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Organizational Structure of Pran Group PART-1 Organization overview Company Name:
Pran Group
Country/Territory:
Bangladesh
Address:
12 R. K. Mission Road, Dhaka-1203, Dhaka, Dhaka, Bangladesh
Products/Services We Offer:
Glass Jar,Bottles, Lug Caps
Business Type:
Manufacturer
Industry Focus:
Bottles , Glass Packaging Materials , Dinnerware , Others ,
Geographic Markets:
Southeast Asia
No. of Employees:
Above 1000 People
Annual Sales Range (USD):
US$5 Million - US$10 Million
Certificates:
ISO 9001:2000
Year Established:
1980
Legal Representative/CEO:
Mr. G. Kannan
PRAN stands for:
Glass
Program for Rural Advancement Nationally. In Bangla "Progoti Rupayone Agrani Noboddom”. PRAN GROUP was born in 1980. Keeping in view the corporate mission of the group we have over the years diversified our activities. Today we are the largest processors of fruits & vegetables in Bangladesh. We encourage contract farmers and help them grow quality crops with increased yields and to obtain fair prices. The Group comprises of 10 companies. The head offices are located at Dhaka with production facilities around the country. Our management is modern adapted to our environment & culture. Our largest asset is our competent team of hands-on-mangers & dedicated employees. Corporate mission: “Poverty and hunger are curses” Aim of the company: “To generate employment and dignity and self respect for their compatriots through profitable enterprises.” Quality policy: It is the policy of agricultural marketing co. ltd. to market products of consistent quality at home and abroad as per world standards produced hygienically in accordance with good manufacturing1 practices in state- of- the- art plants and processes , packed in appropriate packaging and remain committed to these objectives at all times. AMCL have adopted ISO –9001 as the model for their quality mgt. system. Accordingly a documented system of procedures and instructions has been established throughout the organization defining business processes, responsibilities and authorities. Nature of the company : PRAN in Bangladesh are blessed with a climate ideally suited to agriculture , specially fruits and vegetables - rich is taste and flavor , sweet , mellow and juicy. Consumer benefit: > International quality Products > Competitive price > Wide rage of products that meet the requirement of the consumers of all ages & groups Quality certification: Agricultural Marketing Co Ltd- PRAN is the first food processing company in Bangladesh to achieve the prestigious distinction ISO 9001certification for their quality management system. This supreme certification ensures that PRAN Products reach the consumers table maintaining the highest level of quality. I addition to ISO, PRAN has got international certifications like HALAL & HACCP Sales and distribution network: To make the Group’s products available at the every knock & corner of the country PRAN has developed the best sales & distribution network all over the country. To ensure fast & smooth distribution companies has set up 9 distribution depots & have appointed more than 1000 dealers all over the country. Advertising & Promotion:
Advertising & Promotion is the key to the marketing of any product or brand. To cope up with the rapid & ever changing market situation & to come up with innovative marketing strategy and ideas company has set up a full-fledged In-house advertising agency comprises of the best talents of the country. Company spends a large portion of their promotional budget in brand building exercises at home & abroad. Export: The total scenario of export has changed in volume and figure from the 20.51 corer to tk 37.73 corers and increase of 84 % over the previous year. The ratio between export and local sales stands at 56.44 % respectively. A strategic decision has been taken to further explore export markets for inclusion of more parties as well as newer destination. Export After serving the millions at home successfully, PRAN has focused on exports to serve the billions. At present PRAN is the largest exporter of agro-processed food items of Bangladesh. In recognition of the extraordinary performance in export PRAN has achieved the best processed agro food exports trophy for the three last consecutive years. Currently PRAN products are regularly being exported to 63 countries of the 6 continents all over the globe. Major export markets are Asia, Middle East & Africa. Major exporting countries : Angola, Australia, Austria, Bahrain,Ă‚ Belgium, Benin, Brunei, Burkina Faso, Bhutan, Cameroon, Canada, Capo Verde Islands, Chad, Congo, Djibouti, Eritrea, Equatorial Guinea, Ethiopia, France, Gabon, Gambia, Germany, Ghana, Greece, Guinea, India, Italy, Ivory Coast, Japan, Korea, KSA, Kuwait, Lebanon, Malaysia, Mali, Mauritania, Mauritius, Myanmar, Mayotee, Nederland Antilles, Nepal, Niger, Oman, Pakistan, Palestine, Qatar, RCA, Reunion Islands, Senegal, Sierra Leone, Singapore, Somalia, Somaliland, Sri Lanka, Sudan, Sweden, Switzerland, Togo, UAE, UK, USA & Yemen. Major Exported Products: Fruit Juices, Fruit Drinks Instant Powdered Drinks, Pickles , Canned Fruits & Vegetables, Extruded & Fried Snacks, Tea, Aromatic Rice, Puffed Rice, Flattened Rice, Jam & Jelly, Plain Spices, Blended Spices, Mustard Oil, Mineral Water, Dehydrated Fruits, Tomato Ketchup / Sauce, Toffees, Candies, Bubble Gum, Biscuits & other confectionery etc. Import As the largest food processing company of Bangladesh usually we import the following to meet our requirements: Raw Materials: Cassava powder, Corn Grits, Orange Concentrate, Potato starch, Potato granules, powder milk, Peanuts, pulses & beans, onion, chili, ginger etc
Chemicals : Ascorbic Acid, Beta Carotene, CMC, Citric Acid, Caustic Soda, Hotmelt, Pectin, Potassium Sorbet, Xanthan Gum, Different Flavors, Confectionery raw material. Packing Materials : Aluminum Foil, Crown Cork, Flexible Packing material, Glass Bottle, Glass Jars, HDPE, Lug Cap (30, 53 & 63mm), PET, Shrink Labels, Shrink caps, Tin Can, UStraw. Products of Pran (JUICE) From garden to the consumer, PRAN ensures quality processing at all steps to provide a great variety of choices of processed juice.
