Group Assignment

BM203 – Business Strategy

SLIIT – Faculty of Business

Department of Business Management
BBA Special (Hons) Degree/ BBA (Hons) in Business Management
Year: Two Semesters: First
Date of submission: 10 May 2018

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Table of Contents
1. Abstract………………………………………………………………………………………………………………………………3
2. Introduction to the Company……………………………………………………………………………………………..4
a. Product Portfolio…………………………………………………………………………………………………….4
i. Carbonated Soft Drinks………………………………………………………………………………4
ii. Frozen Confectionery……………………………………………………………………………..…5
iii. Processed Meat……………………………………………………………………………………..….5

3. Corporate Strategies of CCS………………………………………………………………………………………………….6

a. Vision……………………………………………………………………………………………………………………….6
b. Mission…………………………………………………………………………………………………………………….6
c. Key Values………………………………………………………………………………………………………………..6
d. Value Creation for Stakeholders….……………………………………………………………………………7

4. Evaluation of Key Findings Using Theories and Frameworks…………………………………………………9

a. PESTEL Analysis…………………………………………………………………………………………………………9
b. SWOT Analysis…………………………………………………………………………………………………………11
c. Porter’s Five Forces Model………………………………………………………………………………………12
d. Value Chain and Value Network………………………………………………………………………………13
e. Cultural Web…………………………………………………………………………………………………………….14
f. Strategy Clock…………………………………………………………………………………………………………..17
g. Ansoff’s Matrix…………………………………………………………………………………………………………18
h. BCG Matrix..……………………………………………………………………………………………………………..19

5. Conclusion……………………………………………………………………………………………………………………………..20
6. Recommendations…………………………………………………………………………………………………………………21
7. References……………………………………………………………………………………………………………………………..22
 Appendices

Abstract
An in-depth investigation into Ceylon Cold Stores and its’ products was done in order to recommend and
introduce changes and additions to their marketing mix based on information taken into account given
by the Porter’s Five Forces model, PESTEL analysis and SWOT analysis.

To ascertain their market presence, Ansoff’s Matrix was utilized while and in-depth look into their
cultural web (corporate and otherwise) revealed tried and tested control systems which keep the
company in its market performance pinnacle.

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A Boston consulting group model outlook on their marketing mix revealed that products such as EGB,
Soda, Cream Soda and basic Ice creams are at Rising star and cash cow stages while products such as the
recently re-introduced Orange Barley and KIK cola which was aimed to compete with Coca Cola are at a
Dog stage and should be considered to be discontinued.

It is recommended that the introduction of various products relatively new to the market such as Frozen
yogurt should be introduced with a blue ocean strategy in order to quickly form a market monopoly
using the brand equity of CCS while providing barriers for new entrants; time is of the essence here.

Introduction to the Company

Ceylon Cold Stores (CCS), doing business as Elephant House, is a Sri Lankan public limited company
which produces beverages, frozen confectionery and processed meat in the food and beverage industry.
Despite competition from global competitors such as Coca-Cola and Pepsi, Elephant Soft Drinks remains
the market leader in Sri Lanka.

Ceylon Cold Stores was established in 1866 as the Colombo Ice Company, which in 1863 imported the
country's first ice-making machine.

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In 1941, New Colombo Ice Company changed its name to Ceylon Cold Stores Limited and in January 1970
the company was listed on the Colombo Stock Exchange. Ceylon Cold Stores came under the umbrella of
John Keells Holdings Limited with the acquisition of the Whittalls Group in 1991 (John Keells Holdings
has a 54% majority shareholding in the company).

Product Portfolio
1. Carbonated Soft Drinks
2. Ice Creams
3. Processed Meat

1.1. Carbonated Soft Drinks

Ex:
• Elephant House Ginger Bear (EGB)
• Cream Soda
• Lemonade
• Wild Elephant
• Twistee

Currently the portfolio of Elephant House drinks consists of 14 flavors offered in 10 pack sizes. Our
packaging consists of returnable Glass bottles, pet bottles and Cans. The larger portion of volume is in
returnable glass bottles.

Two well-known soft drink brands of Elephant House are Elephant Ginger Bear (EGB) and Cream Soda.
EGB which is made of natural ginger extracts in Sri Lanka for more than hundred years is seen as an ideal
drink, and is leading the market.

