SMP Report on Tapal Tea
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Research Report on Strategic Marketing & Planning
Tapal Tea Private Limited Plot 40, Sector 15, Korangi Industrial Area, Karachi
Submitted To: Sir Ekhlaque Ahmed
Submitted By: Imran Ali – 8862 Muhammad Bilal – 8698 Arsalan Yousuf – 8677 Date: 17-04-2010
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TESTIMONIAL We bow towards, The Great Al- Mighty ALLAH for showing us, the strength and courage for all the challenges through out our journey in exploring the wonders of this visionary and dynamic subject of “Strategic Marketing Planning”. Indeed, we are grateful to our mentor Sir Ekhlaque Ahmed, whose dedication, guidance and enthusiasm for the subject always persuaded a challenge for us to become and prove that, how good we are business managers. We had at most optimum, placed our sincere efforts and sheer hard work to satisfy our mentor with this report. We would always like to remember and honor with gratitude toward our family & friends, in supporting and motivating us during days, we felted low and finally, the TAPAL people specially, Mr. Haroon Rashid whose endless support glimpsed a ray of hope and success to this project. Thank You
Imran Ali Muhammad Bilal Arsalan Yousuf
Table of Contents Executive Summary............................................................................................5 .......................................................................................................................... 6 INSTITUTE OF BUSINESS MANAGEMENT
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Company’s Profile...............................................................................................6 History of Tapal............................................................................................... 6 Business Scope...................................................................................................7 Market Structure of Industry.............................................................................10 Market Share.................................................................................................... 11 Market Structure of the Company.....................................................................12 Market Size - Past four years – Qty (Tons)........................................................13 Market Size - Past four years – Value (in ‘000).................................................14 Market Size - Next four years – Volume (Tons).................................................17 Assumptions for Growth................................................................................18 Dust Tea Segment......................................................................................18 Leaf Tea Segment......................................................................................18 Mixture Tea Segment.................................................................................19 Green tea Segment....................................................................................19 Iced Tea Segment......................................................................................19 Product Life Cycle.............................................................................................19 Competition Growth matrix..............................................................................20 Threat of New Entrant...................................................................................22 Bargaining Power of Buyer............................................................................22 Bargaining Power of Suppliers.......................................................................22 Rivalry between Competitors.........................................................................22 Threats from Substitutes...............................................................................22 Environmental Factors...................................................................................23 Technological.............................................................................................23 Political.......................................................................................................23 Economic....................................................................................................23 Social and Cultural Forces.............................................................................24 Company and Competitor Analysis...................................................................24 Distribution Structure: Shift from 2008 To 2012...............................................26 Distribution Shares And Company’s Positions (2008).......................................27 Top 7 External Trends.......................................................................................28 Input:................................................................................................................ 28 SWOT Analysis..................................................................................................29 Strengths....................................................................................................... 29 Weaknesses...................................................................................................29 Opportunities.................................................................................................29 Threats.......................................................................................................... 29 Cross Matrix Analysis........................................................................................30 Value Chain Model............................................................................................31 Human Resource Management......................................................................31 Technology Development..............................................................................31 Procurement..................................................................................................32 Primary Activities.......................................................................................32 Inbound logistics............................................................................................32 Operations.....................................................................................................32 Outbound Logistics........................................................................................32 Relative Importance of Factors.........................................................................33 Input:................................................................................................................ 34 Rating Against Customer Buying Criteria..........................................................34 INSTITUTE OF BUSINESS MANAGEMENT
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Impact of Issues on Strategic Profile.................................................................36 Customers Buying Criteria: Price...%, Quality Attributes...%............................37 Better................................................................................................................37 Availability........................................................................................................ 37 Taste................................................................................................................. 37 Same................................................................................................................ 37 Color.................................................................................................................37 Quality.............................................................................................................. 37 Worse...............................................................................................................37 Customer Complain Service..............................................................................37 Aroma...............................................................................................................37 10%..................................................................................................................37 20%..................................................................................................................37 30%..................................................................................................................37 Input:................................................................................................................ 38 Improve Aroma and customer complain services.............................................38 The Five Generic Competitive Strategies..........................................................38 Vision & Mission................................................................................................39 Business Objectives and Targets......................................................................40 In Short Term.................................................................................................41 In Long Term.................................................................................................42 Segmentation Variable of the Consumer Market..............................................42 Geographic....................................................................................................42 Climate..........................................................................................................43 Demographics...............................................................................................43 Psychographic...............................................................................................43 Behavioral .....................................................................................................43 Strategic Canvas - Past & Future......................................................................44 Input:................................................................................................................ 46 Selection of Supplier on the basis of price competitiveness can reduce the major part of the production Cost...............................................................................46 Pricing Strategy................................................................................................47 Legging Indicators and Leading Indicators.......................................................47 Action Plan........................................................................................................49
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Executive Summary We the students of the College of Business Management were required to submit a report on "Strategic Marketing & Planning”. There by we have full filled our requirement and have listed our findings in the following pages. We were required to choose a company and analyze all its activities in detail so we chose Tapal. Tapal had always ensured its landmark in quality standards and because of this factor customer value and standards had proved its ultimate goal of customer satisfaction. Today the market share of Tapal have reached the top even in this economic crunch, but on to becoming a leader the company should provoke to raise the bar on a continual basis and to address key success factors, only through mitigating the key issues. In order to achieve the objective of this report we had to rely on our own analytical skills as well the information we received from the major players in the Industry i.e. mainly the three leading Tea manufacturers in the Industry as the likes of Tapal, Unilever, Clover Pakistan and Eastern Tea.
We even went further to compile consumer
views about different brands and the distributors opinions on the different brands available. To full fill the extensive requirements of this report we broke each and every one of the company’s activities in order to conduct and procure a more in-depth and more meaningful analysis. For each activity analysis tools such as Internal Factor Evaluation Matrix, External Factor Evaluation Matrix, In-Depth Activity Cost Analysis and Competitive Profile Matrix are just some of the tools used in the following pages to bring a consistent and better analyzed answer. We hope the following pages will be better able to answer and give thoughtful
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insight into Tapal Tea, its competitors and the Industry in which it operates especially in the light of Pakistan’s economy.
Company’s Profile The journey of Tapal's remarkable success is the combined efforts of three generations. Adam Ali Tapal was the founder of the Tapal Company. The saga of Tapal started with his formulation of a unique tea blend, which was later named family mixture that led to the Tapal brand becoming a hot favorite, and eventually the largest selling brand. Taking a step forward from this humble foundation, Tapal moved up the ladder of success by innovating and introducing different tea brands to suit every taste and pocket, which were sold from its retail outlet in Karachi’s Jodia Bazaar. People from all parts of the city flocked to the outlet to purchase Tapal tea, and soon, the quality of Tapal teas became legendary. The company continued to thrive and grow under the management of the founder’s son, Faizullah A. Tapal, who initiated tea distribution to retail outlets around the city for the convenience of the people.
History of Tapal The saga continued, and new horizons were explored by the founder’s grandson, Aftab Tapal who gave a whole new meaning to the concept of tea and developed a wide range of tea blends catering specifically to the tastes of people throughout Pakistan. He introduced professional management and unique production ideas to the business. Being one of the few professional tea tasters in the country, and a tea connoisseur himself, his progressive outlook has given further strength to the foundation of quality laid by his family, and has bought the Tapal company to newer and higher levels of success.
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Evolving and innovating its way through its near-60 year history, Tapal is presently the largest, 100% Pakistani owned tea company in the country. Its has set new standards for modern tea blending and packaging factories, warehouses equipped with state-of-the-art equipment and a team of highly dynamic professionals headed by Aftab Tapal himself.
Business Scope Pakistan Tea Industry 2009
Branded Tea Segment 53%
Loose Tea Segment 47%
Pakistan Tea Market Estimated 2009
Urban 33% Rural 67%
In Pakistan, Tea is undoubtedly the national drink and it has more consumption than any other type of drink available in the market today. It is estimated that Pakistanis consume over 160 million kg of tea worth over 4.5 billion rupees every year. Despite the increasing emphasis on its hazardous effects on health and the continuously rising prices, due to the low literacy rate and unavailability of a better substitute, the demand and the consumption has increased over the years and is growing at an annual rate over 3.5%.
