A MARKETING AUDIT

ENGLISH BISCUIT
MANUFACTURERS
LIMITED

Submitted by:
MAVISH ZAMAN

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 Table of Contents

EXECUTIVE 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 20
ECONOMIC ENVIRONMENT 22
NATURAL ENVIRONMENT 27
TECHNOLOGY 28
POLITICAL ENVIRONMENT 29
CULTURAL ENVIRONMENT 32
TASK ENVIRONMENT 34
MARKETS 35
EXPECTED MARKET SHARE10 37
DANE CBL 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
COMPANY’S 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 62
MARKETING OBJECTIVES 66
MARKETING STRATEGY 68
BUDGETS 72

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MARKETING ORGANIZATION AUDIT................................................................................................80

MARKETING ORGANIZATION AUDIT................................................................................................81

FORMAL STRUCTURE 82
FUNCTIONAL EFFICIENCY 86
INTERFACE EFFICIENCY 90
MARKET .....................................................................................................................................................93

SYSTEMS ANALYSIS................................................................................................................................93
MARKETING SYSTEMS ANALYSIS 94
LAUNCHING DECISIONS26 INTERVIEWS.........................................................................................94

SOURCES OF GETTING RELEVANT INFORMATION (KOTLER)................................................96

MARKETING PLANNING 100
MARKETING CONTROL SYSTEM 103
NEW PRODUCT DEVELOPMENT 104
MARKETING PRODUCTIVITY AUDIT...............................................................................................105
PROFITABILITY ANALYSIS 106
COST EFFECTIVENESS 107
COST OF DIRECT LABOR...............................................................................................114

......................................................................................................................................................................114

MARKETING FUNCTION AUDIT.........................................................................................................115

MARKETING FUNCTION AUDIT.........................................................................................................116

PRODUCTS 117
BRANDING.................................................................................................................................................118

PACKAGING ............................................................................................................................................119

PRODUCT LINE........................................................................................................................................120
PRICE 121
DISTRIBUTION 123
INCENTIVE PLAN FOR THE DISTRIBUTORS OF EBML33..........................................................125
ADVERTISING, SALES PROMOTION AND PUBLICITY 127
INFORMATIVE PROMOTION4 (KOTLER)........................................................................................127

PERSUASIVE PROMOTION4 (KOTLER)............................................................................................128

BUDGETS(% CONSTRUCTION—FOOTNOTE)................................................................................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 SUMMARY

Our Project

This 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 EBML’s micro and macro environment. This
is then followed by an audit of EBML’s 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 Strategies

By observing and analyzing EBML’s 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 EBML’s 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.

Recommendations

In 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 EBML’s case.

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ENGLISH BISCUIT
MANUFCTURERS

AN OVER VIEW

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ENGLISH BISCUIT MANUFACTURERS (PVT) LTD.

An Overview

Biscuit 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 EBM’s 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.

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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 it’s current situation, a comprehensive market plan
which would include the company’s 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 Statement1

EBML, 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 EBML’s 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 company’s 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 Analysis3

Strengths
• A wide product line
• The Pied Piper icon
Weaknesses
• Vague impression in the minds of the
consumers of the relationship of Pied
Piper with EBM & Peek Freans both

• A strong distribution network

• Inability to capitalize on individual

• Innovation in terms of new ingredients brand advertising

• Value pricing • A wide product line which is

cannibalizing the front runner brands
• A well implemented offensive strategy
• Ineffective innovation in production
• Competitive advantage in terms of
more varieties of biscuits

• Established brand equity

Threats Opportunities
• Stiff competition from LU in terms of • Converging the company’s distributors
packaging, branding, and advertising
• Availing more shelf space and
• Changing consumer preferences enhancing distribution coverage

• Availability of foreign brands, like • More concentration on the “kids

Oreo segment”

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• Fast losing market share brands • Capitalizing on its Pied Piper icon,
(Smile, Venice, Ringo) indicating it as a family brand

THE MARKETING
AUDIT

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MARKETING ENVIRONMENT AUDIT
Macro 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-ENVIRONMENT
In the study of a company’s environment, macro-analysis is of utmost importance since it
provides a bird’s 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:

DEMOGRAPHICS
EBM 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 high

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 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.

Population Age Density of Rate of Life Crude Infant

Population population Expectancy Birth rate Mortality
(millions) structure
Growth rate

139.024 <15 years 156 2.77% per Male 63.2 36 per 97.40 per
persons/sq. year years 1000 1000
46.93%
km persons persons

Female 63
15-64
years 1998 est. 1998 est.

49.66%

1998 est.

>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 ENVIRONMENT
Many 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 Income

Combined: 20% Middle: 60%

1987-88 8 48.3

1990-91 5.7 45

1992-93 6.2 45.6

1993-94 9.2 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 Pakistan Urban Rural

1990-91 3168 30701 2931

1992-93 3590 4976 3070

1993-94 3915 5571 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 Consumer Price Index Total Investments National Savings

8.9 Provisional 7.8 Provisional 17.3 as % of GDP 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 biscuit-
manufacturing 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.

Bahlsen’s: Another foreign brand occupying a large shelf space in the store. The brand
has various varieties, which include Clubs, Teddy’s etc. the prices range from Rs. 58 to
Rs. 100.

Baker’s Pride: Baker’s 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.

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 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 EBM’s 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 ENVIRONMENT
In 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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TECHNOLOGY
In the fast paced world of today, technology plays a significant role in determining the
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competitive advantage of one organization over another. Responses to rapid
technological changes in the environment shape a company’s 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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 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 ENVIRONMENT
In 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 it’s 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

30
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 ENVIRONMENT
Due 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, EBM’s brand Rio is a specialty for tea parties. LU’s
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

32
 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.