A great variety of quality packing in eight different flavors; orange, mango, Lemon, litchi, pineapple, mango-pine, guava & fruit cocktail, offers an ever refreshing choice for you. 1) Juice in Aseptic Pack Using fresh natural Bangladeshi fruits and hygienically produced with the state of art technology, available in eight different flavors as orange, mango, Lemon, litchi, pineapple, mango-pine, guava & fruit cocktail. Very uncommon the fruit cocktail product is a combination of 12 different types of local fruits. Packaging: 1000 ml x 12 Pack/Ctn <2050 Ctn/20 ft Container> 250 ml x 24 Pack/Ctn <3200 Ctn/20 ft Container> 250 ml x 48 Pack/Ctn <1575 Ctn/20 ft Container 2) Juice in Non Returnable Glass Bottle Real fruit juices, using pulp by own processed, available in Non-returnable glass bottle.
Packaging: 250 ml x 24 GB/Ctn <1470 Ctn/20 ft Container> 250 ml x 24 GB/Tray <1360 Ctn/20 ft Container> 3) Juice in Can Using fresh natural Bangladeshi fruits and hygienically produced with the state of art technology food grade metal smart can. Available in seven different flavors as orange, mango, pineapple, guava, fruit cocktail, tamarind & banana flavor. Packaging: 250 ml x 24 Tin Can/Ctn <3000 Ctn/20 ft Container> 250 ml x 48 Tin Can/Ctn <1360 Ctn/20 ft Container> Sprout Juice Real fruit juices, using pulp by own processed, available in attractive sprout pack. Packaging: 150 ml x 48 Pack/Ctn <1120 Ctn/20 ft Container> (DRINKS) From purified natural drink to processed fruit drink, our wide product range gives you many alternatives to quench your thirst From children to the adults, PRAN offers various drinks with different flavor and taste. Our quality processing ensures healthy refreshment for all age group 1) Ice POP Drinks Refreshing, non-carbonated flavored drink with added vitamins, best served for age one to 16 years Packaging 50 ml x 288 Pcs/Ctn <604 Ctn/20 ft Container>
2) Powder Drinks Natural drink powder available in family and single serve packaging in four flavors â&#x20AC;&#x201C;mango, orange, lemon and strawberry. Vita plus is really refreshing and quick liquid solution Packaging: 4 gm x 5000 pcs/Ctn <350 Ctn/20 ft Container> 8 gm X 500 Sachet/Ctn <765 Ctn/20 ft Container> 15 gm x 500 Sachet/Ctn <760 Ctn/20 ft Container> 60 gm x 100 Sachet/Ctn <1200 Ctn/20 ft Container> 250 gm x 24 Pack/Ctn <1100 Ctn/20 ft Container> Jam & Jelly Pran Jam & Jelly is enormously popular as a breakfast favorite. Also taken with utmost demand with any snacks any time the Pran Jam & Jelly are endowed with all the freshness of nature. Flavors: Orange, Apple & Diabetic (Orange) Jelly, Mixed Fruit, Pineapple, Mango Jam. Packaging: 200 gm x 24 Glass Jar/Ctn <3025 Ctn/20 ft Container> 300 gm x 12 Glass Jar/Ctn <3025 Ctn/20 ft Container> 500 gm x 12 Glass Jar/Ctn <2800 Ctn/20 ft Container> Lachcha Semai: 200gm x 50 poly pack/Ctn <380ctn/20ft Container> Molasses: 1kg x 06 Plastic Jar/Ctn <1600ctn/20ft Container>
Mustard Oil Hygienically Produced from best quality Mustard seeds. Packaging: 250 gm x 24 Glass Bottle/Ctn <1125 Ctn/20 ft Container> 500 gm x 20 PET Bottle/Ctn <1125 Ctn/20 ft Container Rose Water: 180ml x 24 pcs/Ctn White Vinegar: 650 ml x 12 Glass Bottle/Ctn 300 ml x 24 PET Bottle/Ctn Rice Products: Aromatic Rice Premium quality Aromatic Chinigura Rice is produced through company appointed Contact Farming, processed in scientific hygienically without any blend or chemical mixture and sorted in computerized color sorting and de-stoner to seize taste of your family. Packaging: Aromatic Rice (Chinigura): 1 kg x 25 Poly Packs/Gunny Ba <740 GB/20 ft Container> 5 kg x 05 Poly Packs/ Gunny Bag Minicat, Pajam, Najirshail: 5 kg x 05 Poly Packs/ Gunny Bag Sauce and Ketchup: Tomato sauce and ketchup are produced from the finest variety of tomatoes that preserves the natural freshness and taste of tomato. Flavors: Thai Chili Sauce, Hot Tomato Sauce, Tomato Ketchup & Tamarind Sauce Packaging: 340 gm x 12 GB/Ctn
<2500 Ctn/20 ft Container> 700 gm x 6 GB/Ctn <2300 Ctn/20 ft Container> 1000 gm x 6 GB/Ctn Chutney All the flairs and flavor of nature â&#x20AC;&#x201C;added by the selected natural ingredients â&#x20AC;&#x201C; makes Pran chutney incredibly popular craze among all ages. Pran chutney gifted with its sweet and sour taste is made of everything natural and produced naturally. Packaging: 20 gm x 420 Sachet /Ctn <1250 Ctn/20 ft Container> Pickles Pran pickle is produced from the selected fresh fruits through hygienic process that further ensures quality and freshness. Variety: Mango, Mixed Pickle, Olive, Chili, Satkora, Lemon, Naga Chili, Boroi Sweet & Garlic Pickle Packaging: 300gm x 12Glass Jar/Ctn <3025Ctn/20ft Container> Spices: Pran spice is prepared from the selected varieties of spices (Chili, Turmeric, Coriander, Cumin) through completely automatic process that ensures absolutely free from hand touch. Pran spice is 100% natural, fresh and pure. It ensures natural coloring and taste of the curry, at the same time, is helpful for health and hygiene. Available Varieties: Chili, Turmeric, Cumin Seed, Coriander powder Packaging: 200 gm x 24 Paper Packs/Ctn <2200 Ctn/20 ft Container> 400 gm x 12 Paper Packs/Ctn <2200 Ctn/20 ft Container> 10 kg x 01 Gunny Bag/Ctn <1400 Ctn/20 ft Container> Available varieties:
Chatpati Mix, Haleem Mix, Fish Mix & Curry Powder Packaging: 200gm x 24Paper Packs/Ctn <2200 Ctn/20 ft Container> 400gm x 24Paper Packs/Ctn <1120 Ctn/20 ft Container> 1 kg x 12 Paper Packs/Ctn <1120 Ctn/20 ft Container> PRAN Tea: PRAN Tea refresh you more than everything; made from 100% natural tea leaves without any additives, preservatives or coloring. Marketed in two different categories – Premium & Non-Premium – to refresh people of different class and tastes Packaging: 02gm x 100 Paper Packs x 36 Paper Packs Boxes/Ctn <475 Ctn/20 ft Container> PRAN Confectionery: Our confectionery products are various flavored candy, gum, magic cup & fruit bar With every chew, it brings a sweet taste in life. PRAN Candy: Milk Candy: This is made of pure milk. It’s a dairy product of PRAN. This is made for kid’s specially.6-12 years children’s are our target customers. It comes from fully automatic deposited machine. In Bangladesh we are market leader. Butter Scotch Candy: This is fully butter made candy. Good flavor & taste attract consumers very much. Coffee Candy: Strong coffee energizer with rejuvenating coffee taste made from coffee powder. Love Candy: PRAN My Love candy having three flavors; Mango, Orange & Strawberry. This is heart shape candy. This comes from our deposited machine. PRAN Packaging R Hardboiled Candy: (Flavored candy, Club candy, Love candy) R Deposited Candy: (Milk, Butter scotch, Coffee, Creamers and Mint plus)