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As a consequence, Tapal desires a high level of customer satisfaction and unflinching brand loyalty through commitment to quality and constant innovation. What deserves to be mentioned is Tapal’s products are various with premium quality and have passed the ISO9001: 2000 quality system certification. A unique combination of high- grown Kenya tea leaves and dust, that gives a refreshing aroma of leaf and strong taste of dust all together in one cup. Tapal is a family name and calls attention to tea as an integral part of our lives whether it is day or night or any time as a source of refreshments and revitalize. Tapal has a diversified customer base ranging from urban to rural areas including various institutions. People go with Tapal to get the Hence; Tapal’s target market mainly consists of young adults and adults belonging to high, middle and lower income groups who are primarily living individual and in family gathering.
Business Scope describes “The Business we are / want to be in” through the eyes of the customers. It defines the areas of operation for the organization. It encompasses the following questions:
•
Specific Region Regions = where?
Tapal Tea, the country’s largest National Tea Company, has manufacturing capability in the country at its three plants located in which two are in Karachi and one in Raiwind. The mother factory in Karachi only produces 65% of the total Tea categories like Danedar, Mezban, Family Mixture, Shades of Green, Chenak, Tezdum and Ice Tea to fulfill its major share contributing south market. The other manufacturing plant in Raiwind mainly produces two categories i.e. Tezdum and Family Mixture. The head office for the operations is based in the cities of Karachi and Lahore with warehouses maintaining the organization’s presence in the cities of Hyderabad, Sukkur, Multan and Islamabad. To meet customer requirements everywhere, Tapal Tea further expands its network through Utility Stores, Army Stores and Modern Trade Network country wide. The only company owned shop located in Jodia Bazaar, Karachi to which it started his business in 1947 as both whole seller and retailer. It’s Tea Blending and mixing center is located in Karachi.
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Tapal Tea has divided the country into two main and Six sub regions as;
South Karachi Hyderabad Sukkur
North Lahore Multan Islamabad These Regions further classified into Zones/Territories and Towns to extensively cover the market. Tapal Tea is currently exporting to Asian counties of Afghanistan, Middle East, USA, Australia and, other European continents which constitute around 1% – 2% of their total sales.
•
Functions / applications Functions / applications = what needs?
Tapal Tea is catering to the basic need of “Tea” accompanied with “Quality and Affordability”. Customer seeking needs would be: Primary Attributes: o Strong Taste o Aroma o Color o Premium Quality Secondary Attributes: o o
Price Availability
•
Customers Whose needs?
“Rural and Urban” – They are catering to the needs of people living in Rural Areas of Pakistan, as the main market for Tapal Tea happens to be the people from rural areas as its 68% of the total population of Pakistan. Besides, it is also catering to the need of people from urban areas as they also constitute a significant percentage of their total market share.
•
Added value For Distributors:
o o
Competitive Margins Credit Facility
o
High margins
For Traders & Wholesalers:
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Quantity Discounts Trade promotions and incentives Shop Branding + merchandising Rent Timely Oder Delivery Shelf Space Rent
o
o o o o
•
Considerations
Diversify the business in the complementary products.
•
Boundaries and Future Scope - Matching production with increasing demands in the future. - Bringing new products (ranges) for new segments and untapped markets - To broaden exports function in Middle East and other international markets; and prove existence in international markets. - To maintain the leading position in the local market. - Modernizing operations and optimal capacity utilization. - Restructuring strategies for the bottom of pyramid customer base. - Customer oriented pricing strategy - Tactical media strategy for each brand - Strengthen the brands and communication to avoid internal cannibalization.
Input: Tapal always seeks out different arenas to beat the competition while struggling to maintain the existing share, plan trade driven promotions to strengthen the long term relationships. To be an aggressive player in the market it is trying to exploring international markets where it can not only penetrate, diversify and make long-term investment but also harvest its current business.
Market Structure of Industry Eastern Tea
Loose /Mushroom Tea
Tapal
Unilever
Clover Pakistan
Dust
Mezban Dust Chenak Dust
Pearl Dust Red Rose
Royal Dust
Surhan Dust Dawn Dust
Available
Leaf
Danedar Tezdum DD-Teabags
Lipton Yellow Label LYL Teabags Supreme
Tetley World Tetley Teabags
Vital Chai
Available
-
-
Vital Chai
Available
Clear Green TBs
-
-
Available
Lipton Iced Tea (Powder + Can)
-
-
-
Category
Mixture Green Tea
Iced Tea
Family Mixture Jasmine TBs Elaichi TBs Lemon TBs Gulbahar Tapal Ice tea (Can + Powder)
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Inputs: Tapal is present in all the brand segments of Tea industry but there is a gap in the mixture and Ice Tea segments so Tapal must develop strategic plans to enhance these two categories.
Market Share PakistanBrandedTeaMarket 2009
Clover Pakistan 4%
Eastern Tea 9%
Uniliver 40%
Others 4%
Tapal 43%
Quantitative findings INSTITUTE OF BUSINESS MANAGEMENT
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•
Over all the branded Tea market has been greatly dominated by Tapal, stealing 43% of the markets share, followed by Unilever 40%
•
The other Tea manufacturers only hold 4% of the markets share which reflect that how difficult is it to penetrate the market.
•
It also highlights the fact that Tapal and Unilever market shares represent the major chunk of the consumer base.
Input: Tapal Tea must sustain the market share but explore new markets to avoid internal cannibalizing amongst its existing brand.
Market Structure of the Company
End Users
Masses Bulk buyer Price sensitive
Masses
Product Applicatio n
Discounted Price
B2B B2C Profit margin on bulk buying
Product
Mixture Leaf Dust Iced Tea
Mixture Leaf Dust
Govt. Officials Finance Dept.
Owner Proprietor Consumer
Procurement Dept.
Traders Retailers Whole sellers Restaurants Hotels/Cafes Corporate Offices Banks
Influencer
Purchaser
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Masses Shoppers Price sensitive
Arm forces and their families Foreigner Consumers
Convenient buy Contracted supply B2B Discounted Price Economy Packs
Satisfy Tea drinking needs B2B B2C
Mixture Leaf Dust Vendor/contractor Finance Dept. Administration Dept. Family Monthly Budget Contractual Restaurants, Hotels/Cafes, Offices supplies Portion of Traders/wholesalers Family Shoppers
Leaf
Govt. Officials Finance Dept.
Procurement Dept. Foreign Distributions
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Educational Institutions
USC/CSD
Distributors
Modern Trades
[General Trade/Wholesale Out Of Home]
[MAKRO/METRO]
Armed forces & Export Channel
The Manufacturer Synopsis: •
• •
In the Tea Industry, the key player in the distribution structure is “the Distributors”. These distributors are basically hired by companies. These distributors are further cover whole sellers and retailers, as they custodian of their respective areas defined by the company. • International Modern Trades are the next sales drivers in the FMCG industry but may damage the distributor or attract the company direct distributions USC/CSDs are also playing an important role in the market but its dependency on Govt. grant would have a substantial impact on its operations. Armed forces is a niche segment but contributing a portion of the cake. Rate of Exchange due to Export market supports business.
Market Size - Past four years – Qty (Tons)
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*All in Ton
Market Size - Past four years – Value
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(in ‘000)
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2005-06 Rural
2006-07
Loose
100,395 57,564
Branded
42,654
Urban
47,245
2007-08
2008-09
103,771 59,729 3.8% 44,101 3.4% 48,833
107,397 61,155 2.4% 46,182 4.7% 50,540
111,175 62,462 2.1% 48,744 5.5% 52,317
Loose
12,748
12,956 1.6%
13,186 1.8%
13,456 2.0%
Branded
34,674
35,854 3.4%
37,301 4.0%
38,825 4.1%
147,640 70,312 77,328
152,604 72,485 80,119
157,936 74,300 83,636
163,492 76,332 87,160
Grand Total Loose Total Branded Total
*All in Ton
Dust
Leaf
Mixture
Sub Total Rural Urban Sub Total Rural Urban Sub Total Rural Urban
2005-06
2006-07
2007-08
2008-09
50,381 34,007 16,374 80,476 54,321 26,155 16,532 11,159 5,373
52,425 35,387 17,038 83,051 56,059 26,991 16,716 11,283 5,433
54,667 36,900 17,767 85,796 57,912 27,884 16,851 11,374 5,477
57,123 38,558 18,565 88,541 59,765 28,776 17,021 11,489 5,532
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Grand Total Rural Urban
Total Black Tea
147,640 100,395 47,245
152,604 103,771 48,833
157,936 107,397 50,540
163,492 111,175 52,317
*All in Ton
Total Tea Market 120,000 100,000 80,000 60,000
Branded Tea Loose Tea
40,000 20,000 0 Urban
Rural
2005-06
Urban
Rural
2006-07
Urban
Rural
2007-08
Urban
Rural
2008-09
Synopsis: •
The overall Tea industry has been growing gradually both in terms of sales and revenue.
