A MARKETING AUDIT

ENGLISH BISCUIT MANUFACTURERS LIMITED

Submitted by: MAVISH ZAMAN1

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Table of ContentsEXECUTIVE SUMMARY............................................................................................................................6 ENGLISH BISCUIT MANUFCTURERS..................................................................................................10 AN OVER VIEW..........................................................................................................................................10 AN OVERVIEW...........................................................................................................................................11 PROBLEM STATEMENT..........................................................................................................................13 SWOT ANALYSIS.......................................................................................................................................15 STRENGTHS................................................................................................................................................16 WEAKNESSES.............................................................................................................................................16 THREATS.....................................................................................................................................................16 OPPORTUNITIES.......................................................................................................................................16 DEMOGRAPHICS ECONOMIC ENVIRONMENT NATURAL ENVIRONMENT TECHNOLOGY POLITICAL ENVIRONMENT CULTURAL ENVIRONMENT TASK ENVIRONMENT MARKETS EXPECTED MARKET SHARE10 DANE CBL 20 22 27 28 29 32 34 35 37

LU....................................................................................................................37

GROWTH STRATEGIES4 (KOTLER) 38 EBM HAS SEGMENTED ITS MARKET ON THE BASIS OF INCOME AND AGE AND LIFE-CYCLE STAGES, THUS ADOPTING A MULTIVARIATE DEMOGRAPHIC SEGMENTATION4 (KOTLER). INDIVIDUALS FROM DIFFERENT INCOME AND AGE GROUPS CONSUME EBM BRANDS AND EBM HAS DESIGNED ITS PRODUCTS ACCORDINGLY. FOR INSTANCE, THE COMPANYS FRONT RUNNER BRANDS LIKE RIO, MARIE AND GLUCO ARE PRICED IN THE RANGE AFFORDABLE TO THE UPPER AND MIDDLE INCOME GROUPS. WHEREAS, THE LOWER INCOMED CONSUMERS GENERALLY GO FOR TICK PACKS, HALF ROLLS, ORDINARY AND PLAIN COMPANY BRANDS SUCH AS THE SALTISH COOKIES. SOOPER, PARTY ETC. 41 MARKET TARGETING 41 CUSTOMERS 43 NEED/WANT ANALYSIS 43 PUBLICS 58 MARKETING STRATEGY AUDIT..........................................................................................................60 MARKETING STRATEGY AUDIT..........................................................................................................61 BUSINESS MISSION MARKETING OBJECTIVES MARKETING STRATEGY BUDGETS 62 66 68 72

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MARKETING ORGANIZATION AUDIT................................................................................................80 MARKETING ORGANIZATION AUDIT................................................................................................81 FORMAL STRUCTURE FUNCTIONAL EFFICIENCY INTERFACE EFFICIENCY 82 86 90

MARKET .....................................................................................................................................................93 SYSTEMS ANALYSIS................................................................................................................................93 MARKETING SYSTEMS ANALYSIS 94 LAUNCHING DECISIONS26 INTERVIEWS.........................................................................................94 SOURCES OF GETTING RELEVANT INFORMATION (KOTLER)................................................96 MARKETING PLANNING MARKETING CONTROL SYSTEM NEW PRODUCT DEVELOPMENT PROFITABILITY ANALYSIS COST EFFECTIVENESS 100 103 104 106 107

MARKETING PRODUCTIVITY AUDIT...............................................................................................105

COST OF DIRECT LABOR...............................................................................................114 ......................................................................................................................................................................114 MARKETING FUNCTION AUDIT.........................................................................................................115 MARKETING FUNCTION AUDIT.........................................................................................................116 PRODUCTS 117 BRANDING.................................................................................................................................................118 PACKAGING ............................................................................................................................................119 PRODUCT LINE........................................................................................................................................120 PRICE DISTRIBUTION ADVERTISING, SALES PROMOTION AND PUBLICITY 121 123 127

INCENTIVE PLAN FOR THE DISTRIBUTORS OF EBML33..........................................................125 INFORMATIVE PROMOTION4 (KOTLER)........................................................................................127 PERSUASIVE PROMOTION4 (KOTLER)............................................................................................128 BUDGETS(% CONSTRUCTIONFOOTNOTE)................................................................................129 THE MESSAGE.........................................................................................................................................130 SALES FORCE 131 THE SALES FORCE STRUCTURE ......................................................................................................131

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CONCLUSION...........................................................................................................................................133 APPENDICES.............................................................................................................................................135 BIBLIOGRAPHY.......................................................................................................................................136

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EXECUTIVE SUMMARY

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EXECUTIVE SUMMARYOur ProjectThis report, "Marketing Audit of English Biscuit Manufacturers (Pvt.) Ltd." (EBML), is a project for our Principles of Marketing course in our 3rd Semester at the Institute of Business Administration. We conducted the report under the guidance of our instructor Mr. Baber Wahab. The reason why we chose EBML is that the biscuit industry in Pakistan is currently experiencing high competition between the two major players, that is EBML and LU.EBML had been and is a major player in the biscuit industry. Infact it had been the market leader until the arrival of Continental Biscuit Limited (CBL), the makers of LU Biscuits. To regain its lost market leadership EBML has been forced to reconsider and replan its marketing strategies and reposition itself in the biscuit industry. This has given us the opportunity to analyze a company, which is actively, and strongly challenging its competitor for its lost share. It has also given us a valuable chance to apply the concepts, which we have learnt in our Principles of Marketing course. We have used this opportunity to put forth our own views and analyses of EBML's environment, strategies, organization, systems, productivity and functions. Finally we have given our recommendations and opinions which we have come up with after making our analysis.

What Do We Aim To Present?Our main focus in this report is the Marketing Audit of EBML. Through this, we aim to identify the compatibility of the company's basic marketing strategies to its resources, structure of the company and ultimately the biscuit industry, its strengths and weaknesses, the effectiveness of the company's control system and finally how they have actually gone about implementing their strategies.

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In this process we have began by analyzing EBMLs micro and macro environment. This is then followed by an audit of EBMLs Marketing Strategy, the Marketing Organization and the Marketing System. We will then focus on the productivity and finally conclude by analyzing the marketing functions such as products, price, distribution, promotion and sales force. Following the audit we will focus on our analysis and in turn will present our recommendations for EBML. Also included will be other alternatives and contingency plans.

Application of Concepts and StrategiesBy observing and analyzing EBMLs environment, strategies, organization, functions and control systems, we have tried to apply the various concepts and strategies taught to us in our course. These concepts have helped us in understanding the various strategies and functions being performed in EBML. We have in this respect started by applying the following marketing concepts and terms: The Core Marketing Concepts. Marketing Philosophies. Analysis of EBMLs Portfolio. Product/Market Expansion Grid. The Marketing Mix. SWOT Analysis. Environmental Factors. Characteristics affecting Consumer Behavior.

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Types of Buying Decisions. Market Segmentation and Selection. Market Positioning. Demand Forecasting. Product ands Service Differentiation. Product Quality, Features and Design. Branding. Packaging. Product Support Services. Product Mix.

RecommendationsIn this respect we have tried to give our recommendations which we thought the company should consider. This is obviously been based n our analysis and findings. In addition to that our recommendations have been based on the way we have approached company cases in our course. These recommendations are given within the audit itself and relate to the concepts that we have identified relevant to EBMLs case.

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ENGLISH BISCUIT MANUFCTURERSAN OVER VIEW

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ENGLISH BISCUIT MANUFACTURERS (PVT) LTD.An OverviewBiscuit industry in Pakistan has been the center of fierce competition between two main competitors, EBM and CBL. English Biscuit Manufacturers, set up in 1967, enjoyed the position of market leader till the entry of Continental Biscuit Limited (CBL), after which it acted as a market challenger to actively regain its lost market share. The company sells a wide variety of micro brands under two mega brands, Peek Freans and EBM. Thus, following a Brand extension as well as Line extension strategy to create greater brand equity. EBM faced competitors like Montgomery and AB in the 70s, which were not properly equipped to respond to EBMs expansion strategies. Later in the 80s, EBM successfully launched its mega brand EBM by stretching downwards with a lower quality than its Peek Freens brand1.2

The 80s, however, marked the entry of new arrivals in the biscuit industry, which also

included international brands. The changing consumer preferences and wants provided the company to rethink its positioning in the market. The following brands entered in the Pakistani market: Meiji Biscuits LU Biscuits Wolf Biscuits Swiss Biscuits

Competition was brought to an equilibrium state in the 90s with the establishment of Peek Freens and LU as the two main brands side by side.

