STRATEGIC MANAGEMENT

REPORT

SUBMITTED TO
SIR MUHAMMAD FARUKH ASLAM

SUBMITTED BY
MUHAMMAD FAIZAN
MARYAM ZAKIR
NOFIL AHMED
SUMAIYA SABIR
ZARA ASAD
 ABOUT ENGRO FOODS PAKISTAN

➢ Engro Foods was established back in 2006, It is a Pakistani food and

beverage company headquartered in Karachi, Pakistan. Its product
portfolio comprises OLPER'S, OLPER'S LITE, OMORÉ, DAIRY OMUNG,
OLPER'S LASSI and TARANG.
➢ Previously it was solely owned by Engro Corporation but, In 2016
Dutch company FrieslandCampina has completed its acquisition of
a majority stake in Engro Foods at an estimated price of $446.81
million and the company is expected to bring in expertise and
introduce new products.

➢ The Netherlands-based dairy company has acquired 51% stake at

Rs120 ($1.14) per share in Engro Foods

➢ Currently Ali Ahmed is serving as CEO or Managing director of the

company in Pakistan
 STRENGTHS
Engro foods being a leading company in dairy products has a number of strengths. They
are as follows: -
1. Engro-an already established name
Engro Corporation (parent company of Engro Foods) is already well established and
a renowned name in the sector of fertilizers, energy and chemicals.
It helps Engro Foods to attract local and foreign investors towards their company,
and it also attract people to use their products
2. Technological strengths
Engro Foods has following technological strengths
➢ They developed a milk collection and automated payment infrastructure “EMAN”
which has improved payment cycles, guaranteed collections and improved
margins directly for the dairy farmers. The foods business is also working on their
packaging suppliers to improve the quality of milk tetra and clean pack as a
means of ensuring product quality for end consumers.
➢ Company has third-generation ultra-high temperature UHT milk plant in the
country. It is the only plant in Pakistan that uses Bactofuge technology to virtually
eliminate bacteria and ensure premium quality and hygiene. Moreover, it is also
setting up another milk processing plant in Central Punjab (Sahiwal).
➢ As a step towards overall supply chain optimization, they have also implemented
a VMI (Vendor Managed Inventory) system with their packaging suppliers, which
has greatly reduced working capital, whilst enabling long term sustainability and
increased growth prospects for business.
3. POSITIVE CREDIT RATING
Engro foods has secured A+ credit rating in most of the banks in Pakistan It reflects
Company’s financial and management strength and denotes a low expectation of
credit risk and the capacity for timely payment of financial commitment and enables
them to borrow at a prime rate.
4. STRONG DISTRIBUTION CHANNEL
Engro has huge Logistics and distributions channels throughout the country.
According to annual report 2017 Engro Foods has network of more 137 national
level distributors which distributes and promotes their products throughout the
country.
Because of easy availability more than 12 million consumers nationwide uses their
products every single day.
5. DIVERSIFIED BRAND PORTFOLIO
Engro Foods Chas diversified brand portfolio including OLPERS, TARANG, DAIRY
UMANG, VITAL TEA and OMORE.
Through which Engro foods is targeting and serving all major market segments
throughout Pakistan.
 In 2014 OLPER’S Milk became the market leader with 44% share in premium UHT
milk category.
6. PRESENCE OF CULTURAL DIVERSITY
They have cultural diversity inside the organization which helps them to think out
of the box and generate different ideas. As diversity brings more possibilities, ideas,
views, opinions which strengthen the organization and helps in growth in future
7. CERTIFICATIONS (INTANGIBLE ASSETS)
Company has variety of certifications including ISO 9001, HALAL, ISO 17025, OHSAS
18001, ISO 14001, BRC, ISO 22000, Global GAP, IFACA, FSSC 22000. These
certifications helped them to increase their legal status and improving brand equity
in the eyes of stakeholders.
8. AWARDS AND RECOGNITIONS
The Company received best corporate report award by joint committee of ICAP and
ICMAP. And it was also nominated by the Committee for a regional award SAFA Best
Presented Annual Report Award. It also won Transformational Business Award
9. POSITIVE RELATIONS WITH SUPPLIERS
Engro foods has been interacting with the farmers for fertilizers and has gained a
good reputation over the years. It has led to a strong bond and long-term
relationship with the farmers who are willing to supply milk to the company. This
is the added advantage and strength of the company because it will never be short
of milk production
For this cause Engro Foods also allocated a budget every year on different
vocational Training Programs for Farmers, which allows them to learn new and
improved ways to increase milk production and strengthen their trust building
positive image of Organization
10. POSTIVE RELATIONS WITH PUBLIC
Engro foods possess a positive image and brand equity among public, which
increases trust of public and also plays important role in future growth of company.
The company run multiple CSR initiatives to establish positive image among public
Some of them are,
➢ Every Year their employees voluntarily dedicate hundreds of hours to run
