BY M.

FARAN YOUSAF
1
 INTERNSHIP REPORT ON

ASIA GHEE MILLS LIMITED BAHAWALPUR

Submitted to: Mr. Hassan Mujtaba Nawaz Saleem

Submitted by: Muhammad Faran Yousaf
Roll no: 215
BBA R1 8th (Marketing)
SESSION 2011-2015

Department of management sciences

THE ISLAMIA UNIVERSITY OF BAHAWALPUR

BY M. FARAN YOUSAF
2
Acknowledgement

All praises to Almighty Allah alone, the Most Merciful and the most compassionate and His
Holy Prophet “ Muhammad” (Peace be Upon Him) the most perfect and exalted one among and
of ever born on the surf ace of earth, who is forever touch of guidance and knowledge for the
humanity..

I want to thank for all those personalities, who have been a continuous source of guidance
during the report. I want to say thanks to all the employees of Asia Ghee Mills (Pvt) Ltd. The
special thanks the chief Accountant Mr. Arshad Saab for their attitude towards me was
really very positive and appreciable. I want to acknowledge them with thanks for their help and
guidance on each and every step. I made many mistakes as I had never been confronted with
the business world but they never minded and instead of minding they behaved like my brother.
They treated me as their younger brother and forgave all my inaccuracies. But In this regard, I
particularly want to thank those personalities who have been the continuous source of
guidance throughout my internship period in this organization

BY M. FARAN YOUSAF
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Contents
Acknowledgement ........................................................................................................................................ 3

INTRODUCTION OF GHEE & OIL INDUSTRY .................................................................................................. 5

Ghee Industry in Pakistan ............................................................................................................................. 6

Introduction of Asia Ghee Mills .................................................................................................................... 7

MAJEED GROUP OF INDUSTRIES ................................................................................................................... 8

PRODUCTS OF ASIA GHEE MILLS................................................................................................................... 8

BY PRODUCTS OF ASIA GHEE MILLS............................................................................................................ 10

Management Hierarchy .............................................................................................................................. 10

Vision....................................................................................................................................................... 10

Mission .................................................................................................................................................... 10

Goals of Asia Ghee Mill ........................................................................................................................... 11

Objectives of Asia Ghee Mill ................................................................................................................... 11

Location................................................................................................................................................... 13

Company Promoters: .............................................................................................................................. 14

Market Feasibility Report............................................................................................................................ 17

ANALYSIS OF ASIA GHEE MILLS ................................................................................................................... 19

PEST Analysis ........................................................................................................................................... 19

SWOT Analysis......................................................................................................................................... 22

Financial Analysis ........................................................................................................................................ 26

Existing STRATEGIES .................................................................................................................................... 27

SWOT analysis of technology ...................................................................................................................... 33

Production Process ..................................................................................................................................... 34

Conclusions ................................................................................................................................................. 41

BY M. FARAN YOUSAF
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 INTRODUCTION OF GHEE & OIL INDUSTRY

Ghee industry was introduced in the sub-continent in mid-thirties, and since then it has grown
tremendously in face of all environmental hazards. It has been subjected to serious edible Oil
shortages, government inconsistent policies and severe variations between demand and supply in
the domestic market.

The country which was self-sufficient in edible Oil production (0.154 million MT), till 1960, and
paying not a single dollar against the import bill, is today importing well over 1.160 million MT
against an import bill of no less that Rs.33000 million per year, being the third largest edible Oil
importing country of the world, after China and the European Union. All these imports
originated from Malaysia.

During the past 21 years of interrupted and partially halfhearted efforts of successive
governments since 1979, the country has been able to procure only 0.5 million MT of edible Oil
from indigenous resources while the rest of the 1.1 million MT is procured from imports.

The structure of Ghee/Oil industry is just like all the other developing industries of Pakistan.
There are certain well-established companies working with good brand names, serving the nation
as a whole. Along with them there are certain units, which are working in limited areas, meeting
the requirements of these niche markets. Some of the vegetable Ghee mills are working under the
control of government and other are held privately.

The raw material required for the production of Ghee/Oil is imported from different countries
and this is the biggest imported item in food category. The prices of Ghee/Oil are very much
influenced by the duties on these imports and the international price fluctuations of these items.

In early 1990’s there had been a serious crisis in the Ghee industry, and the main reason for this
was that production of Ghee was greater than the demand. In this period due to the heavy losses
on account of these units government privatize so many Ghee producing units.

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Vegetable Ghee is the commercial term for vegetable Oil hardened by the process of
hydrogenation. Cottonseed, soybean Oil, Sun Flower Oil, corn Oil, is being mainly used in
Pakistan for the manufacturing of Oil/Ghee. Pakistan is importing Palm Oil and Soya bean Oil
from America, Indonesia and Malaysia. During 1999-2000 Pakistan imports of soya bean Oil
and palm Oil has drastically decreased both in quantity and value. Pakistan imported soya bean
Oil worth $75.8 million and Palm Oil $267.8 million in year 1999-2000.

The manufacturing of vegetable Ghee or cooking oil in the organized sector is contributing
around RS. 30 billion annually to the government exchequer in the form of custom duty, federal
excise duty and income tax etc. Ghee and oil units are not only catering to the need of Pakistan’s
whole population, but also supplying dietary item of daily use to the people of neighboring
countries. The structure of Ghee and Oil industry is just like all other industries on Pakistan.
Traditionally, at present, the edible oil industry started operations at small and cottage industry
scale.

Ghee Industry in Pakistan

In Pakistan ghee industry is flourished over the years. Today there are many Locals and National
companies as well as international companies engage in the production of ghee and oil working
in Pakistan. Among multinational companies includes Lever Brothers (Pvt.) Ltd. They
manufacture DALDA and PLANTA cooking oil and ghee. Some other companies are as follows.

1) Al Hilal Vegetable Ghee Mills engages in the production of Sultan Banaspati Ghee. It is
situated in Multan.

2) Shehbaz Ghee Mills is engage in the production of Shebaz Banaspati. It is situated in Rahim
Yar Khan.