•
Branded Tea segment is showing healthy growth especially in rural markets where as market is gradually saturating in urban area.
•
In the Tea Industry, Dust and Leaf has a major chunk of the Tea industry in terms of Black Tea. However the dust category is now become 2nd most demanding brand and has been continuously increasing among the core tea users especially in rural areas because of two major concerns as: 1. Per capita income has been increased which caused in increase of Tea consumption with the growth in the population rate. 2. people are serving Tea as an economic point of view and with draw from the serving of cold soft drinks to their guests as an expensive drink 3. Bottom of Pyramid market
•
In Mixture category which was the legendry brand of the time and initially blended by Tapal when first started its business in Pakistan is now either being matured or cannibalized by other brand.
•
Green Tea has developing bit-by-bit as the health awareness level gradually build in the mind of the consumers. This segment is very niche as the consumption pattern has restricted consumer with the diet planning, health issues and exposure to particular social class. • Iced Tea portfolio has yet to be waited for the acceptance from consumers as the brand is premature for the industry and need few more years to be established.
Input: INSTITUTE OF BUSINESS MANAGEMENT
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Overall the industry has natural growth with respect to the Population growth rate. Therefore, good pricing strategy related to bottom of pyramid market i.e. Rural Market could capture more returns for the company as well as market share. However Green Tea and Ice Tea needs to be milking to sustain their growth.
Market Size - Next four years – Volume (Tons)
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Assumptions for Growth Dust Tea Segment Rural population is continues growing in Pakistan and hence the market size is increasing proportionally as the total area expending and regular Tea consumption of the people has also increased. Since the Dust category is the flagship brand of this market hence the demand has been increasing at the average rate of 3.3% each year.
Leaf Tea Segment There is a pilgrim shift in the economy of Pakistan which has stretched the middle class upward as a consequence more and more consumer switch to this premium brand. In Pakistan, the growth rate of Leaf is around 2.5% this year which is the highest growth in last 5 years. Teabags are the major revenue generators in the Leaf category in the local urban and international markets providing high contribution margins to business.
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Mixture Tea Segment This category is reaching at its maturity stage but in last decades it was a primary brand of the market. Also one of the major reasons of down this brand is low price gaps between the category brands which stimulate the customers to switch on other brands
Green tea Segment People have become health conscious today and would want to prefer green tea over the traditional black tea but this category has a niche segment so would take time to build in future. As the literacy rate is continue to increasing in Pakistan therefore more growth is expected in this category.
Iced Tea Segment Due to climatic conditions, where the weather of Pakistan is mostly hot; consumers would prefer soft drinks over tea but due to low awareness level this segment would take couple of years to build the market as the youth has been moving towards the healthy lifestyle and trend lovers in urban areas.
Input: Tapal must sustain its current position in the industry but strive to capture the share from the competitors and Loose Tea market by offering good value for money to consumer at every price point. Women are the key part of the overall Tea purchasing and making so targeting this gender and rewarding would be effective for Tapal to grab the market share.
Product Life Cycle INSTITUTE OF BUSINESS MANAGEMENT
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Product Segment
Introductio n
Growth
Maturity Decline
***
DUST Mezban Dust
+++
Pearl Dust/Redrose
++
Royal Dust
+
LEAF
***
Danedar +TB
+++
Tezdum
++
Supreme
++
LYL + TB
+++
Vital Chai
+
Tetley World
+
***
MIXTURE Family Mixture
+++
Vital Chai
++
Tetley World + TB
+
***
GREEN TEA Shades of Green
++
Lipton Green Tea
+
ICED TEA
***
Tapal Ice Tea Powder
+
Lipton Iced Tea
+
Nestea
+
Competition Growth matrix COMPETITION
SEGMENT DUST
LEAF
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MIXTUR E
GREEN TEA
ICED TEA
OVERAL L
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(in Ton) Mezban Dust Chenak Dust
Danedar DD TBs Tezdum
Family Mixture
Unilever
Pearl Dust Red Rose
LYL packs LYL TBs Supreme
-
Clover Pakistan
Royal Dust
Tetley World Tetley TBs
Tetley World
Eastern Tea
Surhan Dust Dawn Dust
Vital Chai
Historical Growth
4%
Projected Growth Company Profitability
Tapal Tea
Jasmine TB Lemon TB Elaichi TB Gulbahar Clear Green
Tapal Ice Tea
33,000
Lipton Iced Tea
32,000
-
-
3,000
Vital Chai
-
-
4,000
3%
1%
4%
9%
3%
3.4%
2.6%
1%
4.8%
22%
3%
6%
7.5%
3%
10%
13%
6.6%
(Mint + Lemon)
Synopsis: After analyzing the market for its capacity and its segmentation, we have come up with the following findings: • The Tea Industry is directly influenced by the changes in the economic factors and stability • Each segment has its own stimuli or functionality which affect the product demand especially Dust segment is penetrating in the urban areas of upper Punjab and has a greater influence on the other variants. • The change in prices and margins has a direct impact on the sales of the segments • Tea consumers in market greatly rely on strong brand name and reputation created over the years. • Iced Tea segment is still premature concept in Pakistan but the trend would be more favorable in future for this category. • Each company has a set target market in which it capitalizes but now they are doing guerilla warfare strategies to capture more share in the market. • Mixture category must clarify its positioning to sustain in the market.
Input: •
Growth in Dust, Leaf and Green Tea Segments
•
Mixture is facing challenges as of being approaching maturity so preemptive action would be taken to avoid lose of positioning and cannibalizing.
•
Green Tea has a huge potential of longevity but more variants to be launched in order to sustain growth
•
More and continuous investment would required to develop the Ice Tea market and opportunity to launch new variants
•
Low cost leadership would improve the pricing strategy
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Porters Five Forces Model Threat of New Entrant Ever rising number of Mushroom Tea products is new entrant in the Pakistani Tea industry and are threat for the other three key players in the market namely: •
Tapal Tea Private Limited
•
Unilever Lever Pakistan Limited
•
Eastern Tea Private Limited
•
Tetley Clover Pakistan Limited
Pakistan is truly a rare land, home to different civilizations and diverse cultures. The industry is dominated mainly by four companies, Tapal, Unilever, Eastern Tea and Clover Pakistan in this very order. As we have already discussed, Unilever capitalizes on its strong hold as the Multinational Giant in the FMCG market due to its multiple product lines in the segments and their low prices. Tapal Tea on the other hand does directly compete with Unilever at the Tea base since it has only Tea manufacturer. The main competitors of these companies are Loose Tea (smuggled) markets i.e. Mushroom Brands, which has been successfully operating in the rural markets especially on price packs. We have discovered that the consumer is not ready and willing to pay price for a cup of Tea that is only affordable. Tapal Tea needs to come up with a differentiation strategy to put up a fight with Loose Tea which is projecting a low priced. Tapal Tea needs to bring down its price in order to make the consumers shift from Loose Tea or other branded Tea without compromising quality.
Bargaining Power of Buyer In case of Tapal the bargaining power of Buyer is low because the there are so many distributors in Pakistan and Tapal has a wide range of options to choose.
Bargaining Power of Suppliers In case of Tapal, Supplier’s bargaining power is high because there are many distributors available but the market has limited number of suppliers.
