Strategic Management a Case Study of Pakola

TABLE OF CONTENTS INTRODUCTION OF PAKOLA.................................................................................................................................. 2 VISION AND MISSION STATEMENTS (ACTUAL) ............................................................................................... 2 Quality Policy ............................................................................................................................................................ 2 Environmental Policy ................................................................................................................................................ 3 Food Safety & Hygiene Policy .................................................................................................................................. 3 Vision Statement (Proposed) .................................................................................................................................... 3 Mission Statement (Proposed) ................................................................................................................................... 3 EXTERNAL ENVIRONMENT .................................................................................................................................... 4 Porter’s Five Forces ................................................................................................................................................... 4 PEST Analysis ........................................................................................................................................................... 7 INTERNAL AUDIT ...................................................................................................................................................... 8 Value Chain ............................................................................................................................................................... 8 Distinctive Competence............................................................................................................................................. 9 COMPANY & COMPETITOR ANALYSIS .............................................................................................................. 10 Competitive Profile Matrix...................................................................................................................................... 10 SWOT Analysis ....................................................................................................................................................... 10 Internal Factor Evaluation ....................................................................................................................................... 11 TOWS Matrix .......................................................................................................................................................... 12 l-E Matrix ................................................................................................................................................................ 15 QSPM ...................................................................................................................................................................... 16 GENERIC STRATEGY .............................................................................................................................................. 17 Current Generic Strategy Vs. Proposed Generic Strategy....................................................................................... 17 STRATEGIC IMPLEMENTATION .......................................................................................................................... 19 The Implementation Phase ...................................................................................................................................... 19 STRATEGIC BRIEF OF EXECUTION OF THE FUNCTINAL FIT ................................................................... 20 The Administrative Fits ........................................................................................................................................... 21 Organizational Structure .......................................................................................................................................... 22 Information, Incentive, Control & Strategic Planning Systems .............................................................................. 22 Corporate Culture & Leadership Style .................................................................................................................... 23 Implementation Situation & Mode .......................................................................................................................... 23 Implementation Mode Of Top Level Management ................................................................................................. 24 POSSIBLE EXTENSION STRATEGIES .................................................................................................................. 28

INTRODUCTION OF PAKOLA Pakola is a line of fruit flavored soft drinks, originally introduced in Pakistan in 1950 by Haji Ali Muhammad. It is produced by Mehran Bottlers (Pvt) Ltd. It is the first nationally branded soft drink of Pakistan. Hence its name Pakola meaning 'Cola of Pakistan. Mehran bottlers is the 1st bottling plant is South Asia. Which has been certified to integrated management system based on (ISO 9001: 2000), (ISO 14001: 1996) and (RVA HACCP) standard. Pakola quality and food safety system follows the FDA GMP requirements and codex. Pakola products are manufactured under strict CGMP and Hygiene controls. Mehran Bottlers Technical Team Mehran bottlers has well experienced people in technical side. There experiences and on going trainings make them more confident and prepare to face all challenges. Painting the Globe Green Pakola is Pakistan's national drink but its might is spread all over globe. It’s the only Pakistani soft drink which is available in North America, Africa, Europe, Far East, India, Afghanistan and Middle East. Production Mehran bottlers operate one of the most modern can filling plant in Pakistan with a filling capacity of 300 cans per minute. The plant is fully computerized and conforms to the highest international quality standards. Apart from the above, Mehran Bottlers also operate a bottle filling plant with a capacity of 240 bottles per minute. The plant can fill both glass and pet bottles of various sizes. Distribution Pakola is distributed nation wide through our network of vehicles and distributors. The company maintains a fleet of 56 trucks for operations in the Karachi base market. Human Resource The company employees 300 personnel at its Karachi plant. Constant efforts are initiated by the management to train and upgrade the employees and to provide better training and working environment.

VISION AND MISSION STATEMENTS (ACTUAL) QUALITY POLICY Vision : To be SECOND TO NONE in exceeding customer expectations for Taste and Flavor, Product Safety, Quality and Price Competitiveness.

Mission: To develop, implement and continuously improve the Integrated Management Systems in a culture of continuous improvement which:

    

Directs the continual up-gradation for efficient and environment friendly manufacturing technology. Monitor and improve the efficiency and effectiveness of all business processes. Promotes professional and flexible work environment, teamwork and innovation through employee participation and process ownership. Drives customer orientation at all levels within the organization. Monitor and economize the Cost of Quality.

ENVIRONMENTAL POLICY Vision: To be SECOND TO NONE in protecting OUR SHARED environment, as EARTH MATTERS for our future generation. Mission: To support this vision, we will continually:     

Comply with applicable local and other environmental regulations and strive to secure fundamental reforms that will improve their environmental effectiveness and reduce the cost of compliance. Improve the environmental performance of our products and processes by minimizing the negative impact on the environment and adopting where practical cleaner production and recycling method. Protect the health and safety of our employees and the surrounding human communities and ecosystems. Use natural resources, including raw materials, energy, and water, as efficiently as possible. Take into account the principles of sustainable development in conducting its administrative, manufacturing, marketing and social activities. Participate in initiatives to improve the Quality of the environment.

FOOD SAFETY & HYGIENE POLICY Vision: No comprise on consumer health by maintenance and improvement of Soft Drink and Drinking Water safety and workplace hygiene conditions. Mission: To develop, implement and improve the Integrated Food Safety and Quality Management Systems in a culture of continual improvement which:   

Provides framework based on HACCP, CODEX Alimentarius and CGMP for safeguarding the consumer health. Supports the use of scientific knowledge, risk analysis and controls in the enhancement of hygiene conditions and practices. Educates people on Good Manufacturing and sanitization practices.

VISION STATEMENT (PROPOSED) It is our vision to be the best and leading provider of food and beverage products in Pakistan, and among the top ten food and beverage companies in the world, by continually challenging present conventions and always staying a step ahead of the competition.

