CARGILLS (CEYLON) PLC.

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 Table of Content
1. Cargills (Ceylon) PLC......................................................................................................3
2. Business Environment of Cargills (Ceylon) PLC..............................................................3
2.1............................................................................................ Internal Environment
..............................................................................................................................3
2.2............................................................................................ External Environment
..............................................................................................................................4
General Environment.......................................................................................4
Task Environment............................................................................................4
3. Environmental Analysis of the Cargills (Ceylon) PLC.....................................................4
3.1. SWOT Analysis..............................................................................................4
3.1.1. Strengths.....................................................................................4
3.1.2.................................................................................................. Weaknesses
...................................................................................................................4
3.1.3............................................................................................... Opportunities
...................................................................................................................5
3.1.4......................................................................................................... Threats
...................................................................................................................5
3.2. PESTLE Analysis...........................................................................................6
3.2.1. Political Forces.........................................................................................6
3.2.2. Economic Forces......................................................................................6
3.2.3. Socio-Cultural Forces...............................................................................6
3.2.4. Technological Forces................................................................................6
3.2.5. Legal Forces.............................................................................................6
3.2.6. Environmental Forces...............................................................................6
3.3. Porter’s Five Competitive Forces. .................................................................7
3.3.1. Power of Suppliers...................................................................................7
3.3.2. Power of customers..................................................................................7
3.3.3. Threat of Substitute Products...................................................................7
3.3.4. Threat of New Entrants.............................................................................7
3.3.5. Rivalry on the Industry.............................................................................8

4. References.............................................................................................................................8

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1. Cargills (Ceylon) PLC.

In 1844, William Miller and David Sime Cargill started a general warehouse, import and whole
sale business in Colombo. The establishment was named the “House of Cargills”. It has built on
a strong foundation of values and ethics. Guided by trusted leadership it spearheads the
sustainable development of the food industry in Sri Lanka.
In 1981 Ceylon Theaters acquired controlling interests of the company. Then Mr. Albert Page
became the chairman of the company. Under this new management the company explored the
potential innovatings. As a result, in 1983 Cargills established the first supermarket chain in Sri
Lanka.
In 1993, the company has invested in its first manufacturing facility Cargills Quality Foods. In
1996 they acquired the franchise license for KFC. In 1999 they began sourcing fruits and
vegetables directly from farmers and in 2002 they invested in a dairy processing plant and their
outcome was Cargills Magic ice cream. In the same year they diversified into agri-processing
with Cargills Kist creating further markets for the farmers. Also they undertook and aggressive
expansion plan in the FMCG sector and acquired Kothmale Holdings PLC and Diana Biscuits in
recent years. In 2013 they acquired franchise license for TGIF and opened its first restaurant at
Fort. In 2014 they started Cargills square and mini mall in Jaffna.
Cargills has differentiated its retails stores as Cargills Food City, Cargills Express, Cargills Book
city KFC branches and Cargills Big City. Furthermore Cargills maintained 27 KFC franchise
restaurants, 10 own vegetable and perishable food processing units, Cargills Magic, Cargills Kist
and Cargills Supremo meat factory.
The Cargills Food City has been rated the most valuable brand in Sri Lanka according the Brand
Finance Index. Cargills Food City has reached 329 stores covering all 25 districts in Sri Lanka.

2. Business Environment of Cargills (Ceylon) PLC.

Business environment consist with all the factors that can be affected to the company’s operating
situation. On the basis of intimacy with the company, the environmental factors may be
classified into two different types .They are Internal and External business environments.
Cargills (Ceylon) PLC have the ability to examine and make changes based on internal and
external environment factors.
1.1. Internal Environment.
The internal environment has a direct impact on the business. The company has controlled
over these factors. This is composed of the elements within the organization including
current employees, management and especially cooperated culture which defines
employee behavior. And also organizational goals, resources, leadership business
processes of Cargills Company included as internal environmental factors. In SWOT