Weight / Pc Pack type
Quantity /Pack
Pack / Ctn
Load in 20΄ Container Quantity
Unit
Big Jar
3 gm
250 pc
15 jar
480
Ctn
Small Jar
3 gm
100 pc
18 jar
790
Ctn
Medium Jar
3 gm
150 pc
24 jar
430
Ctn
Big Pouch
3 gm
1 kg
10 pouch
1130
Ctn
Medium Pouch
3 gm
100 pc
28 pouch
910
Ctn
Small Pouch
3 gm
50 pc
56 pouch
760
Ctn
R Fruit Magic / Magic Cup Pack type
Weight / Pc
Quantity / Pack
Pack / Ctn
Load in 20΄ Container Unit Ctn
Big Jar
17 gm
100 pc
6 jar
Quantity 765
Medium Jar
17 gm
85 pc
12 jar
580
Ctn
Small Jar
17 gm
40 pc
12 jar
1120
Ctn
Pouch
17 gm
24 pc
20 pouch
1340
Ctn
Paper Box
17 gm
10 pc
30 PB
1740
Ctn
R Lolli Pop Pack type
Weight / Pc
Quantity / Pack
Pack / Ctn
Jar
8 gm
100 pc
6 jar
Load in 20΄ Container Quantity Unit 1050 Ctn
Pouch
8 gm
25 pc
20 pouch
1810
Ctn
R Bubble Gum Pack type
Weight / Pc
Quantity / Pack
Pack / Ctn
Jar
4 gm
180 pc
16 jar
Load in 20΄ Container Quantity Unit 660 Ctn
Paper Box
4 gm
100 pc
20 PB
2100
Ctn
Paper Tray
4 gm
100 pc
25 PT
2100
Ctn
R Mango Bar
Pack type
Weight / Pc
Quantity / Pack
Pack / Ctn
Load in Container
20Î&#x201E;
Quantity
Unit
Pouch
16 gm
10 pc
40 pouch
2100
Ctn
Paper Box
16 gm
30pc
12 PB
2100
Ctn
Paper Box
16 gm
24pc
16 PB
1950
Ctn
Mango Bar: The mouth-watering delight of fresh mango pulp blends with citric acid and sodium chloride gives a charming taste. Other products: PRAN UHT Milk: Regular milk is put through a process known as UHT (Ultra Heat Treatment) that makes the milk completely germ-free. PRAN Pasteurized Milk: PRAN Pasteurized Milk is fresh and pure full cream liquid milk. PRAN Flavored milk: PRAN UHT Flavored Milk with mouthwatering taste of rich chocolate and mango... PRAN Pure Ghee: PRAN Pure Ghee is made from Milk Fat. It has typical rich aroma. PART-2 Qualitative Analysis: A. Industry Analysis: a. Overall economy analysis or macro economy analysis: Demographic: Both urban and rural people use some of PRANâ&#x20AC;&#x2122;S product whether it may be a pickle or jelly. But most of it is used in urban area. Age: We can divide the age group between 5 to 50 or above those who uses product of PRAN.
Income: Prices of PRAN’S products and lifestyle. are reasonable any one can afford it. Due to changes in recent life style and current market trend, in the market there are varieties of products similar to that of PRAN’S. And if we see than, people still prefer PRAN’S product. Technology: With the aim to continuously enhance its product and a turnover for sustaining business growth particularly in the face of increasing competition in the local market mentionable the cola plant and the second fully automated Reverse Osmosis technology. AOKI technology based PET blowing machines have been installed. • • •
At the same time for developing HDPE drinking water bottles suitable for the export market a HDPE blow molding machine has also been installed during this period . A new administration building has been constructed together with a well equipped modern laboratory to improve production and product quality management at the factory. Politics: In every industry there is a trade union. When some demands of the worker are not met they are going through the grievance procedure which sometime turn to strike and lock out situation which adversely effect on company’s overall performance and production.
b. Industry life cycle: Industry life cycle analysis can vary based on how much detail we want. A five stage model would include1. Pioneering development. 2. Rapid accelerating growth.. 3. Mature growth. 4. Stabilization and market maturity. 5. Declaration of growth and decline.
Industry Life Cycle 14 12 Net sales
10 8 6 4 2 0 Stage- 1: Stage-2: Pioneering Rapid Development Accelerating Growth
Stage-3: Mature Growth
Stage-4: Stage-5: Stabilization Declaration of & Market Growth & Maturity Decline
Time
The figure shows the growth path of sales during each stage. To estimate industryâ&#x20AC;&#x2122;s sales they much predict the length of time for each stage. This requires answer to such question as â&#x20AC;&#x201C; a. How long will an industry grow at an accelerating rate? b. How long will it be in the mature growth phase before it sales, growth, stabilizes and then declines? So to determine the sales estimate we briefly describe these stages: 1. Pioneering development: During this start up stage the industry experiences modest sales growth and very small on negative profit margin and profits. Here time period is small and firms incur major development cost. 2. Rapid accelerating growth: During this stage a market develops for the product or service and demand become substantial. The profit margins are very high, sales, growth rate are moving at an increasing rate to meet excess demand. During this phase profit can grow at over 100% a year. 3. Mature growth: In this stage, future sales growth may be above normal but it no longer accelerate. Here the rapid growth of sales and a high profit margin attract competitors to the industry which causes an increasing in supply and lower prices which mean the profit margin begin to decline to normal levels. 4. Stabilization and market maturity: During this stage investor can estimate growth easily because sales correlate highly with an economic series. Here competition produces tight profit margins and the rates of return on capital eventually become equal to or slightly below the competitive level. 5. Declaration of growth and decline: In this stage the industry sales growth decline because of shifts in demand or growth of substitutes. Profit margin continues to be squeezed and some firms experience low profits or even. PRAN and its position in the industry life cycle:
Analyzing their market situation, sales estimate and future plan this industry are currently stayed in the mature growth stage. In this stage future sales growth may be above normal but it no longer accelerate. Besides, the rapid growth of sales and the high profit margins attracts competitors to the industry which causes an increase in supply and lower prices which means that the profit margins began to decline to normal stage.