Rivalry between Competitors There is an intense rivalry among the competitors, as the market has a lot potential, which can be observed by the entry of two new competitors in the tea market in the last five years i.e. Clover Pakistan & Eastern. However, the main competition and rivalry is among Unilever & Tapal. Both are always trying to capture each other’s market share and in the recent retaliation strategies from Tapal have been fruitful.
Threats from Substitutes Coffee is a substitute for tea as both fulfilling the core need of refreshment. In the category of coffee Nescafe has a lion’s share and it is an indirect threat of substitute for Tapal because in the winter season people usually prefer coffee over tea.
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Environmental Factors Technological Technology is also harnessed at Tapal to benefit the consumer. Tapal was the pioneer in soft packaging and round tea bag. They imported this innovative technology and established a fully automatic facility under the guidance of their founder, Adam Tapal, where soft packs were produced for the first time in Pakistan. Few years back Tapal has improved the technology to hard packaging. At this facility tea is blended and packed in hygienic conditions, untouched by human hands whilst the hard packing technology keeps tea fresh and packaging costs economical. The success of these hard packs has been such that other tea companies have also followed Tapal's lead and launched some of their brands in hard packaging.
Political The political & legal forces that affect Tapal are the taxes & excise duties levied on Tapal’s products and its imports. Also it has to fulfill all the rules and regulations as per law. Fluctuation in the import duties by federal government is an issue of great concern for all tea-marketing companies. If we look back in past, tea imports during 2004-05 increased by over 10 percent compared to 2003-04 mainly due to a cut in the import duty, the federal government in the budget 2004-05 cut by 50 percent the import duty on tea, bringing it down from 20 percent to 10 percent to what it said protect the local industry and curb the menace of smuggling. This decline resulted in more production and Tapal discovered a new market for herself and started exporting its blend tea. Right now Tapal is exporting tea to some of the countries abroad like Canada, Saudi Arabia, and Dubai. Illegal imports are substantial, nearly 1/3 of domestic consumption and an 81 million USD business. Tea smuggling is a matter of great concern. The government loses huge money in import duties and domestic importers face tough competition from those who are instrumental in bringing back tea meant for Afghanistan. Most is Indian low-grade bulk tea transported through Afghanistan and sold bulk in markets in the towns near the Western border. The trade is growing, 48,000,000 kgs, were brought illegally into the country during FY06 and 40,000,000 kgs, in FY05, a 10 percent increase. Legal imports declined 12.5 percent in the same period.
Economic Another major factor that affects Tapal’s marketing strategy is the conditions prevalent in the economy. The main economic forces affecting the market are:
Stage of Business Life Cycle Whether the economy is in a recession or in a boom, it affects the activities of Tapal in a way that it influences the demand of their product. In a boom the demand of the product increases. Similarly, in a recession the demand of a product falls since the buyers consume less of the product due to falling incomes. Though fluctuations in the demand do occur, these are not major fluctuations as demand for tea is inelastic in relation to price.
Inflation Inflation plays a major role on the marketing strategies used by a company due to two main reasons. Firstly, inflation affects the consumers’ psychology and they become more selective in their purchases. Secondly, inflation results in rising prices for the raw materials purchased by Tapal, which in turn increases the cost of production. This factor plays a major role especially if the increase in cost cannot be transferred to the consumers in the form of raised prices. INSTITUTE OF BUSINESS MANAGEMENT
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Social and Cultural Forces Society and culture plays an important role in determining the marketing plan of Tapal. Consumer adoption of a product depends greatly on the target markets beliefs, tastes and values of the people. For instance, Mezban tea was developed as a stronger tea keeping in mind the taste of the consumers of interior Sind
Company and Competitor Analysis Making a modest beginning over half a century back, today Tapal has become the largest, 100% Pakistani owned Tea Company in the country. It has modern tea blending and packaging factories, warehouses equipped with state-of-the-art equipment and a team of highly dynamic professionals headed by Aftab Tapal himself. He was the first to introduce soft packs in the country. He developed an entirely new brand and category- Tapal’s Family Mixture (the mixture of tea & dust). Mr. Aftab Tapal was the first to invent the highly successful brand Danedar Leaf Blend. In December 1997, Tapal Tea became the first Pakistani Tea Company to earn the ISO-9001 certification: a symbol of the highest international quality standards. Again in December 2000, Tapal acquired the ISO-9001: 2000 certification, making it one of the first few companies in the world to achieve this milestone. In addition to the standard requirements, the ISO-9001: 2000 certification system includes requirements for environment improvement, concepts of TQM (continuous improvement) with major emphasis on consumer requirements and satisfaction. Tapal’s success has left many astounded. No magic formula however, lies behind its growth other than hard work, dedication and of course unique blends and better quality. Competition in an industry is of four kinds • Product form competition • Product category competition • Generic competition • Budget competition In the case of Tapal we would be considering the following competition that is:
Product Form Competition In case of Tapal product form competitions are: • • • • • •
Brokebond Supreme Tetley tea Lipton tea Vital Chai Surhan Dust Mushroom Tea
Product Category Competition In case of Tapal product category competition would be:
• • • • • •
Danedar Kenya BP Mix Patti Super PFI Brazil Green Tea Bangladesh Green Tea Lemon Grass
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• • • • •
BPI (Indonesia) Kenya Mix Tea Kenya Dust F-1 Kenya Green Tea (Indonesia)
Generic Competition In case of Tapal the Generic competition comprises of: • • • • • • •
Nestle Instant Coffee Nescafe Coffee Mineral Water Cola Cadbury Coffee Lipton Ice Tea Juices and soft drinks
Budget Competition Incase of Tapal the Budget Competition is: • • • •
Restaurants Hotels Offices Educational institutions
• • • •
International Modern Trades Cafes Airlines Arm forces USC/CSDs
•
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Distribution Structure: Shift from 2008 To 2012 %
Tea Market 2008
2012
65
50
7
20
USC/CSD
10
7
OOH
18
23
100 %
100%
DISTRIBUTOR MODERN TRADES
Synopsis: •
Distributors will divert themselves towards the large retail stores as the margins are continuously cutting off so the Tapal Tea outlets coverage would be tougher than before.
•
Introduction of the Modern Trades in Pakistan would influence the distribution and other local government subsidiary chains as of more convenience factors and volume share by offering memberships and freight cutoffs.
•
Tapal has been improving the OOH structure to capture the opportunity in the future.
•
Utility Stores has dependency upon the Government subsidy if the policy changes they could be having great impact on the market.
Input: Tapal should reduce the cost of operation and logistics to not only retain its current distributions network but also minimize the margin gaps amongst the sales sources.
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Distribution Shares And Company’s Positions (2008)
% DISTRIBUTOR (GT/WS) MODERN TRADES USC/CSD OOH
ALL PAKISTAN DISTRIBUTIO N
COMPANY’S TURNOVER SHARE
#1 COMPETITOR’S TURNOVER SHARE
OUTLET COVERAGE
60
70
60
65
7
10
15
90
18 5
15 5
15 10
75 25
The only change in the last 4 years is the introduction of IMT (International Modern Trade) with their regional placement and presence at key transaction centers. o The distribution structure of Tapal Tea and Unilever is comprised mainly of “distributors”. The total number Tapal’s exclusive distributors are approx 435 distributors covering 114,000 outlets across Pakistan. However, Tea is also being channeled through various other channels in order to reach to end consumers. o Distributors are the institution through which availability of products is possible across the retail trade. Tapal’s exclusive distributors have a very good relationship with them. The important thing is that they must integrate into total marketing mix because of time and money required to setup an efficient channel. o Whole sellers are very dynamic in their demand as they try to find the better option and direct reach the Modern Trade channels. o The company’s turnover share through, distributor & direct is 70%, & 30% respectively. o The outlet coverage is almost 85-95% in South but 65% in North. Where,
o
o o o o o
GT= General Trade (general stores, Kiryana stores, Medical and General stores) IMT= International Modern Trade (departmental stores/Hyper Market such as Makro) Whole seller- is route to direct to the rural areas and offered quantity discounts USC=Utility Stores corporation – Govt. subsidized shops CSD=Canteen Stores Department – Cantonment subsidized shops
Input: Further expansion in the distributions to increase coverage and reach more consumers and market share.
