EXECUTIVE SUMMARY

Our project aimed at studying t he strategy at MORNING BREAD. A group of 6 members worked on this. The project included certain visits to MORNING BREAD office. The data collection method was interview and questionnaires. MB was established in 1979 for products like bread, cakes, cookies, buns, burgers and biscuits. The company has gone through many phases with the changing environment and different government but the core values, which become a part of their vision as well, are translated from generation to generation. They are strictly adhered to their family values and norms. The company, along with some other competitors attains the highest market share (DAWN, VITA, SUPREME, WONDER). The project aimed at what were the strategies. The company is still not ISO certified.

PART 1- INTRODUCTION MORNING BREAD

1.1 COMPANY PROFILE

Name Morning Bread (New Rawal Food Industries)

Established 1979

Nature Small, private business

Registered Factory Registration Act

Chief executive Raja Muhammad Iqbal

Telephone Mob 0300-8540010

PTCL 051-5471583, 5471683

No. of Employees 100+

Type of Human Resource:

Accounts person Muhammad Arshad

Food technologists/experts Mr. Ejaz Hussain

Marketing/Sales Manager Muhammad Basharat

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Auditors

Manufacturing, production department

Admin dept

Qualifications; Masters to primary

Age: 18-50

Main production: Bread, cakes, cookies, biscuits, buns, rusks, bread slices, burger buns , sugar free bread

Bank/Funding body None, 100 % Equity and profit reinvestment

Location: Peshawar Road, Rawalpindi

Source: (CEO MB)

1.2 COMPANY HIERARCHY

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CEO Raja Muhammad Iqbal

Manager Acc/FinMuhammad Arshad

Manager MarketingBasharat Hussain

Food ExpertEjaz Hussain

Other Admin Staff

Director MarketingRaja Zahid Iqbal

Production workers

Fig 1: MB Hierarchy (Source CEO)

1.3 COMPANY SUMMARY

The company was started in 1979. The core values of the business which their ancestors taught them are still being translated throughout. They taught to keep away from interest. The company does not have any bank or funding body. They want to avoid interest. Their whole business is free of mark up. This is what transferred from ancestors to the next generation.

The company has more than 100 employees. The employees are hired according to their experience/qualifications.

1.3.1 PRODUCTS

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Morning Bread provides non-gluten and high fiber, both baked goods and items to health-conscious and taste-finding consumers. Special considerations are made for all common food items such as dairy, yeast, wheat, and eggs.

Example of items:

۞ BREADS

Bran Bread Add fiber to life. MB Bran Bread freshly baked for health conscious customers. This bread contributes towards the daily intake of fiber to help maintain the right balanced diet.

Plain Bread This freshly baked and nutritious bread was one of the first products to be introduced in the Pakistani market by MB.

۞ BURGER BUNS Oven fresh buns are a treat by themselves. It is baked by using only the very finest of ingredients.

۞ CAKES PLAIN

۞ CAKES FRUIT

۞ RUSKS

۞ COOKIES

۞ SHEERMALS

۞ BISCUITS

Spelt flour is the most common wheat-alternative flour as it has the same characteristics as wheat which provides similar taste; consistency and behaviors creating goods that are just as good as any wheat baked good.

1.3.2 MARKET ANALYSIS SUMMARY

The target market includes people who are price conscious and are moving from high calories breakfast to bread. This is a niche market since most manufactures do not cater to these needs with the exception of high-fiber diets.

MARKET SEGMENTATION

The target market consists of three groups:

THE LOW INCOME GROUP C CLASS:

The low income group is moving form high calorie breakfast to low calorie breakfast. The customers who are least bothered. The easy customers come in this category.

THE HIGH CLASS A GROUP:

This group comprises the most difficult customer group for MB. This group is the most difficult to satisfy in terms of quality. Unfortunately this group pertains to residents of F-6, F-7 and posh area of Islamabad

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THE NORMAL B GROUP:

For these normal items and breads are made. The most MB earns form this group.

Source: (Marketing Manager)

1.3.3 TARGET MARKET SEGMENT STRATEGY

In the target market, they are mainly focusing on B groups, since they are the most prevalent and steady of customers. But a new product “BRAN BREAD” is being made. MB expects and has the most business form B group.