C. Competitive strategy analysis: Porters 5 generic model: To grab the empty market or keep the current market place the company can take several strategies. The project analysis may informally talk to customer, competitors, middleman or others of the industry or he may look at the competitors of the company to learn about the performance and their purchasing power of the customer action and strategy. Or they may simply go along with the porters five factor model: 1. Threat of new / potential entrants: A new entrant in an industry represents a competitive threat to the stabilized firm. So managers of the stabilized firms usually go for barriers to entry. So the company may apply the policy include: • • • •
Economize to scale. Product diversification. Switching cost. Access to distribution channel.
Threats ofof Threats potential entrants potential entrants
Bargaining Bargaining power ofof power Suppliers Suppliers
Industry Rivalry Industry Rivalry
Bargaining Bargaining power ofof power Customers Customers
Threats ofof Threats Substitutes Substitutes
Figure: Porters 5 Generic Model 2. Bargaining power of suppliers: In many industries the cost of purchased supplies accounts 60-80% at total production cost. Suppliers have an important effect on industries project potentials. Considering unfavorable conditions of the supplier company must watch out the factors that make the suppliers group powerful:• Greater concentration among suppliers than buyers. • Dominance by a few suppliers and lack of substitute product. • High differentiation among suppliers. • High differentiation by suppliers and high switching cost for the buyer. 3. Bargaining power of the customer: Buyers are the consequential part of the organization. Buyers can exert bargaining over a supplier industry by forcing its prices down by reducing the amount of goods they purchased from the industry or by demanding better quality for the same price. The
manager of the organization must watch out the following factors that lead to greater buyer power:• Credible threat of backward integration by buyers. • Price sensitivity of the buyers. • Relatively large volume purchase. • Greater concentration in the buyers industry than in suppliers industry. 4. Threat of substitute product: When the availability of substitute product is upper and prices are above the following industry’s product prices, customer tends to switch to substitute. Consequently manager must closely monitor substitute product that are showing improvement in performance or and decline in prices. 5. Rivalry of the existing firms: In the current free market economy. Company has to face high level of competition. That is usually characterized by in terms of price competition, product differentiation and product innovation. Such rivalry usually results from the following factors: Equally balanced competitors. • Lack of differentiation. • Lack of switching cost. • Large increasing manufacturing capacity. . • High exist barriers. Considering the above factors the management of the company should set up their market strategy. On the view to grab the new market place and keep in hand the old one. d. Industry grows: Financial performance of Pran Company: Year
Earning share
2000 2001 2002 2003 2004 2005 2006
42.20 52.48 54.26 55.48 50.39 50.96 36.18
per
Net AssetNet Value PerAfter Share (mn) 258.39 33.76 284.60 41.99 312.82 43.41 343.39 44.39 362.27 40.31 386.55 40.77 396.11 28.95
ProfitPrice TaxEarning Ratio 9.87 7.05 6.91 7.67 13.31 7.86 10.67
% Dividend
% Dividend Yield
20 20 25 24 24.00 26.00 26.00
4.80 5.41 6.67 5.64 3.87 6.49 7.00
Now we compare the financial performance of Pran Company with the apex foods company. So we present the financial performance of apex Foods Company. Apex Food:
Year
Earning share
2000 2001 2002 2003 2004 2005 2006
16.05 16.58 14.92 22.75 26.29 22.77 21.76
per
Net AssetNet Value PerAfter Share (mn) 632.71 9.15 639.29 9.46 634.68 8.51 646.48 12.97 659.77 14.99 679.61 12.98 686.37 12.41
ProfitPrice TaxEarning Ratio 0 15.82 18.88 15.10 17.41 15.21 6.00
% Dividend
% Dividend Yield
10 10 12 12 13.00 15.00 16.00
2.57 3.81 4.26 3.49 2.84 4.36 4.00
Financial Performance
Earning Per share 60 50 40 EPS
30
Pran
20 10 0
Apex 2003
2004
2005
2006
Year
Net Asset Value Per Share 700
Asset Value
600 500 400 300 200 100 0
Pran Apex
2003
2004
2005 Year
2006
Net Profit After Tax(million) 45 40 35 30 Profit(mn) 25 20 15 10 5 0
Pran Apex
2003
2004
2005
2006
Year
Price Earning Ratio
20 15 Price
10
Pran Apex
5 0
2003
2004
2005
Year
2006
% Dividend 30 25 20 Share Per 15 Dividend 10 5 0
Pran Apex 2003
2004
2005
2006
Year
% Dividend Yield
Yield
7 6 5 4 3 2 1 0
Pran Apex 2003
2004
2005
2006
Year
According to the following graphs and financial performance of both of the companies we can anticipate their industry growth of the said companies. Except net asset value per share in 2003 to 2006 of Apexâ&#x20AC;&#x2DC;s is higher than that of Pran.Other than that overall performance OF Pran is higher than rest of the agro based companies in the industry e. Company Analysis: SWOT Analysis:
SWOT analysis involves an examination of a firm’s strength, weakness opportunities, and threats. It helps to evaluate firm’s strategies to exploit its competitive advantages or defend against its weakness. Strength and weakness involve identifying the firm’s internal abilities or lack thereof. Opportunities and threat includes external situation such as competitive forces discovery and development of new technologies, government regulations and domestic and international economic trends. The strengths of a company give the firm a comparative advantage in the market place. Perceived strength can include good customer service or strong financial resources. To remain strength they must continue to be developed, maintained and defended through prudent capital investment polices. Weakness result when competitors have potentially exploitable advantages over the firm. Once weaknesses are identified, the firm can select strategies to mitigate or correct the weakness. Opportunities or environmental factors that favor the firm can include a growing market for the firm’s products, shrinking competition favorable exchange rate shifts a financial community that has confidence in the outlook for the industry or firm or identification of a new market or product segment. Threats are environmental factors that can hinder the firm in achieving its goals. It would include a slowing domestic economy , additional government regulation an increase in industry competition, threat of entry , buyers or suppliers, seeking to increase their bargaining power or new technology that can absolute the industry’ s product. Now we discussed the SWOT analysis Strength: •
Brand image: Firstly, PRAN has stayed in the local market in Bangladesh for many years. So they are so experienced and stationed in people’s mind deeply. Everyone in Bangladesh is aware of PRAN. PRAN portrays different kinds of products which are already exist in the market and people like it. So there is strong brand preference for PRAN over other substitutes in the mind of a number of consumers.