several extremely effective and productive CSR campaigns aimed at
improving the environmental, economic and social fabric of our host
communities and the local areas where they reside.
➢ Some of the are NASRA school Project, Establishment of OPD clinics in rural
areas, Several Plantations projects etc
 WEAKNESSES
1. LOW QUALITY MILK:-
Engro food has only a couple of dairy farms of its own; it largely collects loose milk
from farmers and milk men through its 40 milk collection centers, which
sometimes is of low quality and impure because they add vegetable oil to milk to
get higher prices.
2. DEPENDENCY ON TETRA PAK:-
Engro foods are dependent upon tetra pak for the packaging of its entire dairy
products. Tetra pak is the only option available to olper’s for packaging because it
is having monopoly in the packaging sector in Pakistan. Due to this reason,
TetraPak charges them higher and it increases the production cost.
3. COLLECTION AND DISTRIBUTION COSTS ARE HIGH:-
Engro food ltd 34 out of 40 milk collection centers are located in Punjab, whereas
its only milk processing facility is situated near sukkar (sindh), so it increases the
milk collection and distribution costs; and also increases the chances of milk
getting spoiled because of increased travelling time. But, one major issue which
played havoc with the company was its distribution channels. The existing
distribution networks were not designed adequately to handle the higher
volumetric sale during 2012. Rapid expansion and insufficient distribution
systems of the company created significant problems. It was the primary reason
EFOODS suffered a massive decline in profits of 92 percent during 2013.
4. OWNING RED COLOR:-
The company has not owned the color red like Nestle has a green milkpak; haleeb
has a blue milkpak etc, this may create problems because when a consumer enters
a grocery shop, then he/she might have problems in recalling the brand because
there is no color association attached to olpers. The company may need to find a
suitable color in which to focus its upcoming marketing strategies.
5. NARROW PRODUCT RANGE AS COMPARED TO COMPETITORS:-
When Engro food launched its first dairy products, olper’s milk on 2006, engro
foods has only extended to very few products, whereas its competitors like nestle
and haleeb foods have a much diverified line of dairy products.
6. RE-LAUNCHING OF FAILURE PRODUCTS:-
Engro foods has launched some of these brands owsum flavoured milk, olfruit
juices and omung lassi that failed to create a significant impact in their respective
markets because of their poor advertising.
7. PROMOTION: -
There are two major problem faced in the promotion of Engro foods. The first
problem is that they are spending a large portion of their budget on promotion
with very little turnover from the side of the consumers. This excessive amount
being spent on promotional material such as TVCs are not resulting in any huge
amount of customer turnover. This money could be invested in more profitable
ventures. Furthermore a few TVCs of Engro deviate from Pakistani culture like the
 Olwell commercial which was based on western culture due to which they had to
face serious backlash
8. Decline in sales due to competitors: -
Engro has had to face a sharp decline in sales. They have gone down by 25% and
are expected to go further down. A major reason behind this sharp decline is
attributed to be a result of rising competition like Dostea and Cupshup which have
resulted in a decline in overall market share for Engro dairy products and hence
have caused a decrease in sale of Tarang. Furthermore cases against packed milk
have also caused many customer to lose trust on all sorts of packaged milk though
Tarang has not been subject to any such case.
9. Change in management: -
As of the last year Engro foods has suffered a significant decline in the share price
and earning per share. This is due to the fact that it was acquired by Friesland and
thus had a massive change in senior management staff. This change has caused a
great deal of fluctuation on the share value and earnings. The change has led to a
less competent staff in comparison to its predecessor and thus may cause many
other problem from a long term perspective as well.
ENGRO FOODS BALANCE SHEET 2017-2016
ENGRO FOODS INCOME STATEMENT 2017-2016
ENGRO FOODS BALANCE SHEET 2015-2014
ENGRO FOODS INCOME STATEMENT 2015-2014
ENGRO FOODS BALANCE SHEET -2013
ENGRO FOODS INCOME STATEMENT 2013
 STEEPLE ANALYSIS
STEEPLE Analysis is an analytical tool for strategic business planning.
or it is a strategic framework for understanding external influences on a business.
Organizations’ success or failure is depending upon the internal and external factors of
their environment.
None of the corporation lives in a space; the environment affects the way that strategy is
both planned and carried out and changes in the environment also might cause the
changes in the strategy. The environmental change may also be the reason of becoming
failure for the strategic plans. The Engro food must face such kind of dynamic
environment as being in the market accepting the challenges of the external and internal
forces and the environment.
Some of the factors are:

S - Social Factors
As the literacy rate and the awareness among the people is increasing people are getting
aware of that what is good and what is wrong for them also the UHT milk treatment has
helped to change their attitude to use UHT milk instead of open milk. Previously in
Pakistan mostly people did not have awareness regarding the hazards involved in
consuming open milk. As it was prone to adulteration however over the years different
UHT milk category companies including Engro foods have laid deep emphasis on
educating people regarding the consumption of UHT milk.
Engro Foods Limited has helped to bring about a change in life style of the Pakistani
People by introducing Bactofuge technology
• People awareness program for Olpers and Tarang Bactofuge treated milk, which
helps to improve the sale.
• Usage of open Gawala milk & standardized packed milk.
Pakistan’s 55% population is consisting of 0-24 age and 25-64 is 41%. Due to poor
conditions of economy, people aren’t much aware and health conscious. EFL has changed
the attitudes of people by providing employment and creating awareness in public about
health and the packaged milk. It has also changed the life styles of Pakistani people by its
Bactofuge technology and the milk yield has increased by introducing its new methods to
farmers as well and has made a culture where employees are motivated to work and has
diversify of workforce

T - Technological Factor
This technological factor also has a deep relation with the environment. Engro aims to be
an eco-friendly corporation by using technologies that bring in minimum harm to the
environment. Technology brings competitive advantage for any organization. The
creative use of new technology often gives the competitive advantage this kind of
environment does not change quickly but it brings out disastrous changes for the industry.
Pakistan is a developing country where it strongly needs the advanced technology, good
infrastructure, transport, and seaport and railway development. A major concern that has
arose in Pakistan is that the local milk man sell adulterated milk for the purpose earning
a bit of extra profit. Keeping in mind this growing concern Engro Foods Limited has
adopted Bactofuge Technology which enables Engro foods to produce premium quality
and hygienic milk. It is the only corporation to use this technology which is why ranks so
high in the UHT milk category. The bactofuge plant is in Sukkhur. Engro Foods Limited
has the advanced technology and for proper utilization, it needs the proper energy supply
which is again lacking in country. And for that Engro Foods Limited is working on the coal
energy project with the collaboration of government also Engro foods claim that they
have the latest technology of milk processing and they provide their consumer with the
best hygienic and quality milk and other products which are not manufactured by any
other company.