3) Wazeer Ali Industries Ltd. engages in the production of Tallo Banaspati ghee and cooking oil.
It is situated in Hyderabad.

4) Fatima Enterprises Ltd.

BY M. FARAN YOUSAF
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5) Refahan Maize Product Company involved in the production of Rafhan Corn Oil and it is
situated in Faislabad.

6) Ahmad Food Industries manufactures Ahmad Soya bean Oil.

7) Ghee Corporation of Pakistan (G.C.P) under which 26 units engaged in the production of ghee
are working all over the country.

Apart from these combines there are many other firms manufacturing ghee.

Introduction of Asia Ghee Mills

Asia Ghee Mill is situated 15km away from Bahawalpur at Karachi Road. This Ghee and Oil
manufacturing unit was established in 1994 and start production in 9th June 1997.

Asia Ghee Mill occupied a land area of approximately 3 acres.

The area of Asia Ghee Mill is divided in two heads:

a. Production Area

b. Non Production Area

Non-production area consists of offices, parking facility, and a big lawn. In non-production area
they have their own nursery. Asia Ghee Mill has a very attractive outlook because they have
wide variety of plants and flowers in the lawn and nursery. The office interior of Asia Ghee Mill
is very good because the offices are fully air-conditioned and heaters are also available in cold
weather.

In production area there are different sections related to productions, stores, printing, and
packaging of Ghee and Oil in different sizes.

Asia Ghee Mill is not incorporated in Stock Exchange. Asia Ghee Mill has a capacity of 150 tons
per day but currently they are using 50% of their total capacity.

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 MAJEED GROUP OF INDUSTRIES

Mr. Chuadry Abdul Majeed is the chairman of Asia group of industries, who is one of the best
businessmen in Bahawalpur region.

Majeed Group of Industries involved in the following businesses:

MAJOR BUSINESSES

Asia Ghee Mills

Asia Flour Mills

Bismillah Cotton Industries

Rohi Cotton Mills

Rasool Model Industry Pvt. Ltd (Oil & Cotton)

Majeed Brothers Pvt. Ltd.

PRODUCTS OF ASIA GHEE MILLS

Asia Ghee Mill is manufacturing both Ghee and Oil. The brand names of the product are
given in the table along with their respective weights and prices.

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Major Brands Weight Packs

16 KG Tin Pack

10 KG Tin Pack

5 KG Tin Pack

2.5 KG Tin Pack

12 KG 1 Carton (12 pack of 1KG)

12 KG 1 Carton (24 pack of 0.5KG)

ASIA GHEE

12 KG 1 Carton (48 pack of 0.25KG)

1 KG Plastic Pack

16 KG Tin Pack

10 KG Tin Pack

5 KG Tin Pack

2.5 KG Tin Pack

12 KG 1 Carton (12 pack of 1KG)

ASIA COOKING OIL

12 KG 1 Carton (24 pack of 0.5KG)

12 KG 1 Carton (48 pack of 0.25KG)

1 KG Plastic Pack

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BY PRODUCTS OF ASIA GHEE MILLS
Asia Ghee Mill has two types of by products, which are:

Laundry Soap

CO2

Asia Ghee Mill has sold the laundry soap under the brand name of “Asia Laundry Soap”where
as they dispose off the carbon dioxide into the air.

Management Hierarchy
Introduction

STRATEGIC INTENTION

Vision
“Mr. Masood Majeed is very social person and has an industrial mind, who always think about
the development of people of the country specially living in Bahawalpur through the creation of
employment and meeting their basic necessities of clothes and foods (Flour, Ghee & Oil).”

The management of has the vision and commitment to provide best quality products at
competitive price and our products win reputation in the market due to consistent supply safe and
high quality standard. Our consumers have full faith in our quality and brand as our product pays
back its price to them.

Mission
Asia Ghee Mill don’t have any written mission statement but through our discussion we came at,
and the mission of the Asia Ghee Mill should be:

“We care the health of our customers by providing them, wherever they live, the superlative
purity and best quality oil & ghee at comparable prices and continually improve our products to
meet their needs which help us to maximize the wealth of owners who in turn, create more
employment opportunities and provide maximum benefits to employees. Our mission is to

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ensure that our customers and consumers are provided with the best quality products that are safe
in use. To meet our customer’s expectation and needs Asia ghee mill and Oil Mill committed to
develop and ensure consistent supply of affordable, convenient, safe and high quality products.
As a service company we take great care to ensure that our customers are provided with the best
quality services to fulfill all our customers’ needs. We will ensure that all our employees at each
level and function are well aware of the company’s quality policy and are motivated to apply it
in their areas of responsibilities. Necessary support and training will be given to fulfill their
tasks.

Goals of Asia Ghee Mill

a) To eliminate the burden of debt.

b) To utilize maximum production capacity.

c) To ensure quality at each step of production for both ghee and oil to care the health of our
consumers.

d) To improve the morale and efficiency of employees.

e) To increase market share in Multan division.

f) To develop long lasting good relationships with distribution dealers.

g) To dispose and utilize the wastage in a better way.

Objectives of Asia Ghee Mill

a) They have financed the whole capital through equity and no any debt. They have 10 crore
authorized capital and 7 crore paid up capital.

b) To increase production of ghee and oil from 27000 tons last year to 35000 tons this year.

c) Installation of Levi bond Tento Meter Model to check the color of oil and Spector Photo
Meter to assure zero percentage of Nickel in ghee.

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d) To provide three bonuses to every employee in a year and 25% of basic pay as performance
reward. And to provide minimum 15% increment on their basic pay per year to each employee.

e) To sell 15000 tons of ghee and oil in coming year in Multan division, especially in Malsey,
Wehari, Khanewal, and mia channoo.

f) To give bonuses to dealers Rs. 5/ 16kg beyond the sales target of 500 tons per month.

g) To manufacture the laundry soap from the wastage of ghee & oil and recycle the water for
reuses purposes in the production.