•
Superior quality control measures: PRAN maintain and control the superior quality of the product. It is the policy of agricultural marketing company limited to market products of consistent quality at home and abroad as per would standards produced by in accordance with good manufacturing practices.
•
Integrity: PRAN believes success depends upon the quality and value of their products by providing a safe, wholesome economically efficient and a healthy environment for their customers and by providing a fair return to their investors while maintaining the highest standards of integrity.
•
Market share: Because of the variety of the product PRAN leads in the share market and increasing the market share.
•
Customer satisfaction: Whenever PRAN exist in the market, that time customer consumed their product. They launch different kinds of product and the price of the product is measurable. So the customer satisfied with the PRAN product.
Weaknesses: Limited decision taking capacity: The PRAN Company is existing under the rules and regulation of agricultural marketing company limited. So PRAN can not take any instant decision to adjust the sudden market changes. Price disadvantage: Sometime price of the product may be varying because of raw material. Because the price of the raw material which is also the key ingredient of their product line, is comparatively expensive than that of their competitors in Bangladesh especially the emerging ones. So this makes them sell their products at a higher cost than most of their competitors. Lowest per capita consumption: Bangladesh has the lowest per capita consumption in the entire world. So upper class and middle class can bear the PRAN product but the lower class people can not bear it. Lack of geographical coverage: Sometime the PRAN product can not reach in the definite geographical area because of lack of communication. Opportunities: • • • • • •
The agriculture sector is the largest contributor to GDP. So PRAN produced canned fruit and vegetables, mushrooms etc and it is the part of agriculture. So it’s an opportunity to contribute to GDP. The crop production system is highly labor intensive and there is an abundance of labor in the country. Through the production of the PRAN product the employment opportunity are increased in Bangladesh. Through the production of the good product there is a great opportunity to attract the foreign investors. Company can develop the effective distribution system. PRAN Company can make survey to make effective product.
Threats: • Uncertainty in receiving fair prices • PRAN mainly produced the agro- based product and most of the products are perishable. So it has to be preserved system. • Inadequacy of appropriate technology. • Lack of required capital. • Decreasing market share. • Major prolonged economic depression.
â&#x20AC;˘
Reduces the customer due to low quality of the product.
Threats Opportunities Strengths Weaknesses
Coverage: Generally speaking, at the time to cover the following aspects, we should look into the following matter
Financial Aspects Capital of owner Cash flow Access to additional resources Investment requirement Profitability Risk
Management, Supervisory And Operator Capabilities Management competence Age/experience Skills availability Technological know-how Management contacts/network Salesmanship of owner/staff Personnel management
Physical Resources Buildings Plant & machinery Technology / incubator parks Location Transport facilities Infrastructure & utilities Industrial flats/estates
Market Profile of target market Competitors' marketing strategy Market share Product features/quality Expanding/contracting/stagnant market Market niche for new/existing product Demand /supply situations (past, pre sent, future)
Management Information Is the necessary information Available?
Supply of Raw Materials Are the sources adequate in terms of Quantity, quality & price? Is it available in time to aid in Decision Are new materials becoming available making and in taking Corrective actions? which would be useful to the company Will they continue to be adequate? Social Environment How is the small business getting Adjusted to the markets? Are people accepting the product? Is there any particular prejudice, Likes or dislikes for the product .............
Production Process is the product going to be mass Produced? Is it labor intensive? Is it a job order or a continuous Operation process? Is it based on product or Technology?
Business strategy: Strategic planning calls for action in 3 key areas: • •
The first is measuring a company’s business as an investment portfolio. The second involves assessing each businesses strength by considering the markets growth rate and the company’s position and fit in the market. • The third is establishing a strategy. Corporate and division strategic planning: All corporate Headquarters undertake four planning activities:
• • • •
Defining the corporate mission Establishing strategic business unit(SBU) Assigning resource to each Planning new business, downsizing or terminating older business.
As we know Bangladesh is an industry arena. RAN is also not different from these views. We have already learned about their corporate mission. Mission statement is at their best when they are guided by a vision.
? Question
Hig h
Star PRAN
Lo w
Market Growth Rate
The BCG Matrix Evaluation of PRAN:
Cash Cow ACME
SQUARE
Dog BD
High
Low
R el at iv e M ar ke t S h ar e Factors underlying market attractiveness and competitive position of PRAN: Market attractiveness: Overall market size Annual market growth ness Historical profit margin Technological requirement Environmental impact
Large Better 2006 Modern friendly
Business strength: Market share Product quality
Fairly large Best
Brand reputation Distribution network Unit costs
Very good Strong minimum
Business strategy of PRAN: still now we can generally say that PRAN is holding first position in the agro based industry. Though it have different types of food product. This firm has fairly large market share in the relevant product market and usually leads the other firms in price changes, new product introductions, distribution coverage and promotional intensity But pran have to be alert on 3 founds to stay n the industry. • • •
The firm must find ways to expand total market demand that is size of the market. The firm must protect its current market share through good defensive and offensive actions. Third the firm can try to increase its market share even if the market size remains constant.