E - Economical Factor
Every organization have impact by its economic factors and they must respond
economically.
As Pakistan is developing country and its economy is growing. The interest rate in
Pakistan is 7.5%. Engro Foods Limited also has the advantage of benefiting from the
economies of scale as they get comparatively cheaper labor then other MNC’s. Pakistan is
a developing country and over the year the per capita income has increased but other
factors such as inflation and currency depreciation is causing the purchasing power of
the locals to decrease.
On the other hand, overall economic instability of Pakistan has proven to be a challenge
for many MNCS in Pakistan Some problems are also faced in the economy as the milk
production is seasonal and keep fluctuating so special steps must be taken to keep it
working smoothly. Other problems such as energy crisis , governmental taxes are also the
hurdles in achieving the long-term goals of EFL.

E – Environmental Factor
Engro Foods has been operating in Pakistan since 2006, throughout these years,
environment of world has changed a lot which also brings effects in Pakistan, Laws
regarding environmental safety are imposing strictly these days on companies
throughout the country, Government is taking some actions regarding waste disposal, use
of certain chemicals like CFC, use of antibiotics in milk industry etc.
Indeed, Engro Foods is taking significant and necessary steps to better take care of
environment of country, like getting several Certifications from ISO, OHAS,(both are
related to environmental safety ) Moreover, Engro tries to reduce Carbon Footprint by
reducing greenhouse gas (GHG) emissions, they are actively promoting the use of Non-
CFC products at all their manufacturing units and stopped procuring non-eco-friendly air
conditioners with refrigerant gases that are harmful for the ozone layer.
But, Certainly Engro Foods Should increase, and do more to all these efforts, to better
compete in future of Green Marketing in Pakistan.
P - Political Factor
Political factors are big problem for the Engro Foods Limited such as instable
government, government policies and strike which affects the whole supply chain
management of EFL and resultantly increase the cost of doing business. Engro foods
follow the rules and regulations by the government and therefore also abide by the
government laws for trade policies and complete its responsibilities in a better manner.
Engro Foods Limited makes strategies according to law and obeys the law made by
government for the wages, trade policies, taxes. It completes its responsibilities. As in
current year with a change in government and distinct policies being announced such as
increase in the tax rate which will in short affect Engro foods in the long run.

L – Legal Factor
Engro Foods strictly follows rules and regulations of the government. It always keeps its
department updated about what is happening in the sector or milk industry that will help
them to make them to make their strategies accordingly. they have legal laws like
minimum wages, working time, minimum working age and other regulations.
But Recently on Jan 17 2018, Supreme Court Of Pakistan has banned several brand of
Packaged Milk in Pakistan because of the use of illegal chemical injections on farm cows.
Although, Olpers and Dairy Omang is found as safe for human consumption, but Engro
Foods should keep an eye on their milk suppliers and make sure that they are not using
those chemical injections on farm cows
Moreover, the industry is facing huge challenges. Pricing problems are shaking the
industry through Finance Acts of 2015-16 and 2016-17, the government imposed 10%
sales tax on concentrated milk powder, cream, yogurt, cheese, butter, UHT and fat-filled
milk.
Furthermore, FBR withdrew Zero-Rated facility for milk and Beverage industry
resulting increase in prices and decline in milk industry Pakistan
Largely because of changes in tax laws, and legal environment Engro Foods’ profit for
2017 dropped 43.8% to only Rs5.63 million against Rs10.01 million in 2016, according
to the company’s financial statement.

E - Ethical Factor
Ethical and Cultural Environment can make a huge impact on company
As Pakistan is mainly a Muslim country and people here are always having concerned
related to Religion Because of Religious Blasphemy by Dutch Government, It can make
impact on Engro Foods business in Pakistan because Engro’s Parent company is now a
Dutch Manufacturer.
Moreover, Engro should make sure that all their products must be 100 percent halal in
Pakistan
 KEY SUCCESS FACTORS.
The combination of important facts that is required in order to accomplish one or more
desirable business goals. Key Success Factors (KSF) are generally three to five areas that
a company may focus on, to attain its vision. KSF may also be major flaws that need to be
addressed before other goals can be completed or strengths that must be preserved

1. PRODUCTION: -
Engro Foods has a vast network of 1,635 milk collection centres, which collects milk
from about 150,000 farmers on a daily basis. About 300 million liters of milk is
processed in a UHT plants in Sahiwal and Sukkhur. The company has its own dairy
farm in Nara that produces over 35,000 litres per day. All these resources give a
distinct advantage to Engro foods in fulfilling their market demand with much ease.
Their ability to meet the market demand in accordance with rising demand for
hygienic milk has been a key factor towards their increasing business growth and
sales.