33
TASK ENVIRONMENT

34
 THE TASK ENVIRONMENT
Effective 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.

MARKETS
Every 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 Pakistan

9
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

35
 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

36
Expected Market Share10

We 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

6% 24% EBML
16%
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.

37
Growth Strategies4 (Kotler)

We would analyze EBML’s 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

38
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 Agha’s, 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 LU’s 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)

39
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.

4 (Kotler)
For estimating future demand, the company can carry out a Survey of the buyers’
intentions regarding purchases and how they would rank the company products as
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 country’s political arena and the economic
situation in the country. 4 (Kotler)

Market Segmentation

40
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 company’s 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 Targeting

The 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 company’s present position in the
market as a major market challenger. Therefore, the Industry Structure4 (Kotler) and the
Segment Size and Growth are definitely in EBM’s 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 Marketing

41
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
company’s resources, product’s 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 LU’s strategies in this regard. The company can adopt any of the following
positioning strategies:

• On Product Attributes: The quality Of EBM’s 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

42
 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.

CUSTOMERS
Customers consist of people who buy goods and services for personal consumption 4
(Kotler)
.

Need/Want Analysis

For 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:

43
• Biscuits would satisfy a person’s 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.

44
EBM’s Dedication to Quality

E.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 EBM’s
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.

45
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

46
 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

47
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 Packs

Further 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 tastes

The 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.

48
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)

49
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 Complex Buying Variety-seeking

between brands behavior buying behavior

Few differences Dissonance reducing Habitual buying

between brands buying behavior behavior

In case of biscuits, the type of consumer buying behavior involved would be Variety-
seeking 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)

50
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 company’s front-runner brands and by advertising the company values
and encouraging consumers to seek variety and try something new.

51
COMPETITORS

The 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 Competitors15

EBML’s main competitors in the biscuit industry are CBL and Dane Foods.

Continental Biscuits Limited (CBL)

52
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

53
successful in attracting a moderate market share even in the presence of such biscuit-
manufacturing 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.

54
• 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.
4
However, we suggest that the company should adopt a Unique Selling Proposition,
(Kotler)
picking one brand attribute and establishing that as a basis for building a
competitive positioning. In EBM’s case, a USP could be its ability to blend different
ingredients such as zeera, chocolate chips and peanuts into the product’s main ingredients
and providing the tastes based on these ingredients, with a touch of these special mixes.

55
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: EBM’s 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 EBM’s 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

56
Channel Strategy

EBM 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 Retailing”16. The company’s 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

57
SUPPLIERS

Suppliers 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.

PUBLICS
Publics 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 firm’s
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.

58
 4 (Kotler)
• General Publics: EBM has built a pretty good reputation in the minds of the
general public. This has been facilitated by EBM’s 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 Whole-
Wheat 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.

59
MARKETING STRATEGY
AUDIT

60
 MARKETING STRATEGY AUDIT

• Business mission

• Marketing objectives

• Marketing Strategy

• Budgets

61
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 MISSION

In the process of strategic planning the first and the most basic step is clearly defining the
purpose of the company’s 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?

62
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

• EBM’s main competition is from CBL, the manufacturers of LU, Dane Foods and
Meiji

• To regain EBM’s 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 EBM’s mission
statement and analyze it in light of its strengths and weaknesses.

MD’s 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”.

63
 This mission statement is defined more in technological terms in the way that it
emphasizes the company’s functional aspects, it wants to achieve success through better
and more efficient field operations. It identifies EBM’s 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.

Strengths

The 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
company’s 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 company’s
continued emphasis on customer satisfaction and that, these two assets of the company
work side-by-side in accomplishing the company’s 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 MD’s reference to an imaginary battleground is very much according to the present
marketing environment in the biscuit industry and the prevalent cutthroat competition.

Weaknesses

However, the MD’s 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 consumer

64
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)
. EBM’s 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. EBM’s 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.

65
Taking this into account, EBM must design a mission statement, which is market-
oriented, does not become outdated, is specific and guided by a vision.

MARKETING OBJECTIVES

Marketing 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 company’s 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 front-
runner 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

66
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 needs

67
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 STRATEGY
Marketing strategies have been defined as the logic through which a firm hopes to
achieve its marketing objectives4 (Kotler)
. Adopting a marketing strategy involves an
analysis of the company’s standing in the overall industry. We will apply this concept in
relation to EBM.

Faced with a stiff competition from LU, EBM needs to do a comprehensive competitor
analysis. EBM’s 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 EBM’s 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.

EBM has identified three major steeping stones in its strategy analysis

• Rationalization of the product portfolio.

68
• 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

69
• 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, EBM’s 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 product’s 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

70
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.

71
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.

BUDGETS

It 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 EBM’s budgets related to tonnage, sales, brand wise tonnage and
growth and the Advertising & Promotion budgets.

72
Reality vs. Anomaly34

Tonnage

1997.98 1998-99

CFL 2818 3223

Peek Freans 3507 4260

English Biscuit 669 833

Group 6994 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.

73
Sales Budget:

Net Sales34

In millions

1997.98 1998-99

CFL 21.67 23

EB 35.6 44.3

Group 57.27 67.3

Improvement in contribution over 1997-98 due to:

Volume Rs. 40.73 Million

Sales min. 2.7 Million

Total 43.43 Million

74
A&P BUDGET22

1998-99

Budget Rs. 60 Million

Spent Rs. 40 Million

Balance Rs. 20 Million

RINGO: Rs. 4.95 Million

GLUCO: Rs. 2.75 Million

CLICK: Rs. 1.1 Million

RIO: Rs. 4.62 Million

MARIE: Rs. 2.53 Million

TOTAL: Rs. 15.95 Million

OTHERS: Rs. 5.05 Million

Rs. 21 Million

75
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
company’s 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 EBML’s main product
lines CFL and EB, follows. Brand wise budget in tons of EBM’s four major brands for
the year 1998-99 is then presented.