As we know that every company is established for earn profit through minimize the cost and
increase the production, our main purpose also to earn profit but we have other objective that can
be mention below:

i) Efficient process control

ii) Separate research and development division

iii) Reduction of cost wherever possible

iv) Minimize process losses

v) Special attention and top priority to hygiene and adopt

Good Manufacturing Practices (GMP)

vi) Calibration of all equipment

vii) Pest control

viii) Safety standards

ix) System checks to ensure quality control

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Name & Address

Asia ghee mill& oil mill (pvt) ltd

12 KM Dera Nawab Road Bahawalpur

PHONE: 0622-870251

HEAD OFFICE Address

ASIA GHEE MILLS (PVT) LTD

HEAD OFFICE

MAJEED CHAMBER,

GRAIN MARKET,

BAHAWAL PUR

PHONE: 0622-884411

Constitution

Our company is private limited company. Members of the company are Mr. Masood Majeed Mr
Mamood Majeed & Mr. Saud Majeed Prospectus, Article of Association, Memorandum of the
company is register with the registrar of the company under section 1984.

Location
About location

Location wise we are choosing place for industry is near about the Samma Satta. Which is away
12 km from bwp on main high way Bahawalpur ?

These are some main reason for choosing area in this point,

Because it is situated between the rural and urban areas.

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Easily accessible for supplier

Easily accessible for employee because our mostly employee relate to Bahawalpur Samma Satta
KhanGa Shreef. DeraBakha,.

Near of patrol pump and CNG station

Promoters and their contribution

Company Promoters:
Overall management and control of the firm will be actively managed by the partners
who will actively participate in management decision and control the affairs of the firms.

Partner Name Designation

Mr.Abdul Majeed

Mr. Abbdul Majeed (Late ) was the founder of Asia Ghee Mill. He was also the chairman
of Majeed Group Industries. He was the First Mayor of Bahawalpur. He was very kind to
his workers.

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Mr.Masood Majeed Mr.Mamood Majeed

Managing Director Managing Director

Mr. Saoud Majeed

Managing Director

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Mr. Muhammad Arshad Mr. Tariq

Chief Finance Manager IT Incharge of Asia Ghee mill

Of Majeed Group of Industry

Chief Account Manager & Marketing Manager of Asia Ghee mill

4 Miss.Zara Afzal Rao Marketing Manager

5 Mr.Fahad Islam Production Manager

The Promoters of the project are professionally qualified and have valuable and extensive
experience of business management industrial fields. They have got good trading contacts and
market reputation in the industry. The project faces no problem in terms of marketing its
products. The sponsor’s experience would assist the company in its smooth and profitable
operation. The sponsors are financially sound and capable to contribute their part of equity in the
proposed scheme.

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Market Feasibility Report
Segments

we select the Bahawalpur market for selling our products target is middle level people and low
level people. Because we provide best quality ghee and oil to those people at low as possible
price against our competitors.

Competitors

In Pakistan Ghee Industry is flourished over the years today there are many locals and national
companies as well as international companies engage in the production of Ghee Oil working in
Pakistan .Among Multinational companies include Lever Brothers PVT ltd they Manufactured
Dalda and Planta cooking Oil and Ghee.

Some other companies as Follows

AL HILLAL vegetable Ghee Mill- engages in the production of sultan banaspati Ghee. It is
situated in Multan

Shahbaz Ghee mill -is engage in the production of Shahbaz Banaspati. It is situated in Rahim
Yar Khan.

Wazir Ali Industry Limited- engages in the Production of Tallo Banaspati Oil NAD Ghee. It is
situated in Haidrabad.

Rafhan Maize Products Company - involved in the production of Rafhan Corn Oil and is
situated Faisalabad.

Pricing

Asia ghee& Oil Mill is manufacturing both Ghee and Oil. The brand names of the product are
given in the table along with their respective weights and prices.

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Major Brands Weight Packs Prices Rs.

16 KG Tin Pack 2400

10 KG Tin Pack 1500

5 KG Tin Pack 750

2.5 KG Tin Pack 375

12 KG 1 Carton (12 pack of 1KG) 1775

ASIA BANASPATI

12 KG 1 Carton (24 pack of 1/2KG) 1775

12 KG 1 Carton (48 pack of 1/4KG) 1775

1 KG Plastic Pack 150

16 KG Tin Pack 2400

10 KG Tin Pack 1500

5 KG Tin Pack 750

2.5 KG Tin Pack 375

ASIA PURE COOKING OIL

12 KG 1 Carton (12 pack of 1KG) 1775

12 KG 1 Carton (24 pack of 0.5KG) 1775

12 KG 1 Carton (48 pack of 0.25KG) 1775

1 KG Plastic Pack 150

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Marketing and Selling Arrangements

We market our product in daily newspaper and through electronic media like TV, Radio and
other print media. We sell our product by make our agencies in the city where we sell these
products to whole seller.

ANALYSIS OF ASIA GHEE MILLS

First to analyze the environment as a whole, two techniques are used. Which are

PEST Analysis” and “Structural Analysis”. And for the specific analysis of company “Value
chain analysis”, “SWOT” and “Financial Analysis” is used.

PEST Analysis
PEST analysis is used to assess what environmental factors are affecting the organization, which
of them are most important and how they will effect in next year’s. It is an indicator of political,
economic, social and technological influences on organization. The analysis of Asia Ghee Mills
is as under:

Political and Legal Factors

Industrial Laws

Industrial laws regarding unions has no impact upon the Asia Ghee& Oil Mills because no union
exit in the organization, but if in future it become so, then the company has to consider these
laws in their decision making concerning wage rates, bonuses, and benefits of the employees.

Foreign Trade

This matter will be of a key concern for Asia Ghee& Oil Mills. Because the Asia Ghee& Oil
Mills is importing four different types of oil from Singapore and Malaysia, which are not
available locally, but the Government don’t provide any support to import these raw materials
and don’t provide any relaxation in import duty upon the imported raw materials. So if

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Government bring any change in its foreign policy, then it will be very much important to cope
with that.

