Habib Oil

MillsSubmitted By:

Nabeel Raja

IntroductionHabib Oil Mills (Pvt.) Ltd. "HOM" is the largest FMCG Company exclusively in the vegetable oil & fats sector in Pakistan. The company produces premium brand cooking oils and hydrogenated cooking mediums, and markets the products through its own distribution network, which covers almost all commercially viable markets nationwide.

Incorporated in 1954-55, Habib Oil Mills (Pvt.) Limited was initially established as an oil expelling unit. The present management took over the unit in 1978. The company has strong financial background and has sizable infrastructure managed by professional staff. It enjoys excellent relations with its bankers and is considered liquid on all financial considerations throughout its performance. It has proven track record in this business and has plans for targeted prosperous growth in future.

The marketing policy of the company envisages development of brand loyalties among the customers and consumers through their continued involvement and participation in series of several promotional activities run by professional staff and consultants. The products enjoy vast popularity and brand loyalty and stand first in terms of market share in this sector nationwide. The company has achieved a growth of over 500% in last ten-year period, which is primarily attributed to its consistent quality care and driving successes from application of needed market strategies.

2 | P a g e

Mission Statement Of Habib Oil"Our aim is to become the trend setters in promoting healthy living through providing quality food products.”

Components present:

1) Concern for public image:

Promoting healthy living

2) Self concept:

To become the trend setters .

Proposed Mission Statement

Our aim is to become the trend setters in Pakistan promoting healthy living through providing quality food products and also maintain this position. We demands openness and honesty throughout operations to prompt trust, and integrity. Employees are encouraged to bring forth new and better ideas for improved performance. We strive to provide products and services of superior value to meet the expectations of our internal and external customers.

3 | P a g e

INTERNAL FACTOR EVALUATION

Internal Factor Evaluation (IFE) Matrix is a strategy-formulation tool summarizes and evaluates the major strengths and weaknesses in the functional areas of a business, and it also provides a basis for identifying and evaluating relationships among those areas.

Assign 1 to 4 rating to each factor to indicate whether that factor represents;

1 = Major weakness 2 = Minor weakness 3 = Minor strength 4 = Major strength

Key Internal FactorsWeigh

tRating

s

Weighted

Score

STRENGTHS

A respectable position in the eyes of the consumers

0.11 3 0.3

Market Leader 0.08 4 0.2

Habib’s slogan 0.06 3 0.06

Loyal customers 0.08 4 0.32

Production facilities 0.07 3 0.21

Efficient supply chain management system

0.1 4 0.32

Pricing 0.04 3 0.18

Strong sales and distribution network

0.12 4 0.48

WEAKNESSES

Centralized Decision Making 0.12 2 0.24

Huge amount of Import 0.14 2 0.2

Lack of company-owned R&D 0.08 1 0.08

Total 1 2.59

4 | P a g e

ANALYSIS

The total weighted score of IFE Matrix is 2.59 which is above industry average. It means that company’s internal position is good. Factors like efficient supply chain management system and sales and distribution network are getting higher weights and company’s rating to these factors are also very strong. It appears from this analysis that Habib is overcoming its weaknesses quite fairly with its strengths. Such as strong distribution network, production facilities and efficient supply chain management system.When we analyzed the weaknesses, centralized decision making and huge amount of import are the weaknesses that need to be overcome.

EXTERNAL FACTOR EVALUATIONThe EFE matrix is the strategic tool used to evaluate firm existing

strategies, EFE matrix can be defined as the strategic tool to evaluate external environment or macro environment of the firm include economic, social, technological, government, political, legal and competitive information.

The EFE matrix is similar to IFE matrix the only difference is that IFE matrix evaluate the internal factors of the company and EFE matrix evaluate the external factors.

Assign 1 to 4 rating to each key, that indicate how effectively the firm's current strategies respond to the factor, where

4 = the response is superior3 = the response is above average2 = the response is average1 = the response is poor

5 | P a g e

Key Internal FactorsWeig

htRating

s

Weighted

ScoreOPPORTUNITIES Setting Refineries 0.12 4 0.48Local production of Raw Material 0.1 3 0.3Untapped rural Market 0.09 4 0.36People are becoming more health conscious

0.11 3 0.33

Population growth 0.05 3 0.15THREATS 0

Unbranded edible oils 0.08 3 0.39Lower pricing by competitors 0.15 3 0.45Intense competition in the industry 0.13 3 0.24Reduction in the purchasing power of people due to inflation

0.1 2 0.2

International brands are entering in the market

0.07 2 0.14

Total 1 3.04

ANALYSISThe total weighted score of EFE Matrix is 3.04 which is above industry average. It appears that Habib is responding in a good way to existing opportunities and threats in the industry. The average weighted score shows that Company’s performance is good but not outstanding in the industry.

When we analyze the EFE Matrix by separating the opportunities and threats, we found that Setting up Refineries and emerging modern trade departmental chains like Macro and Metro carry more weights and Habib’s rating to these factors is also very good means Habib is taking full advantage to these opportunities. After that, Local production of Raw Material 0.10 weights each and company’s rating to this factor is 3. These are the areas where Habib needs improvement to take advantage of the market opportunities.