MISSION STATEMENT (PROPOSED) It is Mehran Bottlers mission to be the number one food and beverage company in Pakistan by providing our customers with the highest product quality in terms of taste, experience, and satisfaction. We will ensure this

through an unwavering dedication to the continuous development of our products and processes ensuring that we remain best in class. We will strive to hire the most competent and dedicated employees whose work ethic will set the standard in the industry. We will be paymasters, as we strongly believe that human resource is the only asset that truly appreciates over time. We will also be a responsible social corporate citizen, and strive to enhance the quality of life in the markets we serve.

EXTERNAL ENVIRONMENT PORTER’S FIVE FORCES Applying Porter’s five forces to the Pakistani beverage industry allows us to garner a retrospective view of the potential attractiveness in terms of profitability of the industry. We first must analyze the industry through the fiveforce template, which will allow us to more accurately gauge the industry in terms of its potential. When discussing the beverage industry, we are referring to not only the concentrate manufacturing concern, but because Pakola is a wholly owned subsidiary of Mehran Bottlers, Ltd. we are also including the bottling industry. Therefore, all our analytical studies will follow that both the concentrate and bottling industries, from the perspective of Pakola, are in fact just one industry: the beverage industry.

A

THREAT OF NEW ENTRANTS

1.

Do large firms have a cost or performance advantage in your segment of the industry?

2.

Are there any proprietary product differences in your industry

3.

Are there arty established brand identities in your industry?

4,

Do your customers incur any significant costs in switching suppliers?

5.

Is a lot of capital needed to enter your industry?

YES (+)

-

No (-)

* * * * *

6.

Is serviceable used equipment expensive?

7.

Does the newcomer to your industry face difficulty in accessing distribution channels? Does experience help your to continuously lower costs?

8.

Does the newcomer have any problems in obtaining the necessary skiiled people, materials or supplies? 10. Does your product or service have any proprietary features that give you lower costs? 11. Are there any licenses, insurance or qualifications that are difficuit to obtain?

* * *

9.

12. Can the newcomer expect strong retaliation an entering the market?

B 1. 2.

BARGAINING POWER OF BUYERS Are there a Jorge number of buyers relative to the number affirms in the business? Do you have a large number of customers, each with relativeiy small purchases?

BARGAINING POWER OF BUYERS

Are there a Jorge number of buyers relative t in the business?

*

Do you have a large number of customers, ea purchases?

*

* *1.

Does the1. customer face any significant B ARGAINING POWER OF B UYERS costs in s

2.

Dothe you have a large Is buyer of number the needof forcustomers, additional ea in 3. aware purchases?

Does the2.buyer need a lotof ofbuyers important infort Are there a Jorge number relative in the business?

Is-there anything your customer 3. Does the4. customerthat faceprevents any significant costs in s YES( No function in-house? +) (-)

* 5. *

Does Your customers the5.buyer need are not a lot highly of important sensitive infor to p

Your customers' businesses are profitable. Is there anything that prevents your customer 7. function in-house?

4.

Is Your theproduct buyer is unique of the to need somefor degree additional or hasina 6- aware

3.

Does the customer face any significant costs in switching suppliers?

6-

4.

Does the buyer need a lot of important information?

7.

5.

Is the buyer aware of the need for additional information?

8,

6-

Is there anything that prevents your customer from taking your function in-house?

9.

7.

Your customers are not highly sensitive to price.

10. You provide incentives to the decision make

8,

Your product is unique to some degree or has accepted branding,

*

9.

Your customers' businesses are profitable.

10. You provide incentives to the decision makers.

C 1.

THREAT OF SUBSTITUTES Substitutes have performance limitations that do not completely offset their lowest price. Or, their performance is not justified by their higher price.

*

* 8, You provide Your incentives are notto highly the decision sensitivemake to p *customers Your product * 9. is unique to some degree or has a Your customers' businesses are profitable. 10.

* *

*

YE S

-

*

No (-)

2.

The customer will incur costs in switching to a substitute.

3.

Your customer has no real substitute.

4.

Your customer is not likely to substitute.

D

BARGAINING POWER OF SUPPLIERS

* * * YES

1.

My inputs (materials, labor, supplies, services, etc.) are standard rather than unique or differentiated

2,

1 can switch between suppliers quickly and cheaply,

3.

My suppliers would find it difficult to enter my business or my customers would find it difficult to perform my function inhouse. 1 can substitute inputs readiiy.

4.

1 have many potential suppliers,

6.

My business is important to my suppliers.

7.

My cost of purchases has no significant influence an my overall costs.

E

DETERMINANTS OF RIVALRY AMONG EXISTING COMPETITION

1.

The industry is growing rapidly.

2.

The industry is not cyclical with intermittent overcapacity.

J,

The fixed costs of the business are a relatively law portion af total costs. There are significant product differences and brand identities between the competitors.

6.

It would not be hard to get out of this business because there are no specialized skills and facilities or Ions-term contract commitments, etc. My customers would incur significant costs in switching to a competitor.

9.

F 1.

My product is complex and requires a detailed understanding on the part of my customer. My competitors are alt of approximately the same size as 1 am.

OVERALL INDUSTRY RATING Threat of new entrants.

* * * * *

YES (+)

-

No()

* *

The competitors are diversified rather than specialized.

s.

(+)

*

5.

7,

NO(-)

*

5,

4.

-

* * * * * * *

Favorable

Moderate

Unfavorable

Implications

8

2

2

Threat of new entrants is very low

2.

Bargaining power of buyers.

5

2

2

3.

Threat of substitutes.

1

2

1

4.

Bargaining power of

5

1

1

5.

Intensity suppliers. of rivalry among competitors.