2. PRICE COMPETITIVENESS: -
Engro Foods uses the strategy of competitive pricing for its products. It considers
the market economy as well as the pricing policies of all its competitors. They use
the customer feedback in determining and fixing the prices of its own products. The
market demand is another deterrent in determining the prices and Engro attempts
to set-up a low price with damaging the quality of the product. This pricing strategy
helps them to reach out to every section of the community. They depend more on
increasing their volume of sales rather than price to meet their profit making
objective. This pricing strategy has helped Engro capture a large market share in the
UHT milk industry as they are considered to be reasonable and hygienic.

3. FINANCIAL POSITION: -
Engro foods enjoys a firm financial standing in the food and personal care industry.
It ranks on 3rd after Fauji Foods and At-Tahur according to market capitalization.
Engro foods have consistently been earning profits above the million dollar mark in
recent years and due to this reason they have been given an A grade credit standing
reflecting their high liquidity. Furthermore most of their ratios are above the
standard bench mark set in the industry. Showing their high performance in the
food industry.

4. MARKET SHARE: -
The market share of UHT milk is 35% Nestle, 27% Engro and 17% Haleeb. Whereas
in ice cream 65% belongs to Walls and 24% to Omore (Engro). This high percentage
of market share is the result of increasing amount of demand for hygienic milk.
Since Engro is already an established brand it has gained a massive portion of the
 market share in overall Pakistan. Which has resulted in bringing up massive amount
of sales over the years and their demand to expand greatly.

5. PRODUCT QUALITY
Quality Assurance is strictly followed in Engro Foods. Company has being certified
by many food quality assurance certificates nationally and globally. Qualified food
technologists at this department ensure that highest quality parameters are
adhered to through all steps of production and that the products reach the
consumers as per promise which proves to be a key success factor for Engro foods.
Product quality is key success factor for EFL due to which Recently, Royal Friesland
Campina (RFC) - the parent company of Engro Foods Limited (EFL), awarded the
Sukkur plant the 'Golden Quality Certificate'. The Golden Quality Certificate is
awarded to production facilities and organizations which complete 365 days
without a quality incident. The food-safety and quality-control systems being
followed at the plant were given a high score of 93 percent.

6. Research & Development

EFL is a company that prides itself on being a market leader in innovative new
offerings. EFL has Sestablished this edge by gauging customer needs in the market
and offering products differentiated on their quality and their value proposition.
The emphasis of fostering creativity and successfully implementing those ideas
translates into company unique product portfolio, which sets EFL apart from their
competitors. Providing their customer’s better products that integrate their life
styles, Olpers recently introduced the 250 ml specialized Ecolean pack also
launched a family pack of 1500ml olpers milk with a cap which delivers convenience
to its customers.

7. HR MANAGEMENT
As the human resource department has the potential to manage the most important
and valuable resources of an organization. Without a proper functioning human
resource department, any company would fail to achieve a high level of efficiency
and workforce management. EFL consider HR management as an important assets
and key success factor for organization growth and development.
It is the policy of Engro Foods Limited to attract, induct, develop, retain and motivate
high caliber talent who are qualified, capable and willing to contribute their best
towards accomplishment of Company objectives. To achieve this, Engro will pursue
high standards of Human Resource Management practices encompassing following
principles of equal opportunities, training & development, performance
management, compensation & benefits and non-discrimination.
 8. SALES AND DISTRIBUTION: -
Due to using advanced technology and strong distribution channels system, the
sales of Engro Foods has increased throughout the year. As engro has network of
137 national level distributors which distributes and promotes their product
throughout the country and due to this strongest network EFL claims that more than
12 million consumers uses their product national wide on daily basis which proves
to be a success factor for Engro Foods.

