[STRATEGIC MANAGEMENT] August 18, 2014

Introduction
As the global economy slowly turns itself around and begins its long-term recovery driven by
rapid growth in Asia, greater stability in the United States and the Middle East, tempered
somewhat by Europe’s continuing economy troubles. Sri Lanka today stands on the verge of
success and prosperity.

With the permanent peace to the country in May 2009, the Sri Lankan Government has
accelerated economic progress through a series of measures such as control of inflation,
Reduction of interest rates, encouragement of tourism sector……etc.

Therefore today’s business organizations should have a well-managed strategies within the
organization in order to get the maximum output from its employees as well as to increase the
efficiency and effectiveness of the day to day work activities in an economical way while reaching
the objectives of the organization. It doesn’t matter whether the organization is large scale or
small but almost all the organizations should have to achieve their best not because they have to
but to survive in the market while achieving the organization’s goals and objectives. So having
well-managed strategies are a complete and utter plus point for any organization where every
organization is looking for maximum efficiency and effectiveness.

After finishing the module “Strategic Management” I have been asked to fulfill a report as the
end semester assignment on the topic of “Analysis on Strategies used in a selected organization”.

I have chosen “Keells Food Product PLC” which is one of the leading companies in meat industry
in Sri Lanka for my assignment. As one of the leading companies in Sri Lankan market, I had the
argument of how it looks like the strategic practices in Keells Food Product PLC. So it’s one of the
best chances I’ve got to study the strategic practices in an organization where I can recommend
some other our views points as well.

So with that, I am pleased to present strategic practices of the of Keells Food Product PLC on
behalf of the Strategic Management module. By studying this report you would be able to
understand the strategies used in the Keells Food Product PLC and how effective it has
established within the Keells Food Product PLC.

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Keells Food Product PLC

John Keells Holdings PLC (JKH) specializes in the sectors of Food & Beverage, Transport, Leisure,
Information Technology, BPO, Financial Services, Property Development, Plantation and Investor
Services. JKH preserves the identity of each sector group, yet successfully bring them together as
John Keells Holdings PLC.

The Food & Beverage Sector Group is home to a portfolio of leading brands in the Beverage,
Frozen Confectionary, and Processed Meats categories which include "Elephant" carbonated soft
drinks, "Elephant House" Ice Creams, and the "Keells" and "Krest" ranges of Processed Meats. All
brands are market leaders in their respective categories and are supported by a well-established
distribution channel of almost 80,000 Outlets Island wide.

Keells Food Products PLC is presently Sri Lanka’s market leader in the processed meat industry
and enjoys a market share of approximately 70%. A subsidiary company of John Keells Holdings,
Keells Food Products PLC started its operations in the year 1983, and today takes the pride being
solely responsible in developing the Sri Lankan Processed Meats industry to its current heights.

Keells Food Products PLC have kept abreast of the industry through strategic investments in
state-of-the-art food processing technology, quality control systems, an aggressive companywide
R&D orientation and ground breaking marketing leadership in the food industry of Sri Lanka.

‘Keells’ world class Sausages, Meat Balls, Hams, Bacons, Cold meats and ‘Krest’ battered and
crumbed delicacies combine gourmet taste, nutrition and offer superior quality. The range offers
convenience to meet today’s demanding lifestyles of consumers all over the world.

Keells Food Products PLC, the first meat further processing company with SLS product
certification, ISO9001:2000 and HACCP certification, today it serves local markets, super markets,
hospitality industries as well as certain markets in India, United Arab Emirates & Maldives.

Mission of the company

“To be the largest provider of value added meat, fish and vegetable products in Sri Lanka while
establishing regional brand presence and catering to international markets with Asian
communities, environmental friendly technology.’

Vision of the company

“Our passion is to deliver pleasure and nutrition throughout peoples lives, through exciting and
superior products, whenever and wherever they choose to eat and drink”

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Objectives
Specific Objectives
 To be familiarized with the safe and hygienic production procedures from raw materials
to finished products at Keells Food Products PLC.
 To be familiarized with the quality assurance practices and laboratory testing those are
applied for raw and finished products.

