Report on Surya Nepal

CHAPTER1: INTRODUCTION

1.1 BACKGROUND THE STUDY This report is prepared for the partial fulfillment of the requirement for the Bachelor in Business Administration (BBA), 5th sum. Purbanchal University. This project tries to analyze the internal as well as external environment of the Surya Nepal Pvt. ltd. The project has tried to explore the various aspects of macro, task and internal environment, which are providing various strength, weakness, opportunities and threats. Apart from that, the study also deals with the various strategies being used by SNPL to with the dynamic environment. In the present scenario, overall manufacturing industry are not performing well even in this situation the SNPL is able to generate the huge amount of profit. The company is the single largest contributor to the Nepali exchequer, accounting for nearly 4% of the country's revenue. The study also tries to find out the strategies the SNPL is implementing which is the key success factor for them. 1.1.1. HISTORY OF THE SNPL Established with a Vision of "Growth through Quality and Excellent". Surya Nepal Pvt. Ltd. formally known as (Surya Tobacco Company) is in its 23 rd years of operation since 1987. It is a joint venture between BAT (British American Tobacco) holding 2% shares. ITC Limited with 59% and Nepalese entrepreneurs holding 39%. It has its factory in Simra, with the head office established in Kathmandu. SNPL has given a new era to the domestic cigarette market. The company initially started its production with two brands of cigarette, Naulo and Bijuli of which Naulo was later dropped. At present the brand under its wings are Surya, Shikhar, Khukuri, Bijuli and chautari each of which has their own brand extensions. Surya in the highest selling brand in Nepal at the premium segment where as Khukuri at general segment brand. SNPL has over 70% to 75% of the total market share of the cigarette industry in Nepal in terms of value. In the premium segment it commands about 95% of the total market share. In the high segment it is about 820% to 85% while in the lower segment it sales about 60%. In terms of brands and sales its brands are the most sellable brands in Nepal. SNPL has the largest and strongest distribution network coverage in amongst all the FMCG companies in Nepal, covering allover Nepal. 75000 retailers are served through 6000 secondary wholesalers and 60 whole distributors. 1.1.2. MISSION STATEMENT OF SNPL • Need of the industry. Make and market cigarettes of international level. • Make cigarettes available at all the outlets of the country.

• Be one the leading business house of Nepal in terms cigarettes manufacturing and marketing. • Satisfying the customer by making products of their requirement. Must always be responsive and effective to the changing 1.1.3. GENERAL OVER VIEW OF SNPL'S ENVIRONMENT Environment means the surroundings, external objects, influences or circumstances under which an organization has to operate. It is the aggregate of all condition, events and influences that surround the organization and affect its operations. Organizations have to operate within the framework of external and internal environment. The external environment. The external environment might care either opportunities or pose threats. Similarly, the internal environment might either impart strength or cause weaknesses. It also consists of the organizational environment that might be either controllable or beyond control. According to Keith Davis (1989) defines business environment as "the aggregate of all condition, events and influences that surround and affect a business." In word of Ricky Griffin, "Business environment is the combination of all the factors, actors and the forces that are surrounding to the business which directly and indirectly affect to the day to day operation of the business." As the organization has to operate within these frameworks, it is always desirable that organizations be able to utilize their internal strengths or minimize their weaknesses so tat the opportunity in the external environment could be tapped, or in some cases, threats could be minimized. Such practices are covered under SWOT analysis, where, opportunity means a favorable condition in the external environment of the organization to grow or achieve its missions or goals. Similarly, threat could be the unfavorable conditions in the external environment that create risk or cause damage to the organization. These two aspects can not be changed by the organization. Strength means a capability of the organization that can be used to gain advantage and may cover the areas like research, product development, finance or technology. Weakness means a limitation or constraint creating strategic disadvantages and may cover the areas mentioned above. In this part we deal with the external environment for Surya Nepal Private Limited. A business represents organized efforts of enterprises to produce and market product to make profit through customer need satisfaction. Business environment is the aggregate of all conditions, events and influences that surround and affect it. It is the sum total of the environment factors which provides an atmosphere for business. As the business environment helps in adaptation, strategic orientation, boundary spanning, lobbying and stability for a business organization, its importance increases in this change oriented world. 1.1.4. Organization of the Study Introduction In this chapter the general background of SNPL has been described along with the history, mission statement and general over view of the SNPL'S Environment. Also the objective,