76
 Production in tons (1998-99)35

CFL EBM

Pkt. Creams 366.564 0

Pkt. Plains 100.023 3406.194

Pkt. Crackers 29.172 247.203

Total 495.759 3653.397

H/Roll Cream 206.745 0

H/Roll plains 46.321 990.242

H/Roll Crackers 0 41.184

Total 253.066 1031.426

T/Pack Cream 793.353 0

T/Pack Plain 29.425 330.385

T/Pack Crackers 25.707 78.441

Total 848.485 408.826

All Categories Cream 1366.662 0

All Categories Plains 175.769 4726.821

All Categories Crackers 54.879 366.828

Total Branded 1597.31 5093.649

77
Forecasted Figures of Brands (tons)36

1998-99 1999-2000 Growth 2000-2001 Growth 2001-2002

Growth

Click

Pkt. 340 374 415 465

H/Roll 183 201 229 262

Total 523 575 10% 644 12% 727 13%

Gluco

Pkt. 804 884 972 1070

Gluco+

Pkt. 153 168 185 204

H/Roll 62 74 89 108

Total 1019 1126 11% 1246 11% 1382 11%

Rio

Pkt. 375 462 551 598

H/Roll 207 231 263 328

T/Pack 793 847 911 1005

Total 1375 1540 12% 1725 12% 1931 12%

78
Marie

Pkt. 444 499 549 603

H/Roll 88 100 114 131

T/Pack 28 32 36 43

Total 560 631 13% 699 11% 777 11%

Total 3477 3872 11% 4314 11% 4817 11%

79
 MARKETING
ORGANIZATION AUDIT

80
 MARKETING ORGANIZATION AUDIT

• Formal Structure

• Functional Efficiency

• Interface Efficiency

81
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 STRUCTURE
A company’s organizational structure depicts the formal hierarchy pattern. It shows the
various lines of interactions designed by the management to achieve the organizational
goals. Large Company’s 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.

82
The Structure of the Marketing Department

EBM 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 the consumer response and then go for mass production, as it may be a
risk to start producing straight away. In all such areas the G.P.M has the authority to
make decisions.

Under the G.P.M there is the B.M (Brand Manager). Brand manager is responsible for all
the brands E.B.M has in the market. He works for the success of all the brands. He tries
to identify the threats and opportunities in the environment and gives his
recommendations to the G.P.M about the possible improvements, which could be brought
about in the biscuits

Under the Brand Mangers are the A.B.M (Assistant Brand Managers). There are
basically five ABMs, who have been assigned specific brands. They are solely
responsible for the success of their own brands. The major brands of E.B.M have been
divided among five ABMs. The ABMs decide on the distribution of specific brands in
specific areas. Due to cultural differences there are differences in the tastes. These A.B.M
have to make sure that the right biscuits reach the right areas.

83
Also, in some areas there may be strong competition for certain brands so they must see
that too much supply does not reach there. For example, in Karachi due to a lot of
competition in the creams line from LU’s Prince, E.B.M has been forced to limit its
supply of Rio instead it concentrates on other brands in Karachi. It markets its Rio brand
in Punjab where LU’s competition is weaker.

Also under the N.S.M are the two G.R.M (General Regional Managers) EBM has
divided the country into two zones the northern zone which includes Punjab, NWFP and
northern part of Baluchistan, and the southern zone, which includes Sindh and southern
parts of Baluchistan. G.R.M are the heads of each of these zones. For the southern zone,
the G.R.M sits in Karachi and for the northern zone, the G.R.M is in Rawalpindi. Here
EBM has used “geographic organization4 (Kotler)
”, because of the large area EBM is
covering and also because there are people of different cultures in each province. Their
tastes and preferences differ and so it is important to adopt a more regionalized approach.

Both the Regional Managers are responsible for an efficient distribution of biscuits in
their respective zones. They are also responsible for the promotion of the different brands
in their zones. Sine they live in the same environment as the consumers, they become
more aware of the consumer’s preferences and can suggest some important
improvements about the brands to the top management.

Under the G.R.M are the Z.M (Zonal Managers). There are four Zonal Managers. The
two zones the northern and the southern are further divided into four sub-zones. They are
Karachi and Hyderabad in the Southern Zone and Rawalpindi and Lahore Northern
Zone. A Zonal Manager heads each zone.

Each Z.M is responsible for the activities in their respective zones. They seek to
maximize the company’s profitability in their zones.