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EBM is currently following the Production Concept of management, under which it produces products that are highly affordable and easily available in the market. In face of stiff competition, the company has undertaken a large-scale selling and promotion effort in order to increase its market share and create a stronger brand image. Therefore, it also follows the Selling Concept. EBM has sponsored baby-contests and the Godzilla scheme in an attempt to attract more customers and to profitably reinforce its brands in the market. These are a few of our observations and findings related to the company operations. We later present a detailed analysis of its current situation, a comprehensive market plan which would include the companys objectives and issues, threats and opportunities, marketing strategies and action plans after the marketing audit. Our recommendations and specific concepts related to EBM follow.

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PROBLEM STATEMENT

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Problem Statement1EBML, currently a market challenger in the biscuit industry, is engaged in differentiation and value-pricing strategies. However, the wide product line of the company constituting various products in the decline stage is cannibalizing the front runner brands like Rio, Marie, and Gluco. Moreover, stiff competition from LU and changing consumer preferences are the main hurdles in EBMLs efforts to regain its lost market leadership position in the industry, capitalize on its Pied Piper icon and increase market share of its profitable front runner brands.

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The Problem Statement has been prepared by analyzing the companys current situation, desired position and the hurdles faced by it in its way to accomplish its desired position.

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SWOT ANALYSIS

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SWOT Analysis3Strengths A wide product line The Pied Piper icon A strong distribution network Innovation in terms of new ingredients Value pricing A well implemented offensive strategy Competitive advantage in terms of more varieties of biscuits Established brand equity Ineffective innovation in production

WeaknessesVague impression in the minds of the consumers of the relationship of Pied Piper with EBM & Peek Freans both Inability to capitalize on individual brand advertising A wide product line which is

cannibalizing the front runner brands

Threats Stiff competition from LU in terms of packaging, branding, and advertising Changing consumer preferences Availability of foreign brands, like Oreo

OpportunitiesConverging the companys distributors Availing more shelf space and

enhancing distribution coverage More concentration on the kids

segment

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Fast

losing

market

share

brands

Capitalizing on its Pied Piper icon, indicating it as a family brand

(Smile, Venice, Ringo)

THE MARKETING AUDIT

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MARKETING ENVIRONMENT AUDITMacro Environment Demographics Economic Natural Technology Political Cultural

Task Environment Markets Customers Competitors Channels Suppliers Publics

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MACRO-ENVIRONMENT

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MACRO-ENVIRONMENTIn the study of a companys environment, macro-analysis is of utmost importance since it provides a birds eye view of a complex combination of all the factors that are outside the company itself but have the ability to affect the development of the company as a whole. Such factors have also affected EBM and its production activities to a great extent. In his interview Mr. Mehmood Nanji, VP Marketing presented a comprehensive picture of all the major factors as well as the issues and problems within which EBM currently operate. A brief account of our observations and findings follows:

DEMOGRAPHICSEBM describes biscuits as a food between meals and a favorite of snack for children. Changes in lifestyles and primarily the marketing and advertising efforts of the entire food industry have forced people to go for much healthier food. The various changes in the demographic features of Pakistan over the past few years have affected the production and distribution activities of EBM. At EBM, segmentation has also been done on the bases of demographics, with major focus on Income and Age segmentation. 4

Migration of rural population to urban areas: With a huge majority of the rural

population migrating to the urban centers of the country for employment purposes, the major focus of the distribution of packaged foods is the urban population now, whereas previously biscuit companies such as Meiji and Montgomery were consumed to a great extent in the less developed areas of the country. However, the Kasur district in the province of Punjab is the biggest market for EBM brand Rio. But according to EBM, this is because the distributors are strong in Kasur due to which Rio has a 100% market share in the area. 4

Age composition: According to the Economic Survey of Pakistan (1997-98 issue),

the population of Pakistan stood at 139.024 million on Jan 1, 1998. Demographic trends in Pakistan are basically a function of the age composition. The high20

expectancy as well as mortality rates in the country have slowed down the economic progress to a great extent. Since the major target of the biscuit industry, as regards to the age composition is concerned, is the segment of the population under the age of 15 years and some in the 15 to 54 years age bracket, therefore the prospects seem bright for the biscuit manufacturers. EBM has also segmented the population of the country according to age composition. In case of EBM within the Pakistani biscuit industry, the major target market for its biscuits is constituted by the population less than 12 years of age. To meet the demands of this market segment, EBM provides its famous brands such as Rio, Gluco and Marie with high nutrition ingredients specifically for the school-going children.5

Population (millions) 139.024

Age structure 65 3.41%

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Increasing education level: The increasing education level has made the consumers more aware of quality-oriented products, especially healthier and nutritious food. The literacy rate in Pakistan is 38.6 %, with 806000 higher educated students. According to the Economic Survey of Pakistan 1997-985, population in the primary stage, i.e. Class 1- Class 5 constitutes 77% of the total educated population. A major chunk of the educated population in the country now go for packaged food and need quality assurance in the products they buy. With such a major portion of the educated population in the school going category, EBM has an advantage of catering to this specified and identified market for its major brands such as Gluco and Rio. For EBM, maintenance of quality standards is the prime objective to provide value and satisfaction, which these value-oriented consumers want.

ECONOMIC ENVIRONMENTMany changing economic scenarios over the years have affected the biscuit market. EBM, being a factor of biscuit market has also been affected4. Changes in the income level, interest rates prevailing in the country, savings and borrowing rate have had a great impact on the biscuit industry(Kotler). Our interview with the VP Marketing revealed the following facts related to the economic factors affecting EBM. Income size: Changes in the incomes of the households have brought along with them opportunities as well as problems for the entire packaged foods industry of Pakistan. Opportunities in the sense that now customers have greater purchasing power and they are spending more on almost every category of products that obviously includes food products thereby bringing about more spending in biscuits.

Now more money is being allocated to non-essential products, biscuits included in that category. Consumers now are switching to fast foods especially recreational food products. So marketers are seeing good opportunities to cater to such expanding markets.

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But in order to cater to the production of these packaged brands, which are within the purchasing power of the common man, it is also important to produce a value for money. And EBM is doing just that. Also people who could not afford fast food before can now afford it, hence new customers are entering the market and now markets are growing in terms of potential customers that can be catered to.

Trends in Household Income distribution in Pakistan(Source: Economic Survey of Pakistan)5 Year Household Combined: 20% 1987-88 1990-91 1992-93 1993-94 8 5.7 6.2 9.2 Income Middle: 60% 48.3 45 45.6 50.6

As seen from the table above, the middle income group has gradually increased over the years. This has the indications that people now spend more on consumer goods, food being the most important one, and obviously biscuits since biscuits are the main snack between meals.

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Monthly Average Household Rural/Urban Income (in Rs.)Source: Economic Survey of Pakistan 1997-985 Year 1990-91 1992-93 1993-94 Pakistan 3168 3590 3915 Urban 30701 4976 5571 Rural 2931 3070 3248

With the monthly average household income of rural areas is also on a rise, consumers in these areas are also becoming increasingly aware of the value of their money. With advances in transportation and distribution methods, biscuits of all types are now making their way into theses areas creating a new market but a smaller one as compared to the urban areas.

Selected Macroeconomic Indicators(Source: SBP Annual Report 1997-98) GDP Deflator 8.9 Provisional Consumer Price Index 7.8 Provisional Total Investments 17.3 as % of GDP National Savings 14.5 as % of GDP

Foreign competition: Foreign investors are also entering the Pakistani consumer market. According to the Economic Survey of Pakistan 1997-985, total foreign investment in the year 1996-97 was $949.5 million. Uplift of restrictions from foreign imports has created a problem by increasing competition and evoking a price war. For example, Oreo is now available in Pakistan. Along with these foreign investors local

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production is also increasing and every now and then we hear of a new biscuitmanufacturing firm entering the market. Increased purchasing power and exposures to foreign products have bestowed customers with more rights to choose among different brands and companies. They now can select among at least a thousand different brands from a hundred different companies. This calls for more flexibility and adjustment to the market. It has become a norm of the industry to adjust according to the needs and demands of consumers, and of course, this flexibility does not come without investment. So, definitely that has been an effect on biscuit industry and one needs to become more flexible catering to larger customer base as is in the case of EBM. The following the various foreign brands of biscuits, ticky packs and crackers available in the market now: Oreo: the large pack sells for about Rs. 98. Cliff Cool, a major departmental store in Clifton sells Rs. 3000 to Rs. 4000 per day worth of Oreo and according to the store incharge, Oreo is in great demand these days. Bahlsens: Another foreign brand occupying a large shelf space in the store. The brand has various varieties, which include Clubs, Teddys etc. the prices range from Rs. 58 to Rs. 100. Bakers Pride: Bakers Pride also has many varieties and also offers chocolate rolls amongst other biscuits. The price is about Rs. 50 to Rs. 60. Source: Cliff Cool Departmental Store, Clifton. Income and Inflation: Pakistan has experienced sustained inflation over the last 4 years, from 1993-94 to 1996-97, as measured by the changes Consumer Price Index (CPI). Over these years, inflation ranged from 10.8% to 13%7. This high inflation rate has enforced major economic and social costs and the persistence of double-digit inflation rate was of major threat to macro economic growth and stability. The