importance and limitation of the study have been described. Methodology of the Field work In this chapter research methodology, PEST/General Environment, Task Environment, Competitive analysis (Porter's Five- Factor Model), Research Based View of SNPL, Value Chain analysis and SWOT Analysis of SNPL are described. Analysis of data In this chapter all the data collected from the office, books, Internet and through employees are presented which is then followed by analysis of the data collected from the opinion of employee towards different sub-topic of the chapter. In this chapter competitive Advantages of SNPL, Strategy adopted by SNPL are analyzed. Summary, Conclusion and Recommendation In this Chapter the Overall summary of the Study regarding background, history, objective of SNPL is shown along with conclusion of the overall field work and data which is then followed by some recommendation that may be useful for the SNPL'S overall performance. 1.2 OBJECTIVE OF THE STUDY The basic objective of the study is to determine various environment forces that affect the business decision of the SNPL, how they are facing with these forces. Beside these the study also aims to reveal the following thing: • To assess the nature of the environment for all the business in the Nepal. • To identify the key forces in the external environment that is affecting the overall cigarette industry. • To determine the competitive forces in the cigarette industry. • To identify the competitive position of the SNPL in the cigarette industry. • To determine the opportunity and challenges faced by the SNPL. • To determine the key forces of internal environment for SNPL. • To identified the strength and weakness of SNPL. 1.3 IMPORTANCE OF THE STUDY This study gives insight about general, task and internal environmental influence on the business decision-making process. The study will be useful to the management student like us to identify how the environmental forces are affecting the business firm and how are they using their strength to take advantage of opportunities by overcoming weakness and avoid threats. As being the student of the management we should be aware of the whether the things we learned in our books are being implemented in the organizations or not. This study helps the management of SNPL as it provides the opportunities and treats faced by the SNPL. The can refer t this study as it can provide as the source of information at the time of decision making. It can help SNPL management to make informed decision. This study can be helpful for other research for conducting further research in the cigarette industry. A part from that it will be helpful in the investors who are willing to invest in the cigarette industry.

1.4. LIMITATION OF THE STUDY The main limitation of this study was the report was prepared for the fulfillment of academic requirement, as time was limited we could not gather more information. Beside that we couldn't visit the industry as it is situated far from the Kathmandu valley at Simara. The entire report is based on the information provided by the staffs of the SNPL. Inferences drawn from the analysis depends upon the data provided by SNPL and information available to the public by various journal and publications. The limited time frame has severely restricted the report to its simplest form, excluding the details. Information regarding the internal books of accounting is restricted to the cost and few researches. Excluding these limitations would have made the report more comprehensive. However, the various I conducted have provided me with ample information to enrich this report with the realistic base. I had tried to minimize those limitations as much as possible to provide unbiased and complete report. Some of limitations are Time constraint Time period for research was only 10 days, in which we have to also attend our class, prepare for exam and do research work simultaneous. Cost constraint As a student we were not able to afford to conduct huge scale research thus we only choose 100 as sample size. Ambiguity among respondents We were not able to collect full information because respondent were not also willing to share information with us. Some respondents while filling the questionnaire were reluctant to answer few of the questions especially demography like income and age few of the respondents willing to fill the questionnaire by themselves committed errors by answering the question which ought to be skipped and also selected more than the restricted choices.

CHAPTER2: METHODOLOGY

2.1. RESEARCH METHODOLOGY 2.1.1. RESEARCH DESIGN AND SOURCES OF DATA The attempt has been to collect the required information from the different reliable sources. The study is mainly based on primary and secondary source. Primary Sources The primary data was collected through personal interview and personal observation in different department of organization for collecting quantitative and qualitative data. The only primary source of information on the interview that of Mr. Raju man Singh, the Marketing Manager of the SNPL.

Secondary Sources Necessary information and data concerning the study was colleted from the secondary source. The URL of SPNL was a key source to know the profile of the company. Secondary data was collected from collateral material As Company's profile. Catalogue and Broachers, Website, magazine and Reference books. Therefore, all the data used are reliable and creditable as they are compiled either by the bank or other publisher. The data were carefully studied and analyzed to meet the objective.

2.1.2. TOOLS USED The approach of the research process is from theoretical foundation to collection and analysis of data. It based on descriptive as well as analytical research design. The study is based on analysis of the general task and internal environment. The study is based on primary as well as secondary data. Secondary source of information includes the review of literature, books, journal and URL and the primary source of data include the interview with the staff of SNPL. The tools used for analysis are: • PEST analysis is used to analyze the external environment. • Porters Five Forces Model is used to analyze the task environment. • Value chain Analysis and Resource based view to analyze the internal environment.

2.2. PEST ANALYSIS/ GENERAL ENVIRONMENT General environment affect the organization and its task environment. It is also called the remote environment. It is composed of a set of forces that are outside the organization's operating system i.e. political, economical, social, legal and technological factors. These factors are uncontrollable. It is presents the opportunities, threats and constraint for the organization. 2.2.1. POLITICAL FACTORS Political factors define the legal and regularity parameters within which firms must operate. The direction and stability of the political factors are a major consideration for managers for formulating company strategy. The SNPL has also been affected by the political factors of Nepal. The political factors have determined the following constraints in the smooth functioning of the SNPL. • The political instability instability in Nepal has also affected the SNPL. • The government of Nepal has placed different tax regulation on the cigarettes sales in Nepal. • The cigarettes are not allowed to be advertised in the electronic media like television and radio. The leads to lower coverage towards the consumers of its products. • The government decision regarding the tax rate, interest rate, minimum wage legislation affects the pricing policy of the company. • The government awareness programs on injuries caused due to smoking of cigarettes has also been problem for SNPL.

2.2.2. ECONOMIC FACTORS Economic factors concern the nature and direction in which the firm operates. Because the consumption patterns are affected by the relative affluence of various market segments, each firm must consider economic trends in the segments that affect its industry. The economic factors affect on the SPNL are as follow: • The existing market rate affects the pricing policy and the economy of the SPNL. • The inflation rate and recession also affect the company. • The level of disposal income of the costumers also affects the company growth and strategy formulation • The propensities of the people to spend on cigarettes also affect the economic decision of the company. • The import duties are high in Nepal which restricts the company from importing more and it tern affect the economy of the SNPL.