84
 Each Z.M has a field force under him. On an average there are six salesmen in a
particular field force. They all are provided delivery vans in which they deliver the goods
to the major retail outlets of the country. They try and make sure that most of the brands
are available in their particular area’s retail outlets. The field force is the last link between
the E.B.M and the customers, and so an important position. As they are closest to the
customers they give useful suggestions about how to bring about improvements in the
product. (The organization chart below has been taken from the company)

O R G A N

M A N A G I N G
D I R E C T O R
M r . K H A W E R . M . B U T T

D I R E C T O R
O P E R A T I O N S
M r . S A L E E M C H O W D E R Y

V . P M A R K E V T . IP N TG E C H ND II CR AE LC T O RD I FR I E N C A T N O C R E A
M R . M A H M O O A DN D N AR N& JD I A N D A C C O M U R N . J T A I NM G S H E
M R . G H A F FM A R R . I Q K BA AT IL Y A L I M O H A M M

N A T I O N A L P R O D U C T I O N
S A L E S M A N A G E R
M A N A G E R

M A N A G G E E R N E R A GL E N E R A L G E N E R A L
S A L E S P R O D U C RT E G I O N A L R E G I O N A L
C O O R D M I N A A N T A O G R E MR A N A G E R M A N A G E R

S A L E S SB TR A A F N F DZ O N A LZ O N A LZ O N A LZ O N A L
M A N A MG AE NR A MG AE NR A MG AE NR A MG AE NR A G E R

A S S I S T F A I NE AL DT F I E L D F I E L D F I E L D
B R A N DF O R C FE O R C FE O R C FE O R C E
M A N A G E R

85
FUNCTIONAL EFFICIENCY
At EBM, there is a very good coordination between the marketing and the sales staff. In
the formal hierarchy, the N.S.M is directly under the VP marketing. This leads to an
effective interaction between the two areas. Infact, the VP Marketing makes the major
selling decisions. This also leads to a very effective communication system.

The marketing staff often carries out market researches to analyze the major consumer
trends and also to identify the opportunities in the market. The research may be helpful in
identifying the reasons for low sales and profits. This information is very useful for the
selling people as they can alter then strategies accordingly. Also quick decisions can be
made as this information is readily made available to the sales people, this makes the
company more adaptable to the changing environment.

Communication

Upward communication4 (Kotler) is very important for any organization as some of the most
dynamic ideas may come from someone lower down the hierarchy. It becomes very
important when the marketing heads are trying to allocate the advertising budget. EBM
has a limited advertising budget, which is about 50% of its major competitor LU. EBM
tries to allocate this among the different brands to achieve the maximum benefit.

To make on effective decision in such a situation, the Marketing Heads need specific
information about each brand in terms of its position in the market and not just the
current sales figures. This could be accessed from the sales managers lower down the
hierarchy. Because of the close interaction of the sales and the marketing people at
EBML. This is not been much of a problem. Regular meetings are arranged between the
top management and the lower level managers so that the different brand’s progress
could be evaluated.

86
Downward communication4 (Kotler)
at E.B.M. is also very well organized. Top
management makes sure that all the relevant information reaches down the hierarchy
without any distortion. Clear cut targets are given to each member in the chain. These
usually are in quantitative terms for the lower level management and in profitability
terms for the middle management. Incentives are also attached at distinct levels of
performance and so everyone knows what is expected of them4 (Kotler).

Other important information about the top management’s future plans regarding specific
brands must be made know to the sales people. Like for example if the company is going
to introduce a new brand, the sales people must know this in advance as they can provide
important information about the feasibility of such a plan. Also, the future of the existing
brands is made known to the sales people as they have time to alter their strategies in
advance.

Supervision and Orientation

The VP marketing also makes sure that the marketing staff is well trained, supervised,
motivated and evaluated. There is no formal training being given to the marketing and
selling people but a thorough orientation about the company is given to them at the time
of recruitment. Complete information about the different brands EBM deals in is
provided to them. They also need to know about the customers and competitions
characteristics, the strong points of the firm products and its competitive advantages 4
(Kotler)
.

Good quality of supervision directs and motivates the sales force to do a better job.
Supervision is needed to see that whether the marketing and sales people are spending
their time effectively and achieving sufficient amount of sales.

87
Sales Force

The top management tries to provide proper motivation to its sales force, as they often
have to be provided encouragement to do a good job. As in the case of the field force,
they are quite lower down the hierarchy, but still they are an integral part of the sales
process as they are closest link EBM has with the customers. So it is important that the
top management makes them feel important within the organization. This is usually done
by providing them with more decision making power in their areas and delegating more
responsibility4 (Kotler).

EBM has set specific sales targets for its sales people. This also results in providing them
motivation. They know exactly what is expected of them, and also provide the necessary
direction.

Rewards and Incentives

The top management also realizes the importance of rewards and incentives in motivating
its salesforce. Monetary incentives are attached at distinct levels of performance. There
are rewards for each level in the formal hierarchy. Frequent meetings are held between
the lower management and the upper management. This helps to boost their morale, as
they feel free to give their suggestions, which makes them feel more important in the
organization. Social gatherings of employees are also organized.

These gatherings are usually held at special occasions such as at a launch of a new brand,
or to celebrate a major success of a particular brand. Also functions are arranged on Eid.
These gatherings give the subordinates a chance to interact informally with their bosses.
They also develop social contacts with their fellow employees, which encourages
teamwork and co-operation between them. Distinguished performers of a particular year
are also honored. This helps to instill a feeling of competition among other members of
the organization, which will enhance their efficiency in the long run.

88
Evaluation Procedures

Periodic evaluation of the sales people is very important to see whether the desired sales
targets are being achieved. This requires regular information from sales people. The
necessary information i.e. the exact sales figures are obtained from the sales department
under the M.S.C. Evaluation takes place based on the sales figure of each sales
performance.

Through this formal evaluation, EBM’s top management communicates its clear
standards regarding sales targets. Sales people also get helpful feedback, they try and
look back at their shortcomings. They also get a chance to explain their position and also
may give suggestions about the possible changes in the advertising or quality
improvement.

There are basically two methods of evaluating performance20 interview

. First, is when
performance of different sales people at a similar level is confirmed, like people in the
field force or the zonal managers. But different market conditions of different areas are
kept in mind. For example, LU has a strong hold in the creams-line in Karachi because of
its better advertising. So it will not be a good evaluation if you compare a sales person in
Karachi with the other in Punjab.