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inflation rate in Pakistan, however, stood is 8.2% in 1997-987. Income, pricing and inflation have always had a pressuring on businesses for it makes credit terms difficult to be liberalized and eventually have an adverse effect on sales. More transactions now are carried out in cash and credits are extended to only those customers whose worthiness has been proven, but it is also an opportunity for marketers. Inflation has led to increased prices and has made consumers more conscious of the value of their money and the ways in which they spend it7. What EBM is doing in this respect is that it tries to avail every opportunity and tries to get the best out of it. Initially it had one supplier, now they have about twenty suppliers to reduce their dependence on them and to strike the best deal out of these suppliers. 4

Economies of Scale in production: The production facilities at EBM give the

company an advantage as it realizes economies of scale in its production. Catering to the expanding market EBMs production has increased enormously. Brands that were once produced at 20 tons are now being produced at about a 100 tons, thereby, bringing purchasing-side advantage to the company as it gets low-price benefits on bulk purchases (Kotler). Also the wastage associated with production is being reduced to save money and the environment. Addressing to the credit extension problem the company has decided to carry out all its sales and purchase transactions in cash. This does cost the company problems concerning sales but it believes that if it maintains quality standards, these costs would be a lot less.

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NATURAL ENVIRONMENTIn the natural environment of the entire biscuit industry, the natural resources include basic biscuit ingredients such as wheat, butter and sugar. 4

Availability of raw material(Kotler): As far as the raw materials are concerned, EBM

has the availability of sugar as well as butter or vegetable oil. However, the availability of wheat is a problem. For manufacturing biscuits, the wheat used contains a glutin base. Glutin is an ingredient used to keep the biscuits together so that they do not crumble. Wheat from Punjab has a different glutin base as compared to the wheat in Karachi or the wheat that is imported from the US. EBM fulfills most of its wheat requirements from abroad. Therefore the scarcity of wheat has increased costs for the company but these costs are not passed on to the consumers. As far is sugar is concerned, EBM has easy availability of sugar in the country. In Pakistan, sugar is produced by 76 sugar mills, which on an average produce 5.4 million tones of sugar as against a total aggregate demand of 2.9 million tones in the country. (Source: Economic Survey of Pakistan 1997-98)5. Therefore, the biscuit industry has abundant availability of sugar and also at reasonable prices. 4

Costs of Energy:(Kotler) The major sources of energy for the food industry in Pakistan

are electricity, gas and petroleum for the running of the machinery. Energy costs, especially those of electricity, are increasing constantly due to which, among other companies, EBM is also facing a high energy cost but this increase in costs is not transferred onto the consumers. The company sets aside a portion of its revenue for meeting these unforeseen increases in energy costs. 4

Environment-friendly company(Kotler): The VP Marketing has described EBM as an

environment friendly company in the sense that there is no spoilage in the production process and no disposal of harmful waste material. EBM manufactures safe products and is involved in energy-efficient operations. Moreover, EBM also supports such public related causes as The Kidney Center Walk-a-Cause and sponsors other such causes to enhance its image amongst the general public.

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TECHNOLOGYIn the fast paced world of today, technology plays a significant role in determining the competitive advantage of one organization over another.4

Responses to rapid

technological changes in the environment shape a companys destiny. (Kotler)

Technology in the Biscuit Industry: Biscuit making is not a very high technology business. But technological progress has surely brought a few dramatic changes in the way that biscuits are produced; viz. a viz. packaging, viz. a viz. formation of the dough, viz. a viz. making sheets in which the biscuits are packed. The machinery that is installed is very expensive and involves complex ovens and other tools. The ovens are of various types. Previously, brick ovens were used in the biscuit industry. The rapid technological progress has eased the biscuit manufacturing process by introducing gas ovens. Even though technology plays an important role in the biscuit industry of Pakistan, yet it is not as fast paced as it is in other major industries.

The various machinery used in biscuit manufacturing is:8 (IRS-Report in the morning campus) Universal vertical mixer Sugar pulverizing crusher Rotary biscuits moulder Electric baking moulders Electric baking oven Baking oven, fire bricks Weighing scale Tools and equipment

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4

R&D(Kotler): EBM does not spend a lot on R&D since biscuit making is not such a

complex and vast industry. The research at EBM only involves an analysis of the biscuit market and a quality control procedure. The company also concentrates on extensions in existing brands such as, new flavors introduced, new ingredients like nuts or almonds etc. Moreover, EBM has recently finished an exercise on ISO 9000 under which it has to follow certain rules and regulations for quality control. Celebrating 30 years of excellence, the company has been certified as manufacturers of quality products ensuring hygiene and nutrition to its consumers.

Taking technology in view, EBM is basically aiming at economies of scale in its production processes as mentioned before. Taking advances in technology along, the company has always indulged in cost efficient and environment friendly operations by understanding the ways in which technology has shaped the economies of the world and the consumers therein.

POLITICAL ENVIRONMENTIn the political environment, we study the government laws and agencies and their influences on the overall running of the firm4(Kotler). Especially in the Pakistani political arena, which experiences changing governments from time to time, private as well as public limited companies are faced with increased regulations and more pressuring laws. Some governments favor the agricultural sector and formulate strategies accordingly i.e. more resources are spent in improving and in the uplift of that sector. Others may be tilted towards the manufacturing sector and so will formulate rules and strategies, which are helpful in the uplift of the manufacturing sector.

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Changing governments and policies:

Unfortunately in Pakistan there has been a minimal amount of stability in government policies. In the last eleven years three elected governments have been dissolved. Each new government has its own way of running the country, and so its own unique set of policies. This constant change in economic policies has been very damaging for the development of the industrial sector. Tax rates keep changing, and also do the various import duties. All these have implications on a business like E.B.M.

Taxes:

As tax rates and import duties fluctuate it is very difficult for the firm to set stable price of its product. Company has to set a reasonable price, which is affordable by the people of the segment it is targeting. When prices rise E.B.M loses its low income customers and the extra revenue goes to the government. So it is not only the customers who loses out by paying a higher price but also the Company which faces decline in sales and so a decline in profits. The recent imposition of G.S.T (general sales tax) which is a tax levied at the retail stage, is a good example. The reason why the business sector was resisting the launch of G.S.T. was that the end product to the customers will become expensive and businesses will experience a fall in demand. Increase in import duties can be both harmful and beneficial for E.B.M, depending on the stage of the production cycle. As a manufacturer it is has an unfavorable impact. The reason is that E.B.M imports most of its biscuit manufacturing machinery. When it imports E.B.M has to pay an import duty on it. A rise in import duty will increase the cost of machinery to the Company and so increase the cost of production. The Company is forced to pass on the higher costs in the shape of higher prices to its customers. If the import duty is too high E.B.M carries out a cost benefit analysis that whether it will be able to pass on the higher costs to higher prices without lowering demand by much. If it

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is feasible only then will it go ahead with the purchase decision. Governments in the past have resorted to strict import controls to reduce the balance of payment deficit, and also sometimes to increase its own revenue.

Import duty:

An increase in import duty can also be beneficial when E.B.M is marketing its product. An increase in import duty will raise the price of all foreign brands competing in the local market. In this way E.B.M can have a competitive advantage over its foreign competitors and can gain a greater market share. Another major sector, which the government influences, is the regulation of fuel and energy prices4 (Kotler). Petrol prices have been rising steadily over the past several years. This causes the prices of transport to rise. It includes both the costs of transporting the raw materials and delivering the finished product to the market. This increase in cost has to be covered by higher prices. Also the factory runs on fuel and electricity an increase in price of either of these by the government will put pressure on the Company to increase its price which can well prove to be harmful for the sales.

Devaluation:

Devaluation has been a routine procedure in Pakistan. It has both harmful and beneficial implications for E.B.M. Devaluation makes imports more expensive and exports cheaper. So for E.B.M imported resources become expensive. For example its import of heavy machinery will become expensive and also its basic raw material wheat is imported. After devaluation it will have to pay a higher to obtain materials. But devaluation can be beneficial in case of competition, as imported brands become expensive in the local market. All this devaluation leads to instability in prices.