2.2.3. SOCIAL FACTORS Social factors that affect a firm involve the belief, values, attitudes, opinion and lifestyle of persons in the firm's external environment as developed from cultural, ecological, demographic, and religious. Educational and ethic conditioning. Social, cultural, demographic and environmental changes have a major affect upon virtually all products, services, markets and customers. The social forces are more or less dynamic. The SNPL is also affected by the social changes and the factors. The social factors that have placed constraint on the SNPL are as: • As cigarette is not assumed as a favorable product by the society, there is hesitance to talk about it and consume it. • The smoking in Nepal has not yet been so freely adopted and the people often hide while smoking. • Company's social and moral ethics are also causing promotional difficulties for its sales i.e. as goods corporate citizens; the company doesn't prefer smoking to the citizen below 18 years. • Due to the demographic changes in the population most of people use cheaper brands for which the market for premium brands is very low in terms of value. • There are some businessmen who do not like to make profit form selling cigarettes brands which destroy the company opportunity of creating the new market. • Women smoking cigarettes in Nepal are also not accepted by the society hence the SNPL has the disadvantages of creating new consumers.

2.2.4. TECHNOLOGICAL ENVIRONMENT The technological factors involve the technological changes that are to avoid obsolescence and promote innovation. The technological factors suggest the adoption of creative technology that creates the possibilities for new products, for improvement in the existing products or in manufacturing and marketing techniques.

The SNPL is also one the organization in Nepal that adapts and uses the latest technology for marketing and manufacturing the product. The SNPL invest lots of amount on the R&D activities to find out the customers needs and preferences and also determines the latest and possible technology to make the product. The SNPL has been launching new products in regular interval of time to satisfy the different customer's requirement. The brands like Surya light, Shikhar light and menthol are the outcome of the creative technological wok of the SNPL.The SNPL has adopted all the latest technology for the smooth functioning of its business. From marketing to finance, from manufacturing to distribution the SNPL has all the latest technology use. The SNPL also have the linkage of its kathmandu head office with its Simra factory. The order placed in the Kathmandu office are directly send to the Simra factory for the dispatch due the networking between the factory and the office. BUSINESS SYSTEM AND ITS ENVIRONMENT FEIGURE (FIGURE)

2.3. TASK ENVIRONMENT Task environment is made up of stakeholder that affects the business ability to serve its customers. It consists of forces outside the business organization that affect in the achievement of the goals of the business organization. The task environment consist of factors relate to the group and other organizations that compete with and have an impact on an organization's markets and business. The various components of task environment that have bearing on the operation of SNPL are: 2.3.1. CUSTOMERS As we know that the business activities begin and end with the customers so, SNPL have tried hard to create more customer value as one of their mission is to satisfy customers by making products of their requirement. The customers of SNPL are the ultimate customers who buy products for their personal consumption. Customers vary greatly in terms of needs, preferences, perceptions, attitudes, values, bargaining power, buying behavior, satisfaction and other aspects that shape up the purchase of goods or services offered by SNPL. 2.3.2. SUPPLIERS AND ALLIES Suppliers are individual or organizations who supply inputs and resources to the business organizations. Supplier environment that influence the business activities are cost availability and continuity of supply of raw material needed in the production. cost and availability of finance, energy, human resources and cost availability and the existence of sources and means for supply of plants and machinery, spare parts and after sale service and the existence of substitute materials, bargaining power of suppliers and infrastructural support for the availability of different factors of production. The major supplier of raw material (tobacco) in SNPL is India. The simple packaging is done in Dhankuta whereas the sophisticated packing is done in third countries and the cigarette paper used for this packaging is also of the foreign countries where the packaging is done. Allies

sStrategies alliances and networks with other organizations through joint ventures help in developing a supply chain. Likewise SNPL is also a joint venture between BAT (British American Tobacco) holding 2% share. ITC Limited with 59% and Nepalese entrepreneurs holding 39%. It has its factory in Simra, with the head office established in Kathmandu. Such alliances have not only provided expertise to SNPL but have also helped in diversifying the total risk. 2.3.3. COMPETITORS Previously the company enjoyed monopoly in the market, competing only with foreign brands. But due to the government's policy of liberalization and encouragement in the private participation during the 80's new company stared coming into market. Surya regards JCF as its major competitor, competing almost with each of their brands such as Shikhar for Yak, Bijuli for deurali and surya for Marlboro etc. SNPL have succeeded in gaining a sustainable competitive advantage through the product differentiation and positioning. The four major players in the cigarettes industry in Nepal are the main competitor of Surya Nepal Pvt. Ltd. (SNPL). They are Janakpur Cigarette Factory (JCF), Nepal tobacco company (NTC), Perfect Blends Pvt. Ltd. (PBP) and Seti Cigarette Factory (SCF)