Environmental Protection Laws

Although the laws regarding environment are not very sophisticated in Pakistan but even if they
become so, they will not be hampering for Asia Ghee Oil Mills, because in Asia Ghee& Oil
Mills all the wastes are considered as by products and used or sold. The water is also recycled for
reuses purposes. The only emission is of the carbon dioxide, which is within the prescribed range
of pollution.

Taxation Policy

The Asia Ghee& Oil Mills is paying tax each year. In last year the Asia Ghee& Oil Mills paid
income tax 43% of net profit to the Government. But in this year Asia Ghee& Oil Mills has to
pay income tax of 45% of net profit, which is equal for all the private companies.

Employment and Government Stability

Employment is not a matter of high concern for the organization because it is already following
all the labor laws. But recently the Government increases the wages of the employees but Asia
Ghee& Oil Mills has not affected by that, because this is a private company. But they are paying
more than the Government announced.

Economic Factors

Among the many of economic factors some are more important for Asia ghee mill& Oil Mills;
the detail of these factors is in following:

Interest Rates

Interest rates increase and decrease has no impact upon the financial performance of the Asia
ghee mill& Oil Mills, because the company has no loan of any bank. But it in future the
company needs to take the loan then it must have to consider this issue.

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Inflation

At the moment inflation rate does not seem to be very much related matter, because any increase
in oil prices will be offset by the increase in price of Ghee and cooking oil. Because there is no
close substitute of Ghee and cooking oil, so the sales will not be affected. But if we take it in
longer perspective the inflation in the country will increase the cost of production, which will
increase the sale price. And at high sale price the product will become in-competitive in the
international market if the company will involve in the export. So the pan of export will be
adversely affected by the inflation.

Disposable Income

Within the country the demand will be affected if the disposable income will be reduced. Ghee
and cooking oil is a basic food ingredient and its primary demand cannot be eliminated. But
other than its direct use, it is also used in bakery and confectionery items and so many other
foods whose demand is dependent on disposable. So any decrease in disposable income of the
consumers will also be affecting Asia ghee mill& Oil Mills negatively.

Technological Factors

Technology in ghee industry can be divided into two sectors. First is cotton seed and second are
ghee mills. The technological factors, which are more concerned with Asia ghee mill& Oil Mills,
are as under:

Government Spending on Research

Usually in order to support some industry and improve economy, government allocates some
fund to R & D. Unfortunately our government doesn’t have any money for R & D. Due to this
non-serious behavior of government this sector along with others, is suffering very much. No
single mill owner can support R & D especially in the field of Cottonseed varieties. The varieties
which now a days are being cultivated are of sub-standard qualities. It gives less recovery and
more wastage. There is a need to find out the seeds, which can give better recovery.

New Discoveries and Developments

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New discoveries in the field of raw material will be very much beneficial for the company, as it
will reduce the cost of production. But, if there will be any change in the technology of ghee
mills, or process development than it will be very difficult for the company to coup with that
change. In fact the company has made much investment in latest plant and machinery in 1994,
and almost 80% of its total fixed cost is stuck up in this area. So adopting any change means a
loss of all these assets. Which is almost unbearable for the company.

Socio-cultural factors

Socio cultural factors like demographics; income distribution, life style etc. can also affect the
company in different ways. Let’s see which of them are more concerned to Asia ghee mill& Oil
Mills.

Life Style Changes

The consumption of ghee is very much related with the life styles of people. Now people, all
around the world, are becoming more and more health conscious. They are well aware that a
high consumption of ghee will increase the cholesterol, which leads to heart disease. That is why,
a significant change in the consumption of ghee is being observed in last many months. Although
the use of ghee cannot be fully eliminated but if this life style grows at same speed it will surely
decrease the demand of ghee but on the other hand the demand of the cooking oil is gradually
increase in last many months due to the same reason.

Level of Education

Level of education is directly related with awareness and health consciousness. In countries
where education rate is high the ghee consumption rate is low. In Pakistan, as well as in foreign
markets the rate of literary is increasing which will affect the organization negatively. High level
of literacy will lead to low level of ghee consumption and people started switch towards cooking
oil.

SWOT Analysis
Strengths of Asia Ghee & Oil Mills

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STRENGTHS OF ASIA GHEE MILLS

Professional Leadership

Usually in such kind of traditional organizations leadership is deficient. People are usually
guided through specified rules and regulations. Also the professionalism is lacking in most of the
cases. But Asia ghee mill& Oil Mills is clearly different in this aspect from other organizations.
After taking charge of many responsibilities Mr. Ch. Abdul Majeed has worked very hard for the
success of the mill. Due to his professional abilities and leadership qualities he has also achieved
many of his objectives. And now this is the result of his efforts that the company is showing very
good performance and operating on professional basis.

Skilled Labor with High Morale

In most of the factories skilled and semi-skilled labor along with unskilled labor is hired from
outside. There is always a risk associated with them that whether they work properly or not. First
of all Asia ghee mill& Oil Mills always hire the educated people, you can take the example that
they require at least Matric pass candidate for the post of helper. Asia ghee mill& Oil Mills has
placed its new employees with the senior employees and trained them before they actually placed
on job. They have the career opportunity to move upward to become an operator because helper
has known all the responsibilities of the operator. So this will create the most loyal employees
with high morale, which are more productive.

Sophisticated Technology

There are no hard and fast rules in ghee/oil industry regarding the technology or process implied.
Even in some factories fifty years old machinery is also used. Such type of machinery affects the
quality of oil/ghee. Asia ghee mill& Oil Mills has the latest machinery and plant. As it is one of
the latest ghee/oil mills build in Pakistan whose machinery is locally available from Multan &
Lahore, so it is using the most modern technology available in Pakistan. This machinery also
gives an edge to the organization over its competitors, because all the ghee/oil industries working
in Pakistan are using “By Pass” operations means that the same machinery is used for the

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23
production of ghee and oil. Whereas the only Asia ghee mill& Oil Mills has separate processes
for both ghee and oil to assure the good quality products.