MICHAEL PORTER’S FIVE COMPETITIVE STRATEGIES

MODEL.
A company can survive and succeed in the long run only if it successfully develops
strategies to confront five competitive forces that shape the structure of competition in
its industry. Michael Porter‟s classic model of competition has given analytical method
which tells about two dynamic factors, Competitive forces and Competitive strategies.
This model helps to evaluate the competitive position of the business. In Michael Porter‟s
model, any business that wants to survive and succeed must develop and implement
strategies to effectively counter five competitive forces.
FORCE # 1: -BARGAINING POWER OF SUPPLIERS
The bargaining power of the supplier reflects to what extent the suppliers can drive up
the price of goods and services. It is dependent on the number of suppliers present in the
market for that particular good or service, how unique these aspects are, and how much
it would cost a company to switch from one supplier to another. The lesser the number
of suppliers are available in the market of the commodity the more reliant the company
would become on the supplier. This reliance on the supplier helps the supplier build up a
sort of monopoly in which he is in control of the prices of the supplies the company want
to buy from it and hence the supplier holds more power.

The power the supplier has, does affect the overall industries as they become in control
of the overall pricing and quality of the products, but this is not the case in the food
industry as due to the large market the power in the hand of the supplier depletes.
Following are a few reason for the lesser degree of bargaining power for suppliers in the
case of Engro: -

1. Number of Suppliers: -
In product line of Engro foods mostly comprises of milk related products such as
Tetra Pak milk (Olpers, Tarang), ice-cream (Omore) and cream. Considering such a
product line the staple ingredient for their manufacture is milk. Milk is a standard
commodity whose availability is highly saturated due to the large number of dairy
farm and milk men who are already present in the market. The large number of
available suppliers in the market eliminates the possibility of supplier charging
higher prices as due any unreasonable price change Engro foods can move on
 toward another alternative supplier who is ready to sell his milk at a relatively
cheaper price.

2. Importance of Volume to the Supplier: -

The nature of milk as a commodity is such that it can’t be stored for long periods as
to preserve it the farmer would have to incur a high cost. For this reason the
suppliers are always looking for customers who can purchase their milk in bulk
quantity so that they do not have to incur such high cost. This decreases the
bargaining power of the supplier that he would be willing to sell at any price which
is prevailing in overall milk market.

FORCE # 2: -BARGAINING POWER OF BUYERS

The bargaining power of the customer is considered to be the ability the customers have
to drive prices down. It is dependent on how many buyers or customers a company has
and the significance of each customer to and what would be the switching cost that the
customer will have to incur in order to shift to another brand. The smaller and more
powerful a client base, the more power it holds.

Engro foods have a large number of competitors in the market. These include companies
such as Nestle, Haleeb, Nurpur and other local milkmen. Due to availability of these large
number of competitors in the market. Customer are in better control of the prices. As
there are so many competitors available in the market Engro will have to set their prices
in accordance with the overall market as the customer would not be willing to pay for
overpriced milk due to the large number of alternative already existing in the market.

FORCE # 3: -THREAT OF NEW ENTRANT:

A new entrant is a potential competitor which could be the threat for existing companies.
But in order to enter in the market the new entrant have to consider the entry barriers
which prevents from entering into the industry. Dairy sector is a high-tech business.
Engro food uses UHT along with Bactofuge Technology. Other firms operating in dairy
sector like haleeb and Nestle have huge investment in machinery development to
compete and operate effectively. Nestle’s total investment in Plant and machinery equals
approximately Rs. 36.5 billion as per 2015 report. On the other hand, only manufacturing
cost of Engro Foods is approximately 37 billion in 2015. The need of such huge
investment to enter and successfully operate in the market is barrier for new firms; hence
Threat of new entrants is low.

