Porters Five Models Analysis

Porter
s Five
Models
Analysi
s
The assignment is about the Engro food and some of its product
in which the porters five models analysis is applied, in which
they know about the different steps applied on a Engro food.

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Engro Food

Porters Five Models Analysis

Submitted By: Ali Hussain Kayani

Submitted to: Sir Mudasir Abbas
Subject: Strategic Management

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Porters Five Models Analysis

Table of Contents
ABSTRACT....................................................................................................................................3
REASON OF CHOOSING PARTICULAR INDUSTRY...............................................................3
INTRODUCTION TO INDUSTRY................................................................................................4
FIRMS SELECTED WITH THEIR BRIEF HISTORY..................................................................5
PROCESSING UNITS IN SUKKUR AND SAHIWAL.................................................................7
PORTERS FIVE FORCES ANALYSIS ON ENGRO FOOD........................................................8
THREAT OF NEW ETRANCE......................................................................................................8
BARGAINING POWER OF SUPPLIER.......................................................................................9
BARGAINING POWER OF BUYERS..........................................................................................9
AVAILABILITY OF SUBSTITUTES.............................................................................................9
COMPETITIVE RIVALRY...........................................................................................................10
CONCLUSION AND RECOMMENDATION.............................................................................11

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Porters Five Models Analysis

ABSTRACT
Engro stands for energy for growth. Engro Corporation is one of the leading Pakistani
business conglomerates with stakes in the fertilizer, food, power generation, petrochemicals and
terminal storage industries. This study is about the Engro Food from the time when Engro
Foods came up with the idea of adding a new product line to their already well established and
long set of product lines to the point that they are still heavily promoting their products. Porters
Five Forces model is a powerful tool for analyzing management recent industry profitability and
attractiveness using outside-in perspective. The basic idea that every company is operating in a
network of buyers, suppliers, substitutes, new entrants and competitors are involved. And in this
I have selected four firms of Engro Food in Pakistan.

REASON OF CHOOSING PARTICULAR INDUSTRY

I have chosen Engro food industry for this analysis. The reason of choosing Engro Food
industry is that Engro Foods continues to experience to strong growth due to many reasons.
Engro Food is one of the most popular and developing industry in Pakistan. Engro foods
making progress due to effective management system. So thats why it is rapidly growing
against their competitors. The main reason behind this is the rapid growth in the food industry
and increasing rate usage. The demand and wants of customers towards food of different
companies and this is one of the local companies, so gather the information about the local
company.

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Porters Five Models Analysis

INTRODUCTION TO INDUSTRY
Engro Foods Limited was legitimately launched as a fully owned subsidiary of Engro in 2004. To enter into
food business they use dairy products and the company started inaugurating processing units in
Sukkur and Sahiwal along with ice cream manufacture facility. Top quality brands like Olpers, Olwell, Tarang,
Omore and Owsum have been successfully propelled under the tiller of Companys dairy products.
To support these brands and their highest standards of quality, Engro Foods has financed heavily
in milk processing and milk collection substructure. And the company believes that the success of its products
will help the company to achieve its goals. And the company is aiming to be the giant of food industry in
Pakistan.
Engro Foods is among the biggest and fastest growing companies in Pakistan with a vision to
cater to local needs with products conforming to global standards. Engro Foods Limited is an
87% owned subsidiary engaged in the manufacturing, processing and marketing of dairy
products, frozen desserts and fruit drinks. The business owns two milk processing plants in
Sukkur and Sahiwal and operates a dairy farm in Nara, Sindh. In its continued efforts to elevate
consumer delight worldwide, the business has established several brands that have already
become household names in Pakistan such as Olpers (UHT milk, low-fat milk, cream, desi
ghee, lassi and flavored drinks), Omor (frozen desserts), Tarang (tea whitener) and Dairy
Omung (UHT dairy liquid and dessert cream).