General Objectives
 To familiarized with the general working procedure and basic manufacturing practices
and to obtain practical experiences and knowledge on quality assurance, research and
development and other functional and operational aspects of the meat processing plant.
 To develop personal skills such as problem solving ability, interpersonal skills, leadership,
ability to work as a team to achieve targets, that are demanded by the current
organization atmosphere.
 To identify the strengths and limitations the plant as well as to point suggestions for the
improvement of the factory.

Distribution and marketing of Keells products

Keells and Krest companies produce wide range of processed meat and battered and crumbed
products respectively. Raw materials are received from local as well as international suppliers
and then those are sending to processing section after quality inspection. Finished products are
sent to finely cold storage after giving assurance for quality. From Finely cold stores, products are
distributed to local markets, hotels and super markets as well as international markets. Product
complaints are come back to the factory in an opposite way to product flow. Customer complaint
sheets are distributed to shop keepers and they collect complaint. Monthly evaluations and
remedial actions are under taken by the department of quality assurance.

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SWOT analysis of Keells Food Products Plc

1. Strengths

High Quality Conscious

 Keels products are the only processed meats in Sri Lanka that conform to the SLS (Sri
Lanka Standards) certification, whilst the processes that are carried out are aligned to
incorporate ISO 22000 standards. Moreover at an organizational level our entire
operations conform to ISO 9000 standards. Also Keells Food Products is having food
quality standards, such as ISO 9001 certificate, HACCP certificate for food safety
management tool and SLS certificates.
High technology
 Having Modern Technology and qualifies works throughout the process and upgraded
machineries and equipment. They incorporates some of the most modern semi-
automated machinery conforming to international standards for hygiene and safety,
such as sausage linking machine (to automate the portioning and hanging process, at
high speed) peeler machine, slicer machine and a thermoform packaging machine in
their Keells range factory.
 Having the best Laboratory among in asia and Modern storage facilities.
 Keels hold a high web technology which is speed, quick download, easy navigation bars,
customer friendly and corporate colour for their web strategies

2. Weakness

High Staff Turnover

 High staff turnover can hurt Keells ability to compete, because replacing valuable staff is
expenses
Weak R&D
 Weak R&D can slow Keells growth as competitors out-innovate Keells.

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3. Opportunities

Online Market
 The online market offers Keells the ability to greatly expand their business. Keells can
market to a much wider audience for relatively little expense. "Online Market" will have
a long-term positive impact on the entity, which adds to its value.
Innovation
 Greater innovation can help Keells to produce unique products and services that meet
customer’s needs.
New Services
 New services help Keells to better meet their customer’s needs. These services can
expand Keells business and diversify their customer base.
New Products
 New products can help Keells to expand their business and diversity their customer
base.

4. Threats

French fries, which accounts for a small segment of sales in the Krest Range faced stiff
competition from cheaper variants introduced into the market by their competitors. However
due to stock pressure and distribution strengths the product grew rapidly adding 36% growth. It
is believed further marketing support and changes in the marketing mix will further grow this
category.

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Porter’s five forces of Keels Food products Plc

1. Threat of New Entrance

The threat of new entrants is very low in the food and beverages industry. The industry is very
mature and it has successfully reached economies of scale. In order to compete in this industry a
retailer must be able to achieve economies of scale.
Supply side of keels: high economics of scale, because high volume of own production, thus it
will reduce the cost per unit as they can spread fixed cost over more units, employ more
efficient technology, or command better stipulations from suppliers. So these deter entry by
forcing the hopefuling entrant either to come into the industry on a large scale or to accept a
cost disadvantage.
Demand side: discourage the entry by limiting the willingness of customers to buy from a
newcomer and by reducing the price the newcomer can command until it builds up a large base
of customers.
Another barrier to entry is that it takes an incredible amount of capital requirements
technological cost. It takes an extreme amount of capital not only to be able to manufacture and
sell the products but also to keep up with the research and development that is necessary for
the innovation requirements. High initial investment will be required for building or renting new
stores, manufacturing plants, storages, and also to extend customer credit, build inventories,
and fund start-up losses. Thus the barrier is particularly great if the capital is required for
unrecoverable and therefore harder to finance expenditures, such as advertising or research and
development. Access to distribution channels is another high barrier to entry. A company must
find a retailer to sell their products or have their own retails.
Finally, strong brand loyalty of customers also contributes to entry barriers. But as switching cost
for buyers are low, the threat of new entrants could be characterized as moderate.