The other method of evaluation is when current year’s sales figures are compared with
that of the past years. This is practiced when comparing the sales targets of the middle
management. For example, when comparing performance of the N.S.M, G.R.M and
G.P.M, this clearly shows their level of competence.

89
INTERFACE EFFICIENCY
EBM is basically divided into four major departments. They are:

1. Finance Department

2. Technical and R&D Department

3. Marketing Department

4. Administration

For the success of the company, it is important that all these departments have a close
interaction, and should work in the same direction. All these departments are equally
important for the overall success of the company.

Before the major marketing plans are made all other departments are taken into
consideration. Usually a consensus is sought before taking major product decisions.

Finance Department

Finance is concerned with finding and using funds to carry out the marketing plan. The
Marketing department may have brilliant plans, but it always has to be seen that whether
the company has enough resources to take a risk. For example, if it wants to introduce a
new brand. The Marketing department must prepare a cost and benefit analysis. It has to
satisfy the Finance Directors about the chances of its success. Marketing department on
its own cannot get the approval from the top management.

90
The Technical & R&D Department

The Technical and R&D department is concerned with both developing of new brands,
which are according to the preferences of the people, and also manufacturing of the
products. The Marketing department does market research. They try to find out what
exactly do the consumers want. This information is conveyed to the R&D section, which
tries to produce such products. The quality of the product depends on the quality of
market research provided by the marketing department.

• Marketing Department

The Marketing department has to work closely with the R&D to develop good products.
The production manager’s views also are taken, as to whether a particular biscuit brand
could be produced in the desired price range, as costs may vary with level of production.
The Production Manager informs the marketing department if the costs will be high, or
for a good quality will have to be higher raised. On issues such as pricing of products the
production and the marketing department have to work closely especially when the aim is
to bring down costs. Even sometimes it may not be feasible to produce a particular brand
in the deserved quantity as this may be too low, and the resulting costs may be too high.

91
• Administration

The Administration department of EBM is concerned with recruiting people. Other

functions of the administration are record keeping of all the company’s archive data.

Human Resource Management is an extremely important area for all the companies.
Selecting the right people for right areas is of utmost importance for the success of any
form. For the Marketing department, it is important to have very efficient sales people.
The performance difference between an average salesperson and a top salesperson can be
substantial.

According to studies, sales superstars at EBM sell an average of 1.5 to 2 times more than
the average salesperson. Also in a typical sales force, the top 30% of the sales people
might bring in 60% of the sales. Thus overall sales person selection can greatly increase
overall sales force performance.

For recruitment, detailed interviews are conducted. The interviewees consist of

executives from Administration and also representatives of the Marketing department.
They try and see whether the applicant can fit in the role desired to be filled. Also, when
deciding on the number of applicants to be recruited in the particular area, for example on
deciding the number of zonal managers, or the number of people in a particular field
force, the V.P Marketing will try and consult the director administration. He will try and
explain why the need is arisen for the additional recruitment.

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 MARKET
SYSTEMS ANALYSIS

93
 MARKETING SYSTEMS ANALYSIS

MARKETING INFORMATION SYSTEMS

A good marketing information system always balances the information that managers
would like to have against what they really need and what is feasible to offer.

Types of Decisions Generally Made at EBML.

Answering specifically to the question Mr. Jamil said that the general types of decision
made by the marketing department at EBM are Launching decision, Media planning,
Forecasting, Packaging decision, and Promotion.

Launching Decisions26 interviews

Regarding launching decision, the major area of concern is what product to bring to
market and which particular segment to cater to. In this regard, information that a
manager needs is complete geographical bio-data including demographics, spending
patterns, and consumer's lifestyle. Mr. Jamil told us that while launching a new product
EBM has to take care of all the necessary elements of production and product itself.
Ranging from the type of cream sandwiched to the crispiness and other attributes of the
biscuit there are thousands of decisions that are to be made.

Packaging 20 interviews

Packaging is another important area in which decisions are made, especially when
launching a new product is the prime issue. The type of packaging heavily depends upon
the specific market they want to cater to. For children, cartoons and myth features are

94
usually more attractive. For adults, sober packaging is a better option. Time to time care
is also taken of the packaging which are becoming outdated and they are changed slightly
and gradually.

What segments to target 26 interview

Depending upon the information available, another important field of decision-making

regards which segment EBM should target. Currently, EBM is catering to a large range of
age, from 8 to 80. But it attacks different age groups with different packaging, cream,
biscuit, and advertisement.

Advertisement26 interview

Another decision that is made frequently and checked upon from time to time is the type
of advertisement to attract different consumer groups. The type of advertisement aimed at
children is totally different from what adults are targeted with. Children are usually
targeted with cartoons or by showing dancing and happy children who eat EBM's
biscuits. While the advertisement aimed at adults usually shows happy people at parties
or with friends, enjoying the company and eating biscuits by EBM.

Another important aspect is the time when the advertisement is shown. Normally,
advertisement aimed at children and adults is shown during the hours of children- and
adult programs respectively.

95
Media planning26 interview

Media planning is another major area of decision- making. Usually regards decisions
concerning how much advertisement at television should be shown and what coverage
should be in newspapers and magazine.

Forecasting20 interview

Forecasting the sales, demand and other relevant factors is also very important. It is done
by analyzing the statistical data for the next year which, at EBM, is obtained by external
sources. Major decisions regarding production and promotion are based upon this
forecastingkotler

Promotion26 interview

How much to invest in promotion and what weight to be given to which method of
promotion is another decision frequently made at EBM. The major source of promotion
comes from television advertisement followed by salespersons. Newspapers, magazines
and posters also get attention.