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In order to be successful in this unstable political environment, Company has to try and carry out sound planning, so that it anticipates new government policies. It should try and keep a reserve when revising its prices so that it does not have to change its price at every cost fluctuation.

CULTURAL ENVIRONMENTDue to advertisement, increased rate of literacy and easy access to information people are becoming increasingly aware of different products that available in the market today and are quality conscious and value-oriented consumers. They go for nutrition rather than taste. People now believe more in packaged foods, ready to cook products that save time. This can be seen as an opportunity as their trust in biscuit industry is increasing and more demand is following.

Traditions4 (Kotler): Tea parties have become a way of celebration and biscuits are a part of it. Biscuits have been a part of the tradition here in Pakistan and are served in different ways. For example, EBMs brand Rio is a specialty for tea parties. LUs Prince is the favorite lunch item for children in school. Ticky packs of various biscuit companies are now available in the market, which provide economy and convenience to the consumers.

Convenience for working mothers: An increase in the number of workers especially women has also increased the demand for fast food including biscuits. It helps them save their time and makes it free to allocate somewhere else. Concept of heavy meal is diminishing and people take biscuits in between the meals at any hour of the day. To give a good nutrition to their children, mothers are reckoning upon biscuits which

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children eat eagerly and ensure nutrition and health to them. Hence, this brings them convenience and they are more satisfied that their children have taken good, hygienic food. Women on diet also take light food to maintain their fitness level, for instance The Whole Wheat crackers produced by EBM are in great demand amongst the diet conscious consumers.

Media influence on the purchases and shifts in beliefs4 (Kotler): But changes in life styles have also brought with them problems. Beliefs regarding locally produced products have changed and as the Pakistani cultural and social environment becomes a prey to international media and culture, people have started giving more preference to foreign products. Openness of imports has brought in more competition.

Availability of imported packaged foods not only snacks but biscuits too have influenced packaged food industry in Pakistan. Pakistani manufacturers of biscuits and other food items are now trying to reduce their production costs in order to offer their products at a much lower prices than those of the foreign products but offer the same quality of items. Therefore, the biscuit industry in Pakistan is also under pressure to adopt new strategies to countering this foreign threat.

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TASK ENVIRONMENT

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THE TASK ENVIRONMENTEffective marketing involves maintaining healthy relationships with customers, retailers, suppliers and other such factors in the environment of the company. Success of marketers depends on a proper handling of these factors. In this section of the environment audit, we analyze the closely linked microenvironment factors affecting the operations of English Biscuit Manufacturers.

MARKETSEvery company has to identify the consumers that it can satisfy among all the consumers in the market. The company has to see the attractiveness of each segment and then decide on the segment, which they can serve in the best possible way and thus earn maximum profits4 (Kotler).

Biscuit Market in Pakistan9

The total market for biscuits in Pakistan into two distinct groups, which are the organized

market and the unorganized market. The unorganized consists of the biscuits made in the bakeries and in the in house manufacturers. The total size of the biscuit market in Pakistan is about 50000 tons estimated per annum. The unorganized sector is about 50% of the total market that is 25000tonnes, the remaining 25000 tons is met by the organized sector, which is an industrial base sector. The companies in the organized sector are called the Professionally Managed-Marketed Marketing Companies. There are only four of these companies in Pakistan, which are Meiji, EBM, LU and Dane Foods. The total sales of Meiji and Dane foods are about 1500-2000 tons each, while the sales of LU and EBM are 10500 and 4500 tons respectively. There are other manufacturers present in the market that have a considerably smaller volume of total sales, they also sell packaged biscuits but they sell these at a very cheap price. 10 interview

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LU

EBM

Sales in Tonnage

EBM LU

4500

10500

Categorize within the Biscuit Market The biscuit market in terms of the types of biscuits can be broken into 3 categories Plains, Creams and Crackers. LU has a considerable market share in the creams and cracker. EBM has a major share in the plains, at the moment the market can be divided into 35% creams 30% crackers, and the rest are plain. 10 interview

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Expected Market Share10We estimate the market share of EBM along with its competitors in the biscuit industry by comparing intended purchase by the consumers with the frequency of purchase.

Expected Market Share

16%

6%

24%

EBML CBL Dane Foods Others

54%

DANE

CBL

LU

The other players in the biscuit industry are Meiji, Montgomery, Wolf and Kims, etc. in

the organized sector. This category will also include small manufacturers of unbranded products and Bakeries would be categorized under the unorganized sector of the industry.

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Growth Strategies4 (Kotler)We would analyze EBMLs growth strategies regarding markets in the light of the Product/Market Expansion Grid.

The Product/Market Expansion Grid

Existing Products

New Products

Existing Markets

Market Penetration

Product development

New Markets

Market development

Diversification

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At present, we feel EBML is engaged in Market Penetration, making more sales to present customers without changing the products in any way. This, the company is doing by increasing the sales and promotion efforts of its front runner brands, especially Rio, Ringo and Marie. The company should continue with this growth strategy.

Recommendation: We would also recommend better store displays by EBM at busy departmental stores such as Aghas, Jumbo and Shell shops. This would attract customers of other biscuit brands and create greater consumer loyalty for EBML. With sales of Half rolls and ticky packs on the rise, EBML should continue with its Product Development strategy, offering new or modified products to current markets. Operating with a wide product portfolio, EBM has been successful in developing new products from time to time, thus combating the aggressive moves of its main competitor, CBL. In this respect, the company launched Rio in direct competition to LUs Prince and Tip Top as against 50-50.

Estimating market demand4 (Kotler) For effective market targeting strategies, it is important for EBM to estimate its market demand from time to time. A general equation of estimating total market demand is:

Q = (n) (q) (p)

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Where Q is the total market demand n is the number of buyers in the market q is the quantity purchased by an average buyer per year p is the price of an average unit

If, for instance, there are 10 million buyers in the market, purchasing an average of 25 biscuits packs every year with an average unit price of Rs. 18, then the total market demand for this biscuit industry would be Rs. 4.5 billion. For estimating future demand, the company can carry out a compared to the competitors. It can also ask its salesforce to prepare estimates of future demands based on past patterns in demand and sales, keeping in view the countrys political arena and the economic situation in the country. 4 (Kotler)4 (Kotler)

Survey of the buyers

intentions regarding purchases and how they would rank the company products as

Market Segmentation

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EBM has segmented its market on the basis of Income and Age and Life-Cycle Stages, thus adopting a Multivariate Demographic Segmentation4(Kotler)

. Individuals

from different income and age groups consume EBM brands and EBM has designed its products accordingly. For instance, the companys front runner brands like Rio, Marie and Gluco are priced in the range affordable to the upper and middle income groups. Whereas, the lower incomed consumers generally go for tick packs, half rolls, ordinary and plain company brands such as the Saltish cookies. Sooper, Party etc.

Market TargetingThe marker segments into which EBM has entered so far have proved to be favorable for the company. The biscuit industry in Pakistan is profitable and the current company segment sales and growth are also positive. Moreover, apart from LU EBM does not face any such stiff competition that would threaten the companys present position in the market as a major market challenger. Therefore, the Industry Structure4 (Kotler) and the Segment Size and Growth are definitely in EBMs favor.

Market Coverage Strategies of EBM4 (Kotler)For the evaluation of different market segments, the company can adopt any of the three Market Coverage Strategies given below:

Undifferentiated Marketing Differentiated Marketing Concentrated Marketing41

EBM is currently engaged in the Differentiated Marketing Strategy11, offering separate marketing offers for different market segments and going after the market with different product lines. Choosing any of these strategies would involve a careful analysis of the companys resources, products stage in the life cycle, and the competitors marketing strategies.

Market Positioning4 (Kotler)The main task for EBM regarding market positioning is to position its products in such a way that it is able to create more consumer involvement in EBM products and to counteract LUs strategies in this regard. The company can adopt any of the following positioning strategies: On Product Attributes: The quality Of EBMs products, 30 years of experience in the industry. Benefits: hygiene and nourishment Classes of users: Rio for kids, Whole Wheat for health conscious consumers. Against LU: We are dedicated to providing you with more value at a standard price.

Recommendations: For positioning, we recommend the following strategies: 12

EBML needs to focus more on the consumer segment of children. It requires a

careful study of the perception of the kids regarding the different biscuit brands. The company is missing on an important segment and needs development in this area. As

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suggested before, the company can reposition its brands and redesign the products in the way that kids are attracted towards these brands due to their unique shapes (cartoon characters etc.) Capitalizing on its Pied Piper icon and utilizing it as a symbol of an entire family of brands rather than simply a company identification.13 More innovation in terms of packaging, the company should move away from the typical white packaging and bring out more colorful versions of the packages.13 Should emphasize on its various taste elements in the different brands. For example, zeera in Click, peanuts in Peanut Pik and chocolate chips in Smile.