When we analyzed the threats we found that the biggest threat in the industry is intense competition and company’s rating is 3. It shows that competition is the biggest threat for Habib (competition from the local as well as from unbranded/ loose edible oil) is also severe threats face by the whole industry.

6 | P a g e

COMPETITIVE PROFILE MATRIX Competitive profile matrix is an essential strategic management tool to compare the firm with the major players of the industry. Competitive profile matrix show the clear picture to the firm about their strong points and weak points relative to their competitors. The CPM score is measured on basis of critical success factors, each factor is measured in same scale mean the weight remain same for every firm only rating varies. The best thing about CPM that it include your firm and also facilitate to add other competitors make easier the comparative analysis.

IFE matrix only internal factors are evaluated and in EFE matrix external factors are evaluated but CPM include both internal and external factors to evaluate overall position of the firm with respective to their major competitors.

Assign ratings values are represent as:

1 = major weakness 2 = minor weakness 3 = minor strength 4 = major strength

Critical Success Factor

Weight

Habib Oil Habib Sufi

Rating

Score

Rating

Score

Rating

Score

Price 0.2 4 0.8 4 0.8 3 0.6Competitiveness

0.15 4 0.6 3 0.4 2 0.3

Market Share 0.1 3 0.3 3 0.3 2 0.2Product Quality

0.2 3 0.6 3 0.6 3 0.6

Promotion Efforts

0.2 3 0.6 4 0.8 3 0.6

Customer Loyalty

0.15 4 0.6 3 0.4 3 0.4

Total 1 3.5 3.3 2.7

7 | P a g e

8 | P a g e

ANALYSIS

From the analysis of CPM, we found that overall rating of Habib is better than Habib and Sufi. In CPM if Habib’s rating is higher than the competing firms it doesn’t mean that Habib is better than the second or third. So, we have to take a look to individual success factors.

If we take a look to individual factors we found that the price, Market share and Customer loyalty is better as compare to competitors. In product quality the company’s position is same as the competing firms. But in promotional efforts Habib’s position is better than Habib. So, Habib has to pay more attention to the promotional efforts.

9 | P a g e

SPACE Matrix10 | P a g e

SWOT MatrixOf

HOM

Strengths (S)1. A respectable position in the eyes of the

consumers2. Market Leader3. Habib’s slogan4. Loyal customers5. Production facilities6. Efficient supply chain management system7. Pricing8. Strong sales and distribution network

Weakness (W)1. Centralized Decision

Making2. Huge amount of

Import3. Lack of company-

owned R&D

Opportunities (O)1. Setting Refineries2. Local production of Raw

Material3. Untapped rural Market4. People are becoming

more health conscious5. Population growth

SO Strategies Strong sales and distribution and sales

network can be use to tap rural market (S8, O3)

Habib’s production facility is very strong if it succeeds to establish local production of raw material Habib can further increase the production of cooking oil (S5, O2)

Habib’s name and image is very reputable in the international market help Habib to get export potential (S6, O1, O2)

Habib’s production facility is very strong if it succeeds to establish local production of raw material Habib can further increase the production of cooking oil (S5,O2).

If Habib decreases the price by lowering its cost, able to get share in the rural market (S7,O3).

WO Strategies If Habib improves the

R&D it able to have local production of raw material (W3, O2).

If Habib decrease import and focus on local production of raw material can increase the export (W2,O1).

Threats (T)1. Unbranded edible oils2. Lower pricing by

competitors3. Intense competition in

the industry4. Reduction in the

purchasing power of people due to inflation

5. International brands are entering in the market

ST Strategies Habib can use its strong sales and

distribution to compete with unbranded oil in rural markets (S8,T1).

If Habib decrease its prices by lowering its cost, can cope with the decreasing purchasing power (S7,T4)

Habib should further strengthen its brand name and positioning to increase threat for new entrants (S1,T5)

WT Strategies If Habib become self

sufficient in raw material production, it helps Habib to decrease the cost of production and become more competitive and strong in the industry (W2, T2, T3)

Y axisFinancial strength 3.75 Environmental stability -3.5 Y axis : 3.75+ (-3.5) = 0.25

X axisIndustry strength 3.50 Competitive advantage -1.50 X axis: 3.5 + (-1.5) = 2.0

11 | P a g e

ANALYSISHabib is financially very strong (3.75) and having good competitive advantage (-1.5) in a growing industry.Habib is in an excellent position to use its internal strengths. Habib is taking full advantage of external opportunities and overcoming internal weaknesses and avoiding external threats.

STRATEGIES Market penetration and Market development:

It is a good strategy and this can be increased by targeting rural markets where people are still using unbranded/ loose cooking oil. Habib should use its efficient distribution network to increase market penetration.

Product development: Habib is currently is working on this strategy, recently it introduced olive oil as people are becoming more health conscious. New product development is a good strategy. Further new product development can be a good strategy.