SOURCES OF GETTING RELEVANT INFORMATION (Kotler)

EBML uses many a system to accumulate information it needs to make all decisions. It
has a continuous flow system of information to keep abreast with any change in the
environment. Steps are taken to ensure that right information reaches right person at the
right time. This is done by developing a special system of information inflow. In this
regard, the functional departments have been divided into information accumulation

96
centers. All the information coming in is accumulated in the main information center.
Here it is evaluated as being relevant and reliable. From here, it is sent to the specific
information center where this information is needed and which the information is relevant
to. For example, information related to sales having the last week sales figures and other
such information is directed to the marketing department, whereas information regarding
raw material prices heads towards the purchasing department. 26 interview

Form the specific department, the information that has been subdivided according to the
category to which it belongs, goes to the specific person who is responsible for dealing
with that information and making related decisions accordingly. Special measures are
taken to ensure the flow of information to the specific person and that it does not go
elsewhere.

This information comprises daily information required to make day-to-day decisions. The
flow of this information is mainly from newspapers, television, sales force and retailers.
The accumulation of this information majorly is the responsibility of the central
information system. This department has been separated out and has been given the status
of a separate entity called the MIS system. The responsibility of the Management
Information System (MIS) is to keep all records available to be used by the management
and to keep track of all important and relevant changes in the environment (Mega and
Micro both). 26 interview

The Management Information System at EBML has track of all relevant facts and figures
for the past twenty-five years including sales figures, demographic divisions, strategic
changes, statistical data about the costs and cost structure, budgets, standards, and
variances. It also includes time to time changes in the overall strategy, changes in the
market share, information about the market conditions, information about the overall
economic conditions and even facts and figures concerning competitors’ standing on
these basis.

97
Besides this many other sources of information are also used at EBML while making a
decision. These include internal records, marketing intelligence, sampling, and through
report base system. 26 interview

Internal Records(kotler)

As discussed earlier the company keeps an internal record for information regarding fact
and figures for more than 25 years. These internal records are very important while
making a decision. Strategic changes over the last ten years and their resulting impact on
the performance of the firm helps make new strategic changes. Sales figures for a specific
season during the last two or three years help forecast sales for the next period. Another
benefit of internal records is that they can be accessed very quickly and their cost is very
low as compared to other sources of collecting information. 26 interview

Marketing Intelligence(kotler)

The everyday information about the development in the marketing environment is called
marketing intelligence. This may include information about the everyday aspect of
market, concerning current market share, competitors strategy or some new law been
enacted. There are many a sources we see at EBML that are used to collect information.
Apart from the internal records that keep track of the past, new information is collected
through company's own personnel, i.e. executives, product managers and general
employees. For this an open-door policy is followed at EBML to ensure timely arrival of
any related information. This not only helps collect information but also helps keep
employee morale high. But there is a potential hazard in practicing open-door policy and
that is of incorrect information. Unless there is some criteria to evaluate validity and
reliability the incoming information may prove to be hazardous. For this EBML has
developed a report base system which would be explained later in the report. 26 interview

98
Sampling(kotler)

Sampling is there when managers draw conclusion about large group of consumers by
looking at a small proportion of total consumer population. At EBML sampling is done
through sales force. Daily information coming from sales body is used to induct or to
draw conclusion about changing consumer taste. This is done by evaluating the daily
performance of each brand as sold by the sales force. Feedback is generally given to sales
people who come up with ideas about the changing preferences. Correct information is
then directed to the information center from where it goes to the specific person26 interview.

Marketing Research(kotler)

Marketing research at EBML is not very much organized. They do not follow any
particular method to do marketing research. The main source of marketing research is
through research companies. Whenever the firm comes to launch a new product it
contacts a research company to analyze the marketing conditions for it. For this purpose
they have special contracts with research firm. Apart from this research which is
conducted when a new product is about to launch, research to get information about the
general changes in trends, economic conditions, etc. time-to-time research is also get
done through these research companies. But here too, reliability of the information is a
matter of concern. Another important issue is the timely arrival of this information. Since
the continuous changes in the environment may lead to a decline, timely and accurate
information regarding these changes is important26 interview.

99
MARKETING PLANNING
The company is very efficient in this regard that it prepares periodic long-term and short-
term strategic plans and periodically revises it. Currently EBML is pursuing a strategy
that requires it to cater to different market segment ranging from higher-income segment
to upper- and middle-income segment. It offers to market a wide variety of biscuit.
Although the company's brands primarily cater to the top end of the market, there can be
seen an obvious discrimination within its packaged biscuit consumers, i.e., the middle
income, upper income, and higher income segments26 interview.

Multiple Segmentation27

In other words we can say that EBML is following a multiple segmentation strategy.
These segments are primarily segmented on the basis of their income level, geographical
and age. Under this strategy EBML caters to different segments with totally different
products, thereby serving to the needs of different biscuit buyers. Taste difference is also
taken into account. So there is product differentiation with cream, plain, and salty
biscuits. Even within the defined category differentiation is present such as cream
biscuits are available in different flavors like chocolate, coconuts, etc. thus we can say
that each segment is catered to differently and not only this but each segment receives a
distinction marketing offer26 interview.

Here we see that the company neither follows ‘mass marketing’ 27 nor does it follow
‘market segmentation’. It does not follow mass marketing because it does not target the
entire market with single marketing offer, and does not follow market segmentation
because it does not target only one or few segments by offering one distinctive marketing
offer. Rather we see, at EBML, there is an amalgam of both the mass marketing and
market segmentation, as the company offers differentiated product to different market
segments, thereby providing access to a larger proportion of the overall market as well as
serving the needs of different groups of customers effectively27.