MB Earnings % with groups

5%, 5%

75%, 75%

20%, 20%Class A

Class B

Class C

Fig 2: (Source: CEO & Marketing Manager)

1.3.4 INDUSTRY ANALYSIS

Morning Bread competes in the Food Services Industry. In addition to competing with other bread manufacturers, it competes with all restaurants, bakeries and supermarkets for a share of its customer’s food Rupees. Morning Bread is most concerned with competitors who differentiate their products and services with a healthy, organic focus.

1.3.5 COMPETITION AND BUYING PATTERNS

Currently there are four /five firms in city that provide similar items.

DAWN BREAD

Strengths: Makes spelt bread, muffins and cookies. Have added products like frozen parathas and ISO certified. Also maintained a website where complete product information, along with the nutritious values is given.

Weaknesses: Does not provide a wide selection of non-wheat goods. Furthermore the texture and flavor of their spelt goods is very dense and flavorless. They use whole spelt bread which makes a denser, crumby consistency bread. Dawn bread offers high calorie food items.

VITA BREAD

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Strengths: Makes spelt bread, and other items (same as MB)

Weaknesses: Does not produce a wide selection or large quantity of non-wheat goods. Their main focus is wheat goods.

WONDER BREAD

CONTINENTAL BREAD

Strengths: is having a network with famous Islamabad stores like Best Price. It is available Almost at every store of Islamabad.

PART 2 – STRATEGY AT MB

2.1 MISSION

MB aims to offer high quality bread (baking). It makes Products at a competitive price and available technology to meet the demand of the middle- to higher-income local market area residents. MB will base on (and currently bases) its growth and profitability on:

۞ A primary focus on authentic products forms the biscuit and bread world. Rusks, buns, fruit cakes, plain cakes, plain bread, and bran bread, cookies, Sheermals. The products are distinctive in terms of quality, price and customer satisfaction.

۞ A strong brand (MB) recognized all over which consumers trust blindly and feel good while consuming.

۞ Clear leadership in its specialties.

2.2 VISION

MB vision is to be a market leader in all the specialty products they are offering. They aim at pursuing leadership positions in the bread market. They aim to reach there by getting a good economic value for their company, attain a strong competitive position in the competing markets and exceed customer expectations for quality and value. They will benefit from getting new networks with retailers. They aim to measure their performance by customer feedback and loyalty, market leadership, returns, sales growth.

The competitive edge is the quality of goods. MB use only organic flours of the highest quality that create incredible non-gluten goods that can't be matched anywhere else in city. Other bread making firms do not emphasize on these things.

2.3 ENVIRONMENT (SCANNING)

2.3.1 PESTEL FRAMEWORK

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POLITICAL:

MB sales and business is highly affected by political or country situation. For example, if due to strikes roads are blocked from Rawalpindi to Islamabad, MB faces problems in delivering items to Islamabad retailers or stores. Bread and other food items are perishable; they need to be consumed quickly. Due to road blocks, strikes and other issues, business is heavily affected.

ECONOMIC:

High inflation rates in Pakistan have led to higher production costs. MB is hardly getting or managing to get a margin of 5%. Sugar and ATTA shortage have led to these things. Their production costs are higher due to inflation (7pc). Sugar and ATTA (flour) both are used for bread making or other baking. The baking industry overall may face a recession.

SOCIAL:

During the month of RAMADAN, sales are lowest. Bakeries earn the highest revenues. (By offering aftari products and enjoy the most revenues). Diet conscious people who have knowledge of what is to be consumed, and how to take care of diet.

TECHNOLOGICAL:

MB is using old bread making technology.

LEGAL:

MB plans to get ISO certified. It ensures nothing about product safety or people working in the MB factory.

2.4 MB CORPORATE STRATEGY

MB is producing and selling biscuits, breads and cakes mainly. MB seems to strengthen each product’s leadership in region and create a market for it. The leadership is expressed as a strong market position and highest market share in the bread making business. The CEO is the biggest strategist at MB. CEO adds value to the company by allocating resources and himself negotiating with the top managers. The managers and other people cooperate fully and decision making is agreed upon. The CEO himself guides managers about certain business issues. The CEO and managers are quick at decision making and decision delays are avoided.