Backward Linkages

Generically the company has got an advantage of access to the sources of raw material. In fact
the owner of the company is big business man of Bahawalpur. The raw materials, which are
available in Pakistan, are mostly available in Bahawalpur. The other strength of the company is
that they take the oil from their own cotton factories but their cotton factories meet only 10% of
the total raw material required for the current capacity utilization

Weaknesses of Asia ghee mill& Oil Mills

Lack of Awareness

The major weakness of the Asia ghee mill& Oil Mills is the lack of awareness among the
consumers, because the Asia ghee mill& Oil Mills don’t go for any type of advertising program.
Asia ghee mill& Oil Mills use print media one time in a month, where as they had used
electronic media in start but now they don’t have any advertisement for their products, so that’s
why majority of the people even don’t listen the name of company.

Limited Distribution Network

The other weakness of the Asia ghee mill& Oil Mills is of having limited distribution network.
As we have already told that Asia ghee mill& Oil Mills is distributing their products only in
Bahawalpur, where they are distributing their products at mass level and having a market share
of 70-80%, but in Multan division the firm has started its distribution. Because of this limited
distribution network the company is unable to utilize its full capacity because currently Mill is
utilizing 50% of its full capacity which is enough to meet the need of consumers in Bahawalpur,
and other than Bahawalpur the company don’t have so much demand because of no
advertisement, and absence of distribution network which forced the company to operate half
capacity.

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Dealership Marketing

Asia ghee mill& Oil Mills distribute its products through outside dealers which cause increase in
price of the products which the consumers receive, because the dealers and retailers take their
margin which causes a 1-2 rupees difference in the Ex-factory price and Retail price.

Opportunities

Generic Opportunities

The ghee/oil has so many opportunities due to its product nature. It is a necessity and no one can
avoid it. In Pakistan, the consumption rate of ghee/oil is high in the world, and as the population
growth rate is also very high so the company has an opportunity to meet the demand of local
market. Also the product has no substitute, so people have to buy it in any case. These are the
natural opportunities, which the company is enjoying.

Threats

Low Production of Sunflower seed

The sunflower is not produced sufficiently in the country. It is due to the low productivity of the
varieties and due to the less area cultivation. Due to this low production the mill faces a shortage
of raw oil, which is always a problem for the company.

Decrease in Consumption

Due to the increase in awareness level of the people the consumption rate is decreased. The
reduction in disposable income is also a cause of decrease consumption of ghee. The high rate of
heart disease in the country is another cause, which restrict the people to use ghee. Because of all
these factors the consumption rate of ghee is decreasing in Pakistan. This is a source of
continuous threat for the company.

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Financial Analysis
In order to see the viability of the company, Financial Analysis is necessary. In this analysis we
calculate financial ratio and some financial indicators.

PROFITABILITY RATIO

A profitable company will have to be expanded further. So we can analyze its profitability
through following indicators. The company has authorized capital of 10 crore, and the paid up
capital of 7 crore.

Gross Profit Margin

Gross Profit Margin = Gross Profit / Net Sales

Gross Profit Margin = 114270750 / 761805000 = 15%

Asia Ghee Mills is getting 15% profit margin after paying its cost of goods sold. From that 15%
margin company can easily pays its operating expenses and taxes. As firm is not raising any
long-term debts, so, the profit for the company is enough to pay its operating expenses.

Net Profit Margin

Net Profit Margin = Net Profit / Net Sales

Net Profit Margin = 29966640 / 761805000 = 3.93%

Company is earning very good profit margin, and it is improved from previous year by 0.93%.
Which shows good performance the main reason for that is the increase in sales from previous
year. Company is utilized its equity very well. Shareholder’s value is also increased.

ACTIVITY RATIO

From available data we are only able to calculate inventory turnover ratio. As firm is utilizing its
capacity about 50% and from that, they have to keep some inventory as safety stock.

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Inventory Turnover

Inventory Turnover = CGS / Inventory

Inventory Turnover = 647534250 / 190451250 = 3.4 times

It means the firm is able to sell its inventory 3 to 4 times a year. Due to uncertainty they have to
keep about 25% inventory as ending inventory.

Existing STRATEGIES
Corporate Level Strategies

Ccorporate level strategy focuses on strategies for enterprises consisting of more than one
business. Asia Ghee Mills, for instance, comprises several businesses, including consumer goods
and industrial goods. Asia Ghee Mills involve more than one business is said to be diversified.

CONCENTRIC DIVERSIFICATION

“Adding new, but related products or services”.

Asia Ghee Mills involved in concentric diversification because Asia Ghee Mills has two by
products, laundry soap and CO2 gas. Asia Ghee Mills has developed a setup to sold laundry soap
under brand name of “Asia Laundry Soap” so Asia Ghee Mills is adding new but related
products in to the market. Instead of selling laundry soap as a raw soap to any other soap
manufacturer, they themselves start cutting and packaging of the soap and sold in the market as
their own new products under their own brand name. Then we said it concentric diversification
because they manufacture the soap from the by products they receive.

BACKWARD INTEGRATION

“Seeking ownership or increased control of a firm’s suppliers”.

Asia Ghee Mills involved in backward integration because they receive the cottonseed oil from
their own cotton factories. Although these three cotton factories provide only 10% of its total

BY M. FARAN YOUSAF
27
requirement but this will increase the bargaining power of the Asia Ghee Mills if it has to
negotiate upon the prices of oil purchasing from other factories.

Business Level Strategy

Firms compete directly with one another at what is called the business level of strategic
management, so we will focus on crafting successful competitive strategies. Because competition
takes place at the business level, strategic management at this level is crucial to the overall
success of the firm.

COST LEADERSHIP

In manufacturing and especially in industries where the product differentiation is not possible the
only strategy the organization is left with is "Low Cost Production" or cost leadership. In fact
cost reduction is the only way to stay in the industry. Asia Ghee Mills has cost leadership
strategy. Asia Ghee Mills has the following two major competitors:

Major Competitors Weights Prices (Rs.) Weights Prices (Rs.)