2.3.4. FINANCIAL INSTITUTIONS Business organization depend upon various financial institution like commercial banks, development banks, finance companies, insurance companies, capital market institution etc for supply of funds and insurance of risk. The major suppliers of fund to SNPL are Nabil Bank Limited and Standard Chartered Bank Limited. SNPL has taken insurance policies from National Insurance Company, Oriental Insurance Company and Himalayan General Insurance Company. 2.3.5. MARKETING INTERMEDIARIES SNPL has its distribution in all over Nepal through 60 wholesale distributors, 6000 secondary wholesalers and 75000 retailers which is the widest supply chain of any product yet found in the country. Secondary wholesalers receive goods from the wholesales distributors in cash and supply it to the retailers. There is another middleman called door salesman who go to the retailers and sell the goods. Door salesman receives the goods in credit from the wholesale distributors or main dealers. The major advertising agency for SNPL is J.W. Thompson. It is an international agency of India which has an office in Nepal also. 2.3.6. LABOR UNION Labor union is an organization of workers acting collectively to promote and protect mutual interest through collective bargaining. In SNPL, the election among the labor union is held once in 2 years. SNPL should develop a healthy labor relationship and should cooperate with them in order to establish favorable work climate and to promote a participative culture. 2.3.7. PRESSURE GROUPS

Pressure groups pressurize and lobby government and business organization to protect their right and interest. Pressure groups of SNPL are FNCCI, customers associations like khudra Byapar sangh, Paan Byawasai Sangh, Bitrak Sangh,Upabhokta Sangh etc. 2.3.8. MEDIA The media is the sole force that can indirectly make great impact over the operation and existence of SNPL. The printing media like newspaper and magazines frequently forces the SNPL to act socially and to care the environment. The media scrutinize every action of SNPL and thus, SNPL handles the media with good public relation management.

2.4. COMPETITIVE ANALYSIS: PORTER'S FIVE- FORCES MODEL Five- forces model is developed by Michel porter, a Harvard professor. According to him successful manager do more than simply react to he environment. Porters five forces model of competitive analysis is a widely used approach for developing strategies in industries. The intensity of the competition among firm varies widely across industries. The five forces are: Fig 4: Porter five –forces model 2.4.1. RIVALRY AMONG EXISTING FIRMS In terms of sales, capital, distribution channel and quality. Rivalry among competing firms is usually the most powerful of the five competitive forces. The strategies pursued by one firm can be successful only to the extent that they provide competitive advantage over the strategies pursued by reveal firms. The rivalry among the cigarettes industry in Nepal in high. There are five players in the cigarettes industry in Nepal. They are: SNPL: Surya Nepal Pvt. Ltd., a joint venture with ITC limited, Indian and BAT (British Amreican Tobaccos) and Nepalese entrepreneurs producing its own brand of cigarette like Surya, Shikhar, Khukuri, Bijuli, and Chautari and so on. JCF: Janakpur Cigarette Factory. A government owned company producing Yak, Gaida, Deaurali and Laliguras (Laliguras was later Discontinued). NTC: Nepal Tobacco Company, backed – up by GTC (Golden Tobacco Company), Indian producing Gorkha, Nepal Gold Flake and Shangri-la, Yeti etc. PBC: Perfect Blends Pvt. Ltd. - A new entrant in the market is an initiative of Chaudhary Group of industries with brand like Gaurav, Sahasi & Pine. SCF: Seti Cigarette Factory has a technical tie up with PMI who is the major distributors for Marlboro and L & M. The SNPL has to compete with above Mention Company in the market. The strategy adopted by SNPL is met with retaliatory countermoves, such as lowering prices, enchasing

quality, adding features and increasing advertising. the SNPL has been the most strong in the cigarettes industry of Nepal 2.4.2. POTENTIAL ENTRY OF NEW COMPETITORS Whenever new firms can easily enter a particular industry, the intensity of competitiveness among firms increase. The potential entry of the new firm in the cigarettes industry of Nepal is low because of the following reason. • The capital requirement for established for establishing a cigarette company is very high. • The government rules and regulation regarding opening a new cigarette company is very tough and time consuming. • The new firm need to be well equipped and should be able to compete with the SNPL quality and its strong distribution network. • The consumers of the cigarettes do not switch to new brand easily. • The country infrastructure and political instability also restrict the investor to launch a new cigarettes firm. • The new firm also might not have the access of the required raw material an might also lack the experience needed. 2.4.3. POTENTIAL DEVELOPMENT OF SUBSTITUTE PRODUCT In many industries, firms are in close competition with producers of substitute products in other industries. In the cigarettes industries of Nepal the SNPL has also got to compete with the substitute products of its brands. The substitute products for the SNPL brands are the products like Khaini, Gutka and Chewing gum. The presence of substitute product has put a ceiling on the price that can be charged before consumers will switch to the substitute product. The market share of the substitute products of the cigarettes is not very high. the SNPL has not yet got to work hard to kill the substitute product because the substitute product has not yet captured the market and is also not been able to attract the consumer of the cigarettes.