0

4

5

Bargaining power of buyers is considerably low Threat of substitutes is mediocre Bargainins power of suppliers Is considerably low Intensity or rivalry is extremely high

A thorough investigation of the five-force template shows us that the industry is highly favorable when it comes to threat of new entrants. Vet because of a cutthroat rivalry between existing players, It gets an unfavorable rating when It comes to this regard. In the remaining three forces, the beverage industry has scored favorably. Therefore when aggregating these results, we can see that this industry is reasonably attractive. The fallowing analysis of each external force will allow us to further corroborate our findings. Threat of new entrants: In this industry, It is considerably difficult and costly to set up the factories and bottling plants required. Also, for a new entrant, it would be extremely difficult if not impractical to infiltrate the established distribution network of the current players like Pepsi and Coke. Furthermore, It would be quite a daunting task to change the hard and fast perception of millions of consumers, making it a favorable point for this industry. Bargaining power of buyers: There are an extremely large number of buyers as compared to companies in the industry, and these buyers often purchase this Industry's relatively low priced products on a habitual, impulse, or convenience basis, thus making It favorable for the Industry. Threat of substitutes: The threat of substitutes, although mediocre, still poses a considerable threat to the overall profitability of the industry, and that is because in recent times a health craze has taken over all respects of life, worldwide, Therefore; it would signify a heavy reduction in the consumption of sugary And carbonated cola based beverages, and instead prompt consumers to opt far healthier drinks such as fruit juices, and energy drinks. Rivalry omong existing players: The players in the beverage industry have one of the moat competitive rivalries in any industry. In Pakistan the market is dominated by the two international giants. Pepsi and Coke, with market shares respectively of 77%, and 16%, leaving little room for others to grow. Yet even with approximately 5% of the total market share, Pakola can still manage to be profitable in a cut-throat Industry, and hive plan to position it strategically in order to do so. The beverage Industry is a reasonably attractive industry to be in, and with Its 55 years of established presence, Pakola is well positioned to leverage that history so as to attain a competitive edge. Mehran Bottlers' current focus is one of a lackluster "if it ain't brake, then don't fix it" attitude, that stems from its history of centralized power base and tall and unprofessional organizational structure.

PEST ANALYSIS Political: There is significant political pressure on the beverage industry in Pakistan. This pressure mostly arises from a high levy of taxes, 15% central excise duty, as well as 18% sales tax, which totals up to about 36K. of retail prices. This extremely high double taxation rate greatly deters the players in the industry from charging premium prices for perceived value addition.

Another political factor that impacts the beverage industry, however this time positively, is the government's policy of banning the serving of food at wedding receptions. This has prompted an increase in the consumption rates of soft drinks and carbonated beverages, Economic: There are several implications of the economic situation of Pakistan upon the beverage industry. For one, there have been complaints from several quarters regarding the excess wastage of water in the production of aerated beverages, which for a population compounded with astounding poverty levels raises points for concern. Recently, there has been a crisis in the production of sugar in Pakistan, with prices skyrocketing. Such economic factors have a resounding Impact on related Industries; and although most companies In this Industry have switched from sugar to high-fructose corn syrup, some were affected by the agri-based crisis. Social: A major social trend in the rural areas of Pakistan has been a shift from presenting guests with drinks such as lassi red sherbet, and fruit juices, towards cold drinks. This trend has spumed more from impressive distribution networks and less from increased advertising, yet the result is positively in favor of beverage companies. Technological: Technology plays a secondary role In this Industry, as It is not heavily dependant on technological advancements like the consumer electronics industry, or the software industry. Because beverage products are nontech based in nature, technology in this industry is therefore limited to function as a catalyst to improve production capacities, speed of product manufacturing cycles, Inventory management, and e-commerce applications.

INTERNAL AUDIT VALUE CHAIN

According to our analysis, we have found that the major flaw in Mehran Bottlers' value chain is its distribution network. The product's quality, advertising and marketing efforts all become insignificant when the product is not available in a wide number of retail outlets. Therefore this is a major point of concern for the company because it will dictate its success in the short run. Pakola's stagnant market share figures are in part a result of its poor distribution setup. From a logistics standpoint, the company has at Its disposal 56 vans from Where It serves both the rural and urban markets in Karachi and its surrounding feeder markets. Yet although a major focus is placed on serving the rural markets, the company has foregone on the huge urban markets. Another pothole in Pakola's distribution is that they have not been able to infiltrate the restaurant Industry with their beverages like Pepsi and Coke have done. This 'fountain' business segment makes up a large and highly profitable part of cola companies businesses. By failing to act on serving this potential goldmine, Pakola is forced to suffer with a low market share. It has missed such big markets like Pizza Hut, Mc Donalds, KFC and other fast food restaurants. One saving grace is that even with such poor distribution, their product's quality is commendable in that it has maintained a steady base of loyal customers. Pakola should concentrate on driving its core competencies to create differentiation in product research and development, distribution, and marketing. For companies optlhg for a low cost strategy it is necessary to focus instead on purchasing, production R&D, and manufacturing activities. Thus because Pakola is a differentiator, it

should communicate this differentiation. One of the main drawbacks of Pakola's current strategy is that it hardly conveys its message to its consumers. This will be further discussed In later sections.