Through above discussion we came to know inspite of having different product still it needs to be exercise the leadership strategy because if we considered PRAN to be as number one then ACME, SQUARE food products, BD food the firm’s known as challengers followers soon well catch up the first position. PART-3 Quantitative analysis a. Ratio analysis: Ratio analysis: Ratio analysis involves methods of calculating and interpreting financial ratios to analyze and monitor the firm’s performance. The basic inputs to ratio analysis are firm’s income statement and balance sheet. Interested parties: Ratio analysis of a firm’s financial statement is of interest to shareholders, creditors and the firms own management. Both present and prospective shareholders are interested in the firm’s current and future level of risk and return, which directly affects share price. The firm’s creditors are interested primarily in the shirt term liquidity of the company and its ability to make interest and principal payments. A secondary concern of creditors is the firm’s profitability; they want assurance that the business is healthy. Management, like
stockholders is concerned with all aspect of the firmâ&#x20AC;&#x2122;s financial situation, and it attempts to produce financial ratios that will be considered favorable by both owners and creditors. In addition, Management uses ratios to monitor the firmâ&#x20AC;&#x2122;s performance from period to period. Liquidity Ratio: For the year 2003: Current ratio: = = =
CurrentAssets CurrentLiabilities 580472010 464013742
1.25098
Quick ratio: = = = =
cash + markatableSecurities + receivables Currentliabilities cash + stock + sharecapital + receivable currentliabilities 18026597 + 456605572 + 80000000 + 15220740 464013742
1.228
For the year 2004: Current ratio: = = =
CurrentAssets CurrentLiabilities 622251899 503199292
1.2365
Quick ratio: = =
cash + markatableSecurities + receivables Currentliabilities cash + stock + sharecapital + receivable currentliabilities
=
22781135 + 493278897 + 80000000 + 29956569 503199292
=
1.244
For the year 2005: Current ratio:
= = =
CurrentAssets CurrentLiabilities 660584792 499627981
1.3221
Quick ratio: = =
cash + markatableSecurities + receivables Currentliabilities cash + stock + sharecapital + receivable currentliabilities
=
33184149 + 491608049 + 80000000 + 42501462 499627981
=
1.2955
For the year 2006: Current ratio: = =
CurrentAssets CurrentLiabilities 673783245 5003648041
= 1.3465 Quick ratio: = =
cash + markatableSecurities + receivables Currentliabilities cash + stock + sharecapital + receivable currentliabilities
=
39484215 + 496023771 + 80000000 + 45504079 500364804
=
1.321
Ratio
Current Ratio 1.36 1.34 1.32 1.3 1.28 1.26 1.24 1.22 1.2 1.18 1.16 2003
2004
2005
2006
Year C urre nt R a t io
Quick ratio 1.34 1.32 1.3
Ratio
1.28 1.26 1.24 1.22 1.2 1.18 1.16 2003
2004
2005
Year
2006 Q uick Ratio
Interpretation: The standard rate of current ratio is 1.25:1.According to the company in every year (2003-2006) the current ratio is between 1.25:1.so these values are acceptable. And the standard rate of quick ratio is 1:1.according to the company, the rate is between 1.23 to 1.32.so these are acceptable. Leverage ratio: For the year 2003:
Total debt ratio: =
currentliability + totallongt ermdebt totaldebt + totalequity
=
464013742 + 185979959 185979959 + 386748095 + 293913711
=
75%
Debt equity ratio: =
totallongt ermdebt totalequity
=
185979959 293913711
=
63.27%
Interest coverage ratio: =
netincome + incometaxes + int erest exp enses int erest exp ense
=
44386931 + 1763235 + 66680144 66680144
=
1.69
For the year 2004: Total debt ratio: =
currentliability + totallongt ermdebt totaldebt + totalequity
=
503199292 + 156153798 156153798 + 417645508 + 309015238
=
74.68%
Debt equity ratio: =
totallongt ermdebt totalequity
=
156153798 309015238
=
50.53%
Interest coverage ratio: =
netincome + incometaxes + int erest exp enses int erest exp ense
=
40309136 + 6571243 + 71120957 6571243
=
17.95
For the year 2005: Total debt ratio: =
currentliability + totallongtermdebt totaldebt + totalequity
=
499627981 + 165941504 165941504 + 418762505 + 330037953
=
72.76%
Debt equity ratio: =
totallongt ermdebt totalequity
=
165941504 330037953
=
50.27%
Interest coverage ratio: =
netincome + incometaxes + int erest exp enses int erest exp ense
=
40771757 + 14659587 + 74872070 74872070
=
1.74
For the year 2006: Total debt ratio: = = =
currentliability + totallongtermdebt totaldebt + totalequity
500364804 + 152592058 74872070
71.40%
Debt equity ratio: =
totallongt ermdebt totalequity
=
152592058 337687792
=
45.18%
Interest coverage ratio: =
currentliability + totallongtermdebt totaldebt + totalequity
=
2894713 + 2280453 + 80438927 80438927
=
1.388
Total Debt Ratio 77% 76% 75% 74% Ratio
73%
Total Debt Ratio
72% 71% 70% 69% 68% 2003
2004
2005
2006
Year
Interest Coverage Ratio 18 16 14 12 10
Interest Coverage Ratio
Ratio 8 6 4 2 0
2003
2004
2005 Year
2006
Debt Equity Ratio 70.00% 60.00% 50.00% Ratio
40.00%
Debt Equity Ratio
30.00% 20.00% 10.00% 0.00%
2003
2004
2005
2006
Year
Interpretation: In the total debt ratio, we assume that the amount of total debt ratio and debt equity ratio which are identified is equal with 1. Activity ratio: On the year 2003: Inventory turnover: =
= =
cos tofgoodsol ds averageinventory
556668499 40452620 +47788404 2
12.61 times
Average collection period:
accountrecivables totalsales 365
=
=
15220740 752710227 365
15220740 2062220
=
7.38
Total asset turnover: =
sales totalassets
=
752710227 943907412
=
.7974
For the year 2004: Inventory turnover: =
= =
cos tofgoodsol ds averageinventory
574352080 47788404+47850460 2
12.01 times
Average collection period:
accountrecivables totalsales 365
=
29956569 775131774 365
=
29956569 2123649
=
14.10
Total asset turnover: =
