Executive Summary:: Introduction of Ghee/Oil Industry
Executive Summary:: Introduction of Ghee/Oil Industry
Executive Summary:: Introduction of Ghee/Oil Industry
This study was conducted to analyze the Asia ghee & Mills product. Asia ghee mill has a good
reputation in Bahawalpur region and playing a vital role in economy plus providing the
employment opportunities to local public of Bahawalpur. Purpose of this study was to identify
the Brand loyalty, Customer satisfaction and Brand quality and customer satisfaction. The
researched data was collected primarily from questionnaire and secondary from reports and
website etc. Although results show the brand has a good reputation at domestic level in
consumers mind.
Chapter # 1 Introduction
Introduction of Ghee/Oil Industry
The oil mills have a significant role in the economy of our country, because our country is an
agricultural country. The usage of oil is very high in form of cooking oil & ghee. Oil Mills are
acting very high level of business. They are providing the employment opportunities in the
country the ghee industry was also very famous in mid 30s and ever since this industry has
grown greatly in face off all environmental risk. Now a day’s our country is importing 1.160
Metric Ton of edible oil which cost is more than thirty-three million and is the third largest oil
importer of edible oil after CHINA and other EUROPEAN UNION Some of the vegetable ghee
mill are under the supervision of government and other vegetable ghee industries are privately
owned. The raw material for the manufacturing of products are purchased from different foreign
countries, changes in international price cause variation in production price and also has an effect
on retailed price. The vegetable ghee is obtained from vegetable oil by the process of
hydrogenation. Meanwhile Cotton Seed, Soya bean oil, Sun flower oil and Corn oil are mostly
used in Pakistan for the production of Ghee/Oil. Pakistan imports Soya bean oil and Palm oil
from America, Malaysia and Indonesia, these are the countries from where Pakistan mostly
imports soya bean oil and palm oil. The import of soya bean oil and palm oil was greatly reduced
during year 1999-2000. During that time Pakistan imported Soya bean oil which was off $75.8
million and Palm Oil which was off $267.8 million during year 1999-2000. 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. 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
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period due to the heavy losses on account of this unit’s government privatize so many Ghee
producing units.
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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. As Ghee industries are one of the fastest growing
industries in Pakistan which are manufacturing their products on national and international level.
This study chosen Asia Ghee Mill because it is one of the most prominent ghee mills in
Bahawalpur, Pakistan. It is operated by “Majeed Group” one of the strongest group of
Bahawalpur. However, Asia is producing their product on local level (Sothern Punjab) and their
products (Ghee and Cooking Oil) have strong brand equity and market share in Southern Punjab
but the major flaw of Asia’s Industry products is that their products are unrecognizable and has
no or less market share in upper areas of Pakistan. All Goods are made according to standards of
ISO (International Standard Organization) and are locally sold and is not distributed to Upper
area.
The area of Asia Ghee Mill is divided in two heads:
1. Production Area
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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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To ensure quality for the care of health of our consumers.
To grow good interactions with distribution dealers.
To grow good interactions with distribution dealers.
To utilize supreme production capacity/
To position and utilize the wastage in a sound way.
To utilize the full possible resource of the mill by improving the process.
PEST Analysis
STP (Segment Target Positioning)
SWOT Analysis
Financial Analysis
Structural Analysis
PEST Analysis
PEST analysis is used to evaluate 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:
This matter will be a key concern for Asia Ghee Mills. Because the Asia Ghee Mills is importing
four different types of oil from Singapore and Malaysia, which are not available locally, but the
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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 Government bring any change in
its foreign policy, then it will be very much important to cope with that.
Although the laws regarding environment are not very cultured in Pakistan but in Asia Ghee
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.
Industrial Laws
Industrial laws regarding unions has no impact upon the Asia Ghee 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.
Economic Factors
Between the many of economic factors some are more significant for Asia Ghee Mills; the detail
of these factors is in following:
Inflation
At the instant 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
Inside of 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 reduced. 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.
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Interest Rates
Interest rates increase and decrease has no impact upon the financial performance of the Asia
Ghee Mills, because the company has no loan of any bank. But it in future the company need to
take the loan then it must have to consider this issue.
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 Mills.
Typically, 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.
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 Mills.
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.
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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.
Bahawalpur and other areas of southern Punjab. Like Lodhran, Mailsi, Vehari etc.
Target group
Positioning
The Asia Ghee Positioned their products with uniqueness and pure quality products with vitamin
A, D and K.
Structural Analysis
The structural analysis draws on Five Forces approach prepared by Porter. It is a structured mean
of assessing the competitive environment.
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Threat of New Entrance
Threat of entry depends upon the extent to which there are barriers to entry. Ghee mills require a
big manufacturing unit which requires a huge capital investment; like Asia Ghee Mills has 10
crores authorized capital and 7 crore paid up capital. So we can say that ghee-manufacturing unit
is highly capital intensive and because of high capital investment it has high risk for new to enter
into production.