2.4.4. BARGAINING POWER OF SUPPLIERS The bargaining power of the suppliers affects the intensity of the competition in an industry, especially when there few suppliers who sell too many, when substitute product are not easily available of the switching cost of raw material is costly. The bargaining power of the SNPL is high in the cigarettes industry because of the following reason. • SNPL has a huge distribution network all over Nepal. • The demand for the SNPL brands is very high and the brands are sold on cash. • The quality and taste of the SNPL brands are of international class with low and reasonable price. • The SNPL has its products extension to satisfy consumer off different need and preferences. • The organization selling the SNPL brands earn high amount of profit from the SNPL brands. • The SNPL has been able to deliver its product to the distributors and wholesalers as and when required.

2.4.5. BARGAINING POWER OF BUYERS When the customers are concentrated or large, or buys in volume, their bargaining power represents a major force affecting the intensity of competition in an industry. The bargaining power of the buyers of the SNPL brands is medium because of the following reasons. • Buyers purchase large proportions of the SNPL products also earn profit in same proportion. • Alternatives suppliers available but do not have the strong market demand and has also not been able to attract the customers. • The competitors of SNPL brands are growing rapidly and are trying to cover the market of SNPL. • The changing the supplier from SNPL to other company cost very little for the buyers.

2.5. RESOURCE BASED VIEW OF SNPL Once the organization has identified its resources, its need to find out which of its resource are valuable and represent the strength and weakness for the organization. The Resource Based View (RBV) has addressed this by setting forth same key guidelines that help determine what constitute a valuable asset, capabilities or competence i.e. what makes the resource valuable. The RBV of SNPL is done to see if the resources of the SNPL are on the stronger side or not. 2.5.1. COMPETTIVE SUPERIORITY SNPL is the number one cigarettes manufacturing and selling company in Nepal. The SNPL is totally consumer focused and manufactures cigarettes according to the need and want of its customer. It has different brands with different taste and quality under its belt. The SNPL has gained the competitive advantage over its competitors because of its brands extension like Surya light, Shikhar lights, mani packets. It has also different brands for price sensitive costumers. Brands like Surya are for the higher segment customer where as Khukuri and Bijuli are for people of the low segment. The joint venture with ITC Ltd. India and BAT has also helped SNPL gained the competitive superiority. 2.5.2. IMMITABILITY SNPL has been able to maintain and improve its quality on continuous basis for its consumers. Best utilization of all its resources has helped SNPL improved its brands quality design are easily copied but its very tough for the imitator to produce or utilize the resource to its best and maintain the quality as the SNPL. The duplicate of SNPL brands i.e. Surya consumers are aware of it and so are the company personnel who are working hard to eliminate the duplicate Surya brands from the market. 2.5.3. APPROPRABILITY The SNPL is Joint Venture Company and has also issued shares to the general public. The SNPL product passes through the various channels before its reaches to the final consumer. All the channel members enjoy there part of the profit for the sale of the SNPL brands. The SNPL first to sales to the distributor, distributors to the wholesalers,

wholesalers to retailer and the retailer to final consumers. The SNPL enjoys the profit margin from the cost of manufacturing and the price that it asks form the distributors. 2.5.4. RESOURCE SCARCITY The SNPL have the skilled, well trained and professional man power to utilize its resource. The SNPL do not possess resources that are in short supply but the SNPL has a technical department who are able to utilize the resources to its best form. The raw material for making cigarettes for SNPL are imported from the Virginia on regular basis which are of the best quality. 2.5.5. DURABILITY The resource of the SNPL depreciates slowly. Its tangible assets like plant and manufacturing machine are the best machine for making cigarettes. A study has proved that the total life of a cigarettes brand is about 25 yrs after that it's possess away from the market. The brand of SNPL that is Surya has been in the market place for last 15 yrs and is still been appreciated by the consumers. The brands are improving and appreciating there brand name and still generating profit for the SNPL. 2.6. VALUE CHAIN ANALYSIS The term value chain describes a way of looking at a business as a chain of activities that transforms input into outputs that customer value. Customer's value derives from three basis sources: activities that differentiate the product, activates that lower its cost activities that meet the customer's need quickly. The value chain for customer of SNPL is created by the combined activates of the four departments they are marketing, finance, technical and leaf departments. The company is headed b the president/ managing director. The vice presidents of four departments report to the president. 2.6.1. THE LEAF DEPARTMENT The leaf department is a type of backward integration of the company. It has a national leaf manager who has four officials reporting to him. This department takes care of the cultivation of tobacco. The tobacco is homegrown in the terai region for i.e. in Bara, Parsa, Sarlahi, Dang and Chitwan which has the weather- wet, hot and humid and topography plains, suitable for the cultivation of tobacco. 2.6.2. THE TECHNICAL DEPARTMENT It is also known as the production department has a vice- President to whom the primary and secondary department managers report. The primary dept is mainly involved with processing and blending the raw material to be used ads fillers in cigarette. In the secondary dept the raw material is given its final from i.e. cigarette sticks and packed to be sold in the market. There are two types packaging, the sift cup pack e.g. used for Shikhar and the Hinge Lid hard pack used for Surya Luxury kings and lights. The cigarettes are packed in 10s and 20s. These ready to be sold products are then handled by the marketing department.