2. Bargaining Power of Suppliers

The bargaining power of suppliers is very low in this industry. There are so many suppliers to
keels, they have wide range of different suppliers, thus can easily switch to another supplier if it
is necessary. Suppliers are business partners of keels, so that the bargaining power of them is
relatively low; however, suppliers will protect them through reasonable pricing.
Though the local supply of chicken and meat could not meet the demand last year. Even though
agreement with key suppliers, keels faced shortages during the year. They were import the
shortfall from their foreign suppliers from Europe and Australia.

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3. Bargaining Power of Buyer

The group of keel’s buyers is formed by individual customers, Pizza Hut, McDonalds and Hotels.
The bargaining power of the buyers is moderately high. There is a high volume of buyers and
large retailers dominate in the food and beverages market. The buyers also are a significant
portion of the industries revenue. If they cannot keep their buyers happy then they risk losing
them to their competitors. The buyers have low switching cost if they are not happy. The reasons
why the power is not completely high is that the buyers do have the ability to integrate
backwards into the industry.

4. Threat of substitutes

There are many Products for product substitute in the industry and the buyer’s cost of switching
to the substitute is low. The threat of product to product substitutes is high thus, its affect
profitability of the company. So that they should keep distance itself from substitutes through
product performance, marketing etc. It also effects the growth of the company and the bonanza
of industry that they reap in good times. Some of the substitutes are bakeries, non-carbonated
substitutes for beverages such as juices, milk, fruit drinks, and coffee and tea are maintaining a
strong foothold in the market. And the entry of low cost sausages and in some instances
unbranded sausages sold in loose form, poses a challenge to the industry in maintaining the
integrity of the products.

5. Intensity of Rivalry among Competitive

Rivalry among the competitors is very strong in this industry. The major competitors are so
closely balanced that it increases the rivalry. In order to gain market share in the food and
beverage must gain market share by taking it from their competitors. One of the other reasons
for high rivalry is lack of differentiation opportunities. Competitors make similar products for
example sausages, ice cream etc. The competitors are compared to one another constantly, their
price, quality, packing, and in many other aspects. Also competition among the market
competitors, including price, price discounting, new product introductions, advertising wars,
promotions etc. are very high. Thus, it limits the profitability of the company.

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Competitive Strategy of Keells Food Products Plc

For a company to be successful it must be competition oriented. A good competition strategy
should focus on the weaknesses of the competitor but avoiding the strengths. The company
then launches attacks against the weak points of the competitor. This would enable one
company to gain a competitive advantage against the other companies. Differentiation, focused
differentiation, best cost provider and low cost leadership are some strategies put forward. Such
strategies can be adopted by a company to gain favor in the market. For example Keells Food
Products Plc and Gills Food Products (Pvt) Ltd, two similar companies competing for the same
market can employ these strategies to outdo each other.

Differentiation is a strategy where a company produces goods that are different from those
offered by other companies. Keells Food Products Plc for instance may decide to produce
products different from those of Gills Food Products (Pvt) Ltd by simple modification of the
ingredients and by launching innovative products. Keells Food Products Plc can increase the
quality of its products and therefore can charge slightly higher prices. This would make it stand
a high chance of winning the consumer’s confidence. The high premium charged covers the
additional cost of production.
Under Differentiation Strategy,
 New Product innovations
Keells Food Products PLC (KFP) sustained its market leadership position in the processed foods
category through a range of marketing strategies aimed at strengthening its market share, whilst
connecting more closely with the consumer. The Company has been driving innovation and high
brand recall in an effort to enhance the consumption of our products. Based on a combination of
consumer feedback and R&D efforts, we are constantly formulating new products that fulfill the
expectations of our consumers. Modern lifestyles have created a huge demand for healthy
convenience foods and the Keells power snack was created to fill this need, as it offers a filling
and nutritious snack with adequate protein. Keells product range boasts some unique
innovations that excite buyers and remain in line with evolving consumer trends.’ Their
innovation map is a vibrant source of charting new directions for their products and inspires the
Research and Development team to use the insights to create products that truly delight
customers.