In 2015 they have extended their range of beverages by introducing a fruit flavor based Green tea with
minimal carbonation during the year under the “Twistee” sub brand. The product is available in two
flavours - peach and Apple. These new additions to the portfolio aim to cater to the emerging trend for
lifestyle beverages in tandem with the global movement towards healthier lifestyle choices.

Currently CCS exports beverage products to 23 countries mostly in Europe, Middle East, North America,
neighboring India and Maldives.

1.2. Frozen Confectionery

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Elephant House ice-creams too have considerable market share, and highly are demanded by the
consumers. Their exclusive ingredients, taste and flavors have immensely attracted people’s attention.

Their current product portfolio includes popular flavors like, Vanilla, Chocolate, Fruit n Nut and
Strawberry and is offered as bulk containers, sticks and cups.

Ex:
 Bulk Containers – Vanilla, Chocolate, Strawberry, Kiri Pani, Karutha Kolomban, Double Delight,
Hakuru
 Sticks – Wonder Bar, Magic Cone, Jumbo Jolly, 2 Bar, Necto
 Cups – Vanilla, Choclate, Pani Kaju, Mango Batta, Fruit n Nut

In 2015 they further extended the range of their take home premium segment with a new variant to
have a total of 5 flavor offerings.

Ex:
 Choc Choc Chip
 Cookie Cream
 Coffee

1.3. Processed Meat/ Sausages

• Chicken Sausages
• Pork Sausages
• Beef Sausages

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Corporate Strategies of CCS
Corporate Vision

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

Corporate Mission

“Our mission is to help Elephant House and its employees to implement innovative responses to
business challenges – creating a flexible corporate culture that delivers positive business benefits”

Key Values of The Company

 Innovation

Changing consistently, re-inventing and evolving

 Integrity

Doing the right thing always

 Excellence

Constantly raising the bar

 Caring

Fostering a great place to work

 Trust

Building strong relationships based on openness and trust

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The Ceylon Cold Stores PLC, strongly aligned to the John Keells Holdings PLC (JKH) policies, mirrors the
same level of commitment towards sustainable development as the parent Company. The company’s
entire operational perspective echoes their attitude towards sustainability, where initiatives in this
regard are skillfully integrated into the Company’s strategic priorities.

CCSs’ sustainability strategies are built upon three key principles; environmental stewardship, social
responsibility and economic success, which are pursued through their “Sustainable Business Model”. By
demonstrating leadership within each of these powerful principles, they ensure the successful delivery
of their Corporate Vision.

Their focus on sustainability involves engaging with their key stakeholders; shareholders, customers,
employees, supply chain partners, community and the government.

Value Creation for Stakeholders through core-competencies

Stakeholder Core Competencies
Group
Shareholders  Financial Stability
 Cost leadership
 Group Synergies
 Sustainable business conduct
Customers  Superior knowledge and
expertise
 Advanced R & D capabilities
 Diversified range of products
 Widespread market presence
through a strong Distributor
network
 High brand visibility
 Brand loyalty
Employees  Employer of choice in Sri lanka
 Strong, communicative work
culture
 Exemplary business ethics
 Long standing ties with the
community
 Brand loyalty
Strategies and Focus
 Commitment towards optimizing the
bottom line
 Sustainable Business practices to
improve overall performance
 Compliance with all mandatory
Accounting, Auditing, and Corporate
Governance principles
 Managing the product lifecycle
 Introducing innovative product
concepts in tandem with global trends
and changing lifestyles of customers
 Encourage customer feedback through
proactive engagement
 Sustainable brand building to stay
relevant with customer life style
changes through dynamic marketing
and promotional campaigns
 Remuneration policy
 Employee engagement and labour
Relations
 Performance and Reward Management
 Training and Mentoring
 Occupational Health and Safety
 Complying with labour regulations

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 Distributors/  Advanced technology
Retailers  Business continuity
mechanism
 Established business
credentials
 Superior logistics
 Strong business relationships
Suppliers  Quality
 On time delivery
 Competitive prices
 Sustainable business practices to
mitigate risks and improve overall
performance
 expand market presence across the
country by combining existing and
alternate channels
 Sustainable Supply Chain Management
practices to Improve Overall
performance
 Introduction of a stable pricing
structure