ENTRY BARRIER:-
1. Capital requirement:
In order to produce the packed products it requires a big investment in terms of
finances, human resources, technicalities etc. so these prevent a new entrant from
entering to the industry. Because, it is not easy to do. Olpers have some threat like
from new entrants Goodmilk product of shskargang food.
 2. Economy of scale:
Economy of scale determines entry because they force potential competitors either
to enter on a large scale bases (a costly and perhaps risky move) or to accept a cost
disadvantage. Moreover, new entrants in the pasteurized milk business may
encounter scale related barriers not just in the production, but in the advertising
marketing, distribution, financing and raw milk purchasing as well, Engro foods
achieved its breakeven in 2003 & are operating beyond that.
3. Product differentiation:-
This one also presents an entry barrier for the new entrant in the industry as the
competitors like Nestle & Engro foods are differentiating their products. So this
could be a difficult task for a new comer to the industry.

FORCE # 4: -AVAILABILITY OF SUBSTITUTES.

Substitutes are available in the food industry as there is not much difference between the
companies operating in the food industry. As all the companies are offering similar type
of products. So if one company increases the price of their products the customers can
switch to the products & services of another company. So this also have an impact at the
attractiveness of an industry. Major threat for substitute for Engro foods are Haleeb,
Nestle, Goodmilk and shakarganj.

FORCE # 5: -RIVALRY WITH COMPETITORS.

Rivalry is intense between the competitors within the food industry as companies like
Nestle, Haleeb, and Engro foods are competing well within the industry with each other.
As the difference between one food company and the other is not that great so in such a
scenario the company who will have better cost structure, efficient operations &
minimum cost will be able to attract the customers towards it and can grab the market.
Diverse competitors

1. Diverse competitors: -
Engro foods competitors like Haleeb & Nestle are consistently involve in their
homework in order to capture the market and in attracting the customers towards
them. Competitor like good milk is also adding competition to the industry and the
magnitude of rivalry is very high.
2. Industry growth rate
The industry has a large potential for growth. The prospective growth can be
estimated in a way the UHT milk is serving a small chunk of total milk consumption
body. So further growth can be pursued.
3. Exit barriers are high
If a firm tries to exit Milk industry, it would have to bear a High Exit cost. The
plants set up to treat milk with ultra high temperature have no significant use in
another industry. Hence firm avoid exiting the industry and hence the rivalry goes
on.
HIGH
 MARKETING EXPENSES

10
Fauji
9

7 Nestle

5 Engro

4 Shakagunj

1
1 LOW 2 3 4 5 6 7 8 HIGH 9 10

STRATEGIC MAPPING

Actual Values
Firm Sales Mark Own
Expenses Rating
Fauji 7001000000000 2335148674 10 ,10
Nestle 122214698 18406725 7 ,6
Engro 34653486 3933248 5,5
Shakrgunjh 4373219 55965 4, 3
 “Liquidity Ratios”
2017 2016 2015 2014 2013 Average Industr Interpretation
y bench
mark
Current 1.2 1.9 1.5 1.3 1.7 1.52 1.32 It indicates the ability of firm to pay off its current
Ratio liability with its current assets. In 2012 company has
ideal ratio (1.2) and indicate it’s a “Safe liquid” but in
later years they have shown great volatility increasing
and decreasing at a rapid date. Though they have
maintained over the ideal ration of Denoting they are a
liquid company.
Quick 0.7 1.1 1.0 0.7 0.9 0.88 0.55 A quick ratio higher than 1:1 indicates that the business
Ratio can meet its current financial obligations with the
available quick funds on hand. In 2012, company had
(1.2) quick ration means it has higher liability while less
quick asset to pay its short-term liabilities while in 2016
company somehow maintained its ratio but again
declined in 2017. However, company maintain its quick
ratio double than its industry bench mark.
Cash to 0.0 0.1 0.0 0.0 0.1 0.04 1.0 The Cash to current liabilities indicates that how much
Current of the available cash can be used to pay off the current
Liabilities liabilities of the company. As per liquidity it shows the
purest form as it considers the most liquid asset which
is cash. A ratio greater than 1 generally shows a positive
sign for the company. The ratios throughout the year
denote that company is not keeping a conservative
approach regarding their assets as there is little to no
cash for meeting their short-term debt obligations.
 “Activity Ratios”
2017 2016 2015 2014 2013 Average Industr Interpretation
y Bench
mark
Inventory 9.1 9.9 11.2 10.2 9.0 9.88 4.36 Inventory Turnover measures how many times a
Turnover company sold its total average inventory during the
year.
2015 proved to be an ideal year for EFL because higher
inventory is sold during this year. as company has
strong distribution channel throughout the nation and
uses automated inventory system due to which
company has high inventory turnover.
ITO= Sales/ Avg inventory

