 2011 to 2012 • Revise the strategic management model • change in culture. • adequate promotional mix, resonate brand and position in the market. • Enter foreign markets • Reposition springley on its point of differentiation. 2012 to 2013 • Plan special campaigns to promote corporate brand image. • Promote new products in the market extensively such as juices, farm products and ‘make to drink’ products. • Apply market penetration strategy in local markets. • Get into market development once local leadership is gained. • Proliferate and maintain ‘jam-e-shireen’.