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 analysis, Strengths and Weaknesses implies the internal environment of the business (Page
04).
1.2. External Environment
This refers to the environment that has and indirect influence on the business. The factors
are uncontrollable by the business. There are two types of environment.
I. General Environment
General environment is everything outside the company’s boundaries. These environment factors
are evaluating in PESTLE analysis (Page No 6).
II. Task Environment
Suppliers – Cargills mostly get their materials from the rural farmers for their agri products and
dairy products. And also they have good relationship with their suppliers. They have long term
agreements with some strong suppliers and their representatives. It is an advantage for the
company. So that Cargills have positive affect of this environment factor.
Competitors – Recently growth of other supermarket chains can be seen in Sri Lanka such as
Arpico, Keels, Lak Sathosa. It makes a bad effects on Cargills (Ceylon) PLC.
Customers – Spread across 25 districts in Sri Lanka Cargills have millions of consumers
through variety of distribution channels. The Company has to satisfy their loyal customers and
also have to satisfy other customers in order to increase their loyal customers. So that the
company can earn large profits. The company is improving their quality of products and services
to meet customer requirement.

3. Environmental analysis of Cargills (Ceylon) PLC.

3.1. SWOT Analysis

SWOT analysis analyze the Internal and External environments in an organization. This
analysis helps to identify the current possession of the company in the market.
SWOT can be broke in to 02 distinct parts. Strengths and weaknesses are based on Internal
Environment and Opportunities and Threats are based on External Environment.

3.1.1. Strengths
Company’s Good will and Reputation: The value of the Cargills name has been not
calculated yet.
Brand Name: Strong brand name is the major strength of the company. Cargills have a
strong brand name so that it can increase their prices for their products because
consumers gives additional value for their brands.
Large network of outlets: It is so convenient to their customers to buy goods and
services from them because their outlets perceived as close to home.
Superior Technology: Cargills has the largest IP VPN network in Sri Lanka. So Cargills
was able to provide more value added services to Sri Lankan Customers.

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 Strong Logistics: Cargills has one of the largest ware house in Sri Lanka, which holds
more than 50,000 brands of items.
Having Strong Recognizable Brands: Cargills has strong brand of products which
range from Home care range to Ice Cream, Meats, Sauces, Juices, Nectars, Jams. Some
highly recognized brands such as Kist, Supremo, Cargills Magic etc.
Strong Relationships with Suppliers: Cargills have long-term agreements in place with
some strong suppliers and their representatives such as Uniliver Ceylon, Millers, Prima
and Nestle Lanka etc.
Assets and Financial Stability: According to 2009 interim report the company’s total
asset value is LKR 7,902,943,000.
Years of Experience and Heritage: The Company is operating in Sri Lanka since 1844.
None of the competitor in Sri Lanka doesn’t have 174 years of experience.
Lowest price: Being perceived as the lowest priced supermarkets in the country. Leading
via vegetables and fruits.

3.1.2. Weaknesses
1. Online presence.
2. Customer service.
3. Manpower shortage at store and operational level.
4. Lack of trained employees at store and operational levels.
5. High staff turnover.
6. Storage issues at outlets.
7. Lack of focus on pharmaceutical business.
8. Inadequate fish supply.
9. Parking issues at some outlets.

3.1.3. Opportunities.
1. Expanding the supermarket chain after the - after 3 decades of war Sri Lankan
companies are now able to expand their businesses on war affected areas. So Cargillls
limited has opened their food city branches in Jaffna, Batticaloa, Wauniya etc.
2. Ability to launch more Cargills brands. It makes diversity to their customers and also
they can expand their business.
3. Opening larger format stores in urban city centers and penetrating rural areas with
smaller format convenient stores.
4. Online market offers Cargills the ability to expand their business.
5. Increased demand for conveniences.
6. International markets: international markets offer Cargills new opportunities to expand
their business.

3.1.4. Threats
1. Does not have an online shopping system: Most of the international level supermarkets
are operating and internet based shopping system. With busy lifestyles of the
customers they tend to do online shopping.
2. Government’s policy and prize standards.
3. Government tax policy.
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 4. The steady growth of competitors like Keels Super, Laughs, Arpico and rise in store
standalone supermarkets.
5. Head hunting of trained hunting and store managers by competitors.

3.2. PESTLE Analysis

PESTLE analysis is mainly scan the general environment of an organization.