CUSTOMERSCustomers consist of people who buy goods and services for personal consumption 4(Kotler)

.

Need/Want AnalysisFor every business, it is necessary to identify the needs and wants of the consumers that the products fulfill. Accordingly, the products should be produced to satisfy these consumer needs to the greatest extent.

In case of a biscuit industry:

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Biscuits would satisfy a persons social needs. This is so because in every day use, biscuits are consumed with friends and are served to guests. Consumers can consume biscuits while socializing. We would not categorize biscuits as satisfying physiological needs because biscuits are not something a person cannot live without. As mentioned before, biscuits are considered to be food between meals, and therefore donot serve the purpose of satisfying physiological needs.

Consumers would search for a brand of biscuits that would give them the most value, quality, features and satisfaction for their money. Hence, as far as the wants of the consumers of biscuits are concerned, consumers seek quality and taste in biscuits. They want the product to provide nourishment and good taste at the same time.

Biscuits are usually eaten between meals, and so it is more of a lifestyle than a need. This lifestyle has been created by the various advertising campaign used by the biscuit manufacturers. The general concept that was held regarding biscuits was that children mainly consume biscuits. But with time the biscuit manufacturers were able to change this image through advertising and also by introducing new varieties to suit different age segments. Soon it was realized that biscuits also provided nourishment and health to adults.

The reason why people have accepted biscuits in their lifestyles is because of the growing concern for healthier food. In search of healthier foods, people prefer packaged food and biscuit manufacturers provide them that.

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EBMs Dedication to QualityE.B.M is one of the top biscuit manufacturers in Pakistan. It has achieved this position because of its continuous urge for quality. EBM has a significant market share, and this is because of the image it has created in the minds of people. People are ready to pay an extra price in return of superior quality. There are also some cheaper brands in the market but they are usually low in quality. Whereas EBM has maintained a standard in quality and its main competitive advantage is its quality. And as the trend is towards healthier living, people are ready to pay the extra price. EBM has also brought about changes and improvements in its various range of biscuits. It has been quite successful in changing the culture of biscuits, which was mostly considered to be for children. EBM has tried to get more people to consume biscuits by bringing in more variations in accordance with their tastes.

For example EBM introduced Click, its premium Zeera biscuit. This specially catered to the tastes and liking of the adult consumers. Also diabetic patients who because of medical reasons do not take extra sugar were the main consumers of this range of EBMs brands. Catering to the special requirements of diet conscious consumers Diet conscious people do not eat biscuits because it is made up of butter and sugar and so contain lots of fats and cholesterol. For this segment EBM introduced its Whole-Wheat Slices, a very light range of biscuits with minimal amount of fats, having fiber as its basic ingredients. Weight conscious consumers also preferred the whole-wheat crackers. In this way, EBM has been able to capture a new and profitable segment.

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Special Offers for the Consumers14 Adopting the strategy of Market Penetration, EBM has introduced special offers in the biscuit market with its product line. In this respect, The company offers special prizes inside the packs. Coupons for prizes inside the packs. These prizes can be redeemed at the specified retail outlets. The consumers have to buy any EBM/Peek Freans Biscuit special promotion packs to see what they have won.

With this market penetration strategy, EBM claims:

Everyone is a Winner with The Pied Piper range of Biscuits

The following is a diagrammatic description of the Prizes Hierarchy offered by EBM through these special promotion packs.

Prizes Hierarchy14

Watch Camera

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Poster Magic Marker Magnet Scale Stickers

Imposition of the GST and the burden on the consumers E.B.M lays heavy emphasis on the stability of prices as majority of the population of Pakistan belongs to the lower income group. This is quite a difficult task because of the high inflation rate usually in double digits. Also high tax rate pressurizes the company to increase its price. The recent imposition of GST (general sales tax) has forced the prices to increase and eventually, the consumers have to pay the extra amount. The company over the years has tried to keep prices as stable as possible. To manage this, it keeps a certain reserve when it revises its prices keeping in mind the future fluctuations. In times of low costs this reserve builds up and can be used as a cover when costs rise suddenly. Also EBM has increased its contacts with various suppliers of raw materials and who ever gives the most reasonable deal gets the contract to supply. As this leads to a lot of competition in suppliers, EBM gets a competitive price.

Over the years people have become price conscious as inflation is continuously lowering their living standards. With all the other commodities, biscuits have also become expensive. The normal biscuits packet has experienced an almost 100% rise in price over the last 5-6 years. So now it was becoming out of the reach of common man. Sensing the

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fall in demand EBM launched its plastic wrapper pack, which was without the normal cardboard packing. This helped in reducing the packaging cost and eventually, the price.

The launch of the Ticky PacksFurther focusing on the economy purchasers, EBM launched the ticky packs. These contain two to four biscuits depending on the type and cost for around Rs.2. This was launched mainly for the school going children, to encourage them to buy more nourishing food instead of candies, which were the most attractive products available to them. Children can easily buy these from their own pocket money.

Keeping pace with changing consumer tastesThe tastes and preferences of customers keep changing with time. A company in order to be successful has to keep pace with it and bring in new variations in accordance with new tastes. A failure to do so will cause the company to be driven out of the market. As children prefer chocolates to biscuits, EBM took out cream biscuits like Chocolate Sandwich and then Rio. By closely monitoring the target segments, company can better understand their taste preferences and so come up with successful products.

Characteristics Affecting Consumer Behavior in the Biscuit Market4(Kotler)

Different characteristics of the consumers affect their buying patterns and the way they perceive various marketing offers. It is important for businesses to determine what types of characteristics affect the specific consumers of their products.

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In case of the biscuit market generally, the following consumer buying behaviors should be taken into account: Social class of the consumer: Members of a social class share similar beliefs, interests, values and behaviors. The social class of a consumer greatly influences his or her buying behavior as well as brand preferences. In case of biscuits, if the consumer comes from a higher social class, he or she would prefer imported brands in biscuits mostly. Whereas, a consumer from the middle social class would generally prefer local brands and would definitely consider price differences. A consumer from the lower social class would go for ticky packs of local and cheap brands such as Montgomery. Family: Family members can exert influence on eachother in terms of buying decisions. In case of biscuits, brands that are generally liked by all members of the family are purchased. For instance, it is generally observed that on an average, all family members go for Prince by LU, Rio and Marie by EBM. Age and Life-Cycle Stage: consumers also change their preferences for biscuit brands over their lifetimes. Kids generally prefer Rio and Gluco and prince by LU to Whole Wheat Slices, whereas teenagers go for Peanut Pik, 50-50 by LU and Chocolate sandwiches. Adults on the other hand prefer Whole Wheat Slices, Marie for a much lighter flavor and Tuc by LU. Lifestyles: Consumers of biscuits also vary in their lifestyles. For instance, diet conscious consumers prefer Whole Wheat Slices and Tuc by LU, indicating their patterns of living and their psychographics. Some may differ in their opinions regarding salty and sweeter biscuits, about nourishing ingredients or even company opinions.

Consumer Buying Roles4 (Kotler)

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Consumers differ in buying behaviors in terms of involvement in the purchase of a product and perceiving brand differences. We give a brief account of these buying roles in relation to the specific product under consideration, biscuits and then put up a few recommendations in this respect.

Four types of Buying Roles4 (Kotler)

High Involvement

Low involvement

Significant differences between brands

Complex Buying behavior

Variety-seeking buying behavior

Few differences between brands

Dissonance reducing buying behavior

Habitual buying behavior

In case of biscuits, the type of consumer buying behavior involved would be Varietyseeking buying behavior, low consumer involvement but significant perceived brand differences. This is because consumers are frequently engaged in brand switching and they would generally go for a new brand if it is initially successful and renowned. 4 (Kotler)

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Consumers generally chose biscuits according to their beliefs as well as according to what they had heard of the brand from other consumers. They later evaluate the brand during the actual consumption and establish opinions about the brands in this manner. 4(Kotler)

For his next purchase, the consumer might want to try another brand simply because he wants variety in tastes.

Recommendation: EBM, being a market challenger at the moment, should encourage variety seeking buying behavior by diverting the attention of the consumers from LU. This the company can achieve by offering special deals like the free Click half roll with Lipton Tea purchase, by offering free samples of a not-so-famous brand of the company, like Sooper, with every purchase of the companys front-runner brands and by advertising the company values and encouraging consumers to seek variety and try something new.