DISTINCTIVE COMPETENCE The distinctive competence of Pakola is its ability to create unique tasting flavors which none of its competitors are able to do. This core competence leads to its competitive advantage of being, a beverage manufacturer of unique flavored drinks. Presently Pakola has three unique tastes which is currently absent In the other beverage companies. Such unique flavored soft drinks such as Ice-cream Soda, Apple Sidra, Lychee, and Raspberry are all examples of Pakola's internal ability to create different and previously unheard-of drinks successfully. It is through this that they have managed to build brand loyalty with consumers, because it is a unique taste that consumers demand for when they choose a drink, and oftentimes when Pakola's ice-cream soda is not available, brand loyal consumers will settle for anything, In the beverage industry, distribution is of vital importance. Pepsi has managed to create such an impressive and unmatchable distribution network setup that it has become their distinctive competence and competitive advantage. Strategic Cost Management: As per our analysis Pakola, being a Seth-owned company, Is not effectively managing Its costs. As stated in their current mission statements, one of their focus is to reduce costs so as to be a low cost operator. This is a misinterpretation of what is required for a differentiator. Rather than reducing costs seeking to be a loss leader, a company following a differentiation strategy should Instead aim to manage cost strategically In order to optimize resources and Internal efficiencies. As discussed earlier, Mehran Bottlers has 56 vans with which it supplies its products, whereas FMCQ companies like Unilever have a significantly lesser number of vans even though they have much better market reach. Pakola needs to reduce this unnecessary expense; along with costs that arise In a bureaucratic organization with little formal structure. Financial Trends Pakola is privately owned concern with a highly centralized authority base that results in a tall organization structure. They do not publish any kind of financial information and instead guard as a closely held secret, This mindset Is highly limiting in Its nature, and will only serve Co lessen Che competitiveness of the company itself, Yet according to our own estimates, Pakola has 4% market share of the cola-market, where Pepsi and Coke combined have nearly 95K manVet share. From the gross revenue of Rs.5E hi Hi on per annum of the cola Industry, with an estlmaCed 4% share, we deduce thaC Pakola makes about Rs.2.3 billion per annum in revenues, selling 8 million cases of cola per year. In an increasingly growing industry, this figure is not impressive in the least bit. Considering that another Pakistani company, PSO makes 4.2Bn in after-tax profits, Pakola's revenues seem lackluster at best, This trend can be immensely improved by focusing on weak areas like distribution and marketing.

COMPANY & COMPETITOR ANALYSIS COMPETITIVE PROFILE MATRIX Pakoia

Pepsi

Coke

Weight

Rating

Weighted Score

Rating

Weighted Scone

Rating

Weighted Score

Market Share

0.30

1

0.30

4

1.20

3

0.90

Distribution

0.25

1

0.25

4

1.00

2

0.50

Customer Loyalty

0.20

4

0.80

2

0-40

2

0.40

Financial Position

0.15

2

0.30

4

0.60

3

0.45

Product Quality

0.10

3

0.30

3

0.30

4

Total

1.00

Critical Factors

Success

1.95

3.50

0.40 2.65

Pakola received a score of 1.95 in the competitive profile matrix. This low figure is representative of Pakoia's inability to leverage it’s competitive advantage of unique tasting flavors successfully. This, inability stems from the company's lack of effective communication of their offering and its uniqueness. This is one of the major mistakes companies make when following a differentiation strategy, they assume that consumers will recognize the difference that they offer. This Is exactly the mistake that Pakola has made. The areas where Pakola has taken a heating are in market share and distribution. From a strategic viewpoint however, distribution is the area which Pakola should target in the short run if they hope to achieve any type of success. Advertising programs that are basically demand-building exercises are useless if the product has little market reach and is not meeting the created demand. Therefore, before concentrating on marketing activities in the hopes of increasing market share, Pakola needs to strategically outsource their distribution setup to a distribution company such as Muller and Phipps, with the expertise in now to effectively increase a company's reach into the market. In due time the company should build up its own sales teams so as to make distribution a core competency of theirs. Yet they should trust an established distribution company in the short-run to improve it’s product availability.

SWOT ANALYSIS Strengths     

55 years establi shed presence Extremely brand loyal customers Automated bottling plant Online order booking system 5 - Pu blic percepli on of being an innovator

Weaknesses   

Weak distribution setup Ineffective marketing No formal organization structure

 

Centralized decision making process Lack of professional employees

Opportunities   

Health conscious trend In lifestyles High growth rate of food mdustry Increased demand in rural markets

Threats    

Engro's entry into the food and beverage (milk) industry Increase in foreign imports of beverages Rising prices of sugar and sugar substitutes Main competitors are International giants of the Industry

INTERNAL FACTOR EVALUATION 

Key internal Factors

Weig ht

Strengths 55 years established presence

Extremely brand loyal customers Automated bottling plant Online order booking system Public perception of being an innovator

0.12 0.14 0.10 0.04 0.08

Weaknesses Weak distribution setup Ineffective marketing No formal organization structure Centralized decision making, process Lack of prof essi anal employees TOTAL

0.14 0.10 0.12 0.08 0.05 1.00

Ratin Weight g ed Score 1 0.12 4 0.56 2 0.20 1 0.04 3 0.24 1 2 1 2 1

0.14 0.20 0.12 0.16 0.03 1.86

Pakola received a total score of 1.86 in the internal evaluation. This signifies that the company has a weak internal system and is not able to effectively manage any of their strengths in a meaningful manner. Also of their weaknesses, it is worthy to note that their weak distribution setup had the most weightage. Therefore, from our internal factor analysis we can form two possible strategies. One is the formation of a structured and competent distribution network through the enabling of sales force teams. An alternate path would be to outsource the function to an existing distribution company like Muller and Phipps in the short-run, and over time develop the organization required for an internal distribution setup.

Engro's entry into the food and beverage market with Olper's milk has presented Pakola with a competitive challenge. Launched a little after Pakola launched its line of milk products. Olper's had the backing of a massive marketing and advertising campaign that clearly communicated their position and proposition to consumers. Pakola's weak branding choices regarding it’s milk products reflect this ineffectiveness in communicating to end-users. The company stretched it’s Pakola brand name to it’s UHT milk as well as to it’s flavored milks, when the name stood mainly for their ice-cream soda cola drink in the minds of consumers. Therefore, by stretching the brand name to milk, they create a mental conflict in users, between fizzy carbonated colas, and pure clean milk. This mistake coupled with ineffective marketing has put Pakola in this situation.