Community  Long standing ties with the  Livelihood development programmes

community to uplift the living standards of
communities
 Provision of basic facilities to improve
the living standards of the community

Government  Long standing ties with the  Cordial relationship with the
government Government
Environmental  Technical Know-how  Explore alternative energy solutions
regulators  Clear environmental track  Sustainable operations that manage
Record and control the usage of water
 Voluntary and Statutory  Mitigation of sound and Dust pollution
Compliance and Control of effluents
 Promote the efficient reuse of
manufacturing waste

Evaluation of Key Findings Using Theories and Frameworks

PESTEL Analysis

Factor International & Local Drivers Impact O/T

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 -Changes in South Asian Free Trade -will affect to the beverages industry since other
Agreement (SAFTA) which Sri Lanka countries can invest money on Sri Lanka to open up
Political & Legal T
participates. world’s famous franchisees like Starbucks.

O
-Acceptance of Economic Technological -Will be an opportunity to have more laborers with a

Corporation Agreement (ETCA) with India. less salary package.

-After the new government was -This is a wonderful opportunity to all organizations T
implemented, they set up 1000 public Wi- which are catering to mass market to reach out to a

Fi hotspots in prominent places island wider market through Internet.

wide.

-This will affect long term planning, will be a T

-Political Instability, High restrictions disadvantage to Going Global Strategy.

when exporting products

-Sri Lanka’s Per Capita Income is rapidly -This will be an added advantage to the industry that O
Economical & Environmental

growing and currently it’s at USD 3278.89. will increase the amount of disposable income resulting
in more money spent.

O
- Government Import taxes are increased -Directly will affect to increase sales by encouraging

After implementing the new budget local beverages.

proposal in 2015

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 -Digital Penetration has increased by 19% -Will be an advantage to increase sales via online O
Social & Cultural

in Sri Lanka. (Source: Internet Live Stats) channels due to the high level of interest on Internet.

-Changes in Life style due to globalization. -Consumers will go for convenience more than anything O

which will direct to promote e-purchasing.

O
-Multiple presence of social media -As a Beverage Manufacturer, could be able to use

platforms due to changes in social trends. multiple social media platforms as a way of sharing,
(Facebook, Instagram, YouTube, expressing activities or happy moments on social media
Pinterest...) platforms.

-Continuous updates on innovative -will move the entire industry to technological driven O
Technological

technology devices to the global market market where the organization could use Mobile apps
like Payment methods/ Applications / to promote EH beverages to the mass market.
Operating Systems/ Platforms.

O
-Increase in mobile bandwidth. -Due to the rapid growth of mobile infrastructure has

led to increase mobile bandwidth with high speed

internet connections. This will effect to use more mobile
technologies as they become more user friendly.

-High Mobile Penetration – Over 100% -Mobile Penetration is over 100% in Sri Lanka, which

(Source: Internet Live Stats) indicates that everyone in Sri Lanka owns one or two
mobile devices and that’s a best method to connect
with potential customers.

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 SWOT Analysis

Strengths Impact Weaknesses Impact

1. Trained employees and executives
2. State of the art POS and Supply Chain
Management
3. Backward integration
4. Strong management & Leadership qualities
5. Good H.R. Practices with a good incentive
Internal
H 1. Backwards culture of employees H
H 2. Re-active planning system
H 3. Limited online presence (un-official H
H Facebook page, no e-commerce & no H
H official website) H
H 4. High employee turnover

system M 5. Strict budgetary control

6. Loyal Customer base M 6. High operating cost of stores and H
7. High pricing power M inventory M
8. State of the stores with good ambiance N. I. 7. Limited coverage when compared to M
9. Strong financial health and stability N. I. competitors N. I.
10. Stores in strategic locations N. I.
11. Brand Reputation and recognition
12. Wide Range of product and value added
services
Opportunities Impac Threats Impac
t t
1. Growth in production related technology such H 1. Increasing competition H
as cloud based production systems 2. Dynamic environment H
External

2. Growth in the modern production industry H 3. Rising technological advancements H

3. Growth of manufacturing support services H 4. Growth of social media interactions H
4. Rising acceptance of own-label products H 5. Growth of online sales M
5. Growth in consumer consumption M
6. Reduction in government taxes L

 The impact on creative thinking of the current S, W, O & T are measured as high, medium, low or no-
impact.