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COMPETITORSThe major competitors of English biscuits are LU, Dane foods, Meiji but the number one competitor is LU, which has a significant share of the market in terms of sales volume. LU basically has five to six brands which it markets vigorously in comparison to English Biscuits Manufacturers which has about 53 brands under EB and about 44 brands under Coronet Foods Private Ltd. (CFL). The reason that LU is the market leader is because of their ability to study the trends in the market better and then adapt to them and thus capture a higher market share. EBM has been in the market for thirty years and were the first to start the cream biscuits but did not promote them much, in comes LU they make a better cream biscuit promote well enough and they become the market leaders. Another example where LU took advantage of their understanding of the market was in the case of 50- 50, which were a bit sweet and a bit salty. LU introduced this range and promoted it really well, selling about 10000 cartons, which is the combined sale of a lot of brands in EBM. To this, the EBM management replied by introducing the brand TIP TOP which was so manufactured so as to taste like the 50-50 of LU but it was not up to the standard of 50-50 and thus was a failure. EBM has discontinued the production of the TIP-TOP brand in the recent past.

Brief Profiles of the Main Competitors15EBMLs main competitors in the biscuit industry are CBL and Dane Foods.

Continental Biscuits Limited (CBL)

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Starting its operations in 1986, CBL soon established a firm position in the biscuit industry of Pakistan and is now considered as the market leader. EBML lost its market leadership position to CBL mainly due to the fact that CBL introduced innovative products manufactured under advance technology and backed by sufficient resources to support its massive advertising and promotion efforts. Under the CBL mega brand, LU, comes the following renowned brands:

Prince Milco LU Tuc Candi Gala 50-50

CBL has successfully applied differentiation to its market positioning strategies by capitalizing on its existing brands, maintaining & improving their quality, advanced technology, individual brand advertising emphasizing together the complete range of biscuits by LU thus building the unique family name LU.

Dane Foods Limited (DFL) Starting its operations in 1994, DFL has quickly build up its image in he biscuit market through positioning its products as Cookies providing a taste of the homemade cookies to consumers. This was a new concept in the Pakistani biscuit industry and DFL was

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successful in attracting a moderate market share even in the presence of such biscuitmanufacturing giants as LU and EBML. The famous brands of DFL include:

Royal Dane Butter Cookies Tivoli Coconut Cookies Hansel Chocolate Chip Cookies

Even though Dane Foods failed at bringing about innovation in its product offers, it has been successful in its packaging strategies (gift packs, cup and pouch packs) and also communicating its efforts at developing a new product category in the biscuit market, i.e. cookies, through advertisements.

Competitive Advantage4 (Kotler)EBM can establish competitive advantage over its major competitor. LU, by differentiating its offer. EBM should keep identifying potential advantages and introduce these one by one to try to put LU off balance. The lines along which differentiation should be adopted are explained below with reference to EBM:

Product Differentiation: Style and Design of a few biscuit lines may be altered, more features may be introduced, for instance, zeera, nuts, chocolate chips, more and unique variety of flavors.

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Service Differentiation: EBM should continue to be efficient in its delivery of products to the distributors. It should also maintain healthy relationship with its suppliers and distributors.

Image Differentiation: It should sponsor celebrities for its advertisements and should continue to sponsor important events.

Personnel Differentiation: In case of EBM, it should continue to hire and train people to make an overall good impression of the company. The sales and the marketing staff should be given training regarding proper handling of contracts and distributors.

Recommendation: All these competitive positioning strategies are very important for the company. However, we suggest that the company should adopt a Unique Selling Proposition,(Kotler) 4

picking one brand attribute and establishing that as a basis for building a

competitive positioning. In EBMs case, a USP could be its ability to blend different ingredients such as zeera, chocolate chips and peanuts into the products main ingredients and providing the tastes based on these ingredients, with a touch of these special mixes.

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CHANNELS4 (KOTLER)An efficient and effective network of marketing intermediaries is of vital importance to any firm to succeed. In Pakistan, particularly in the biscuit industry, maintaining a workable web of intermediaries such as resellers, wholesalers, marketing and financial agencies determine the success of the company. EBM boasts sound footings as far this particular factor is concerned. Given below is an observation of the various networks, which are used by EBM to enhance its production and distribution activities.

Resellers: EBMs main strength as far as their performance is concerned are resellers. These resellers are made up of retailers and wholesalers. This is because, after all, these are the people who actually make sales to the general public. Therefore the hundreds of thousands of retailers scattered throughout the country are provided with as much biscuits as possible. This diminishes any possibility of shortages as far as EBMs products are concerned. How these retailers are provided with the best quality biscuits at the shortest possible time? The answer is below.

Distributors: EBM relies on 400 distributors all over Pakistan to make its products available to the retailers and in turn the consumers. The distributors place orders with EBM and are given the biscuits, they then are responsible for its timely supply to the retailers. In Karachi EBM uses the services of Premiere Distributors.

Marketing Service Agencies: With regard to advertising, EBM utilizes the services of Spectrum. Although Interflow also handles a lot of advertising, however that is reserved for the Peek Freans brands. As far as research is concerned, EBM uses the services of Aftab Associates, to conduct tests on focus groups so as to approximate the probable success of its brands like Marie. interview

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Channel StrategyEBM operates under a vast channel of distributors who are required to cover the breadth of retail stores as opposed to selling to few and selected stores. Hence, the company follows the strategy of Width Retailing16. The companys distributor channel supports its operations owing to the fact that all sales are made on cash basis and the company provides the distributors with monthly sales targets.

Recommendations: We recommend the following channel strategies to be adopted by EBML: Converging the major distributors of the company brands and allotting these distributors different zones to operate in.17 Carefully monitoring the supply of Rio in the market as there is a serious supply shortage in majority of the areas of Karachi and other major cities whereas, consumers in Kasur district are only aware of the Rio brand in biscuits indicating a shortage of supply in that area of other major brands. The company needs to increase its interface with the market.17

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SUPPLIERSSuppliers are firms which provide the company with the raw materials the company needs. The efficiency of these suppliers determines the overall performance of the company.

EBM being involved in the food business it needs its raw materials to be supplied without delays. These delays can be of great danger to the company because they might result in factory shutdowns, inability of EBM to supply its products to its distributors punctually, thus leading to dissatisfied customers or even lost sales.

PUBLICSPublics are groups which have an interest in the company or may be able to influence its ability to achieve its objectives4(Kotler)

. In Pakistan, the basic structure in which

companies like EBM operate is not very well developed. However, there are some publics which are able to influence EBM in achieving its objectives.

Financial Publics: 4 (Kotler) These consist of banks, stockholders, investment houses etc. EBM being a private limited company has its stockholders, who obviously monitor whether the primary objective of the firm is being achieved, that is profitability. This, at times, conflicts with the actual activities of the firms management. EBM also has to keep a steady financial position so as to please banks for it to obtain necessary credit or loans whenever needed.

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General Publics:

4 (Kotler)

EBM has built a pretty good reputation in the minds of the

general public. This has been facilitated by EBMs participation in various charities and social welfare programs such as the Kidney Center Walk a Cause. On the manufacturing side its relatively new health oriented products such as the WholeWheat crackers has complimented this good image in the eyes of the masses.

Internal Publics: 4 (Kotler) EBM has done a great job handling their employees. Surely all employees seem to be satisfied with the company. This is supported by the fact that in the last five to six years there has been no major disagreement between the management and the employees. Our general observations at the company were that at EBM, employees are provided with a relaxed and friendly environment wherein they interact with their superiors freely and without any such formalities. This in turn facilitates a positive attitude between employees and encourages them to contribute more towards the overall company goals.

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MARKETING STRATEGY AUDIT

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MARKETING STRATEGY AUDIT

Business mission Marketing objectives Marketing Strategy Budgets

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Marketing strategy is the logic by which the business hopes to achieve its marketing objectives.4 (Kotler). It includes such areas as the business mission statement, defining the marketing objectives, planning the strategies for achieving these objectives and goals and the careful analysis of the budget to determine the possibilities of accomplishing the set objectives.

BUSINESS MISSIONIn the process of strategic planning the first and the most basic step is clearly defining the purpose of the companys existence, what it wants to achieve in the larger environment 4(Kotler)

. Under a clearly laid out mission statement, employees work independently yet

contribute their efforts to the overall company goals and objectives.

A mission statement should point out the following questions: 4 (Kotler)

What is our business? What is the product that we offer? Who are our customers? Who are our main competitors? What do we aim to achieve?