2.5 RESOURCES

To achieve these, MB has the following resources. MB is staying in the competition and wants to outperform it as well. It has some threshold competences and resources to stay in the business.

2.5.1 THRESHOLD PRODUCT FEATURES

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Shape, low price and good quality, being provided by all the bread making firms (DAWN, WONDER, VITA) and local bakeries.

2.5.2 AVAIALBLE RESOURCES

Land, labor and capital: (production costs, trained employees, in time delivery of products to general stores.

PHYSICAL RESOURCES

The available resources to MB include physical resources like bread making machines, building (production plant), and production capacity.

HUMAN RESOURCES

It includes human resources like knowledge and skill of people.

FINANCIAL RESOURCES

The financial resources include capital, debt and creditors. MB has less financial resources (venture capital) and more profit reinvestment.

INTANGIBLE RESOURCES

Goodwill is an intangible resource and adds value to MB since 1979. These are the threshold resources for MB as well

2.5.3 UNIQUE RESOURCES

These are difficult and currently MB doesn’t have any. (If they want to outperform business competition). (To include employees with very good exceptional training, rather trained and motivated to stay in the organization for ever. The labor is moving from competitors to MB for just a bit raise in salary. For example, if VITA bread is offering Rs. 4500 to its employee in production, MB attracts them by offering those 4600. It has been an old practice. If MB is able to retain its trained employees, so that production secrets do not leak out, this will be a unique resource.

2.6 MB BUSINESS STRATEGY

MB is currently competing with VITA, DAWN, WONDER, and SUPREME as well. As a business strategy, it relies heavily on product differentiation. They have the opportunity to differentiate themselves from their competitors. They further have a business strategy to get ISO certification. This business strategy will add value to its products and further profits. The business strategies further include by opening showrooms at different placed in Islamabad, the basic problem lies with retail business. The customers will be able to enjoy products in time and retailing costs will be low. MB plans to develop an efficient website which will give product knowledge on World Wide Web. They have more customers in Rawalpindi as compared to Islamabad. They are covering the Rawalpindi customers. They are covering customers of Axial, WAH, Murree, Kahuta, Attock,

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Chakwal, Tallagang, and Chakwal as well. The nature of competitive environment is stable and mature. MB is not a cost leader.

The business strategy is further linked with marketing and finance strategy.

Fig 3: (Source: CEO & Marketing Manager)

2.7 MB OPERATIONAL STRATEGY

2.7.1 COMPETEITIVE PRIORITY

Cost

The cost is not low. A low cost strategy results in high profit margins. Unfortunately MB is unable to produce at a low cost. (Rising ATTA prices (shortage) and sugar crises have imposed problems over production costs. Though some cost minimization programs are a part of their operational strategy.

Quality

The 2 dimensions of quality are high performance and good consistency. Well MB makes consistent products. (We get same product anywhere). The third dimension is process quality. For example, a customer buys MB cake and goes home. Next time he

buys he finds it sweeter than before. It did not meet its customer requirements. No one is going to buy. MB is maintaining process quality as well. MB is maintaining a standard of its quality.

Time

MB wishes that its products reach its customers in right time. Delivery is quick and short. MB wants its customers to enjoy fresh products. Rapid and on time delivery are 2

Business strategy

Marketing strategy Operational strategy Finance strategy

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dimensions that MB is meeting (strikes and road blocks impose problems). Every day MB cars rush to deliver products to stores in Rawalpindi and Islamabad.

Flexibility

MB is not flexible. It offers little range of products.

2.8 MB FINANCIAL STRATEGY

MB is facing problems in raising capital, just like any other small business. Its ability to raise capital is low. It does not want to go for debt financing. MB strategy does not contain an optimal capital structure to offer the lowest WACC. The main mode of financing is unleveled. This is where the financial strategy is integrated with the corporate level. The CEO wishes to keep business away from markup. (Equity is more expensive than debt). MB is a private business, no shares at KSE or Initial Public Offerings for investments. Running the business effectively and ability to finance business without debt is a part of their strategy.