Backward integration :Backward integration is like acquiring supplier as the suppliers of Habib are the raw material providers and Malaysian refining companies, acquiring supplier is a good strategy because raw material costs 70% of total cost of production. Acquiring suppliers or join venturing with them is a good strategy to driven out cost and decreasing cost of production.

12 | P a g e

IE Matrix

ANALYSIS

In IE Matrix, Habib lies in the region of Hold and Maintain. Means that Habib has to maintain and hold its current position.

STRATEGIES

Market penetrationHabib need to work on market penetration, it should capture rural markets where people still use loose or unbranded cooking oil. In this why Habib can further strengthen its position and increase its market share.

Product developmentProduct development is another strategy that Habib is following, product development is a good strategy to maintain and hold current position.

13 | P a g e

BCG Matrix

Star Habib Cooking oil Super Habib Oil

These are products which have a large market share in a fast growing industry. Their sales are consistent throughout the year. Their cash generation is also high and at the same time has a high growth potential, therefore require larger investments.Question Mark

Handi Cooking Oil Nayab Cooking Oil

This product of Habib’s requires plenty of additional investment. It was acquired only a few years ago. Right now it has a small market share in a market with a high growth rate.Cash Cow

Habib BanaspatiThis product of Habib has one of the largest market shares in the category of banaspati. However during recent years there has not been

14 | P a g e

consistent growth in the industry. And the company has chosen to decrease its additional investments.Dog

Mayar BanaspatiThis is a declining market. Habib’s product has a low market share in this category. And the company is not considering heavy investment in this product.

Division RevenueRevenue

%Profit

Profit %

Market Share

Industrial Growth

1 Habib Cooking oil 500,000

52%$125,00

0 71% 1 3%

2 Super Habib Oil 30,000

3% $18,000 10% 0.80 3%

3 Handi Cooking Oil 50,000

5% $15,000 9% 0.47 13%

4 Nayab Cooking Oil 20,000

2% $200 0.11% 0.1 15%

5 Habib Banaspati 350,000

36% $17,500 10% 0.67 -12%

6 Mayar Banaspati 10,000

1% $500 0.28% 0.17 -15%

Total 960,000 100 176,200 100

15 | P a g e

Grand Strategy Matrix

ANALYSIS

Habib is in an excellent strategic position. Habib should continue its current strategies.

As we discussed earlier: Market development, Market development, Product development, Horizontal and Backward integration is good

strategy for Habib.

16 | P a g e

QSPM MatrixKey Factors Weight

Strategy 1

AttractiveScore

Strategy 1

Strategy2

Attractive Score

Strategy 2

STRENGTHS

A respectable position in the eyes of the consumers

0.11 3 0.33 4 0.44

Market Leader 0.08 - -  - - Habib’s slogan 0.06 - -  - - Loyal customers 0.08 3 0.24 4 0.32Production facilities 0.07 2 0.14 4 0.28Efficient supply chain management system 0.1 4 0.4 3 0.3

Pricing 0.04 2 0.08 4 0.16Strong sales and distribution network 0.12 4 0.48 3 0.36

WEAKNESSES  Centralized Decision Making 0.12 -  - - - 

Huge amount of Import 0.14 1 0.14 4 0.56Lack of company-owned R&D 0.08 1 0.08 4 0.32

1  OPPORTUNITIES  

Setting Refineries 0.12 3 0.36 4 0.48Local production of Raw Material 0.1 3 0.3 4 0.4

Untapped rural Market 0.09 4 0.36 3 0.27People are becoming more health conscious 0.11 4 0.44 3 0.33

Population growth 0.05 3 0.15 4 0.2THREATS  

Unbranded edible oils 0.08 4 0.32 3 0.24Lower pricing by competitors 0.15 3 0.45 4 0.6

Intense competition in the industry 0.13 4 0.52 3 0.39

Reduction in the purchasing power of

0.1 3 0.3 4 0.4

17 | P a g e

people due to inflationInternational brands are entering in the market 0.07 2 0.14 3 0.21

Total 1 5.23 6.26*Strategy 1: Market penetration, capturing the rural markets of Pakistan where people still use unbranded /

loose cooking oil for cooking.*Strategy 2: Joint ventures with Malaysian companies for the production and refining of raw material, in this

way Habib can reduce its cost of production, because raw material costs 70% of total cost of production.

18 | P a g e

ANALYSIS

From the QSPM Matrix, it is found that strategy 2 is more attractive as the sum total score of the strategy 2 is 6.26.

STRATEGY 2

Joint ventures with Malaysian companies for the production and refining of raw material, in this way Habib can reduce its cost of production, because raw material costs 70% of total cost of production.

Through this strategy Habib can easily get raw material as the raw material of cooking oil are cotton seed, Soya beans etc are not easily available in Pakistan by joint venturing with Malaysian companies for the production and refining of raw material. Habib will be to reduce the cost of production and make the prices more reasonable in the market.

In this way Habib can also increase its market penetration, by increasing production and lowering the prices.

19 | P a g e