•
Heavy investment in the marketing promotions in OOH sector can build strong and long-term relationships with the corporate businesses and other complementary goods manufacturers.
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Top 7 External Trends Taking advantage Trend
We
C1
C2
C3
Increasing competition, price erosion, market share
Yes
Yes
Yes
Yes
Cutoff Profit and margin
No
No
No
Yes
Yes
Yes
No
No
Yes
Yes
Yes
No
Population growth
Opportunity, high profits Influence on sales and marketing Promotions Market share increases
Yes
Yes
Yes
Yes
Healthy Lifestyle and awareness
More demand of Green Tea as an Health benefit indicator
Yes
Yes
No
Yes
Customer/Trade Credit Policy
Low ROI, budget constraint , More receivables
No
No
Yes
Yes
Growth of rural markets of Sind and Punjab; focus of companies on this area Manufacturing Cost Increase Teabag Growth Digital communication
Potential Impact
Synopsis: •
Since the industry is on the growth as population expansion in Pakistan especially in rural areas so the arrival of new entrants has major impact on the industry.
•
Tea prices in international market are randomly increasing in a fiscal year which caused cuts n profitability in major brands.
•
Since the SEC classes have been stretching towards the upper middle level therefore the demand of the premium product has increased as well as price products in lower middle.
•
This industry is still following the conventional rules of communication therefore no company yet entered in this strategy.
•
Tea has become a national drink of Pakistan and has more preference over other beverages especially in rural market which is contributing 66% of the total population of the country. As a consequence, the market size is continuously increasing so far caused more consumption of tea.
Input: Focus on the cost reduction, managing healthy brands, compelling brand communication and product innovation.
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SWOT Analysis Strengths 1. 2.
Company name image –1st National Tea Company Highly experience Sales staff + exclusive sole distribution network Efficient production capacity Expertise – Tea Blending. Economical pricing strategy Short term credit policy i.e. efficient ROI
3. 4. 5.
6.
Weaknesses 1. 2. 3. 4. 5. 6.
No customer complain center within the company. Limited budget and investment in the business Weak coverage in upper northern areas of Pakistan high Price gaps between product line Single product manufacturing company i.e. just Tea No specified R&D department
Opportunities 1. Growing rural market and export 2. Initiatives in price pack category as to capture value from price sensitive customers 3. Newer segments introduced with entry of new brands which still have huge potential for growth
4. Central and upper Punjab has tremendous potential for growth and profitability 5. Competition is still weak in south coastal areas 6. Tea prices are become high in gray/loose tea market 7. Green Tea market is growing because of health awareness programs
Threats 1. Abolishment of Subsidy given by Govt. on Tea Import 2. WTO (World trade Order) opening local markets for global competition. 3. Competitors launching newer brands with high margins at reduced price for our price-sensitive economy proving serious threat in near future 4. Increase counterfeit and IP issues 5. Attraction for new entrants in the industry 6. Complementary goods are going more and more expensive then before i.e. Milk, Sugar etc.
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Cross Matrix Analysis
Strengths 1. Company name st
image –1 National Tea Company with recognized brands 2. Highly experience Sales staff + exclusive sole distribution network 3. Efficient production capacity 4. Expertise – Tea Blending. 5. Economical pricing strategy 6. Short term credit policy i.e. efficient ROI
Weaknesses 1. No customer complain center within the company. 2. Limited budget and investment in the business 3. Weak coverage in upper northern areas of Pakistan 4. High Price gaps
Opportunities
Threats
1. Growing rural market and export 2. Initiatives in price pack category as to capture value from price sensitive customers 3. Newer segments introduced with entry of new brands which still have huge potential for growth 4. Central and upper Punjab has tremendous potential for growth and profitability 5. Competition is still weak in south coastal areas 6. Tea prices are become high in gray/loose tea market 7. Green Tea market is growing because of health awareness level O1,2, 4 & 5: S2, 3, 4 &5
1. Abolishment of Subsidy given by Govt. on Tea Import 2. WTO (World trade Order) opening local markets for global competition. 3. Competitors launching newer brands with high margins at reduced price for our price-sensitive economy proving serious threat in near future 4. Increase counterfeit and IP issues 5. Attraction for new entrants in the industry 6. Complementary goods are going more and more expensive then before i.e. Milk, Sugar etc.
High Potential
Ability to resist
O6:S1&5
T2,3 & 5: S1,3,4 & 5
Increase Market Share
Ability to resist
T1,2:S1,5 & 6
O7:S4 Segment Growth
O4:W3
T6:W5
Hire new distributors
High Risk
O2:W4
T5:W3
More customer switching
Market Saturation
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T3:W2 Price wars
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between product line 5. Single product manufacturing company i.e. just Tea 6. No specified R&D department.
Value Chain Model Human Resource Management Tapal's management philosophy is based on the traditional values of the Tapal family; values that were based on good business sense such as establishing a tea-shop in the business area of Jodia Bazaar. This mix of tradition and innovation has become the hallmark of the winning Tapal strategy. The company is managed by a dedicated team of highly qualified and experienced professionals with diverse experience. Some of the key features of the management philosophy are: • • • • • •
Accessibility-Open Door Policy On-Going Training & Development Discipline & Respect at every level Participative Management Style Performance Appraisal System Excellent Employee Compensation
Technology Development Tapal is always striving to install the most innovative technology in their firm. In the production, Tapal has Hesser & Sohrab machines require less human requirement and whole work is automated only the finished product are packed in cartons by the workers. Although Tapal can automate this process too but in this case workers working their might loose their jobs. To record the attendance of employee and to enforce the punctuality there’s a machine on the entrance of the factory where every employee has to put his/her finger and enter ID card number and their arrival time will be recorded. Human Resource department has software through which they maintain the leaves encashment record along with full information about every employee is maintained. If an employee wants a leave on so and so date he/she must access the server and send an email to the HR executive and the confirmation will be delivered to the employee. The software we really impressed with is the Oracle software used in the sales department to dispatch orders to distributors. In this oracle software they have record of every distributor and its zone, town, territory. We search the customer name and then book new order. In the new order-booking format there is a table, which is divided in to following columns: In this process they call the number of stock requested by distributors in the column of quantity reserved. If the stock is not available an alert message will prompt on the screen and then the sales executive on his own discretion allocate the items to distributors. This
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system is centralized by the warehouse database so you get the updated information about the stocks.
Procurement The procurement of tea is dealt by Tea and Blend department. The purchase of tea takes place in two ways: on an auction and on a private offer basis. In a private offer the tea gardens send samples to different tea industries. There are no bids and no auctions. The same procedure is carried out in checking the tea samples. However in a private offer the purchase is made on the SAS basis i.e. subject of approval of sample. If the sample is approved by the tea tester then the purchase is made. Incase of a rejected sample a replacement is made of another kind of tea. In both cases that are the auction and private buying, after the purchase is made a purchased sample is sent which is again checked to confirm the authenticity of the tea and when the tea batch that actually comes in after shipment is also tested to confirm it is the same tea without anything wrong in it.
Primary Activities Inbound logistics The raw material for tea is provided mostly by Kenya. The Tea and Blend department initiates the whole process, be in touch with the suppliers in Kenya. The purchase of tea takes place in two ways. On a auction and on a private offer basis. In an auction what happens is that all major tea producing and exporting countries send catalogues and samples of tea to major tea industries around the world. These samples are tested on various aspects of taste, color, aroma and many other aspects. The samples that are approved by the tea testing people are bought in the auction. The auction takes place every week in a major city of the tea exporting country e.g. in Kenya it takes place in Mombassa, in Srilanka it takes place in Colombo. Tapal has representatives in all these major tea exporting countries who buy tea in the auction on behalf of Tapal.
Operations The testing procedure is as such that the samples are displayed first. In front of the samples is a cup which has that specific tea in it. All teas are brewed in the same manner with the same amount of contents for the best result. Tea tasting team tastes all the tea and comes to a joint conclusion. The tea which is selected is then bought in an auction or a private offer. There is obviously a lot of samples coming in every week and lot of purchases being made. Thus to keep a record of all such purchases and samples Tapal has prepared a software called the Raw Tea Inventory. This software keeps record of all purchases, samples, tea gardens, country and the person selling tea. We were astonished to know that the tea department tastes about 500 cups a day.