2.9 MB MARKETING STRATEGY

MB current marketing is weak. DAWN and VITA are keeping celebrities like Pakistani film stars. MB doesn’t focus on it. In the beginning, it focused a lot on TV ads, but now does not much capital/ cash to spend on advertisements. Though sales and marketing people are doing a good job, they get customer feedback about the product.

2.10 STRATEGY AND IMPLEMENTATION SUMMARY

Their strategy focuses on serving a niche market with quality goods. MB wishes to become a part of to achieve these goals, they are currently providing:

۞ Focusing on good retail relationships with middleman

۞ Quality baked goods for everyone to enjoy at a fair price.

2.10.1 SALES STRATEGY

MB strategy focuses on building a customer base by providing good customer experience. With the addition of the bran bread, they hope to see health conscious customers to come to them. In future they plan to open a showroom, so that the distribution function is minimized and the customers are able to get the products in time and fresh as well.

They also want to develop certain schemes like sponsoring the QTV programs. They want to keep away from advertising. They would also like to make get a website about product information.

2.10.2 SALES FORECAST

The sales forecast assumes the following changes:

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۞ Bread sales in the summer months will be slightly higher since more people will be having BBQs and picnics requiring items such as hamburger and hotdog buns.

۞ Bread and cakes sales will be, and are actually, higher in March and April because of the food-oriented moderate weather. Summers also prove to be profitable since a long day, and a breakfast is a must.

۞ The sales will decline in Ramadan since people do not eat to have breads and rusks, the diet and eating pattern changes in Ramadan.

۞ During monsoon, bread catches fungus quickly and sales decline a little bit.

Source: (CEO & Marketing manager)

PART 3 MB STRATEGY DESIGN

3.1 STRATEGY BY EXPERIENCE AT MB

The company has EXPERIENCE design. It is a stable, mature and small business. Ideas lens is not there, since novel ideas are not required that much, such in the case of hardware (processors) industry. The strategy was developed as an outcome of individual (CEO father) and collective experience of individuals (Some people have more than 23 years of experience at MB). There are certain assumptions found in the company. They assume that their business is about bread making, name MORNING BREAD, but ……. Rusks, buns, burgers and cakes are also being offered. Why not MORNING CAKE?

They assume that the Rawalpindi customers value them a lot and are their main customers. The demographics of Rawalpindi residents have changed to some extent, of which they may not be aware. The political and economic environment is changing rapidly. They assume that the current strategies would be still helpful.

MORNING BREAD (NEW RAWALMORNING BREAD (NEW RAWAL FOOD INDUSTRIES, RAWALIPINDI)FOOD INDUSTRIES, RAWALIPINDI)

Visit # 1 SUB QUESTIONNAIREVisit # 1 SUB QUESTIONNAIRE

(CLOSED ENDED)

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Date: 01-10-07

Interviewee: Raja Muhammad Iqbal

Designation: CEO and Owner

Interview Duration: 3 hours

Interviewers: Sadaf Fayyaz, Wajiha Arif

Q1 How many people does your business currently employ?

None

1

2-5

6-9

10-25

26-50

51-100

101-250

251-1000

1000+

Q2 What is the business location?

Punjab

Sind

Baluchistan

NWFP

AJK

Other

Q3 What is the business sector?

Manufacturing

Retailing

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Food Production

IT/Net

Crafts

Professional services

Financial Services

Not-For-profit

Other

Q4 How would you rate medium term prospect of your business?

Should achieve exceptional growth

Should achieve moderate growth

Develop in line with sector

Under perform

Very poor performance

Q5 How would you rate your business financial condition?

Has surplus funds and able to generate capital

Has reasonable cash flows

Tight cash flow but able to raise it

Struggling to get positive cash flows

Critical financial condition

Q6 How would you characterize the management?

Exceptional experience and expertise

Stretched but adequate coverage

Covering with gasp

Weak

Very poor

Q7 How would you rate your products as compared to competitors?

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Very superior to some competitors

Superior than them

In line with competition

Below (inferior)

Very inferior as to competitors

Q8 How strong is the marketing?

It is playing a leading role in business development

It is part of sales

Weak and limited role

Marketing does not exist

Q9 How would you rate the cost effectiveness of MB?

Better than most competitors

Better than some competitors

In line with competition

Worse than some competitors

Worse than most competitor

Q10 For the current year how profitable is your business?