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In case of EBM, EBM is in the packaged foods business EBM offers food in between meals, that is biscuits, thus fulfilling esteem as well social needs Our main customers include retail stores, which in turn sell to consumers EBMs main competition is from CBL, the manufacturers of LU, Dane Foods and Meiji To regain EBMs lost market leadership position in the biscuit industry. We aim to deliver superior value to our customers through quality emphasis.

Since market needs last forever, companies should define their mission statements in terms of the basic needs and wants that they are trying to satisfy. Such statements are called market-oriented mission statements4(Kotler)

. We now present EBMs mission

statement and analyze it in light of its strengths and weaknesses.

MDs Mission Statement18 Our battle ground is the market place. Our soldiers are the field people. We claim that no competitor is geared to match our field operations structurally and manpower wise. For our superior war machinery, professional training focusing on close to customer service and merchandising are quid-pro-non.

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This mission statement is defined more in technological terms in the way that it emphasizes the companys functional aspects, it wants to achieve success through better and more efficient field operations. It identifies EBMs flexible organizational structure, which is adaptable to the changing environment, and an efficient manpower. Through this technological efficiency it wants to gain a competitive edge over its competitors.

StrengthsThe mission statement is powerful in the sense that it aims to identify its major sources of combating the stiff competition. It takes into account its salesforce, which reflects the companys focus on success through employee satisfaction and hard work. Here, the statement becomes a motivating4(Kotler)

force for the workforce. It thus gives due

consideration to the efforts of the workforce to make each employee feel that his work is significant and contributes greatly to the overall company goals. The statement also relates the efficiency of the technology used and the companys continued emphasis on customer satisfaction and that, these two assets of the company work side-by-side in accomplishing the companys objectives of quality control and value-orientation. Hence, the statement satisfies one of the major requirements of an effective mission statement, that is it should be based on distinctive competencies. 4 (Kotler) The MDs reference to an imaginary battleground is very much according to the present marketing environment in the biscuit industry and the prevalent cutthroat competition.

WeaknessesHowever, the MDs mission statement focuses on only the operational aspects of EBM and its field operations. It does not take into account the basic purpose of these operations. In other words, the statement should also have focused on the consumer64

demand and wants that EBM is trying to satisfy through its product line. The statement violates one of the requirements of an effective mission statement that is it should not be too broad rather it should be specific4(Kotler)

. EBMs mission has been too broadly

defined in the way that it does not give workable guidelines for achieving its mission, the term close to customer service seems vague and ambiguous. The exact reference to what services are being considered here is missing. An alternate could have been close to customer satisfaction.

Mission statement acts as a guiding force for the employees of an organization4 (Kotler). If this kind of orientation is given to them they will put all their efforts in trying to beat their competitors in whatever way possible. These tactics may or may not be beneficial for the customers. On the other hand, if the mission had been customer oriented they would give all their efforts in trying to improve the product so that it could provide better value to its customers, and thus build a long term relationship with its customers. This, in it self, could be a major competitive advantage. Before making its mission statement EBM must analyze what basic needs do biscuits satisfy. Biscuits are usually eaten between meals, in ones pastime. They are eaten when a person is relaxing. So it is more of a pleasure need. Judging by this aspect, the competitive scenario expands. EBMs competitors include not only the other biscuit manufacturers but also other packaged foods, whether local or international. This includes candies, chocolates, chips, etc, so it takes a very narrow view as far as competitors are concerned. It may well happen in a course of time that consumers tastes and fashion change or some other product starts satisfying the same needs that the biscuits are satisfying in a better way. Whatever happens the core need remains the same, they will still be requiring something to eat when they are relaxing or in their idle time.

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Taking this into account, EBM must design a mission statement, which is marketoriented, does not become outdated, is specific and guided by a vision.

MARKETING OBJECTIVESMarketing Objectives set clear and distinct goals for the marketing department to achieve. It includes specific goals for different brands of a company, marketing mix, positioning of the products, defining the market segment under consideration and target marketing. 4 (Kotler) The marketing department at EBM is very efficient in this respect in the way that the VP Marketing has put down a clear-cut vision for the company to achieve. Although this vision is mainly focused on one of the companys main line, however, it broadly defines the marketing objectives in view of the next millennium.

To see Peek Freans once again take its rightful place as a leader in the marketplace and in the minds of the consumers

This vision clearly identifies the fact that the company is aiming to reposition its frontrunner brand, Peek Freans. This would involve setting a competitive positioning for the brand by identifying and capitalizing on its distinctive features and by creating a detailed marketing mix. EBM is already engaged in positioning Peek Freans according to certain classes of users4(Kotler)

. For example, Gluco for children, Wheat crackers for adults and diet conscious

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people. It can also emphasize biscuit consumption according to usage occasions4 (Kotler). For example, Tip Top a party biscuit in the advertisements. The company can also accomplish competitive positioning by identifying possible Product attributes4(Kotler)

. Style and design of biscuits can be an important factor.

Biscuits maybe shaped in different ways to attract children. This would definitely distinguish Peek Freans from the competitors brands. The company can also build its competitive advantage on its consistency to maintain quality.

Image differentiation4

(Kotler)

can also be a contributing factor for establishing a

competitive position. Research has shown that most consumers are not aware of the relationship of the Pied Piper to both the Peek Freans and the EBM brands. In this respect, we suggest that the company should keep the Pied Piper icon for its EBM brands and as the main company symbol. In the meantime, it should develop a new icon for its Peek Freans brands. It can make use of other fairy-tale characteristics or simply apply a symbol to the brand line. EBM is successfully engaged in building its Marie brand around a famous celebrity, Zaheer Abbas. This is a very sensible tactic to use against competitors in the way that it creates brand recognition and loyalty as consumers are inspired by the lifestyles of their favorite celebrities. Since the company maintains a good icon, that of the Pied Piper, we suggest that it should also become associated to some specific colors4 (Kotler). For instance, we can identify a Shell logo anywhere even without the actual shell with the red and yellow colors. This could be a good starting point to building instant brand recognition.

Repositioning4 (Kotler), in case of EBM, would require a definite change in the image of the Peek Freans line. Faced with a stiff competition in this major line by LU, EBM needs67

to create further consumer loyalty and brand recognition. For repositioning, the company may need to change a few attributes of the Peek Freans line. Instead of coming up with new brands, EBM should concentrate efforts and resources on repositioning the existing brands.

MARKETING STRATEGYMarketing strategies have been defined as the logic through which a firm hopes to achieve its marketing objectives4 relation to EBM. Faced with a stiff competition from LU, EBM needs to do a comprehensive competitor analysis. EBMs needs to gear its marketing its marketing strategies according to the needs and wants of the consumers and also study the strategies of competitors. It is important to analyze also the weaknesses of the competitors in order to build on them and deliver more value and satisfaction as compared to the competitors. We would categorize EBMs position in the biscuit industry as that of a market challenger4 (Kotler), CBL being the market leader. Therefore, it should adopt the market challenger strategies of aggressively attacking CBL with improved products to regain its lost market share. In this respect, the challenge may also affect low market share companies in the biscuit industry such as Dane Foods and Meiji.(Kotler)

. Adopting a marketing strategy involves an

analysis of the companys standing in the overall industry. We will apply this concept in

EBM has identified three major steeping stones in its strategy analysis

Rationalization of the product portfolio.

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Tonnage determination and the relevant support strategies. Pied Piper larger than life.

By the rationalization of the product portfolio, it is meant that the company aims to achieve an approximately 70% of its total tonnage with the contribution of its focused and front runner brands. The others comprising of EB ticky packs, EB rolls, EB commodities would constitute the rest of the 30 %. This would also help the company to:

Determine the advertising input in terms of tonnage growth. Front runner and dedicated brands with their separate brand equities will be produced with more contributions and on more dedicated lines.

At present, EBM faces the following problems and hindrances that require considerable attention from the management:20

Unstable economic environment in the country. Stiff competition in Price related launches Niche marketing Price cuts Advertising and promotion expenditures

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Branding Production volume Decreasing market share of brands (Smile, Ringo, Venice) Me-too (Tip Top) brands giving false hopes Decrease in consumption of biscuits in Ramazan, especially

with the arrival of Ramazan in December, which is the peak season of biscuit production. Provision for the General Sales Tax (GST) along with the

Rupee-Dollar parity.