2.6.3. THE MARKETING DEPARTMENT It also has a vice president looking after the sales and the brand departments. The brand dept. has three managers and takes care of research ad development, development of communications, product development, pricing etc. The sales department is headed by a national sales manager, under whom there are six area managers with a number of marketing officers assistant them. 2.6.4. THE FINANCE DEPARTMENT It looks after the accounts and financial records of the company. This dept. consists of a number of activities for the proper financing of the various departments. 2.7. SWOT ANALUSIS OF SNPL SWOT analysis is an exercise in which managers identify the organizational strength (S), and weakness (W) and environmental opportunities (O) and threat (T). 2.7.1. STRENGTHS: Old Company Being the nation's one of the oldest company in this field. It is producer of the most popular brands of cigarettes in Nepal. Its popularity in the market has helped it gain the largest share in the market. Brand Loyalty As earlier mentioned about its market leadership. Its quality has increased its popularity is a tremendous consent which has boosted its brand loyalty to the greatest event in Nepal. Smoker of other brands may shift to its products but it's rarely seen that its consumers shift to other products. Habits die hard, like many of the consumers had said that they have health problems with switching brand too. Price It is seen that generally cigarette's price rise with time and quality. Satisfied consumers can pay higher prices to the product. Surya is though gradually changing its prices but the sales is still growing as it has the products for all the segments of the market. Few competitors This company is the market leader. However some of the competitor of its brands is JCF (YAK) and NCF (MARLBORO).

2.7.2. WEAKNESS Distribution Distribution plays important role in the sales of products like cigarettes. Huge the distribution channel lead to higher sales. So the company must have a great distribution channel. The retailers of Surya receive the products from the whole sellers or the daily sales service.

Though the are doing their work properly, there are creating constraints that are affecting the distributions. These can be overcome only by using wide distribution channel as well as effective daily sales services. 2.7.3. OPPORTUNITIES Launch of new brands Since Surya has a great market share in the cigarette segment it can easily introduce new brands in the market according to the changing trends. New filter brands Since the people are becoming more health conscious and the increasing preference of filtered cigarettes, Surya can also launch different new quality cigarettes like cigar and international brands in the market. Premium Since it is the producer of the most sellable FMCG product in Nepal, it has high chance to earn premium in the products as well as other new segments against its brand images. 2.7.4. THREATS Monetary and Fiscal Policy With the change in tax slabs every year, each brand is placed under different tax slabs according to the cigarettes. So the prices of the brands are liable to increase and change every year. This might result the consumers to switch into cheaper brands or even quit smoking. Competitors Currently, the company enjoyed monopolistic leadership in the market, competing only with foreign brands. But due to the government's policy of liberalization and encouragement in the private participation during the 80's new company started coming into the market. WHO WHO has been working hard in increasing awareness to consumers about healthy hazard associated with cigarette smoking habits. This has decreased in the number of smokers to a large extent.

CHAPTER 3: ANALYSIS

3.1. COMPETITIVE ADVANTAGE OF SNPL (KEY SUCCESS FACTORS) SNPL is the market leader in the cigarette industry of Nepal due to its efficient distribution network, cost effectiveness, innovation, research, technology etc, which provides the best working environment and make the company more competitive upon its competitors. The major competitive advantages of SNPL are:

3.1.1. BACKUP FROM ITC LIMITED IN PRODUCT DEVELOPMENT, MATERIAL PURCHASE AND DESIGNING ITC limited, India is the biggest manufacture of cigarette in India and also owns 59% of the total shares of the organization. So being the parent company, ITC provides backup support to the organization in various fields like development of new product, purchase and supply of raw material as well as other necessities and also assists in designing the new techniques for the development and marketing of its products. This is a special benefit to SNPL over its competitors which makes it more competitive is every aspect. 3.1.2. NATIONAL WIDE DISTRIBUTION NETWORK The huge distribution network of SNPL is an advantage for the organization to beat its competitors. SNPL has its distribution in all over Nepal through 60 distributors, 6000 wholesalers and 75000 retailers which the widest supply chain of any product yet found in the country. The distribution network of other competitors is not huge or not so wide which makes lower an availability of their brands while most of the brands of SNPL are found in all 75 districts. 3.1.3. HIGH MARKET SHARE The huge market share of SNPL is one of the major competitive advantages of the company SNPL cover about 75% of the total market share in terms of value and 61% in terms of volume alone. This data represents the strong position of the organization over its competitors either they are national or international. 3.1.4. USE OF BEST TECHNOLOGY The technology used by SNPL is the best technology used in the production of cigarettes in the company. This makes the production and quality both more advances and better in comparison to its competitors. The company duly innovative its technology with changes in it while some of the competitors like JCF hadn't changed it for long time. ITC support SNPL in doing so as they change their technology frequently with immergence of new ones in course of time. 3.2. STRATEGY ADOPTED BY SNPL Strategies are the means by which the long term objective will be achieved. Business strategies may include geographic expansion, diversification, acquisition, product development, market penetration, retrenchment, liquidation and joint ventures. 3.2.1. GENERIC STRATEGY PERSUED BY SNPL Strategy must be based on the core idea about how the firm's can best compete in the market place. The popular term for this core idea is the generic strategy. The generic strategies help to overcome the five forces of industry analysis and achieve competitive advantage. The generic strategies are cost leadership, differentiation and focus. 3.2.1.1. PRODUCT DIFFERENTIATION