sales totalassets
=
775131774 968368328
=
.80045
For the year 2005: Inventory turnover:
=
= =
cos tofgoodsol ds averageinventory
592870264 47850460+37768765 2
13.85 times
Average collection period: =
=
accountrecivables totalsales 365
42501462 797683342 365
=
42501462 218538
=
19.44
Total asset turnover: =
sales totalassets
=
797683342 995607438
=
.80120
For the year 2006: Inventory turnover: =
= =
cos tofgoodsol ds averageinventory
667768855 37768765+32765653 2
18.93 times
Average collection period: =
accountrecivables totalsales 365
=
45504079 867000825 365
=
45504079 2375345
=
19.15
Total asset turnover: =
sales totalassets
=
867000825 990644654
=
.8751
GRAPHS
InventoryTturn Over 20 18 16 14 12
Times
10
inventory turn over
8 6 4 2 0 2003
2004
2005
Year
2006
Average Collection Period 20 18 16 14 12
Ratio
10
Average Collection Period
8 6 4 2 0 2003
2004
2005
2006
Year
Total Asset Turn Over
0.88 0.86 0.84
Ratio
0.82 0.8 0.78 0.76 0.74 2003
2004
2005
Year
2006
Total Turn Over Ratio
Interpretation: here the standard rate of inventory turnover is 7 times, average collection period is 36 days and total asset turnover is 1.5 times. According to the company the rate of inventory turnover is greater than the standard rate so it is acceptable. Then according to the company, the rate of average collection period is less than the standard rate so it is not acceptable. and the rate of total asset turnover is less than the standard rate so it is not acceptable. Profitability ratio: For the year 2003: Gross profit margin: =
sales â&#x2C6;&#x2019; cos tofgoodssold sales
=
752710227 − 556668499 752710227
=
26.04%
Net profit margin: =
profitaftertax totalasset s
=
44386931 943907412
=
.047024
=
4.7%
For year 2004: Gross profit margin: =
sales − cos tofgoodssold sales
=
775131774 − 574352080 775131774
=
25.90%
Net profit margin: =
profitaftertax totalasset s
=
40309136 968368328
=
4.16%
For the year 2005: Gross profit margin: =
sales − cos tofgoodssold sales
=
797683342 − 592870264 797683342
=
5.67%
Net profit margin: =
profitaftertax totalasset s
=
40771757 995607438
=
4.09
For the year 2006
Gross profit margin: =
sales â&#x2C6;&#x2019; cos tofgoodssold sales
=
867000825 â&#x2C6;&#x2019; 667768855 867000825
=
22.97%
Net profit margin: =
profitaftertax totalasset s
=
28947713 990644654
=
2.92%
Gross Profit Margin
26.50% 26.00% 25.50% 25.00% 24.50% 24.00% Profit Margin 23.50% 23.00% 22.50% 22.00% 21.50% 21.00%
gross profit margin 2003
2004
2005
2006
Year
Net Profit Margin
Net Profit
5.00% 4.50% 4.00% 3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00%
Net Profit Margin 2003
2004
2005
Year
2006
Interpretation: the standard rate of gross profit margin is 20%-30% and net profit margin is 5%-10%.according to the company profile the gross profit margin is acceptable but the net profit margin is not acceptable. b. Dupont analysis: The Dupont system analysis is used to dissect the firm’s financial statements and to assess its financial condition. It merges the income statement and balance sheet into two summary measures of profitability; ROA and ROE. ROE for the PRAN Company: 2003: ROE =
totalassets netprofitaftertax netsales X X shareholderequity netsales totalassets
=
44386931 752710227 943907412 × × 752710227 943907412 293913711
=5.89 × .797 × 3.21 = 15% 2004: ROE =
totalassets netprofitaftertax netsales X X shareholderequity netsales totalassets
=
403091361 775131774 968368328 × × 775131774 968368328 30901523
=5.2 × .8004 × 3.13 =13% 2005: ROE =
totalassets netprofitaftertax netsales X X shareholde requity netsales totalassets
=
407717557 797683342 995607438 × × 797683342 995607438 330037953
= 5.11 × .8012 × 3.01 =12%
2006: ROE =
totalassets netprofitaftertax netsales X X shareholde requity netsales totalassets
=
28947713 867000825 990644654 × × 867000825 990644654 337687792
= 3.33 × .8751 × 2.93 =9% ROI for total industry: 2003: ROE =
totalassets netprofitaftertax netsales X X shareholde requity netsales totalassets 5677 133587 160816 × × = 133587 160816 31350
= 4.24 × .83 × 5.12 =18% 2004: ROE =
totalassets netprofitaftertax netsales X X shareholde requity netsales totalassets
=
3308 134632 135942 × × 134632 135942 28469
= 2.45 × .99 × 4.77 =12% ROI for the PRAN Company ROI =
netprofit totalasset
=
44386931 943907412
=5% 2004 ROI =
netprofit totalasset
=
40309136 968368328
=4% 2005 ROI =
netprofit totalasset
=
40771757 995607438
=4% 2006 ROI =
netprofit totalasset
=
28947713 990644654
=3% ROI of total industry: 2003: ROI =
netprofit totalasset
=
5677 160816
=3.5% 2004: ROI =
netprofit totalasset
=
6608 135942
=2.4% For the AMCL (pran):
Year
PAT NS × NS TA
2003 2004
5.89 5.2
2005
5.11
2006
3.33
.797 . 8004 . 8012 . 8751
ROA
TA SE
ROE
4.69 4.16
3.21 3.13
15 13
4.09
3.01
12
2.91
2.93
9
For the overall industry: Year
PAT NS × NS TA
ROA
TA SE
ROE
2003 2004
4.24 2.45
.83 .99
3.5 2.4
5.12 4.77
Decision: Dupont equation, which shows how the profit margin, the assets turnover ratio, and the equity multiplier combined to determine the ROE, and the use of debt interact to determine the return on equity.Pran’s management, can use the Dupont system to analyze ways of improving performance. As a result of such an analysis PRAN may have to develop new product and shift capital into new areas.PRAN’s ROE is 15<overall industry ROE17.92 though PRAN’s ROA is 4.69 >overall industry ROA 3.5. PRAN is seeking a higher return on equity and overall agro based industry recognizes that if competition drives profit margin too low in a particular market, it will be impossible to earn high returns on the capital investor to serve the market. C: Sensitivity analysis: FOR THE YEAR 2003 Sales 827981250 (556668499) (-) Cost of goods sold Gross profit 271312752 (-) expense : Administrative and selling (81048447) Financial Expense (66414159) operating profit 123850145 Contribution to workers participation & (2428956) welfare fund Net profit before tax 121421189 (1763235) Provision for income tax Net profit after tax 119657954 Due to the 10% increase in sales the profit after tax change (increase) by 14.45%. So it is highly sensitive. FOR THE YEAR 2004