Sultan Banaspati 1kg 48 16 kg 740

Shehbaz Banaspati 1kg 47 16 kg 736

Asia Ghee Mills is following cost leadership because the competitors especially Sultan Banaspati
has a very old name in the ghee industry so Asia Ghee Mills has to charge the low prices to
compete with the competitors.

Here from the above table we can see that the price of the Shehbaz Banaspati is equal to the
prices of the Asia Banaspati. But in Bahawalpur the sale of Asia Banaspati is more than Shehbaz
Banaspati, but in Multan division the sale of Sultan Banaspati and Shehbaz Banaspati has more
sales than Asia Banaspati.

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28
According to the text, the low cost strategy is good when, product cannot be differentiated,
industry is producing standardized product, product has same usage and switching cost is low.
All the characteristics are fully applied in ghee industry. So company is using right strategy.

Operation Level Strategy

Operation level strategy focuses at how to develop capabilities in process execution that will
yield competitive advantages for a firm. This involves applying strategic management concepts
to what is known as the operations level, the level at which work inside the organization actually
takes place. We focus on how organizations go about improving their process capabilities,
including both total quality management and core process reengineering.

PRODUCT DEVELOPMENT

“Seeking increased sales by improving or modifying present products or services”.

Currently Asia Ghee Mills is following the product development strategy, because the Asia Ghee
Mills is continuously improving the quality of the ghee/oil for the consumers. Asia Ghee Mills
has a good image in the Bahawalpur, and they try to develop the same good image in all over the
country, so that’s why they are improving their products through TQM.

Recommended strategies

Recommended Strategies

At this time when industry is fully mature, and the competition in terms of access to final
consumer is very high the companies usually face the problems of slow demand growth,
emphasize on cost and services, topping out and loss of profitability. The Asia Ghee Mills is also
facing the same problems. Although it has tackled the major problems very well but still there is
some room of improvement in its existing strategy.

FORWARD INTEGRATION

“Gaining ownership or increased control over distributors or retailers”.

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29
The firm should use their own distribution network because the motive behind that when they
have their own distribution system the additional cost will be avoided which had been kept by
dealers as their own margin. In this dynamic and competitive environment the firm has to
maintain its current position of cost leadership to be competitive.

CONCENTRIC DIVERSIFICATION

Asia Ghee Mills is involving in the concentric diversification because of having two by products.
One is laundry soap and the other is CO2 gas. The firm is using laundry soap as the new product
and is selling under their own brand name. But they are disposing off the CO 2 gas in the air.
They can generate good cash flows if they use CO2 gas as the new product of the factory and
sold to soda water or you may receive the application from different contractors.

MARKET DEVELOPMENT

“Introducing present products or services into new geographic areas”.

As it is already mentioned that the firm is only distributing in Bahawalpur and Multan division.
The firm should go for market development, means that the firm should introduce their products
in new markets or new geographical areas. This can increase the demand of the firm’s products.
Then increase in demand will lead the company to utilize the full capacity of the production.
When the company utilizes the full capacity its sales will increase along with the profitability of
the owners.

ADVERTISEMENT

Asia Ghee Mills is not using any mode of advertisement, because of low demand and
unavailability of their products. They believe that advertisement without availability of the
product is useless and creates a bad image. In order to create awareness Asia Ghee Mills must go
for advertisement.

ISO CERTIFICATE

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30
Although the firm is working better than required ISO certificate but the firm should take the
ISO certificate. Because ISO certificate create a good image among the consumers.

DISPENSARY

Asia Ghee Mills has no dispensary in the factory for the employees’ injuries during the
production. Asia Ghee Mills must take some action to establish a full fledge dispensary for
dealing the employees’ injuries. This will provide the safety to the employees and they will be
more satisfied, productive and having high morale.

Implementation

Asia Ghee Mills can implement on our proposed strategies in following ways:

FORWARD INTEGRATION & MARKET DEVELOPMENT

Asia Ghee Mills has following options available for distribution of its products.

through private dealers

Through their own networks.

As we already suggested Asia Ghee Mills should distribute its products through its own
networks. So for this it should take following steps.

Purchase its own vehicles.

Appoint more sales officers.

Establish its own distribution networks in major cities of Pakistan i.e. Bahawalpur, Multan,
Khanewal, Mianchannoo, Sahiwal, Lahore, Faisalabad. The sales officers are required to sell the
product of the company directly to the retailers. When they got success in these cities then the
company should approach to other cities of the country to explore new markets.

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31
CONCENTRIC DIVERSIFICATION

For establishment of CO2 Gas plant, Asia Ghee Mills should take following measures:

Construction of CO2 gas cracking plant and:

Sold to Soda Water producers or any other contractor.

Gas cracking plant requires approximately 6.5 lac of investment. This plant has the capability to
eject the CO2 gas from the disposable gases. The disposable gases have transferred to sulpher
tower where these gases are required to be refined at 800c, which separate all the gases (H 2, O2,
CO2, CO). Then these gases has to transferred to first converter then second converter where the
converter absorb the CO2 gas, then after absorbing this CO2 gas again has to reboil at 100c which
purify the CO2 gas and then CO2 gas has to transferred from low pressure tank to high pressure
tank. Then the CO2 gas is ready to fill the cylinders.

ADVERTISEMENT

Asia Ghee Mills has following options for advertisement:

Electronic Medias

o TV

o Radio

o Internet

Print Medias

o Newspapers

o Magazines

Asia Ghee Mills should advertise on electronic media especially on TV, Because TV is more
capable to create awareness about the company’s product among the people and can facilitate its

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32
sales officers during sales to retailers. The timing of advertisement should be during Khawatin
programs.

SWOT analysis of technology

Strengths

1. Raw material

In this technology we can easily assess to raw material of ghee, we have no need to import it.
Cotton seeds is a major raw material of ghee .so that’s why we use this technology. Cotton
production is high in Pakistan.so it’s the strength of our technology to easily assess to material.

2. Access to everyone.

Another strength of our technology is easy access to everyone .there is no flexibility in our
technology. Companies who want to start the ghee production sector can easily use this
technology.