100
Nevertheless, this Multiple Segmentation strategy places great demand on EBML's
business for high skills and greater resources and high cost. However we can conclude
that higher performance in each segment would result not only in higher profit and if not
comparable profits within the segment and a higher overall profit that would exceed
profits achieved by either mass marketing or market segmentation.

Multi-Flagship Brands28

The company is now using different brand names with its recent addition of EBM as
another category of its brands. EBML has placed its new EBM brand category as a new
competitor among the already existing ‘Peak Freans’, ‘LU’, and ‘Dane ‘ brand ranges in
the biscuit market28.

The company has integrated these different brand categories under the corporate logo
‘Pide Piper’ icon. Now all the brand categories are advertised under the same logo thus
providing a platform for better and unified positioning of the company as a whole. This
has also helped EBML to create a better positioning of its other brands as the logo is very
well positioned on the minds of the consumers who attach attributes like high quality and
better taste to the ‘Pide Piper’ logo28.

This campaign is thus referred to as ‘The Pide Piper Institutional Campaign’, integrating
the Pide Piper with the two brand ranges by placing the icon on ‘Peak-Freans’ and ‘EBM
Brands’ packages. The same logo also helps better the communication between the
product lines thus increasing the overall efficiency28&26 interview.

Product Differentiation Strategy

EBML has attacked a very wide segment of the current market with its single product
‘Biscuit’. This mass marketing cannot help it generate high profits if it does not take into

101
account the differing needs and demands of the market. It is practically almost
impossible, especially in today’s environment to serve different needs put forth by the
consumer with a single unified product no matter how complete and unique the product
may be4 (kotler)-26-interview.

To cope with the problem EBML has divided the total market into smaller fragment and
has come up with product differentiation to serve to the different needs and demands of
these different segments. The basic strategy is to cater to different segments with
variations in the core product. For example, EBML attracts children with cream biscuits
while offering salty biscuits to the segment which likes salty tastes.

EBML manufactures and markets the widest variety of biscuits in Pakistan biscuit
market. It manufactures and markets fifty-three (53)25 different product varieties under
EBM, and forty-four (44)25 variations under Coronet Food (Pvt.) Ltd. (CFL). These
variations includes price variations, packaging differences (Family packs, Ticky packs,
etc.), taste fluctuations (cream-biscuits, plain, salty and 50-50). Thus it makes it possible
to cater to such a wide variety of consumers.

The company offers its products in various forms of packaging such as regular packs and
rolls, family/jumbo packs, half rolls and ticky packs. The packaging is regarded by its
consumers as of good quality.

Therefore, we can well conclude that EBML has developed its product variation keeping
in mind the fluctuating and ever changing consumer demand.

Aggressive Promotion Strategy

EBML has since its origin following an aggressive promotion strategy. Now when it has
well position itself on customer minds, it still has not given up its tendency towards
aggressive promotion. Every year a lot of money is allocated to promotion.

102
MARKETING CONTROL SYSTEM
EBML has always set standards (objectives) for all departments. This also includes
marketing department for which at the beginning of every period objectives for the period
are set. Incentives are given to motivate workers to achieve these objectives. Special
attention is given to make sure that these objectives are attainable but at the same time it
is made sure that these standards are still challenging.

Another important aspect of objective setting at EBML is that they keep on revising these
standards. They believe that a standard that was challenging a year before, due to some
technological advancement, might have become very easy now.

Profitability, sales volume, cost and spending analysis is done every six months. Every
six months internal reports are made to help managers understand the variances.
Evaluation is carried about by matching the actuals against the budgeted ones.

Objectives for the sales force are also set. The company also tells its sales force the
standards they have set for them, the target sales they have to achieve and also what kind
of help they can expect from management. They are also told what type of advertisement
EBML is going to have during the next period and all other related information is given
to them. In the interim and at the end of the period specifically the performance of this
sale force is matched against the objectives and they are appraised on the basis of this,
thereby.

For marketing department targets are set, too. First of all they are given a budgeted
amount of funds within which they are expected to achieve their objectives for the next
period. These budgets have always been challenging but feasible.

103
NEW PRODUCT DEVELOPMENT
As discussed earlier the company EBML produces and markets a wide range of products
to cater to the different needs and demands of its different segments. During the last four
years (1996-99) the company has on its debit eight new different products
(differentiated). New product development reached its climax during July-December
1997 when tit launched eight varieties with in a duration of only six months28.

EBML has developed most of its new product (product differentiation) on the basis of
deferring consumer needs. It realizes the need of a new product line with the realization
of changing consumer taste and preferences. These changes are deducted from the
research done through research companies every time the company assesses a need for it.

The company EBML takes the idea for product development from its current successful
biscuit brands. It sees in them the attributes that have contributed to the success of these
brands. Also there is a research and development center that has the responsibility of
coming up with new flavors, packaging and other attributes that satisfy consumer needs,
preferences and tastes from more close.

Interview
Surveys are also conducted to assess the need of developing a new product and to
know what type of product are customers looking for. Company's sales force also
provides good information about the changing customer preferences and gives good ideas
not only about coming up with a new product but also about how to improve on the
existing brands.

Interview
Customer themselves are another good source of getting such information. At
EBML when research is conducted through the external company, consumers are also
asked question regarding information about the improvement on the current line and the
attribute they would look for in a new brand line.