Outbound Logistics The outbound logistics in the south region is provided by the Al Mohammadi Enterprises, a renowned and old customer of Tapal.
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Relative Importance of Factors
Factor Number
Absolute ly Critical
Very Importa nt
Quite Importa nt
5
4
3
Price Competitiveness Product Innovation Product Quality Financial Performance Market Share Availability of stocks and Outlet Coverage Customer service/support Marketing Communication Manufacturing Cost
Nice to Have 2
Not signific ant
Don’t Want it
1
0
Yes Yes Yes Yes Yes Yes Yes Yes Yes
Suggested Definitions: Absolutely Crucial:
Overrides most other considerations, wouldn’t consider supplier who doesn’t perform on this factor. Very Important: One of the first things we ask for, but we may be prepared to negotiate on it. Quite Important: A negotiable item, but one when we attach considerable weight to. Nice to Have: It could make the difference in a division, but is normally taken into account last. Not Significant: Not normally taken into account at all. Don’t want it: Would prefer a product without this feature
Synopsis: •
The key issues identified were the Manufacturing Cost, Price and Quality. We are already aware that the Tea prices are touching sky high and consumers are becoming very price sensitive in purchasing Tea for either further selling or personal
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• • •
consumption. Tapal is already working on horizontal integration, improve the technology, cost minimizing and optimal production capacity utilization. Another key factor is the market share which can be achieved through extensive coverage. The booking time and delivery is a major cause and concern of the customer which may shift the customer to other brands. The current delivery period of Tapal is every alternate day when booked an order which is a great concern of product availability. The customer service is not a key requirement for the company as it has controlled by the field force. Since Tapal has a diverse network of distributors the general consumer base does not go too deep down into the complain requirements.
Input: Price is the heart of all factors for the consumer to choose any brand. However, good quality, packaging and performance also play as a catalyst for purchasing decision.
Rating Against Customer Buying Criteria QUALITY & PRICE Non Price Attributes affecting Customer Choice PRODUCT RELATED
This Busines s
Comp A
Comp B
9 8 7 8 9
9 8 9 8 9
6 6 5 5 8
WEIGHTAGE
% 80%
1. Quality 2. Color 3.Aroma 4.Brand Image 5.Taste
30 10 20 10 10
SERVICE RELATED
20%
1.Customer Complain Service 2.Availability
10 10
4 8
8 8
3 2
TOTAL
100%
53
59
35
Up
Same
Down
460499/Kg 260370/kg
490550/Kg 280385/Kg
400470/Kg 240370/Kg
This Busines s
Comp A
Comp B
Has quality gone up/down (+/-)In past 4 years Relative Price today (Rs.) Relative Price 4 years ago Rating Scale: 1 – 10 1 = Very Weak
10 = Very Strong
QUALITY & PRICE Non Price INSTITUTE OF BUSINESS MANAGEMENT
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Attributes affecting Customer Choice PRODUCT RELATED
WEIGHTAGE
% 80%
6.6
7
4.7
30 10 20 10 10
2.7 0.8 1.4 0.8 0.9
2.7 0.8 1.8 0.8 0.9
1.8 0.6 1 0.5 0.8
1. Quality 2. Color 3.Aroma 4.Brand Image 5.Taste
SERVICE RELATED
20%
1.2
1.6
0.5
1.Customer Complain Service 2.Availability
10 10
0.4 0.8
0.8 0.8
0.3 0.2
TOTAL
100%
7.8
8.6
5.2
Inference: After analyzing the customer preference and buying requirement we can safely conclude that:
•
The product constitutes 80% of the customer requirement i.e. customer is more concerned about the non-price factors which include the brand Image, Quality, Aroma, Taste and Color.
•
Tapal plays a good role in quality attribute and have brands to satisfy varied consumer needs.
•
In the Service criteria the customers is more interested in the availability and complain service. Tapal is weaken in customer complain area where the Unilever has a separate unit for that so if Tapal covers up this area then surely would have an edge over the rivals.
•
The main issue which needs to discuss is rapidly increasing product’s price that has already increased over 100% in last four years.
Input: Improve the Aroma, quality and customer complaint services to break the clutter.
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Impact of Issues on Strategic Profile
Issue Name Customers
Product Innovati on +++
Market segments
++
Products/Services
++
Strategic Management Operations (Production/Logistics) Technology
+++
++
High Manufactur ing Cost
++
+++
+
++
+++
+
+++
+++
+++
+++
+++
+++
++
+++
+++
+++
+++
+++ +
Organization Structure
+++ Critical
+
$ Price
Consum er Purchasi ng Power
+
Distribution Channels Raw Materials, Energy
Compa ny Credit Policy
++ +++
+++
++ Very High Impact
+++ +
+ High Impact
Synopsis: Analyzing each issue we conclude that the company must focus on critical issues and regenerate their operating strategies according to the changing purchasing power of the customer.
Input: •
Continues improving operation planning and optimize production cost at minimum level.
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•
Remove credit policy to improve ROI and hire self sufficient distributors who can easily invest.
•
Low cost strategy would pass maximum benefits to consumers that improve their purchasing power
•
Proper forecasting of demand and inventory management can reduce the impact of uncertain $ price
•
Strong relations with supplier can reduce the $ price
•
Value innovation would give competitive edge over rivals
Customers Buying Criteria: Price...%, Quality Attributes...%
Relative Performance Rating
Questio n its Cost
Keep it up
Better
Availability
Same
Color Packaging
Worse
Customer Complain Service
10%
Taste
Quality
Aroma
20%
30%
Impro ve Fast INSTITUTE OF BUSINESS MANAGEMENT
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Do not Sweat
Attributes Important to Customer
Input: Improve Aroma and customer complain services
•
Improve the quality to beat competition
•
Expand coverage to provide convenience to consumers
•
Build strong brand image through attractive packaging and win top of the mind of the consumer
The Five Generic Competitive Strategies Type of Advantage Sought Differentiation
Lower Cost Broad Range of Buyers
Chenak Dust Mezban Sachet Family Mixture Danedar Twin Pack
Narrow Buyer Tapal Special Teabag INSTITUTE OF BUSINESS MANAGEMENT Segment Tapal Ice Tea or Niche
Tezdum 22gm Gulbahar SOG Selection Pack Mezban Dust 125gm
Page 38 Danedar Round Teabag
Inference: Overall Low Cost Provider Strategy This category comprises of Tea brands falling in the Dust and Mixture segments. These segments have been dominated in Karachi, interior Sindh, coastal and thar belt by Tapal’s Family Mixture, Mezban Sachet/Packs, Chenak dust and Denedar Twin Packs. The Tea manufacturers compete with each other on the grounds of price and economy packs.
Broad Differentiation Strategy This area has been competing on differentiation strategy with many customers choosing on the basis of getting less for more. Tezdum competes in this segment on the grounds of 22gm and better brand image and Strong Taste. Gulbahar is the only choice for making traditional Kashmiri Chai for consumers which has differentiation USP. SOG selection pack offers all three Tapal famous Green Tea flavors i.e. Lemon, Jasmine and Elaichi to consumers who seek multi offers on brands.
Focused Differentiation Strategy This strategy has been only adopted by Tapal on Danedar Round Teabag which competes in the high end segment of Lipton Teabags.
Best Cost Provider Strategy The sole runner in this category is the Mezban Dust 125gm which provides value for money that has proved its success in the product line in the sindhi cultural lifestyle.
Input: Less for more, distinctive brands with sustainably growth and value to appeal larger buyer
Vision & Mission The management and the employees of Tapal Tea (Private) Limited is committed to: •
Satisfy stakeholders and be a benchmark for Quality, Creativity and Ethical values in business
•
Achieve leadership in all the categories of core business and diversify in areas which compliment the core business.
•
Provide products and services that meet customers’ requirements, expectation and agreements relating to all aspects of Tapal Integrated Management System.
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•
Define and update measurable objectives and continually improve the effectiveness and performance of the Quality, Health, Safety, Environment, food Safety and IS Management system.