3. Well technology

Our technology is well. Our machines will work efficiently and effectively by using plant
through using this technology we can get maximum production in minimum time.

4. Profitable technology

Our technology is profitable. This technology has capability to produce ghee at large scale. Due
to large production our variable cost will be decrease and we sold ghee at high price and earn
profit.

Weakness

1. Problem of load shedding

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33
In Pakistan there is problem of load shedding of electricity and gas. Because of lack of energy
crisis this technology will not work properly.

2. Expertlabor requirement

The technology that we adopted has required expert labor requirement. First of all we will give
training to the labor to operate the machinery.so its extra work for the production process or
technology.

Opportunities

1. Flourish in future

Such technology will flourish in future. Its creates expert labor in future that is beneficial for our
economy of the country.

Threats

1. Competitive technology

As we discuss that herbal ghee technology is competitor of our technology.so it’s a big threat of
our manufacturing process or technology.in future it can be possible herbal technology will beat
our technology.so its big threat of our mill.

Production Process
Preparation of Ghee:

Objectives:
To prepare ghee form Butter/cream
To study the quality of Ghee.

Relevant information:
Ghee is clarified butter fat. It is prepared on both small and large scale, Deshi method of ghee
making comprises more than 90% if Indian Ghee production. The Ghee is prepared b fermenting

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34
whole milk to curd, churning the curd to butter and boiling down the latter to ghee. Ghee is the
richest source of animal fat in vegetarian diet. It supplies 9 K. calorie energy/gm. It has long
keeping quality under tropical storage conditions. In India, Ghee is prepared form Makhan
(deshi butter). This ghee has low keeping quality than ghee prepared by other methods.
Ghee is being prepared by continuous method on large scale. A new method of ghee making
has been started and named as prettification Cream (ripened/unripe Ned) can also be used for
ghee making. Ghee prepared form unripe Ned cream has got longer keeping quality. Factory
scale ghee is prepared form unripe Ned cream.
Precautions:
1. Prevent over flow due to foaming by regulating heating.
2. Carefulstirring during butter melting.
3. Ripening of cream should be carried out carefully/ appropriately and under controlled
conditions.
Material required:
1.Ripenedcream/cream/butter
2.Muslincloth
Apparatus:
1. Ghee boiled / Iron pan
2. A stirrer with flat end
3.Shegadi or chula
4. Thermometer (0-200 0C)
5. Weighting balance
6.Tin containers for packaging ghee.

Production Process of Ghee:

1.Put the butter/cream in the iron pan. It starts melting at 300 C by the time the temperature
reaches to 64 0 C all the butter gets melted. Butter is stirred during melting.
2. Temperature increases up to 94 0 C and remains till most of the water is evaporated. At this
stage is formed on the surface.
3. The contains of boiling pan become much thicker and bubbles are formed.

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35
4. The curd particles begin to form in to lumps as the temperature approaches to 110 0 C much of
the curd is carried up to the surface where it forms its scum.
5. Curd particles begin to sink to the bottom of the pan. At this stage temperature is about 120 0
C.
6. Scum disappears from the surface and the general appearance is of a clean yellowish liquid
with white curd particle floating near the bottom of pan.
7. As the temperature rises to about 120 0 C the larger bubbles is gradually replaces by smaller
one with cracking sound. At this stage the ghee is ready.
8. During cooling crystal or grain formation takes place if ghee is cooled suddenly, small sized
grains are formed and if ghee is cooled slowly big sized grains are formed. So cool ghee slowly.
Ghee should be filled in Zinc coated tinned vessels.
9. Never use iron or copper containers. It should be protected from sunlight.

Selected uses of oil

Fats are the primary constituents of margarines, butterfat, shortenings, and oils for salad and
cooking. In addition to the visible fat contained in food, fats and oils are found in high quantities

BY M. FARAN YOUSAF
36
in many bakery goods, infant formulas, and dairy products and some sweets. Oils, butter or
margarine are sometimes used directly on food.

Cooking oils

The major use of cooking oil is in frying, where it functions as a heat transfer medium and
contributes flavor and texture to foods. One requirement of a cooking oil is that it be stable under
the very abusive conditions of deep-fat frying, namely, high temperatures and moisture. In
general, oil should be kept at a maximum temperature of 180°C during frying. Frying food at a
temperature which is too low results in increased fat uptake. Water, which is contributed by the
foods that are fried in oil enhances the breakdown of fatty acids which occurs during heating.
Hydrolysis results in poor-quality oil that has a reduced smoke point, darkened color and altered
flavor. During heating, oils also polymerize, creating viscous oil that is readily absorbed by
foods and that produces a greasy product. The more saturated (solid) the oil, the more stable it is
to oxidative and hydrolytic breakdown, and the less likely it is to polymerize.

Oils rich in linoleic acid, such as soybean and canola oils, are particularly susceptible to these
undesirable changes. When soybean oil is partially hydrogenated to reduce the linoleic acid from
about 8 percent to below 3 percent, it is relatively stable frying oil and it is used in processed
fried foods, pan and griddle frying, and sauces. Stability is increased by using cottonseed, corn
oil, palm oil or palmolein or by more hydrogenation of soybean oil.

Foods that are fried and stored before eating, for example, snack products, require an even more
stable oil. More saturated oils improve stability, however, if the frying fat is solid at room
temperature it will produce a dry dull surface that is undesirable on some fried products. When
oils are used continuously, as in restaurants, a frying fat which can withstand very heavy use is
needed. In these cases, more solid shortenings are used to maximize the stability of the fat for
many hours of frying.

Frying oils made from sunflower and safflower have lower stability because of their -tocopherol
content; however, high polyunsaturated fatty acids and low high-oleic safflower and sunflower
oils that have been genetically developed are suitable frying oils.

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37
For optimal use of cooking oils, it is necessary to distinguish between different frying conditions.
The most important parameters to be monitored are duration of use and nature of the foods to be
fried. If food fats enter the frying oil, food components could destabilize the oil and the water
content of the material could influence the frying operation. Whether the use is continuous or
intermittent is relevant, continuous use provides a protective water vapor blanket that protects
against oxidation. Finally, temperature must be considered.