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 Porters’ Five Forces Model
1. Threat of new entrants
 They have been able to sustain the market leadership position through sustainable business
conducts.
 Cost leadership is one of their main core competencies.
Suppliers
 Having experience of more than 150 years. (Established in 1866) Channels
 Having a higher financial stability of 1.2 billion company profit after tax.
 Have a high supplier loyalty by engaging in periodical site visits, audits and ethical and professional
way of selecting suppliers and on time payments within credit period to suppliers.
 Customer loyalty increases through engaging in press releases, public events and CSR activities.
 Moving according to the government actions and legislations by fully complying with relevant
regulations and guidelines in letter and spirit.
 This industry does not have any barriers to enter the market, but the threat for new entrants is very
high.

2. Threat of substitution
 Product for product substitution.
Ex: Highland and Cargill’s Magic ice cream

3. Buyer power
 Bargaining power levels of buyers will differ among buyer groups. In this case they are the retailers,
distributors and the end users.
 There is an opportunity of forward integration to form joint venture franchise operations with
distributors and retailers.

4. Supplier power
 An opportunity of having backward process integration.
 Ongoing dialogues through formal meetings, emails and telephone communication.

5. Competitive rivalry
 Diversified range of products.
 Advanced R & D capabilities.

Value Chain and Value Network Analysis

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A value chain can be defined as a set of activities that an organization carries out to create value for its
customers. The core functions of CCS include Procurement, Inbound Logistics, Production and packaging,
Outbound Logistics, Quality Assurance, Research and Development and Sales and marketing. Finance
and planning, Human Resource Management, Information Technology and Legal departments are
considered as the support functions.

Strategies to Strengthen the Value Chain

The manufacturing plants of carbonated soft drinks and ice creams are located in Rannala. Although the
company has adequate capacity for bottling in glass for the medium term, they are considering the
enhancement of capacity for filling PET bottles by converting one of the existing bottling lines as a dual
purpose line.

Cultural Web

Cultural Web of Elephant House comprises of the following components

1. Organizational structure
2. Control Systems
3. Power structure
4. Rituals and Routines
5. Stories
6. Symbols

1.Organizational Structure

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Since Elephant House is functioning under the umbrella of John Keells Holdings, its organizations
formulation is also somewhat similar to JKH’s structure. As a dominating player in its domain Elephant
House pursues a tall organizational structure with multiple layers of hierarchy within it. And it’s also a
functional structure.

 Decentralization

Organization in which decision making is pushed down to the managers who are closest to the
action

 Employee Empowerment

Increase the decision-making authority (power) of employees.

2. Control Systems

 Corporate Governance Framework

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The Board of Directors, Senior Management and all employees are required to follow the Corporate
Governance Philosophy of the holding company JKH, within the above framework, in the performance of
their official duties and in other situations that could affect the Group’s image.

3. Power Structure

The power Structure at the Elephant House is designed mainly on the basis of a democratic style.
Leadership is encouraged throughout the organization to improve decision making. Employees are
motivated to generate ideas which give them the sense of belongingness to the organization.

4. Rituals and Routines

Elephant House sponsors several social events namely;

1. “Chokolaate”Mother-Daughter Fashion Show 2014-2015

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 Elephant House Ice Cream sponsored the fashion show for the second consecutive year

2. Kala Pola – Kids Art Corner

Was organized by John Keells Foundation held in 2015, and the art competition was sponsored
by Elephant House Ice Cream.

3. V Academy Fun Fiesta

V Academy a leading modeling school of Sri Lanka, held their annual Fun Fiesta in 2012 and
onwards sponsored by Wild Elephant.

5. Stories

Normally explaining about history, culture, values, and structure of Elephant House takes place during
induction. The newly hired employee/employees are given a generic introduction to the organization by
the Voice President of that very specific department.

Strategy Clock
Elephant House pursues both Low price (Cost Leadership) and Premium Price (Differentiation) strategies
in order to gain the highest market share, and remain a dominant player.

Differentiation:

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Includes unique products (premium ice-creams), which stands it out from rivals. These ranges of
products have the best ingredients and special taste that cannot be
found in other brands. Therefore, the target market is expected
to spend higher amount on these products.