Product differentiation refers to creating a product or services the are unique and valued. Strategies dependent on differentiation are designed to appeal to customer with a special sensitivity for a particular product attribute. The reason that shows the SNPL has adopted this strategy is as follows. • SNPL has huge and strong distribution channel than its competitors. • Huge investigation in the R & D activities to find out the customer taste and requirement and launch product accordingly. • The joint venture with Indian tobacco company and British America tobacco has helped it to manufacture product of intentional class in Nepal 3.2.1.2. FOCUS The SNPL has adopted this strategy as it has targeted different category of people with different products. The SNPL has launched different product to attract different level of customer. It has product like Bujili and Khukuri targeted at price sensitive customer with low income and products like Surya classic, Surya luxury kings and Surya light target at people at premium segment. The brand like Shikhar is targeted to the youth above 20 and below 25. 3.2.2. GRAND STRATEGIES PERSUED BY SNPL Grand strategies, often called master or business strategies provide basic direction for strategies actions. They are the basis of coordinated and sustained efforts directed toward achieving long term objective. The grand strategy can be defined as a comprehensive general approach that guides a firm's a major action. The Grand strategies of SNPL are: 3.2.2.1. PRODUCT DEVELOPMENT The SNPL has been expending huge amount of capital on R & D to find out the customer taste and requirements. SNPL is totally consumer focused and making continuous effort on improving the quality of its product in the market. The SNPL has launched many products form the time of its establishment. The SNPL had only four brands under its belt at the period of establishment they were Surya luxury kings, Shikhar filter kings, Khukuri and Chautari. Since than SNPL has adopted product development strategy and launched product like Surya light, Shikhar light, Shikhar Menthol and so on. 3.2.2.2. MARKET DEVELOPMENT SNPL has been stimulating the consumers to move to the higher premium brands like Surya & Shikhar from Khukuri and Bujili. The SNPL generates more profits from premium brands than lower segments brands. The SNPL is using huge promotional tools and advertising techniques to find new market and consumers for its existing products category. Its brand cover more than 75% of the total cigarettes market in Nepal and the percentage is increasingly rapidly.

3.2.2.3. INNOVATION

Innovation is all about improving and crating a new product in the existing market place. The SNPL has making innovation regarding the new taste of the cigarettes. The brands like Shikhar Menthol, Shikhar lights and Surya classic are the result of the innovation. The SNPL has also discontinued products like Chautari from the market after launching new product namely Bujili. The SNPL is still making an effort to effort new product for the market place to surprise the consumer of cigarettes with new taste of cigarette. 3.2.2.4. CONGLOMERATE STRATEGY Conglomerate strategy means acquiring a business because it represents the most promising investment opportunity available the principal concern and often the sole concern of the acquiring firm is the profit pattern of the venture. The SNPL has adopted this strategy by acquiring the distribution of "JOHN PLAYER" solely over the Nepal. By moving to the business of readymade garment the SNPL has show that SNPL is investing its fund in the most promising business available. 3.2.2.5. CORPORATE SOCIAL RESPONSIBILITY SNPL has a great optimism for the future and a deep conviction that by generating employment, earning foreign exchange and though sincere effort to promote health, education, rural empowerment, sport and business. Beside business SNPL is also active in social development activities through various initiatives like Surya Nepal susasthya, Surya Nepal prakriti and Surya Nepal khel pryatan. In addition to its commitment to its quality goods, Surya Nepal fulfills its soul responsibility too. It denotes regularity to hospital and health services and also participates. Instates and patronizes several social, sports, cultural and cultural activities e.g. Shikhar sangh and Surya art exhibition to promote artistes. The company is actively involved in forestation drives providing free plant for a greener Nepal. Vocational training regular, regular rural health camp, literacy program and building educational infrastructure have improved the life thousands of villagers. It is providing donation to various school for their development and betterment. It is also providing school scholarship for 52 orphans in st. Xavier's. It supplies uniform and pay fee for them. The company has donated ambulance to various hospitals and has donated the medical equipment s to teaching hospital. As a part of social responsibility, it is totally against the use of child labor it follows the code and conduct laid down by UN regarding child labor, pollution control and etc, In time of natural calamities SNPL has contribute generously toward relief for disaster victims. Sport sponsor ship is a special SNPL interest event like Surya golf, Khukuri motorcycle rally, Khukuri karate, Khukuri inter cup football championship have given local sports talent a chance to participate in inter national class tournament. In particular Khukuri long term and increasing involvement with football has resulted in promoting the sport at both local and international levels. To encourage a wider awareness and participation in sports. SNPL has sponsored live international telecasts of events like the Olympics the world cup football and the Asian cup football.