Industrial use of fats and oils is usually well-monitored. The continuous operation (implying the
constant addition of fresh oil) and quality requirements for the products normally ensure good
quality control of the oil. In homes, where oils are normally used for much shorter periods of
time and are discarded after being used once or twice, stability problems play a lesser role.
Stability of frying oils is a more important factor in catering operations, where heating is
intermittent and oils may be used for long periods.

Sunflower seed processing into oil

Sunflower oils are cold-pressed. This method, which entails minimal processing, produces light,
flavorful oil suitable for some cooking needs. Sunflower oil manufacture involves cleaning the
seeds, grinding them, pressing and extracting the crude oil from them, and further refining. In
extracting the oil, a volatile hydrocarbon such as hexane is used as a solvent to extract the oil.

2 Agricultural Marketing Resource Center, AgMRC

3 Volatile hydrocarbons are hydrocarbons that are liquid at normal pressure and temperature but
have a high vapor pressure and, therefore, evaporate rapidly. Some examples of volatile
hydrocarbons include toluene, methylene chloride and acetone.16

■ Cleaning and grinding

Incoming oil seeds are passed over magnets to remove any trace of metal before being de-hulled.
The de-hulled seeds are then ground into course meal to provide more surface area to be pressed.
Mechanized grooved rollers or hammer mills crush the material to the proper consistency. The
meal is then heated to facilitate the extraction of the oil. While this procedure allows more oil to

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38
be pressed out, more impurities are also released with the oil, and these must be removed before
the oil can be deemed edible.

■ Pressing

The heated meal is then fed continuously into a screw press, which increases the pressure
progressively as the meal passes through a slotted barrel. Pressure generally increases from
68,950 to 206,850 kilopascals as the oil is squeezed out through the slots in the barrel, and is
recovered.

■ Extracting additional oil with solvents

After the oil has been recovered from the screw press, the oil cake remaining in the press is
processed by solvent extraction to attain the maximum yield. A volatile hydrocarbon (most
commonly hexane) dissolves the oil out of the oil cake is then distilled out of the oil and passes
through the matter, to be collected at the bottom.

■ Removing solvent traces

Ninety percent of the hydrocarbon remaining in the extracted oil simply evaporates, and,
as it does, it is collected for reuse. The remaining 17 hydrocarbon is retrieved with the use
of a stripping column. The oil is boiled by steam, and the lighter hexane floats upward. As it
condenses, it too is collected.

■ Refining the oil

The oil is next refined to remove color, odor, and bitterness. Refining consists of heating the oil
to between 40 and 85°C and mixing an alka- line substance such as sodium hydroxide or sodium
carbonate with it. Oils are also degummed at this time by treating them with water heated to
between 85 and 95 °C steam, or water with acid. The gums, most of which are phosphatides,
precipitate out, and the dregs are removed by centrifuge.

Oil that will be heated (for use in cooking) is then bleached by faltering it through fuller’s earth,
activated carbon, or activated clays that absorb certain pigmented material from the oil. By

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39
contrast, oil that will undergo refrigeration (because it is intended for salad dressing, for
example) is winterized – rapidly chilled and filtered to remove waxes. This procedure ensures
that the oil will not partially solidify in the refrigerator.

Finally, the oil is deodorized. In this process, steam is passed over hot oil in a vacuum at between
225 and 250 °C, thus allowing the volatile taste and odor components to distil from the oil.
Typically, citric acid at 1% is also added to oil after deodorization to inactivate trace metals that
might promote oxidation within the oil and hence shorten its shelf-life.

■ By-products/waste

The most obvious by-product of the oil-making process is oil seed cake. Most kinds of seed
cake are used to make animal feed and low-grade fertilizer; others are simply disposed of.

■ Quality control

The seeds used to make oil are inspected and graded after harvest, and the fat content of
the incoming seeds is measured. For the best oil, the seeds should not be stored at all, or for only
a very short time, since storage increases the chance of deterioration due to mould, loss

of nutrients and rancidity. Quality of seeds very much depends on Infrastructure (silos) available
for the proper storage conditions. The seeds should be stored in well-ventilated warehouses with
a constantly maintained low temperature and humidity. Pests should be eradicated, And mold
growth should be kept to a minimum. Seeds to be stored must have a low moisture content
(around 10%), or they should be dried until they reach this level (dryer seeds are less likely to
encourage the growth of mould).18 Processed oil should be consistent in all aspects such as
color, taste and viscosity. In addition, the oil should be free of impurities and meet the demands
placed upon it for use in cooking. Before being filled, the bottles that hold the oil are cleaned and
electronically

Inspected for foreign material. To prevent oxidation of the oil (and therefore its tendency to go
rancid), the inert (non-reactive) gas nitrogen is used to fill up the space remaining at the top of
the bottle.

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40
Conclusions
Rural refining of oil-bearing plants can produce fats and oils of good quality which provide
needed energy and fat soluble vitamins. Commercial refining produces fats and oils that can be
of high quality and have the characteristics of bland taste, clear color, good keeping quality and
frying stability. Commercially-refined fats and oils are free from known contaminants extracted
from the raw agricultural products. Refining may remove nutritionally valuable carotenoids to
yield oils of low color, but retains substantial proportions of tools, and does not change fatty acid
nor triacylglycerol compositions. Temperature, time and pressure must be carefully controlled
during industrial refining. Oil products should be properly stored, transported and packaged to
maintain quality and consumers must assume responsibility for not abusing oils and fats within
households.

Industry can design almost any fat or oil for a specific application by the use of various
modification processes, such as hydrogenation, interesterification, fractionation or blending.
Hydrogenation typically reduces essential fatty acid content and creates various fatty acid
isomers, both cis and trans. The wide flexibility available to industry through the selection of raw
materials and different modification processes allows for the production of oils at the lowest cost
possible, an important aspect of food production.

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41