TOWS MATRIX Strengths

Weaknesses

1. 55 years established presence 2. Extremely txand loyal customers 3. Automated bottling plant 4. Online order booking system 5. Public perception of being an Innovator S-O Strategies

1. Weak distribution setup 2. Ineffective marketing 3. HO formal organization structure 4, Centralized decision making process I. Lack of professional employees

1. Health conscious trend in lifestyles 2. High growth rate of food industry 3. Increased demand in rural markets

1. Introduce diet versions of current products 2. Diversify into food (candy) Manufacturing 3. Line extend into fruit Jui

1. Hire Muller and Phipps to handle distribution concerns in the short- run

Threats

S,-T Strategies

W-T Strategies

Oppurunity

W-O Strategies

1. Engro's entry into the food and beverage (milk) industry 2. Increase in foreign imports of beverages 3. Rising prices of sugar and sugar substitutes 4. Main competitors are international giants of the industry

1. Introduce line of customizable drinks and orders 2. Initiate push-cart program to take advantage of direct marketing opportunities

1, Conduct an aggressive marketing and advertising campaingn targeting youth 2. Instate a proper human resource division

Of the several strategies detailed above, we will now focus our discussions towards two of the main strategies that should be undertaken in the near future;  

Hire Muller and Phipps to handle distribution concerns I ntroduce diet versions of current products

By allowing an experienced distribution expert like Muller and Phipps to handle its distribution, Pakola can instead focus its short-term resources towards the structuring of its organizational setup. The issues with Pakola's management setup are the root cause of its lackluster strategic business performance; and must be addressed before the company can expect extended success and profits. The second strategy that they can enforce is the introduction of diet versions of their current product portfolio. By tapping into this market they would be able to hit two birds with one stone. They would be targeting those consumers whose lifestyles revolve around healthiness, and also they would be targeting adults who wish not to drink extremely sweet sugary drinks.

Pakola is positioned towards a competitive approach due to its unique competitive advantage and the strength of the industry it is operating in.

L-E MATRIX The IFE, Total Weighted Store Strong 3.0 to 3.99

High 3.0 3.99 The EFE Total Weighted Store

to 3.0 to 4.0 I

Medium 2.0 to 2.99

Low 1.0 1.99

to

Average 2.0 to 2. 99 II

Weak 1.0 to 1.99 III

IV

V

VI

VII

VIII

IX PAKOLA

QSPM Strategic Alternatives Key Internal Factors Strengths 55 years established presence Extremely brand loyal customers Automated bottling plant Online order booking system Public perception of being an innovator Weaknesses Weak distribution setup Ineffective marketing No formal onganilzation structure Centralized decision making process Lack of Professional Employees SUBTOTAL Opportunities Health conscious trend in Lifestyles High growth rate of food industry Increased demand in rural markets

Weight 0.12 0.14 0.10 0.04 0.08

Introduce Diet Line AS TAS 0.24 S2

Outsource Distribution AS 3

TAS 0.36

3

0.30

1

0.10

4

0.31

2

0.16

0.14 0.10 0.12 0.08 0.08 1.00

1 1

0.14 0.10

3 1

0.41 0.30

1

0.08

4

0.31 1.66

.22 .12 .14

4

0.88

1

0.22

1

0.14

1

0.42

Threats Engro's entry into the milk industry with . 18 Olper's Increase in foreign imports in beverages .12 Rising prices of sugar and sugar substitutes .12 Main competi tors are internationa giants .10 SUBTOTAL 1.00 SUM TOTAL ATTRACTIVENESS SCORE

1.18

1.02 2.20

0.64 1.30

From our Strategic Alternatives evaluation, we see that it is more attractive lo outsource our distributfon networks rather than launch a diet line of products. This is in line with their current strategic direction, and will allow Pakola to fortify their market reach before introducing new products that will be harder to push through the distribution channels.

GENERIC STRATEGY

The generic strategy that Pakola needs to pursue is that of differentiation. In their current vision and mission statements, the company says it aims to be a low cost leader, yet through our thorough analysis of the strategic direction the company needs to adopt a generic strategy of differentiation. This will allow Pakola to do three things; 1. Charge a premium 2. Increase unit sales 3. Gain buyer loyalty However, at the expense of sounding simplistic, it is necessary that the company communicate its differentiation to its customers, otherwise these three advantages will not avail themselves. Initially Pakola will need to adopt a focused differentiation approach, which means that they should selectively choose which markets will profit them the most and then target only those markets until such provisions are in place from where the company is able to expand its target base. After which they should opt for a broad differentiation generic strategy.

CURRENT GENERIC STRATEGY VS. PROPOSED GENERIC STRATEGY The current generic strategy being deployed (involuntarily so) by Mehran Bottlers Pakola is a distorted version of what our textbooks would define as a ‘focused differentiation’ with their unique selling preposition of sporting the truly unique taste being targeted at a market that is ciphered on the basis of ‘convenience’. Pakola caters to whichever markets it finds ‘convenient’ to cater to. Operating without a Marketing Department since its very inception, this business has ‘no eyes’ no ears’. It continues to trudge blind. No marketing intelligence, no market researches and virtually zero market feedback and almost absolute consumer ignorance are at the very core of

this business which has amazingly continued to survive for such a surprising span of time, most likely because of the intense brand loyalty that it’s consumers have even without any strategic marketing efforts being executed by the company itself, is poof of the potential that this brand has and the magnitude of success it is capable of. With the market just turning the bend to ‘saturation’, it is entering a phase of intense competition with all major players diversifying their product lines, ranges and even businesses into a versatile range of products to put in place more infantry on the battle ground to use to their advantage in this war of brands. Therefore, we believe that the current strategic objective of Pakola should be to consolidate its existing brand, Pakola through extensive strategic market research and consumer insights to be able to home in on the correct target market like a precision targeting missile rather than as an Anti-aircraft gun. For this task, the entire business, which at present has a typical ‘Seth’ mentality, where the 28 year old C.E.O has a very disorganized business with no strategically developed formal hierarchy in place, instead Pakola has an organizational structure which has ‘evolved’ as a result of a ‘need to be and do’ basis. If the business were to be described in one word, that word would be ‘chaos’. Therefore, to achieve our strategic objectives it is essential that the business will need to be completely overhauled, it will need to be revamped to it’s very core. A turn-around is required here, or a ‘revolution’ if you may. This will require a very circumspectly devised implementation plan, taking into consideration all Functional and Administrative Fits, which must be engineered so as to enable a complete turnaround of the organization in order for it to facilitate the consolidation of it’s unique brand Pakola, which would then lead to a shift in strategy directing the business to align itself for ‘Broad Differentiation’, to become more able to face the diverse range of rival products that are entrenched in the market.