Sales 852644951 {574352080) (-)cost of goods sold Gross profit 278292879 (expense) Administrative and selling (81356529 Financial expense (75577974) 121358368 Operating profit Contribution to workers participation & (2192260) welfare fund Net profit before tax 119166108 (1343795) Provision for income tax Net profit after tax 117822313 Due to the 10% increase in sales the profit after tax change (increase) by 13.81%.So it is highly sensitive. FOR THE YEAR 2005 Sales 877457676 (592870264) (-)Cost of goods sold Gross profit 284581412 (-)expense Administrative and selling (82485540) (77553914) Financial expense Operating profit 124541958 Contribution to workers participation & (2238681) welfare fund Net profit before tax 122303277 Provision for income tax (1763186) 120540091 Net profit after tax Due to the 10% increase in sales, the profit after tax change (increase) by 13.73%.So it is highly sensitive. FOR THE YEAR 2006 Sales 953700908 (667768855) Cost of goods sold Gross profit 285932053 (-)Expense Administrative and selling (86359063) (80001153) Financial expense Operating profit 119571837 Contribution to workers participation & (1643588) welfare fund Net profit before tax 117928249 Provision for income tax (2280453) 115647796 Net profit after tax
Due to the 10% increase in sales, the profit after tax change (increase) by 12.12%.so it is highly sensitive d. Valuation Calculation of sustainable growth: year
ROE
2003
15%
2004
13%
2005
12%
2006
9%
D
2007
=
D
2006
dividend
Ratio= 1- profitaftertax 24 = .567 53.48 24 1=.523 50.39 26 1=.489 50.96 26 1=.281 36.18
1-
Sustainable growth rate 8.5 6.79 5.86 2.52
(1+g)
= 26(1+.0252) =26.65 Cost of common stock
K
e
=
D P
1
+g
0
26.65 = +.0252 386
= 9.4%.
∴ P0 = =
D
1
K−g
26.65 .94 − .0252
= 387
Decision: if intrinsic value is > than Market price. Then we can hold the share. When intrinsic value < then market price we have to sell the shares. Though, here the change is partial (increase) so, we hold or purchase of new share. e. Risk analysis: Business risk: the risk to the firm of being unable to cover operating cost- is assumed to be unchanged .these assumptions means that the firm’s acceptance of a given projects does not effect its ability to meet operating costs.
sales
2003
2004
2005
2006
7527.10227
7751.31774
7976.83342
8670.00825
∴averagesales = x =
x 7527.10227 + 7751.31774 + 7976.833342 + 8670.00825 = n 4
=7981.31542 Standard 2 2 ( 7527.10 −7981.31) + ( 7751.31 −7981.31) = 733520.71 =856.45 CV: σ 856.45 = x
=.10
7981.31
deviation +
( 7976.83 −7981.31)
2
+
(8670.0 −7981.31)
2
FOR industry: 2003 133587
Sales
2004 134632
x 133587 + 134642 = n 2
∴averagesales = x =
=134109.5 2 Standard deviation: (133587 −134109.5) = 546012.5 =738.92 σ 738.92 CV: = = x
+
(134632 −134109.5)
2
134109.5
=.0055 Financial Risk: The risk to the firm of being unable to cover required financial obligations (interest, lease payments, preferred stock dividends)-is assumed to be unchanged. This assumptions means that projects are financed in such a way that the firm’s ability to meet required financing cost is unchanged. 2003 Total debt ratio 75%
Debt equity ratio
2004 Total debt Debt ratio equity ratio
2005 Total debt Debt ratio equity ratio
2006 Total debt Debt ratio equity ratio
63.27%
74.68%
72.76%
71.40%
50.53%
50.27%
45.18%
Decision: if the value is more than .5 then the value is good and if the value is less than .5 then the value is bad. Here all the value is more than .5 so that we can say that the firms have the ability to meet the required financing. COMMON SIZE OF BALANC SHEET AND INCOME STATEMENT Net asset Tangible fixed asset At cost less depriciation investment(at cost) Current Asset stock trade debtors advances and deposits cash and cash equivalants Total liabilities and shareholder equity current liability
common size of balance sheet 2003 2004 2005 2006 37% 34% 32% 30% 19% 2% 2% 2% 48% 1.60% 9.60% 1.90% 100%
51% 3% 8% 2% 100%
49% 4% 10% 3% 100%
50% 5% 9% 4% 100%
current position of long term loan and debtor short term loan for bank liabilities for goods liabilities for expenses liabilities for other finance income tax payable unclaimed dividend
4.83% 40.97% 0.88% 1.72% 0.17% 0.47% 0.11%
4% 43% 1% 2.00% 0.01% 0.36% 0.52% 0.13%
5% 42% 1.30% 0.90% 0.76% 0.52% 0.48% 0.27%
5% 43.00% 1.30% 0.63% 0.17% 0.45% 0.40% 0.15%
Shareholder equity share capital share premium reserve and surplus proposed dividend
8.48% 4.23% 16.39% 2.03%
8% 5% 18% 2%
8% 4% 19% 2%
8% 4% 20% 2%
Long term debt Total
19.70% 100%
16% 100%
17% 100%
16% 100%
2004
2005
2006
100% 74% 10% 9%
100% 74% 10% 9%
100% 77% 9.90% 9.22%
0.28% 0.17%
0.28% 0.22%
0.18% 0.26%
Common size of income statement 2003 sales 100% cost of goods sold 74% administrative and selling 11% finanacial expense 9% contribution to workers participation and welfare funds 0.32% provision for income tax 0.23% Five Years Financial Statistics
Part-4 Conclusion Pran is the largest grower and processors of fruits and vegetables in the country. At the time of preparing this term paper we discover various ways of doing financial and business calculations. Such as we did calculation of different ratios and analysis like DUPONT, SENSITIVITY, VALUATION, and RISK ANALYSIS. We also had an idea of forecasting different business risks associated with the firmâ&#x20AC;&#x2122;s overall financial performance. After analyzing the financial statement of PRAN we find out that overall position of the company in an agro based industry is in top position in Bangladesh.