•
Prevention of injury and ill health by continuously identifying hazards and reducing risks to people, facility and business.
•
Ensuring that the Tapal processes and products are environment friendly and do not contribute to polluting the environments in any manner.
•
Adhere to all applicable legal, statutory and other requirements that relate to Tapal products, services, health and safety.
•
Establish effective arrangements for communicating with all stakeholders throughout the food supply chain regarding all applicable aspects of Tapal Integrated Management System.
Strategic Vision To be a benchmark of Quality, Creativity and Value Innovation, achieve leadership in the beverage manufacturing industry which compliment the core business
Strategic Intent Making Tapal the premium choice of consumers not only in hot beverage segment but also in other correlated segments.
Competitive Innovation •
Bring down the cost through horizontal and vertical business partners; optimize the production capacity to meet the future demand
•
Apply six sigma in complete business processes in order to attain cost leadership
Business Objectives and Targets 1.
To maintain market leading position and increase the sales in North Region by 5% in 2010.
2. To strengthen the regional brands by brand building strategy 3.
Seek out the areas where new products can be introduce to diversify the core business
4.
Investing to increase production capacity, in order to meet expected demand in coming 5 years.
5. To increase localization by the end of 2011 in order to maintain and improve cost effectiveness.
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6.
To optimize the introduction of new products by developing products with new designs and features for youngsters segment.
7. To broaden export functions and prove and maintain product existence in International markets. 8. Modernize the company’s operations by acquiring greater technical expertise. 9. Increasing field force and distribution network.
How? In Short Term •
Through strategic partnership between vendors/suppliers delivering Raw Tea, packaging materials, and machinery required to improve the efficiency of production assembly and simultaneously through lead time management techniques such as maximizing stock delivery turnover.
•
Through continuously train and development of the front line workers and supervisors to ensure to meet the deadline and productivity.
•
Implication of Total Quality Management Techniques such as constant checks in through every stage of assembly line and final test passes through the professional test inspectors, generally meeting the prescribed requirement standard set preferably by ISO- 9000 or other quality standard maintaining bodies. The philosophy of doing it right the first time would be achieved through this method.
•
This can be achieved through effective production processes and a strong link between the Logistics and distribution spread in the market. An integrated system to be devised where by the vendor/supplier and distributor would log in the details of the ordered product on the computer screen and the same would be available to the company plant office. The plant office will start production; each level of completion can be monitored through the intelligent system. This would ensure that the delivery process bottle necks are reduced and also an MIS can be generated to observe the delays, reasons and even the frequency of orders and preference. Subsequently a separate “SOP’s – Standard Operation Procedures” to be devised which would contain the details and timing of production at different stages of production
•
Seek out for avenues such as Tea could be manufactured cheaply on the local grounds rather than depending on dollar price. The following measure would help slash the manufacturing cost on two key risks, devaluation of local currency and unrealistic demand.
•
Through organizing events such as road shows, attack plans, events organizing or more consumer engagement programs to be carried out through brand building and promotional activities to appreciate the brand hard core loyal.
•
Integrated Complaint Management System with 24 hours Call Center facility for Tapal Customers facing any complain to active resolving trouble like counterfeit, fake activities etc.
•
Regular audit Schedule of surprise inspection team to test the measures, service and standards set up at Tapal exclusive distributions centers.
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•
Constant Social Contribution and Environmental Reporting at Factory Site for the residents and workers health and safety and following and obtaining the Ethical Modules requires by the authorities (The above objectives pertain to the day to day business activity and need to be addresses on real time basis. Any delay or slackness in the above would lead to business losses in terms of revenue and repute)
In Long Term •
Achieve further capitalization and investment outlay production of more profitable segment and divest non profitable business units. This will benefit the Tapal Tea by milking to more demanding segments and production. Simultaneously Tapal will have to work out a strategy to reduce the prices of its above price products as they have major share but also focus on the economy packs as volume drivers by consistent in their supply, while entering into a new untapped markets.
•
The positioning of the each segment would be such that it would compete with the Unilever and Eastern Tea but would create an impression of better quality and value innovation without facing the internal canalization. We expect that the customer can be drawn towards each segment even if there were price war.
•
A structured Resource program to be devised emphasizing on intellectual and technical skills that can be made available in obtaining technology of specialized in manufacturing. This entity would achieve two factors, firstly reducing considerable production cost and secondly exposing the company to an additional market which can be supplied with desired profit margins.
•
With the added stress towards environmental protection, CSR initiatives and Sustainability corporations need keep themselves aware of the global developments. One such development is the discouragement and discontinuance of wastages from the global impact scenario.
Segmentation Variable of the Consumer Market Geographic Tapal has divided its operations in to two regions namely:
South Region: South side looks after the Karachi, Hyderabad and Sukkur.
North Region: North side includes Multan, Lahore, and Islamabad.
Size of Southern Region Karachi population size is 19,315,843 till 2010, area 4,227 km² (1,356 sq mi) Hyderabad population size is 1,847,275. Sukkur population size is over 1 million 5,165 km² (1,994 sq mi)
Size of Northern Region Multan population size is 4 million (approx), area is 3,721 km² (1,437 sq mi)
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Lahore population size is 8,896,000, area comprises to 1,772 km² (684 sq mi) Islamabad population size is 805,000 (1998), area 906.0 km² (350 sq mi)
Density of Southern Region Karachi 3,491.9/km² (9,082.5/sq mi) Sukkur 175.9 persons/km²/km²
Density of Northern Region Multan 838/km² (2,170/sq mi) Lahore 3,660/km² (9,479/sq mi) Islamabad 880/km² (2,279/sq mi)
Climate The climate varies as much as the scenery, with cold winters and hots summers in the north and a mild climate in the south, moderated by the influence of the ocean. The central parts have extremely hot summers with temperatures rising to 45 °C (113 °F), followed by very cold winters, often falling below freezing. Officially the highest temperature recorded in Pakistan is 52.8 °C at Jacobabad. There is very little rainfall ranging from less than 250 millimeters to more than 1,250 millimeters (9.8–49.2 in), mostly bring by the unreliable south-westerly monsoon winds during the late summer.
Demographics Age:
20 – 60
Gender:
Male and Female both
Family:
Cohesion families
Occupation:
Labor, Business man, entrepreneurs & self employed, student, farmer
Religion:
Muslims, Hindus and Christians etc
Nationality:
Pakistani
Psychographic Social Class:
lower, middle, middle-upper and upper-upper
Life style:
Trendy, quality conscious, trying to differentiate themselves from others, family belongings, Cultural and Heritage values, Pride, Patriotism
Personality:
Elegant, simple, extrovert
Behavioral
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Occasions:
Ritual, meetings, evening get to gather, Breakfast or any social meeting
User status:
Potential users, non users and hard core users
Usage rate:
depend upon need and consumption
Readiness stage:
intending to buy
Attitude towards product:
Positive attitude
Where customers buy: Tea is sold through two different places, one is the where customers directly buy the product from general retailers, USCs/CSDs, Modern Trades and the second is the institution sales where customers (institutions) directly buy the product from Tapal’s Out of Home Sales department (OOH) who directly maintains links with different institutions.
When customers buy: The consumers usually buy Tea at the start of the month in bulk amount for family usage or when the Tea desire strikes that can suffice them for that particular month or the commencing one too.
How Customers choose: Customers choose Tapal through advertising, print ads, promotional schemes & word of mouth. Since it proudly caters to the different tastes and preferences of people belonging to diverse lifestyles, Tapal Tea is the primary choice of tea lovers nationwide.
Why they prefer a product: As tea fulfills a core need of refreshment. Tapal’s brands remains favorite around the country with its grape-nutty appearance, rich golden color and strong refreshing taste. In fact its popularity is such that other companies have launched their own versions of these blends, but Tapal's remains the original and ultimate.