STRATEGIC IMPLEMENTATION THE IMPLEMENTATION PHASE Contrary to what we, students of business administration generally think, that the answer to any business problem is the development of ‘strategic alternatives’ and then the discernment of one ‘best’ strategy, in reality, we see that the ‘development’ of strategy is only just one half of the story. The other half is the ‘enactment’ of this strategy. The translation of the proposed strategy into solid tangible actions is essential. It stands to reason that the actual enactment of the devised strategies or strategy is one of the most pivotal tasks and challenge faced by a general manager, or in this case the C.E.O, who must not only just be able to conceive bold strategies, but in fact be able to carry out these proposed courses of actions and it is in this execution lies the discernment of whether or not the strategy will be a success. History has borne witness to the fact that defective enactments have made sound strategies ineffective and skilled implementation can make a debatable choice successful, therefore, the business concern at hand, requires a diligently planned and vigilantly execution of it’s implantation plan. The implementation plan focuses on ‘creating fits’. There are two specific kinds of fits: 1. Fits between the proposed strategy and the functional operations of the business :- Functional Fits 2. Fits between the proposed strategy and the organizational structure, processes and systems :- –Administrative Fits

The Functional Fits These fits have their roots rooted in ‘common sense’. Such logical fits require the adoption of functional operational level strategies which are ‘complimentary to’ and ‘geared towards creating synergistic effects’ by working in harmony with the business’s strategic level objectives. All basic functions of the business, namely the marketing, production, Human Resources, R&D, Finance, Engineering must adopt and enact operational modes that reinforce the ultimate goal; of the organization and reinforce the corporate level strategy. More oft than not, this is easier said than done. Creating such functional fits are not always a simple task and require a ‘guiding light’, a ‘router’, a ‘director’ in the literal sense of the words and for this it is required that a higher level individual, one that has ‘developed’ or ‘shared’ or at least understood the ultimate goal must descend to the tactical and operational levels to himself guide and supervise the entire revamping process. He must, under any circumstance, bring the functional policies in line with the strategy being pursued. Pakola, however, is in a more drastic than your average revamping situation. One reason for this is that it must first, ‘create’ some of it’s more essential functions like for instance a Marketing Department and a Human Resource Function. However, there’s a silver lining here, because when it comes to revamping, it is much easier and much swifter to ‘create a function from scratch’ than ‘re-structure’ an already existing, confused function, with all their myopia and hard-set ways of operation. Therefore, we believe that since the Marketing function, Human Resource Function and the Distribution Function stand to be of primary significance in the over-hauling process of Pakola, considering that

the business needs a radical restructuring of it’s organizational structure (involving major lay-offs and inducements of competent personnel) especially, the inducement of the entire ‘Marketing Department’, hired by the Human Resource Function (which would also devise an appropriate compensation plan for these new additions to the force). This hiring of capable personnel for the ranks on a massive level, if done right may result in the much needed newer perceptive of things by the newly induced fresh blood in the organization, assisting the overall-redo of the organization and it’s outlook.

STRATEGIC BRIEF OF EXECUTIONVOF THE FUNCTIONAL FIT Maintain strategic focus on The Human Resource, Marketing and Distribution. 1. Induct a creditable and capable Human Resource Function, capable of 2. Inducting a highly innovative and talented Marketing Department (which currently does not exist in the organization) This Marketing Department will: • Carry out extensive, accurate and decisive market research laying strategic importance to market intelligence, consumer insight and modern techniques of marketing based on scientific research, and putting these to strategic use through effective communication of these decisive elements with the strategic level management. • Exert itself to marketing the product to the already brand loyal consumers in order to consolidate (and in the process also reacquire any of it’s lost market share) them while also targeting newer potentially loyal markets in it’s attempt to gain market share, but this targeting of the newer markets will only happen once the ‘Critical Distribution Issue has been resolved’ (which is one of the key reasons why Pakola continues to remain stagnant or reclining when it comes to market share) • Outsource its Distribution function to Muller and Phipps, the best in distribution in Pakistan, temporarily, to make it’s over-hauling easier to bring about and at the same time, removing its very Achilles heel. The Company will hire Muller and Phipps temporarily, for two reasons; 1. To enable itself to overcome it’s most critical issue of distribution in a relatively effort-less and quick fashion to get back in the game and, 2. To observe and learn from Muller and Phipps, the mode of distribution with the ultimate goal, of learning and setting up it’s own distribution department which will be much more flexible and loyal to it’s own product (enabling Pakola to become a highly flexible and responsive organization capable of instant change to cater to changing market trends), rather than M&P, which distributes thousands of different products and requires time and effort to readjust it’s mode of distribution for our product. To assist the Over-all objective of the organization, first, a creditable and capable Human Resource Department will be induced, which will then assist in the inducement of the Marketing department, which will align itself to carry out extensive, accurate market research and identify the appropriate target markets and will then exert itself to marketing the product to these already brand loyal consumers in order to consolidate (and in the process also reacquire any of it’s lost market share) them while also targeting newer potentially loyal markets in it’s attempt to gain market share, but this targeting of the newer markets will only happen once the ‘Critical Distribution Issue has been resolved’.

THE ADMINISTRATIVE FITS Besides the implementation of effective and synergistic Functional Fits, there is also a very essential need for enacting Administrative Fits involving management systems and processes which are complimentary, consistent with and reinforce the strategic objective(s) of the organization. These stand to be of primary significance as the ‘sources of influence’ available to C.E.O.s and/or General Managers in directing their organizations towards the desired achievements. These include: 1. Organizational Structure 2. Information Systems 3. Incentive Systems 4. Control Systems 5. Strategic Planning Systems 6. Organizational Processes 7. Management Selection and Development 8. Corporate Culture and 9. Leadership Style.