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 Technology superiority
Having Modern Technology and qualifies works throughout the process and upgraded
machineries and equipment. They incorporates some of the most modern semi-automated
machinery conforming to international standards for hygiene and safety, such as sausage linking
machine (to automate the portioning and hanging process, at high speed) peeler machine, slicer
machine and a thermoform packaging machine in their keells range factory.
 Product quality and reliability
Recognizing that consistent quality plays a pivotal role in retaining consumer loyalty towards our
products, Keells remain committed to deliver this promise vis-à-vis strategic investments in
technology. By augmenting capabilities at both our manufacturing plants in Ja-ela and Pannala,
they aspire to become the pinnacle of manufacturing excellence.
Their state-of-the-art manufacturing technology has been instrumental in revolutionizing the
industry and transforming accepted norms and practices. As they strive to uphold the tenets of
their customer promise, they remain fully compliant with all applicable regulatory standards for
quality. Their overriding emphasis on quality and food safety has encouraged them to secure SLS
quality systems certification along with ISO 9001 certification for quality management standards
and ISO 22000 for Food Safety Standards.
With customer health and safety being of paramount importance to Keells, they have structured
all their systems and processes to optimize process efficiency at every level of the operation and
ensure customer health and safety is not compromised at any stage of the product life cycle. The
process is further supported by regular system audits that ensure all processes maintain
optimum performance standards, with prompt remedial actions being initiated to rectify
irregularities and system malfunctions.
 Comprehensive customer service
Keells’s passion is to deliver excellence stems the belief that the only sure way forward is to
become a truly consumer-centric organization that is sensitive to the needs of its customers.
Resonating throughout the organization and reflected in all aspects of the business, is KFP’s
commitment to build a truly communicative, customer-centric culture. In place are a series of
highly focused consumer initiatives that help them, not only to gain an insight into customer
perceptions, but also to table the customer receptivity to their product range at varying stage of
the product lifecycle. Supported by a number of outdoor promotional initiatives, Keells
continued their close associations with customers across the country.

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Recommendations
 Keels Food products Plc must deliver products with more nutritional value because
consumers more focused on quality, including nutritional content. Keels Food products
Plc has to reformulate some of their products to increase nutritional value or eliminate
undesirable ingredients. Doing this while maintaining existing product attributes for
flavor and price can lead the organization to gain competitive advantage.
 Keels Food products Plc must create more formula agility. Ingredients like beef, chicken
and even potatoes have inconsistent quality and chemical makeup, so KFP have to adjust
formulation to maintain consistency in their final products. Consumers and retailers have
higher expectations for product quality, availability, and price performance. The
responsibility on the Keels Food products Plc has to be creating formulas that better
mitigate the issues of ingredient variability and availability based on seasonality and
unpredicted disruptions. Formulas also have to address the need for products to
maintain their nutrition and taste over a longer shelf life.
 Keels Food products Plc must continually drive down costs. With the upward trends of
food commodity, production, and distribution costs and the downward pressure on
pricing from retailers, KFP can turn to formulation to produce greater efficiency and
lower costs.
 Keels Food products Plc must get a necessary action to minimize environment impact.
 Keels Food products Plc have to hire more skilled labors.

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Conclusion
The business environment today makes it imperative for food manufacturing companies to
continually improve their responsiveness to the dictates of consumers, retailers, government
regulators, shareholders, and suppliers. I believe there is a compelling case for food
manufacturing companies to implement a differentiation strategy that optimizes the process for
creating new formulas and the quality of every formula. According to my view point that is the
case Keells Food Product Plc has choose differentiation as their competitive strategy.

Differentiation has helped Keells Food Product Plc.to:

 Deliver new products to market faster.
 Better respond to changing consumer demands, meeting or exceeding taste and
ingredient requirements.
 Lower production costs.

 Easily meet all food safety and other regulatory requirements.

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References

Books

 Keels Annual Report 2013-2014, Food products Plc

 Keels Annual Report 2012-2013,Food products Plc
 Keels Annual Report 2011-2012,Food products Plc
Web addresses
 http://www.keellsfoods.com/
 http://gillslanka.com/

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