Strategic Canvas - Past & Future
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The Strategy Canvas of the Pakistan's Branded Tea Industry 2005-2009
High
Price
Low
Premium Quality
Tapal
Extensive Coverage
Unilever
Delivery Time
Eastern Tea
Eff icient ROI
Clover Pakistan
Production Capacity Recognized Brands
Loose Tea
The Strategy Canvas of the Pakistan's Branded Tea Industry 2010-2015
High
Price
Low
Premium Quality
Tapal
Extensive Coverage
Delivery Time
Unilever
Eastern Tea
Efficient ROI
Production Capacity
Clover Pakistan
Efficient SCM
CSR Initiatives
Loose Tea
Input: •
Exclusive distribution who have extensive market coverage and willing to invest more in the business would increase the market penetration but the long term relationship must be maintain with value in return.
•
100% capacity utilization can reduce cost of production and thus offer competitive price in the market
•
Social issues and CSR initiatives can strengthen the company image, customer preference, brand positioning, attract more investors which would ultimately affect the business cycle.
•
Company owned “Chai Shai Café” would give preemptive mover advantage in this business.
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Cost Structure S. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
Contents
% contributio n
Raw Materials and components consumed Direct Labor Technical director’s remuneration Salaries, wages and benefits Employees’ severance cost Stores consumed Light, heat and water Insurance Rent, rates and taxes Repair and maintenance Royalty Technical assistance Traveling. Conveyance and entertainment Postage and telephone Printing and stationary Vehicle running Depreciation Canteen Newspapers, magazines and subscription Staff training Intangible assets amortized Other manufacturing expenses
86 1.2 0.01 1.6 1.7 0.8 0.2 0.05 0.3 4.08 0.7 0.2 0.07 0.03 0.03 3 0.17 0.01 0.04 0.011 0.003
Total Manufacturing Cost
100%
•
For Tapal Tea, highest value adding component in the total manufacturing cost is Raw material, i.e. 86% which the company import from Sri Lanka, Kenya and Bangladesh
•
Tapal Tea has reduced it costs, as compared to its competitors, buy changing it Raw material Supplier source and auction. It purchases “premium quality” Tea from Sri Lanka, Kenya and Bangladesh. These countries are relatively high annual Tea producer in the world.
•
Cost effectiveness achieved by increased localization.
•
Tea Companies are importing Tea fully from Sri Lanka, Kenya and Bangladesh which in actual increase there costs tremendously as Tax. The end result for them is increased prices.
Input: Selection of Supplier on the basis of price competitiveness can reduce the major part of the production Cost. •
Optimal capacity utilization of plant can reduce expenses
•
Implementation of TQM can improve the business infrastructure and lead to cost leadership in all grounds
INSTITUTE OF BUSINESS MANAGEMENT
Page 46
Pricing Strategy •
Unilever happens to be the trend and price setter for the whole industry. The other major player in the industry, i.e. Tapal, Eastern Tea, Clover Pakistan and Loose Tea its followers.
•
These players generally follow the Cost Plus and variable methods for pricing. Fixed margin 3.36% and 5-8% pass on Distributors and Traders respectively.
•
Loose Tea has been smuggling through borders so mushroom players offer high margins to trade and create tough competition in the market.
Input: Both Low cost and differentiation strategies can give better pricing options to the company as well as to the customers to create competitive advantage.
Legging Indicators and Leading Indicators INSTITUTE OF BUSINESS MANAGEMENT
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Leading & Lagging Indicators [Company is focusing]
Projects/Activitie s done
Impact on Results
Introducing new brands
Product development, Blind Test and preresearch has been done
• Increase profit and market share • New market development
New flavors in Green Tea
Product is in testing phase
Increase sales and market penetration
New variants in Ice Tea Powder
Lab test has done Flavors have decided and tested
Implementation of TQM
Phase out SBUs having no profitability
TIMS unit has established who will ensure the implementation of all areas
Disposed off Ice Tea CAN and Safari PF1
INSTITUTE OF BUSINESS MANAGEMENT
• Taking first mover advantage in the category • More revenues
• Manufacturing Cost would be optimized • Reduce the wastages • Drop down Time delay in processes • Environment friendly company • Investment to be utilized in milking profitable brands • Warehousing Capacity improve
Area of Focusing for tomorrow • New brands for children and youth • Tea bag markets • Diversification in Core business • European Market • Health conscious people • Diet plans • Children and youth who are trendy and want social change • Instant powder/energy Ready To drinks
Kaizen and Six sigma implementation
New machinery would be purchased to cater key demanding brands
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Action Plan S #
Input
1
Customer Complain Center
2
Hiring of new Distributors in North
Ref
SWOT Strategy Canvas
SWOT Distributor Structure
Pg #
Strategy & Action Plan
When & Where
29 32
Establish Customer Care Department
1 QTR 2011-2012 Karachi
To handle customer complains Build trust of customers Regenerate the product strategy
29 26
Seek efficient and experience distributors
4th QTR 2010-2011 North Region
Capture more market share
09 29
Research new markets and opportunities
st
Diversify Business
Business Scope SWOT
4
R&D Department
Assumptions of growth SWOT Top 7 External Trends
18 29 27
Establish department or outsource the consultancy to seek out women cooking behaviors
5
New fillers in the existing product line
SWOT Competition Growth Matrix
29 20
Market survey Competition Analysis
4th QTR 2010 Nationally
09 29
Visit International Markets and Tea Exhibitions to seek out the demand and potential investors
2010-2012 Mid East European countries
3
Export Market exploration
6
7
8
Rural Market penetration
SWOT Competition Growth Matrix Market Share
Green Tea variants
SWOT Top 7 External Trends
Tea Suppliers relationship
9
10
Business Scope SWOT
Pricing Strategy
SWOT Impact of Issues on Strategic profile SWOT Strategy Canvas Market Size Top 7 External Trends Relative importance
Results
11 18 29
29 27
29 35
16 29 27 32
INSTITUTE OF BUSINESS MANAGEMENT
Develop brands for rural market with high leverage of cost Round Dust Teabags launch Introduce new unique variants in Green Tea by stretching health benefits of having it Build long term relationships with number of suppliers to grab the demand of Tea and make difficult to reach for competitors Implement Full pricing strategy
st
1 QTR 2011 Nationally
2011 Karachi
Business growth and generate revenues to milk the other business units Market health indicators and opportunities identification To capture those customers who are willing to pay at different prices Increase the sales volume and company good will Increase Sales revenues as difference in rate of exchange
1st QTR 2011-2012 South Region
Enjoy the major chunk, first mover advantage and leadership
3rd QTR 2011-2012 Nationally
First mover advantage
th
4 QTR 2011-2012 Srilanka Kenya 4th QTR 2010-2011 Nationally
Respond the uncertain demand of the market Increase market share Charge Premium Reduce cost of manufacturing and enhance margins
Page 49
Factor
11
Availability of Products
Strategy Canvas
12
Tea Aroma and Quality
Customer Buying Criteria Top 7 External Trends
29
Train the Sale force and schedule to respond productive calls on daily basis
Weekly 2011-2012 Nationally
Shelf share will be improved Increase sales and revenues
35 27
Improve the blend of Leaf to enrich the aroma
1st QTR 2011-2012 Metro Cities
Capture competition Brands share
1st QTR 2011-2012 Karachi [initial phase]
To take out form maturity stage and sustain growth
2nd QTR 2012-2013 All Regions
Build brand positioning and specify segmentation
1st QTR 2012-2013 Operation & Production plant
Increase CM and price competiveness Increase Consumer value
3rd QTR 2011-2012 Rural Areas
Increase firm goodwill and brand positioning Market share Growth Attract more financial investors and NGOs Publicizing the company CSR
Through Research, multiple blending tests to improve the blend Work on communication platform to reposition the brand Distinctive brand communication to avoid cannibalization within Tapal brands Specific marketing mix planning for each brand
13
Improve Mixture Blend and clarify its Positioning
Market Structure of Industry Competition Growth Matrix
10 20
14
Brand Communicati on Strategy
Market Share Top 7 External Trends
11 27
Low cost Strategy
Competition Growth Matrix Distributor Structure Top 7 External Trends Cost Structure
20 25 33
Implement TQM and JIT to attain the low cost leadership
43
Find issue that best fit to the business vision, mission and goals. Select CSR initiatives that fully support the cause and brands
15
16
Choose Cause and CSR initiatives
Strategy Canvas
INSTITUTE OF BUSINESS MANAGEMENT
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