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Porters Five Models Analysis

FIRMS SELECTED WITH THEIR BRIEF HISTORY
The firms which I have selected are:

Olpers
Omore
Tarang
Desi ghee

OLPERS
Engro Foods had only recently been established by Engro a traditional giant in Pakistans
chemical and fertilizer industry. Engro Foods launched Olpers Milk after long tenure of
consumer research and time and money consumption. During this time they are continuing
observing the issues with the packed milk. After three years of their launch Olpers Milk gain
reputation among consumers and now currently holding 30 percent of market share. Within the
dairy market, company now has a diverse portfolio of products ranging from different types of
cream to premium low fat milk.
The packaged milk category was originated in 1981 by Milk Pak, which pioneered tetra pack
milk in Pakistan. The supply chain involved collecting milk from rural areas across Punjab,
processing the milk through UHT (Ultra-High Temperature Processing) treatment, and selling it
to consumers in uniquely colored triangular and rectangular packs designed. By 2006, the dairy
milk category was growing at 20 percent annually. Brands like Milk Pak (owned by Nestle) and
Haleeb Milk (from Haleeb Foods) had led the dairy market in the worlds fourth largest milk
producing country for nearly two decades without any real sustained competition. Milk Pak was
identified by its green and white packaging the colors of the country and offered a brand backed
with the strong equity of Nestle. Haleeb was recognized as the blue brand, and professed to
have the naturally thickest milk.
Olpers has woken up the competition. Milk Pak responded with campaigns of its own to
reaffirm the positive equity of its brand. Haleeb implemented a response as well. And Olpers
stars cutting its market share after competition become fierce.
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Porters Five Models Analysis

Olpers, however, stepped into the foray by launching a massive campaign that started off with
an introductory slice-of-life. Olpers as a contemporary and modern brand as the name itself
made sound like a foreign brand, giving the perception of quality. To a large extent, they were
successful. Secondly they did some product changes picking red as the brand color in spite of
greens and blues color also helped to enhance the in-store visibility and presence for Olpers
packaged milk, and disassociation from its competition. Thirdly they highlighted and expanded
upon the various occasions in which milk could and should use and making it All Purpose
Milk.
Engro Foods has recently expanded its brands portfolio by launching a premium quality ice
cream with the name of Omore. Omore started its sales from the city of Lahore because of the
culturally inheritor of celebrator of festival of colors i.e. The Spring Festival. They have started
off with 24 different packs and flavors that attract kids and adults from all walks of life.

OMORE
In summers, beverages and ice cream brands invest extensive campaigns; so they started
popping up on our television screens. Omore despite the fact that it is a totally local in
comparison to its competitor i.e. Walls has achieved a good market share as the annual report
shared by Engro Foods recently.
A Pakistani ice cream brand by Engro Foods Limited was launched in the year 2009. Initially, it
targeted Punjab and the major cities like Lahore & Islamabad with a serving of 4.5 liters each
year. Later it entered Sindh and primarily Karachi after two years of its launch; the city is one of
the potential hubs for frozen desserts and ice creams.

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Porters Five Models Analysis

PROCESSING UNITS IN SUKKUR AND SAHIWAL
After a successful launch and high recall of Olpers, Tarang and Dairy Omung, one might expect
same good products when it comes to Omore when Engro Foods decided to extend its portfolio
further. Locally manufactured and produced ice cream is available in 40 different packings that
include ice cream tubs, ice cream cones, ice lollies and sticks. Omore main processing unit is in
Sahiwal but Engro Foods also have a unit in Sukkur.

TARANG
Pakistan's No. 1 tea-whitening brand, Tarang is a specialized tea creamer that makes the perfect
cup of tea guaranteed to transport tea-lovers into a state of sheer bliss any time of the day. The
only tea-creamer that combines convenience with lasting quality and real value for money,
Tarang is available in a liquid format in 6 different SKUs appealing to a mass audience
nationally. Tarang is not only the market leader in both the STC and UHT Dairy categories but
is also Tetra Pak's 6th biggest global brand. This excellent performance has come about as a
result of not only the astute identification of a market need, but one that was manoeuvred with
perfect timing so as to provide consumers with exactly what they were asking for.
Compounding this effect was a brand position that hit right at the heart of the target market,
reeling them with the idea of being "Chai Ka Sahi Jor", and revitalizing the drinking customer
by taking them to a state of 'bliss-tea-tude'.
With its distinctly fresh aroma, rich taste and strong focus on enhancing the tea-drinking
experience for everyone, Tarang has evolved into our biggest and most profitable brand since its
launch in 2007, after securing a firm place in the hearts of millions of tea-enthusiasts all across
Pakistan.