Ex:

• Cookie Cream
• Choc Choc Chip
• French Vanilla
• Coffee

Low Price:

This strategy works very well for Elephant House because it already owns all the major deriving factors.
• Economies of Scale: It has 150 different ice-cream brands

• Lower input cost: Its domestic suppliers provide required ingredients timely at a lower price than
competitors’.

• Experience: EH has rich experience in terms of product, quality, service, innovation-and-risk taking,
management and product development.

 Product Design and Process: EH products

are always launched with charming designs
and innovative brands.

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Ansoff’s Matrix


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


















Market Penetration
As a way of focusing on increasing the volume of their sales of their 2L ice-creams, starting from
2015, CCS started offering them at the current market price of 1.5L.

 Product Development
Introduction of Twistee, ( a fruit flavor based green tea) to their beverage product category and the
launching of their premium ice-cream range including, Choc choc chip, Rocky Road, Cookie Cream an
Coffee extends their product portfolio within the existing markets.

 Market Development
The company exports beverage products, mainly EGB, to 23 countries, mostly in Europe and Middle
East and this is largely to satisfy the demand of the Sri Lankan expatriate community. CCS has been
exporting both regular and premium range ice creams to Maldives and the brand has been able to
secure a significant share of the Maldivian market.

 Conglomerate Diversification
As a company which initially started as an ice making company, Ceylon Cold Stores has now
diversified in to ice cream, beverages and processed meats.

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BCG Matrix

The BCG Matrix is based on the product life cycle theory of a business unit. It is a portfolio planning
model that can be used to determine what priorities should be given in the product portfolio.

EGB can be considered as a star in the product portfolio and it’s currently being exported to 23
different countries mostly in Europe and Middle East.

Recently Elephant House extended the range of their premium ice cream segment by
introducing a total of 5 flavors including Choc choc chip and Cookie cream. They also introduced
a fruit flavored green tea beverage called Twistee to their product portfolio. Since these
products are still quite new, they don’t have a high market share, thus can be identified as
question marks.

Cream Soda and Normal range ice creams under Elephant House brand can be identified as
Cash cows since they’re in their maturity stage and are already having a high market share,
whereas KIK Cola which was aimed to compete with Coca Cola and Orange Barley are in the
declining stage of their product life cycles, hence can be identified as Dogs. And since they are
at the dog stage, those products should be considered to be discontinued.

Conclusion
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With 150 years of experience in the field, Ceylon Cold Stores remains the premier supplier of soft drinks
and Ice cream products to the nation, highlighted by their market leadership and rising market shares.

However, in order to stay innovative and prevent stagnation and prevent the company and products
from being irrelevant in the face of global and local challenges in the form of competition, it was
recommended to introduce various other product ranges in order to:

1. Maintain market leadership

2. Thicken revenue streams
3. Stay true to the corporate values to achieve the CCS vision

This in turn would make sure stakeholders invest on solid returns while opening profitable avenues to
invest on in the future.

According to the BCG matric analysis, it is highly recommended that products in the Dog stage should be
discontinued so as to protect the company from making continued losses while Question marks should
be given careful consideration to re-introduce better advertising campaigns to get better market shares
and a higher competitive advantage.

Recommendations

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The key values of Ceylon Cold Stores are stated in line with their mission stated above. However, in order
to remain true to the corporate values listed above, some recommendations can be made to remain
market leaders in their field and maintain their status thus:

1. Introduction of Frozen Yogurt to Sri Lankan consumers as a blue ocean strategy as these
products are still relatively unknown by the population at large.

2. Introducing Ice cream industrial catering for corporate occasions and holiday occasions.
 It is worth noting that it would not be recommended to introduce basic yogurt products to the
market as it is congested with various branded yogurts; a red ocean insertion may lead to the
drop of various corporate segments below “Rising star” level due to failing strategies and high
competition (Within a BCG matrix).

3. Introduction of value added visual marketing campaigns to thicken revenue streams:

Ex: Textured labels on ice cream containers aimed for the trendy teenage population.

i) This will help compete with global giants such as Coca Cola and Pepsi better within the
local market.

ii) This will help broaden export prospects for CCS products.

4. Introduction of premium stick range to compete with giants such as Cargills Magic range and
other niche products.

References

 Data collected via the interviews

 Strategic documents provided by the organization
 Annual Report of Ceylon Cold Stores PLC - 2014/15
 http://www.elephanthouse.lk/

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  http://www.keells.com/

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 Appendices

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