Suppliers’ Power
All organizations have to obtain resources and provide goods or services. The suppliers can
effect on strategic freedom of an organization and can influence the margins of that organization.
In Asia Ghee Mills, there are two types of suppliers. One is a local supplier, and others are
foreign suppliers. Because of many reasons the suppliers of oil have no powers. The reasons are:
a) As well as the foreign suppliers are concerned they have power of bargain because the
material is not available locally and the buyer don’t have any option other than import, so the
buyer charge the high prices and transaction is done through banks by opening letter of credit
and buyer also has to bear high transportation cost and import duties.
B) as well as the local suppliers are concerned they have small oil mills, which separate oil from
seed. Ghee mills are highly capital intensive so they don’t have any power because they can’t
do forward integration.
c)There are large numbers of oil suppliers in Bahawalpur and in other cities so the buyer checks
the quality of suppliers’ oil and make contract with any one which meet their requirements
regarding quality or price.
Buyers’ Power
The buyers don’t have any power, because the prices of the products are fixing, but high
competition among ghee/oil mills leads the company to minimize the prices.
Competitive Rivalry
Organizations will also be concerned with the extent of rivalry between themselves and
competitors. The extent of competitive rivalry depends upon the nature of four forces described
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earlier. It could be concluded from previous discussion that the ghee market is highly
competitive.
SWOT Analysis
Professional Leadership
Skilled Labor with High Morale
Sophisticated Technology
Distribution Network Control in Bahawalpur
Asia ghee mills have very hard working and loyal workers.
Asia ghee mill have the loyal consumers in Bahawalpur
Usage of local social media advertising concept which provides them strength and market
share and also decrease the cost.
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Opportunities are the external factors that are supportive for achieving the objects of the
organization. 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.
Making agreements with utility stores can be a chance for the industry to grow.
There is a big vision for them to publicize their (2 nd) second brand to capture the market
share of their opponents.
By hiring knowledgeable workforce (marketers, engineers, accountants etc.) against
attractive salaries to advance an aggressive power of skilled staff out of Bahawalpur.
Asia Gee Mill has the chance to expand the industry in Bahawalpur because there is less
no. of productions in the Bahawalpur Division.
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.
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Financial Analysis of Asia Ghee Mills
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 crores, and the paid up
capital of 7 crores.
Asia Ghee Mills is getting 15% profit margin after paying its cost of goods sold. From that 15%
Margin Company can easily pay its operating expenses and taxes. As firm is not raising any
long-term dents, so, the profit for the company is enough to pay its operating expenses.
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
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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.
Inventory Turnover
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.
Chapter 5
Recommended strategies
A
t 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.
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
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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
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.
Business Expansion
The company’s basic aim is to capture maximum market of that country in which they are
operating their activities to capture maximum consumers and also for the extension of their
businesses process for maximization of their profit, but in case of Asia Ghee Mills with
comparison to their competitors, the company is only operating its business in Southern Punjab
Reign.
Brand Awareness
The basic purpose of business is to earn profit. Profit is earning only when, when customers are
purchasing your products, and products are purchased only when, when people know about your
product. So Brand awareness is an integral part for the companies. But in case of Asia Ghee
Mills, products are popular in only Southern Punjab excluding Multan, which is a big threat for
the company. They must do extensively marketing of their product. So, people become well
aware about Asia.
Pricing
1. CORPORATE LEVEL STRETEGY.
Concentric diversification.
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
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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 byproducts they receive.
BACKWARD INTEGRATION.
Seeking ownership or increased control of a firm's suppliersS".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
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
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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.
. Competitor of Asia Ghee Mill
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Material and input
The basic raw material required for producing cooking oil is Canola oil which will be
imported from Canada and Palm Olein oil for ghee will be imported from Malaysia. Other
inputs like Caustic Soda, Bleaching Earth, Common Salt, Antioxidant, Citric Acid, and
Nickel Catalyst are available in Pakistan.
Project Engineering
The plant and machinery used for production consist of Storage Section, Pre-Refining Section,
Hydrogenation Section, Post-Refining Section, Ghee Filling Section, Refrigeration
Section, Steam Generation, Soap Section, Water Pump Section, Hydrogen Gas Generation &
Storage Section, Electric Section, Mcechanical workshop.
Man Power
Mainly three types of man power is required. production labor consist of 21 skilled, 24 semi
skilled and 32 unskilled and 25 Admin statif that includes skilled workers, chowkidar and
peon.
SWOT ANALYSIS
Strength:
Raw material is easily available
Access to customers
Well technology is used
Demand is very high
Profit earning is high
Weakness:
Recourses are going to be end
Security problem
Government restriction
*Load shedding of sui gas & electricity
Threat
The proposed project will be facing the following threat
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Market saturation over a longer period of time due to a large number of entrants*Threat of
increase in the import duty by the government.
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