CHAPTER 4: Summary, conclusion and Recommendation

4.1. Summary Surya Nepal Private Limited is the one best and successful organization established with a vision of "Growth through Quality and Excellent" in 1987. It is a joint venture between BAT (British American Tobacco) holding 2% shares, ITC Limited with 59% and Nepalese entrepreneurs holding 39%. It has its factory in Simra, with the head office established in Kathmandu. It has given a new era to the domestic cigarette market. The company initially started its production with two brands of cigarette, Naulo and Bijuli of which Naulo was later dropped. At present the SNPL produces Surya, Shikhar, Khukuri, Bijuli and Chautarithe each of which has their own brand extensions. Surya in the highest selling brand in Nepal at the premium segment where as Khukuri at general segment brand. It has over 70% to 75% of the total market share of the cigarette industry in Nepal in terms of value. In the premium segment it commands about 95% of the total market share. In the high segment it is about 820% to 85% while in the lower segment it sales about 60%. In terms of brands and sales its brands are the most sellable brands in Nepal. It has the largest and strongest distribution network coverage in most all the FMCG companies in Nepal. SNPL begins its work to lead business house of Nepal in terms cigarettes manufacturing and marketing. It makes its product available at all the outlet of the country; satisfy the need of the customers. It is most successful organization in this competitive and dynamic situation. It produces and markets its product to all level of the people in terms of income which makes enable to people use the brand and satisfy their need with reasonable price with out compromising its quality. It is continuously adopting the change that takes in the environment which gives its opportunities as well as threat. Although having the pressure from both internal and external factor it is running its activities continuing its activities satisfactorily. It has not only fulfilling the desire of people but also contributed in the area of social as well as national sectors. It has support in large sector of the nation for example educational, health, sport, developmental, tourism, handicapped and orphan child and people.

4.2.Conclusion policy of the nation are emerging as threat for the company. However, the company is able to capitalize its opportunities by taking advantages of its strengths and overcoming its weakness. The company is well aware of its responsibility being a corporate citizen. Realizing that it it's engaged in various social activities, it is able to maintain its corporate image. 4.3. Recommendation SNPL is one of the successful and leading company producing and marketing the product with reasonable price. It is seen that it is mainly focused on the producing and marketing in appropriate condition and help in suitable sector of the society which is suffering from the problem. Although there is no more comment on the SNPL about the cigarette. There are some points to be recommended as the research has developed for the welfare of the user and organization itself. Some of them are as follows.

• SNPL is producing cigarette, in our country people are from different economic background so it is needed to focus on producing the cigarette in price varieties which enable them to be brand loyalty. • Cigarette is harmful for the health of people, it will better for SNPL to focus its mind not only marketing huge quantity in society but also make awareness people to use in limit • It focuses mainly in local market for its product and few in foreign market, it will be appropriate for SNPL to maintain its quality with adopting new technology which enhances its quality, helps in entering in market outside the country and gives strength to compete in the global market. • Nowadays SPNL’s products are marketing in everywhere which may pinch to its policy, rules, regulations and norms so it will be appropriate to allow those authorize dealers which are licensed from concern authority. • Although it has contributed in the various development sectors of Nepalese economy, it should not forget to take a step in environmental protection.

ANNEX QUESTIONNAIRES 1. Questionnaire for SNPL I 'm a student of CITE college, making environmental analysis of cigarette industries in Nepal and the customer and competitor's analysis. I request all the concerned persons to cooperate with me in filling this questionnaire. I state that the secrecy of your business will not be disclosed any where. Thank you.

Date of operation: What kind of product are you introducing in the market? Please mention their price. ………………………………………………………………………………………………………… …………………………………………….. Which product (cigarette) do you sell most? ………………………………………………………………………………………………………… …………………………………………………………………………………... What percentage of the market is covered by your product? Below 10%

11%-25%

Above 40%

26%- 40%

What do customer look most in buying product? Price Quality

Availability Brand Others Mentioned about your target group of your products? ………………………………………………………………………………………………………… …………………………………………………………………………………… What's the new trend in modern market? ………………………………………………………………………………………………………… …………………………………………………………………………………… What is the range of margin do you earn from your market? ………………………………………………………………………………………………………… …………………………………………………………………………………… What is the credit terms and conditions that you provide for your dealers? ………………………………………………………………………………………………………… …………………………………………………………………………………… How much (end) price is reasonable to charge for new product and which criteria do you take while pricing? ………………………………………………………………………………………………………… …………………………………………………………………………………… Which promotion tool matters the most in your product promotion? …………………………………………………………………………………………………………

…………………………………………………………………………………… Which media do you focus for the promotion of your product? Why? ………………………………………………………………………………………………………… ……………………………………………………………………………………

OTHERS QUESTIONS What were initial challenges faced by SNPL while introducing cigarette in Nepal? What is the mission of SNPL? Do you think marketing a product is worthwhile? How gave it affected your business? What is the slogan you are using to promote Brand? What is the marked price of your products? Is price war going on with competitors? How price is determined? Factors affecting pricing policy? What is the profit margin? Do you considered the price of the competitors while pricing the product? How many wholesalers, retailers and there within valley and outside valley? How have you determine the places for your product? While determining the place for your product do you go for marketing research? In order to respond to competitive environment, have you offered any discount scheme? If yes, then what types of discount are available here? How many versions (product line depth) have you offered for each product line? How about the environmental analysis of your company? What kinds of environmental factors do affects the organization policy? How about your supplies, competitors, customers? How about the social responsibility does your company play?

How about the current political condition of our company and what kinds of problem are your company is facing? What social factors do play a vital role in the business operation? How about the technological factor and the condition of your company? How about the modern technology that your company is operating? Posted by Bharat Bhattarai at 5:55 PM