All these essential to implementation elements require the top level management to be involved in the process at the most basic levels, in this case the C.E.O himself and his hired board of directors must be an intrinsic part of the supervision and the guidance in the implementation of all the above mentioned essentials. The C.E.O., being a young 28 year old Pakistani, having earned his MBA from abroad is infact in a very likely position to realize the err of the company’s ways and is in the phase of his life where he possesses the vigor to be able to bring out a radical change in vision and actually be able to revolutionize the way this Seth owned myopic organization has been working since it’s inception for over 2 decades, because at the very heart of any organization’s myopia are the negative ramifications of culture, in the organization. In a Seth owned organization like Mehran Bottlers, strategy is very much a thing of fiction. These are organizations that do not believe in Vision or Mission. They believe only in the present. The future is not their concern. Concepts such as Vision and Mission Statements are only ‘fancy image’ elements to Mehran Bottler’s top management. Belief in a vision and a way of operation focused at converting this belief into a reality is not what these people believe in, yet, it is our belief that this is what the organization, above all, needs at the moment. A strategic re-visioning and revamping of their myopic and shortsighted mode of operations, is the most dire need at this point in time. This phenomenon will only materialize, should the C.E.O himself realizes the lack of strategy in the visioning of the firm, and then be able to develop and nurture a way of life in the organization that is geared towards a harmonic blend of long-term-short-term thinking, with just the right balance of long-term strategic thinking and operational level thinking, and cascading this culture down the entire organizational hierarchy, enabling the organization to not only conceive bold strategic directions but actually make these a reality, to become one of the most flexible, synergistically successful Pakistani firms.

ORGANIZATIONAL STRUCTURE The firm needs to tear-down and restructure an organizational hierarchy which has not ‘evolved’ on a ‘need to’ basis, but instead, erect one that is ‘strategically structured to enable the organization to best carry out it’s Tactical and Operational Level operations in accordance with the Strategic objectives of the firm. To be able to succeed, the firm needs to realize that the core of all activities lies with the consumer, in the market, and therefore, the entire organizational must strategically have a market-oriented structure, with all functions, operations, management systems and processes geared towards enabling the firm to very effectively, decisively and swiftly cater to any and all changing or otherwise trends in the market, better and faster than the competition. Therefore, to allow such flexibility, Pakola must restructure it’s inflexible and highly disorganized organizational structure, into a meticulously planned, well coordinated, supportive more flatter hierarchy with lesser hierarchical levels and comparatively greater span of control, encouraging more delegation of authority, leading to greater job satisfaction, enrichment and career development, paving the way to a Learning Organization.

INFORMATION, INCENTIVE, CONTROL & STRATEGIC PLANNING SYSTEMS The firm must mobilize it’s operations through the use of Information Systems, for instance, all operations be connected through a Computer Network, facilitating a ‘real-time’ check on all levels of operations, making it possible to gauge any and all information at any point in time, gearing the firm to measure and anticipate changes in the environment instantly and being able to adjust operations according to these real-time changes in the environment, leading to a more pro-active, responsive way of operation. These information systems must be deployed from top-tobottom, so that an overall picture can be had when needed. The Human Resource Team, as mentioned earlier will be responsible for using the most modern techniques to devise the most appropriate Incentive plan, to mobilize motivation throughout the ranks of the Manpower force because incentive and management systems are among the most important sources of influence available to the management to mobilize motivation and push the force towards the achievement of strategy. No less important is the very selection of managers who share and possess skills that are needed to achieve the intended strategy, yet, this process of selection seems deceptively easy in theory when in practical it is equally difficult because there are nearly always pressures not to fire or demote people and to promote those that are ‘next-in-line’ rather than those that are more capable of carrying out the needed task at hand. Similarly, incentive compensation typically focuses on the short-run rather than strategic performance. For these reasons, we believe that the firm at this point in time requires an Entrepreneurial Manager. Equally essential is putting in place, ‘checks’ throughout the hierarchal levels, which are capable of quickly identifying any and all compromised operations and pin-pointing the exact location in the hierarchy responsible for the compromise, so as to rectify the problem while also laying responsibility for the compromise where it belongs, holding responsible that are rightly responsible. This must cascade through each and every hierarchical level with no exceptions, making any negative elements like blame shifting very difficult to do. The system must not believe in ‘forgiveness, it must believe in Justice.”

CORPORATE CULTURE & LEADERSHIP STYLE The elements of Culture and Leadership Style stand to be of prime importance in the success of any organizations intended Strategy and consequently is one of the primary deciding factors in whether or not the actual implementation of the Intended Strategy is a success or failure. For these are the Direction Givers, the Guiding lights that escort an organization to its ultimate intended goal. Any organization, whether it wishes or not, develops a culture and this culture in actuality shapes the future of the firm. Since this culture constitutes of people’s beliefs, behaviors and attitudes, like isolated individuals these too may be conflicting and destructive setting in motion a culture that pulls the organizations distinct functions in opposite directions. A destructive culture will, in simple words, put the organizations own forces at war with each other. Such cultures are rampant in Pakistani organizations where the Human Resource is naively not viewed as an asset or a ‘deciding factor’ in any strategy development and/or implementation, and for this reason among others, local businesses and brands like Pakola, that have so much potential have failed to become successful on a global level. Therefore, we are of the belief that a cultural revolution is a ‘must’ for Mehran Bottler’s Pakola to revamp itself in the slightest of ways. All restructuring fits, whether involving Functional or Administrative elements are dependent upon the ‘people’ that will carry them out and if these people are not geared towards a fair, constructive, healthy, motivating and enriching culture, the best of developed strategies will fail in the worst of ways. Also, one of the most crucial deciding factors when it comes to shaping culture is the aspect of ‘leadership’, because it is this Leadership that is responsible for setting in motion the aspirations, the benchmarks of excellence. It is this Leadership that is responsible for igniting emotions and creating the drive in the People Force of an organization. It is this elemental phenomenon that fires up an organization’s engine and sets it on the path to constructive competitiveness, synergistic activities and ultimately gives it a competitive advantage like no other. It’s very own core being. It’s people.