Asset 1.6 1.8 1.9 1.6 1.5 1.68 1.77 This ratio shows how efficiently a company can use its
Turnover assets to generate sales. Higher the turnover shows
represent positive sign for company. EFL had ideal
turnover in 2015 because company is generating higher
sales with its total investment (total assets). Its asset
turnover decreases due to its less sales as compared to
other food companies like fauji and nestle. Furthermore
EFL is comparatively a new company in foods industry
as compare to its rival.
ATO= SALES/T.ASSET
Times 2.07 11.11 6.01 1.88 1.88 4.59 5.1 The times interest earned denotes the number of time
Interest the operating income can pay off the interest expense.
Earned The TIE ratio has showed great volatility which reflects
that the company interest payment capability has
shown a volatile trend with 2016 being their highest
due to an increase in total debt of the company. As their
 tie is less than industry bench mark due to their less
sales.
Debt to 29.8% 2.8% 12.8% 32.1% 39.9% 23.48% 33.77%
Equity
ratio The debt to equity ratio denote what percentage of
total equity comprises of debt. Their equity to debt
ratio indicate that they have low equity in their
capital structure in 2017. Their capital structure
was
Assets = E+D
22218330 = 7088648 + 15129682
Over the 5 years average Company has high debt ratio
in its capital structure. However, company is more
risky and profitable in 2013, 2014, 2017 and less risky
in 2015 and 2016. Company has maintained its debt to
equity ratio but it’s a good sign in an increasing, but it
can create a problem for a company in a decreasing
trend.
“Profitability Ratios”
2017 2016 2015 2014 2013 Average Industry Interpretation
Bench
mark
Gross 16.3% 22.8% 23.3% 18.2% 20.5% 20.22% 28.3% The gross profit margin denoted the
Profit portion of profit from net sales after
deducting the cost of goods sold.
Company didn’t maintain its gross profit
margin which shows that company does
not efficiently work on its production
department. Currently company is
serving only UHT milk and ice creams, on
the other hand other companies in
 industry like nestle is producing in
multiple categories like milk and formula
milk, baby food, confectionary,
beverages. That’s why engro foods has
low gross profit as compared to its
industries.

G.P.M=Gross Profit/Sales
Return on 3.9% 13.9% 21.2% 7.7% 2.0% 9.74% 46.5% ROE is a profitability ratio that measures the
Equity ability of a firm to generate profits from its
shareholders investments in the company.
Company didn’t maintain its ROE because of
company low sales and has high debt ratio in
its capital structure.

ROE = NI/EQUITY
Net Profit 1.1% 5.4% 6.4% 2.1% 0.6% 3.12% 7.13% Company sales decline in 2016 and 2017
to Sales due to high competition in the tea
whitening segments and due to the
change in top management which effect
the company performance.
“Market Ratio”
2017 2016 2015 2014 2013 Average Industr Interpretation
y Bench
mark
Earnings 0.49 3.11 4.13 1.16 0.28 1.834 148.4 It indicates how many dollars of net income earned by
Per Share each share. However, the earning per share of Engro
foods decline during the last 5 years. The reason of low
EPS can be the change of top management and due to
the rival of competitor’s products like cup shup, dost
tea, haleeb which resulted in declining of EFL sales. Due
to declining sales their net income decreases and hence
EPS decreases.