At present, EBMs pricing is primarily Cost-based pricing4 (Kotler), under which it adds a standard markup to the product cost. However, in face of stiff competition the company needs to change this pricing approach and apply the Competition-based pricing21 for its front runner brands such as Rio, Marie and Gluco. The pricing strategy should also differ in case of market-follower brands or the brands which are gradually losing their market share, such as Smile, Tip Top, Party and Sooper. These brands would necessitate the application of the Competition-based pricing under which consumers would judge the products value according to the prices charged by the competitors for similar products. As far as advertising is concerned, EBM should plan its advertising and promotion according to the Product Life Cycle stage4(Kotler)

. New offers would require large

advertising budgets such as Party and Sooper. However, Marie being a mature brand can do with a relatively lower budget for advertising. A large chunk of the budget should also

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be allotted for major contributors to the company s sales such as Smile and Rio. Therefore, EBM should continue to promote Rio with Godzilla sponsorship and other such endeavors. High-market share brands, such as Gluco, may require larger advertising budgets to build on the existing marker share and for taking it away from the competitors. We would categorize Smile, Ringo and Venice as being at the maturity stage4 (Kotler) of the Product Life-Cycle. This is time when the sales of these specific brands have declined, profits actually declined due to increased marketing outlays to defend the products against the aggressive competition. Handling the mature products require modifying markets4 (Kotler), products, and also the marketing mix. EBM should modify its market by identify new market segments for its products, such as Ringo for adults. In this respect, product modification4(Kotler)

would

involve changing the features of the Ringo brand. For adults, Ringo can be produced with wheat contents or with zeera and promoted as Ringo, for a healthier you. This would also lead to successful sales promotion with an all-new message strategy, thus modifying the marketing mix4 (Kotler) through promotion. EBM also plans to achieve a 20% growth rate over the last 20 months average in the coming 16 months according to the VP Marketing. This the company plans to accomplish by outlining the following strategies:33

Concentrate on top 10 brands in terms of tonnage. Reproducing this category of top 10 brands to assign input budgets for focused productivity.

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Offering a wide variety of biscuits to different demographic segments, EBML is successfully pursuing Broad based Differentiation strategy11. Segmentation based on income groups is also visible in case of EBML since it caters to the desires of the high, middle and lower income groups accordingly. Hence, overall the company seems to be following the Multivariate strategy4 (Kotler) of market segmentation, with income and age factors as the bases for this segmentation. Accordingly, EBML serves the needs of the different segments with a distinct marketing offer.

BUDGETSIt was important for any company to prepare budgets for the successful implementation of its action plans. Budgets show the forecasted number of units to be produced and sold and average net prices. It also gives a brief overview of the cost of production, distribution, advertising and other marketing procedures. We present and analyze EBMs budgets related to tonnage, sales, brand wise tonnage and growth and the Advertising & Promotion budgets.

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Reality vs. Anomaly34Tonnage1997.98 CFL Peek Freans English Biscuit Group 2818 3507 669 6994 1998-99 3223 4260 833 8316

As evident from the above production budget, EBML allocates more of its total production budget to its leading brand, Peek Freans as compared to English Biscuits and CFL. This is mainly due to the fact that the company sees more growth prospects for Peek Freans. Consumers generally affiliate the Pied Piper icon to Peek Freans only rather than to English Biscuits Manufacturers as a whole. This is one the major reasons that has contributed to the immense success of the Peek Freans brands.

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Sales Budget: Net Sales34In millions1997.98 CFL EB Group 21.67 35.6 57.27 1998-99 23 44.3 67.3

Improvement in contribution over 1997-98 due to:

Volume Sales min. Total

Rs. 40.73 Million 2.7 Million 43.43 Million

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A&P BUDGET221998-99

Budget Spent Balance

Rs. 60 Million Rs. 40 Million Rs. 20 Million

RINGO: GLUCO: CLICK: RIO: MARIE: TOTAL: OTHERS:

Rs. 4.95 Million Rs. 2.75 Million Rs. 1.1 Million Rs. 4.62 Million Rs. 2.53 Million Rs. 15.95 Million Rs. 5.05 Million Rs. 21 Million

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As indicated above, EBM estimated Rs. 72 million for advertising and promotion for the year 1998-99. However, it ended up spending only Rs. 51 million, thus still having a balance of Rs. 21 million left. A considerable portion of this budget was allocated to the Rio-Godzilla scheme and the remaining to Gluco baby contest and Ringo advertisements. EBML has budgeted sufficient resources for Advertising and Promotion efforts. A significant part of this A&P budget is allocated for the promotion of Ringo. Our interviews with EBML executives revealed the fact that since Ringo faced no direct competition for LU, the way TIP TOP and 50-50 are positioned against eachother, therefore the company has decided to incest more into ventures related to its Ringo brand. Moreover, the success of Rio in the market due to similar promotion and advertising efforts provided the company with an opportunity to penetrate into the existing Ringo market through increased promotion efforts. In the later part of this audit, we have presented a comprehensive account of the companys advertising and sales promotion strategies. For now, we only restrict ourselves to the budget allocation of EBM to production and other operations. The production budget in tons for the year 1998-99, in terms of EBMLs main product lines CFL and EB, follows. Brand wise budget in tons of EBMs four major brands for the year 1998-99 is then presented.

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Production in tons (1998-99)35CFL Pkt. Creams Pkt. Plains Pkt. Crackers Total H/Roll Cream H/Roll plains H/Roll Crackers Total T/Pack Cream T/Pack Plain T/Pack Crackers Total All Categories Cream All Categories Plains All Categories Crackers Total Branded 366.564 100.023 29.172 495.759 206.745 46.321 0 253.066 793.353 29.425 25.707 848.485 1366.662 175.769 54.879 1597.31 EBM 0 3406.194 247.203 3653.397 0 990.242 41.184 1031.426 0 330.385 78.441 408.826 0 4726.821 366.828 5093.649

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Forecasted Figures of Brands (tons)361998-99 Growth Click Pkt. H/Roll Total Gluco Pkt. Gluco+ Pkt. H/Roll Total Rio Pkt. H/Roll T/Pack Total 375 207 793 1375 462 231 847 1540 12% 551 263 911 1725 12% 598 328 1005 1931 12% 153 62 1019 168 74 1126 11% 185 89 1246 11% 204 108 1382 11% 804 884 972 1070 340 183 523 374 201 575 10% 415 229 644 12% 465 262 727 13% 1999-2000 Growth 2000-2001 Growth 2001-2002

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Marie Pkt. H/Roll T/Pack Total Total 444 88 28 560 3477 499 100 32 631 3872 13% 11% 549 114 36 699 4314 11% 11% 603 131 43 777 4817 11% 11%

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MARKETING ORGANIZATION AUDIT

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MARKETING ORGANIZATION AUDIT

Formal Structure Functional Efficiency Interface Efficiency

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In this section of the audit, we study the different aspects of the marketing department at EBM, its operations, marketing planning, analysis, implementation and control. The marketing department at EBML contains specialists who have made valuable contributions to the successes of the product line of the company in the consumer market.

FORMAL STRUCTUREA companys organizational structure depicts the formal hierarchy pattern. It shows the various lines of interactions designed by the management to achieve the organizational goals. Large Companys have complex structures with many levels of authority. They also tend to have large marketing departments The structure of the marketing department at EBM is designed as a combination of functional, geographic and product lines4 (Kotler). A functional organization occurs when a functional specialist heads different marketing departments. The top management at EBM has a functional organization. Under the M.D, Mr. Khawar M. Butt, there is the Director Operations, Mr. Saleem Chowdery. There are four major departments that have a functional organization. They are the Marketing and Sales department, Production and R&D department, Finance department, and the Administration. The Vice President Marketing, Mr. Mehmood Nanji, heads the Marketing department. Marketing is a very important department for a company like EBM. The reason being, that it has many strong competitors. So EBM must continuously monitor the changing consumer tastes and preferences. It always has to look for ways to gain a competitive edge over its competitors. To make this possible, the company needs a very dynamic marketing organizational structure, which can quickly adapt to the changing environment.

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The Structure of the Marketing DepartmentEBM has a very elaborate Marketing department. Under the VP Marketing, comes the National Sales Manager, Syed Tahir Hussein. EBM uses a combination of Product and Geographic organization4 (Kotler). As under the N.S.M there are the two G.R.M, (General Regional Managers), the G.P.M (General Product Manager) and the M.S.C. (Manager sales coordinator). Under the M.S.C comes the sales staff, which is responsible for the record keeping and other office activities of the sales department. The G.P.M is responsible for all the product decisions. For example, which brands to promote the most, the pricing decisions, introduction of new brands and phasing out of the old brands. Sometimes for market penetration, price of certain brands have to be reduced, to make them more attractive, in other situations the prices have to be raised if there are calls from the production department, the G.P.M has to check the feasibility and then make appropriate decisions. When introducing new brands the G.P.M formulates the appropriate strategies. For example, sometimes a new product may have to be tested in a few areas to see