IMPLEMENTATION SITUATION & MODE As any organization progresses through it’s circle of life, it develops through a number of distinct stages, namely, Single product, Single business, and multi-businesses, each of which require a unique mode of operation, sporting distinct organizational structures, incentives and controls. And since the way of operation for these models differs, the transitions from either of the stages are particularity difficult to manage. However, these transitions are faced with recurring implementation problems. Pakola, however, is faced with a different situation here. It is in a ‘strategic situation’ requiring a turnaround and consolidation. The Top level management, for this purpose will need to be heedful of the dynamics of this turnaround and will need to pay meticulous attention to all situations and transitions and develop fits between the strategy being pursued and the firm’s functional policies, management systems and processes. To become a more highly flexible, responsive and strategic 3rd Generation Organization, Pakola, must have flatter hierarchies for all it’s departments, which must be synergistically coordinated to make it’s functional structure flexible and responsive to any market changes and thus become a market-oriented organization. It must put in place management systems and processes that assist it’s functions to operate with the least possible friction encouraging effective and conflict-free exchange of communication through the use of Modern Information Systems, also leading to efficient and effective information exchange facilitating timely adjustments in strategies and

operations and consequently decisive action. This however, shall be no easy task for the young C.E.O and his appointed board of directors. Mr. Zeeshan, will have to decide between: (1) The Degree of involvement in the implementation process (2) The attention that must be given to the administrative constraints

The degree of involvement in the implementation process implies how deeply is he involved in implementation of the strategy and whether he will personally direct and oversee the implementation whilst, (2) implies the strength of existing norms and patterns of behavior and the willingness of key managers to support strategies.

IMPLEMENTATION MODE OF TOP LEVEL MANAGEMENT

Pakola’s current need in the attempt to turnaround, is a Director who will be deeply involved in the implementation of strategy and will pay little attention to administrative constraints to the extent that the trade-offs need to be made between achieving strategic objectives and deal with any administrative fallout on a ‘need-to’ basis. Under the given circumstances, when a major turnaround must be attempted, a political manager would take too much time to mitigate the negative consequences of any action, rather than proceeding with rapid action, thereby ‘preserving’ the very conflict-ridden negative culture and processes that are needed to be revamped in the first place. Whereas, An Administrative manager has limited involvement in the processes, systems and people who must achieve strategy, which would be a very naïve course of action under the circumstances given the need for total revamping of the current defective, disorganized and excessively myopic systems, processes and procedures. Similarly, an Organization Shaker, is geared at assigning the ‘right people for the right task’ and are required when the basic structure in place is sound and effectively operating, which is far from being the case when we talk about Mehran Bottler’s Pakola. Therefore, given the current circumstances Pakola requires a manager who is ready to compromise the short-run over the long-run and will take any necessary (and seemingly radical) steps to replace the existing malpractices and strategies and replace them with a completely revamped mode of thinking and operations geared to achieving strategically devised alternatives and goals and in the process create a highly strategic organization, which is

strategically aligned to carry out effective and efficient operations in the most profitable manner while continuing to keep itself open to innovation and improvement so that it becomes an ever ‘Learning’ Organization.

This exceptional measurement tool enables the business managers to view any business from four critical perspectives and hence provides answers to four critical questions by forcing business managers to focus only on a handful of key measures, thereby keeping the managers from losing themselves in numerous and complicated measures. The questions answered are; 1. How do customers see us? (Customer perspective) 2. What must we excel at? (Internal Perspective) 3. Can we continue to improve & create value? (Innovation & Learning perspective) 4. How do we look at shareholders? (Financial Perspective) These serve to firstly, bring together, in a single report, many of the seemingly disparate elements of a company’s competitive agenda: becoming customer oriented, shortening response time, improving quality, emphasizing teamwork, reducing new product, launch times and managing for the long-term. Secondly, the scorecard guards against sub-optimization. By forcing senior managers to consider all the essential operational measures together as a gestalt, the balances business scorecard lets them see whether improvement in one area may have been achieved at the expense of another. Even the best objective can be achieved badly by making the wrong trade-off. Customer’s concerns tend to fall into 4 categories, Time, quality, performance and service. To put the scorecard to work, the company must articulate goals for time, quality, performance and service and then translate these goals into specific measures. Customer based measure are critical, yet they must be translated into measures of what the company must do internally to meet customers’ expectations. After all, excellent customer performance derives from processes, decisions, and actions occurring throughout the organization. When it comes to the Internal perspective, managers are required to focus on those critical internal operations that enable them to satisfy customer needs. The customer-based and internal business process measures on the balanced score card identify the parameters that the company considers most important for competitive success. But the targets keep changing. A company’s ability to innovate, improve and learn ties directly to the company’s value. That is, only through the ability to launch new products, create more value for customers, and improve operating efficiencies continually, can a company penetrate new markets and increase revenues and margins and grow and thereby increase shareholder value – the last portion of the BBSC. While the Financial perspective, measures whether the company’s strategy, implementation, and execution, are contributing to bottom-line improvement. Typical financial goals have to do with profitability, growth, and shareholder value.

POSSIBLE EXTENSION STRATEGIES

Existing

Existing

New

1.

2.

Diet Cola Line

3. Line Extension

Diversify into candy category with Pakola ice-cream Soda Flavouring Acquire a Snack Food Manufacturer

Brand Extension 5.

Fill gaps in currently served categories like fruit juices under a new brand name

New

Brand Name

Brand Portfolio

4.

Introduce a new caffein based drink under a new brand name

New Brands Multi-brands