3.2.1. Political Forces.

 Government Regulation on goods transportation.
 High transportation cost to deliver vegetables, fruits from central province.
 Fluctuating VAT
 Value added tax on consumer goods.
 Nation building tax increment.
These factors affect badly on Cargills.

3.2.2. Economy Forces.

 As 30 year ethnic conflict has ended, the company expanded their businesses to
the north and east areas. This is a good opportunity for the company.
 Unsteady pricing system for goods.
 High import and export tax expenses.
 Economic condition of consumers due to high inflation.
 Economic condition of suppliers.
3.2.3. Socio - Cultural Forces.
 Consumer interest towards organic fresh products.
 Social media advertising campaign for products.
3.2.4. Technological Forces.
 Developed technological equipment to handle the operations.
 Home delivery business.
 Online markets, Mobile application for online shopping.
 Loyalty cards method to have more loyal consumers.
3.2.5. Legal Forces.
 Food safety acts
 Quality certifications
 Consumer law.
 Competition law
3.2.6. Environmental Forces.
 Environment friendly business process.
 Increment in consuming natural food.
 Weather and climate changes may affect to the pricing of vegetables and fruits.
 Seasonal foods may influencing pricing of Sri Lanka.

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3.3. Porter’s Five Competitive Forces.

3.3.1. Power of Suppliers.

This is not an extensive force for Cargills because currently they have over 2,000 suppliers
who supplies more than 20,000 products. Cargills main supplier was Millers Limited and in
2008 Cargills acquired the Millers Limited.
Recently Cargills has develop “Farm to Shelf” concept and with that concept they collect
vegetables, fruits, milk, meat, fish, spices, eggs, rice directly through the rural farmers. They
have established separate vegetable processing units in highly agricultural areas. It reduces
the cost of collection, delivery and totally eliminate the cost of intermediaries. This
advantage directly goes to the customers. From the acquisition of KIST they put other
competitors in pressure because Cargills make their own cordials, jams, sauce in high quality
and sell them but others have to buy and sell those things.

3.3.2. Power of Customers.

This is the most significant fact that affect to the Cargills. This effect can be identified as
moderate to high.
Commencing the promotion and increasing communication channels of competitors
enhancing the bargain power of customers. When customer aware of substitutes they have
more tendencies to go for alternatives.
Cargills spends more than millions of money for their advertising purposes even they have
large customer base. They spends these money in order to maintain their market portion in
the customer mindset.

3.3.3. Threat of Substitute Products.

Before 1980’s there are no alternatives in the market. But now Arpico, Keels leads the
customers to put more pressure on Cargills opening more and more outlets island wide. So
these new outlets and supermarket chains put Cargills in a threat. But most of the substitutes
have low quality so that Cargills minimize these threats with their high quality products.

3.3.4. Threat of New Entrants.

Before 1980 Cargills have no competitors in the market. But now they have lot of
competitors in their industry.
Cargills have more their most profitable outlets in Kandy and Staple Street. Keels has now
opened new outlets very close to above outlets to grab the customer crowd.
Kings supermarket which has started in 2007-2008 has taken well trained employees from
Cargills a d come up with a slightly initiated theme to Cargills. But in few months they have
close their 02 outlets because of high maintenance cost, low brand identity, poor leadership
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 and supply chain. Now it is run as small scale business named “Magna” and it is no more a
competitor to Cargills.
So new entrants can’t make more risks to the Cargills (Ceylon) PLC.

3.3.5. Rivals on the Industry.

In the industry rivalry among the competitors is very strong. The major competitors are so
closely balanced that it increases the rivalry. Lack of differentiation increase its rivalry.
Competitors make similar products so competitors are compared constantly. Their price,
packing, quality and in other aspects. Also among these competitors price, price discounting,
new product introduction, advertising wars, promotions are very high. Thus it limits the
profitability to the company. Some Rivals on the industry are given below,
 Lak Sathosa
 Laugfs Super Markets
 Arpico Super Center
 Keels Super

References.

 Cargills (Ceylon) PLC - http://www.cargillsceylon.com

 Cargills (Ceylon) Annual Report 2015/2016
 Cargills (Ceylon) Annual Report 2016/2017