More than n 25% return

10-25% return

5-10% return

Breakeven

Losses

Shut down point

Interviewee: Raja Muhammad Iqbal

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Signatures: -----------------------------

MORNING BREAD (NEW RAWALMORNING BREAD (NEW RAWAL FOOD INDUSTRIES, RAWALIPINDI)FOOD INDUSTRIES, RAWALIPINDI)

Visit # 1 QUESTIONNAIREVisit # 1 QUESTIONNAIRE

Date: 01-10-07

Interviewee: Raja Muhammad Iqbal

Designation: CEO and Owner

Interview Duration: 3 hours

Interviewers: Sadaf Fayyaz Wajiha Arif

Q1 What is the corporate level strategy of morning bread? Would you like to share it with us?

Ans: The CEO is the main strategist of the company. Since it is a small, private business, the CEO has played a role in transferring the values of his ancestors to the lower level. Hence the

idea was to keep business interest free. The financial strategy is mainly affected by this value.

Q2 How value is added to different parts of the organization?

Ans: The CEO adds value to different parts of the company.

Q3 What is the geographical coverage of your products?

Ans: We have more customers in Rawalpindi as compared to Islamabad. (Detail in Report)

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Q4 What is the diversity of products? Does the company have many product or single product line?

Ans: The company has a plan to expand its product line. Currently the company has 1 product line (only breakfast and tea stuff). The competitor DAWN bread has a broader product line. It has started offering FROZEN PARATHS as well. These can be refrigerated for months and are not as perishable as bread.

Q5 How resources are allocated among different parts of the organization?

Ans: (Detail in report)

Q6 What is the business level strategy of Morning bread? How does it compete successfully in markets?

Q 7 How does it get advantage over its competitors? (like DAWN, WONDER and VITA BREAD)?

Q8 What are some /any new opportunities found in the markets?

Q9 What products are usually made and for what markets/customers?

Ans: Bread/buns, cakes, bran bread, Sheermals, rusks and burger buns are the main products. Bran bread is for diet conscious or doctor diet people.

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Q10 To what extent is the company meeting customer needs?

Ans: The sales are in line with the competition.

Q 11 What is the elements of strategy for Morning Bread?

Ans: Improved packing, hygiene, cost cutting programs, to achieve economies of scale, product improvement, waste production to a least, to maintain a network with retailers,

Q 12 What changes are taking place in the environment? Will these changes affect the business?

Ans: Definitely, the government instability is the biggest change. High inflation gives us least profits. Economic changes like atta shortage also affected our business badly. Sugar crisis also had a dreadful impact on business. (sugar used in making cakes, cookies, biscuits, etc.) Government elections and road blocks also affect our business. Because bread has a small life. Perishable product. It has to reach the retailers in time. Otherwise it’s no use.

Q 13 What is it that stakeholders expect from the company?

Ans: Different stakeholders are involved. No creditors are there. The CEO wants profits; managers want good salaries and environment, workers good pay and customers low price high quality products.

Q 14 What do you think? Which variable (economic, political, and governmental) is creating opportunity and which is creating threat for you?

Ans: Obviously, inflation is a threat. Sugar and Atta shortage is a threat. Opportunity is that during road blocks, our cars move in Pindi, because we have more customers in RWP. DAWN and WONDER have more in ISB. That gives an opportunity.

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Q15 What are the core competencies of Morning Bread? (in terms of people, HR, product)? What is it that gives you an advantage over DAWN and VITA?

Q 16 What are the Critical Success Factors?

Q 17 What is the threshold product features? (What are the product features that are almost same for DAWN and VITA as well?)

Ans: Details in report.

Q18 What are the threshold resources? (that makes you stay in the business)

Ans: They include HR, financial, intangible and physical. (Details in report)

Q19 What are the unique resources (Difficult to imitate for MB)?

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Q 20 How do the corporate level (The CEO) adds value to business?

Ans: Details in report

Q21 (Whether strategy by design, ideas or experience)?

Ans: Details in report

Q22 How does MB considers the expectations of owners in developing its strategy?

Q23 What latitude is given by owners to allow management to develop and pursue strategy?

Interviewee: Raja Mohammad Iqbal

Signatures: -------------------------------

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