DESI GHEE
Launched in 2007, Olper's Tarrka is our premium desi ghee distinct for its pure flavor and
aroma. A leading asli desi ghee brand that is extracted from milk, a dash of Tarrka in your
favorite cuisine is all it takes to bring out the flavor of your food and leave you craving more.
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Porters Five Models Analysis

PORTERS FIVE FORCES ANALYSIS ON ENGRO FOOD
Porter five force analyses consist of following five forces. These are

Threat of new entrance

Rivalry among existing firms
Threat of substitutes products or services
Bargaining power of the buyers
Bargaining power of the suppliers

THREAT OF NEW ETRANCE

The average entrepreneur cannot come along and start a large food company. The threat of
new entrants lies within the food industry itself. Some companies have carved out niche areas in
which they underwrite dairy supply. These food companies are fearful of being squeezed out by
the big players. Another threat of many food companies is other food services companies
entering in the market.

CAPITAL REQUIRMENTS
Competing in a new industry requires resources to invest .production of packed products
requires huge investment of financial, human, technical, and marketing resources. At the
moment Engro Olpers have some threats like from new entrants goodmilk product of
shskargang food.

ECONOMY OF SCALE
Economy of scale determines entry because they force potential competitors either to enter on a
large scale bases (a costly or perhaps risky move) or to accept a cost disadvantage. Moreover,
new entrants in the pasteurized milk business may encounter scale related barriers not just in the
production, but in the advertising marketing, distributing, financing and raw milk purchasing as
well Engro foods achieved its breakeven in 2003.

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Porters Five Models Analysis

BARGAINING POWER OF SUPPLIER
The suppliers of food might not pose a big threat, because of the reasons:

NUMBER OF SUPPLIERS
Raw milk is standard commodity and is available in the open market from a large number of
milkmen. If anyone refuses to sell its product then company can buy it from others who are
already willing to sell to company.

IMPORTANCE OF VOLUME TO SUPPLIER

Suppliers also have less leverage to bargain over price because the company is purchasing the
large volume of their milk and suppliers do not have much option to sell milk to others.

BARGAINING POWER OF BUYERS

The individual does not pose much of a threat to the food industry. Large clients have a lot more
bargaining power with food companies. Large corporate clients like airlines and retailers pay
millions of dollars a year. There are large numbers of distributors who are buying and
distributing the product, so their bargaining power is low and company have leverage to dictate
implement its terms and conditions to distributors.

BACKWARD INTEGRATION
Another reason of low bargaining power is that no buyer or distributor has the resources to start
involve in backward integration.

AVAILABILITY OF SUBSTITUTES
This one is pretty straight forward, for there are plenty of substitutes in the food industry. Most
large food companies offer similar suites of services. Companies focusing on niche areas
usually have competitive advantage, but this advantage depends entirely on the size of the niche
and on whether there are any barriers preventing other firms from entering.

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Porters Five Models Analysis

COMPETITIVE RIVALRY
The food industry is becoming highly competitive. The difference between one Food Company
and another is usually not that great. As a result, food industry has become more like
commodity. An area in which the food company with the low cost structure, greater efficiency
and better customer service will beat out competitors. Food companies also use higher
investment returns and a variety of food investment products to try to lure in customers. In the
long run we are likely to see more consolidation in the food industry. Large companies prefer to
take over or merge with other companies rather than spend the money to market and advertise to
people.
Not only local but attempts by cross borders competitors and companies to gain stronger foot
hold in each other domestic market boosts the intensity of rivalry, especially when the foreign
rivals have lower costs or very attractive products. In case of Engro foods so far nestle and hale
are the only diverse rival and another players that has just joined the UHT milk sector is
goodmilk, no doubt the competition between Engro foods and Haleeb is quite intense both are
engaged in consistent homework just to break and attract the customers towards each other but
goodmilk is adding to the competition between the sector.

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Porters Five Models Analysis

CONCLUSION AND RECOMMENDATION
Engro food is a quality conscious company and customer focusing company. Customer is its
first priority. Engro launched only that product that appeal customer and satisfy the customer
needs and wants. Engro food is also consumer health conscious company and their product
fulfills also necessary vitamins. They should expand their brand portfolio by investing in yogurt
market as their competitors enjoying it just because of low competition their otherwise Milk
pack has its brand name in drinking milk market only. So its an opportunity for them to grab
and enjoy the flavor.

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