Finally market segment at EBML gets ideas about new products from its rivals. The
successful brands of rivals provide a good source of generating ideas about a new brand.
The attributes of these successful brands are studied by the research and development
center to know the consumer taste better.

104
 MARKETING
PRODUCTIVITY AUDIT

105
PROFITABILITY ANALYSIS
Biscuit Company in the organized biscuit industry has lost its market leader ship position
to CBL, which came into the market in the late 80's. Even though the company has been
experiencing growth in its sales but at the same time the market seems to be growing at a
higher rate. The capacity of the total organized sector is estimated around the 42000 tons
per annum. CBL has the highest market share at about 20%, followed by EBML/CFL
group with 15%. Other companies, including Dane, Meiji, Wolf, Montgomery etc.
comprise of the rest of the organized sectors sales. High inflation in recent years have
caused the growth of the standard packs to ease up while at the same time the demand for
the small packs that is the ticky packs and the half rolls has increased dramatically due to
greater customer acceptability and thus are enjoying greater growth9.

. EBML has distributed its various brands according to the different income brackets
within the country. The brand "English Biscuits" has been positioned in the minds of the
consumers as a value for money brand which is being offered to the lower- middle
income segment. The flagship brand, which is "Peek Freans", and the newly launched
"EBM" brands have been priced for the higher income bracket. This strategy has
provided EBML with the perfect opportunity to be accessible to a larger market and also
the chance to cater to different classes of consumers27.

Though this strategy may prove to be fruitful in the long run but in the immediate future
this strategy could be very costly and put great demands on EBML in terms of additional
resources being diverted to make this move a successful one. Nonetheless, a good
performance in each of the segments would enable the company to maintain the profit
margins that they have set for themselves according to their market segmentation
strategy, with overall profit generally exceeding that achieved by either mass marketing
or market segmentation27&28.

25
EBML and CFL combined have about 44 and 53 brands and their extensions
respectively, where as in comparison with their competitors this is a huge amount. Their
main competitor and the market leader CBL has only about 7 major brands and they back
these brands by aggressive and creative. CBL which has launched their LU range of

106
biscuits under licensing from Generale Biscuits of France which later on merged with
Danone group, one of the largest food conglomerates in France. EBML cannot match the
advertising capabilities of their rival, since they do not have those kinds of resources but
they can take their major brands in terms of sales and spend most of the advertising
budget on those brands. The major brands of EBML are Marie, Click, Gluco and Rio and
the total sales of these 4 combined was in excess of 3600 tons and their advertising and
promotion expenditure was 49.5 million rupees and the contribution was 104 million
rupees. The average annual contribution and the net contribution margin is Rs. 121.8
million and 85.54 million Rs. respectively. The compound growth in contribution margin
and the net contribution margin is 42% and 109% respectively. The average annual
contribution and the net contribution margin growth is 14% and 36% respectively30.

COST EFFECTIVENESS

The Manufacturing Process31

The production procedures of all the biscuit manufacturers are the same, however, in
terms of packaging and branding these operations may differ from company to company.
We g8ive a brief overview of a few steps involved in the production process of biscuits
and an analysis of the cost effectiveness and profitability of EBML in this section.

Departments in the Production Process

The following departments are involved in the production processes of biscuit
manufacturing:

• Production department

107
• Service department

Production Departments

Production departments are directly in the production process and these involve the
proper allocation of materials and conversion costs to production.

PRODUCTION PROCESS FLOW31

108
 P R O D U C T I O N D E P T S
S E R V I C E D E P T S
M I X I N G D E P T

Q U A L I T Y C O N T R O L
D E P T
C U T T I N G D E P T
T E C H N I C A L D E P T
S T O R E /
W A R E H O U S I N G B A K I N G D E P T
D E P T

M A I N T E N A N C E
D E P T P A C K A G I N G D E P T

In case of EBM, the production departments are:

• Mixing department
• Cutting department
• Baking department
• Packaging department

Service Departments

Service departments are not directly related to the production of an item, in the way that
their contributions cannot be directly traced to the produced items as such. The cost of
service departments is allocated to production departments, since they benefit from the
services provided.

EBM has the following service departments:

A. Quality control department

B. Technical department

109
C. Store / warehousing department
D. Maintenance department

Process Flow31

Under the manufacturing departments, the process flow is “Sequential”, i.e. the output of
one department is the input for the other department. The production of the different
types of biscuits is carried on side by side. If any one department fails to do what it is
required or the production does not meet the required quality standards then the
production process flow would stop. The production activities of one department are
dependent on the degree of completion of production activities in the preceding
departments.

It is, therefore, essential for the company to keep a constant flow of the production
process to achieve economies of scale. In this respect, it is also crucial for EBM to
maintain its quality standards even under tightly controlled and accurate production
activities.

Cost Accounting Pool

EBM uses the accounting pool for forecasting and projection of data. This pool is used
for making forecasts for the next production year as well as allocating budgets to
different production activities.

Internal Reporting31
At EBM, reports are prepared on a monthly quarterly and yearly basis.

110
Evaluation of performance and comparison of actual costs to budgeted costs in order to
determine the production variances are also taken into consideration in the internal
reporting procedures.

Cost Accumulation System31

Cost accumulation is the organized collection of cost data through a set of procedures or
systems. For an effective cost accumulation system, it is essential for all companies to
maintain an effective and accurate network of reporting procedures.

At EBM, the cost accumulation system is especially important for the maintenance of
quality standards and keeping a constant track of resource usage. The evaluations of
prices of products as well as the future consequences of certain costing decisions are also
taken into account under this cost accumulation system.
Common decision making procedures at EBM include:

• Replacements: Expenditures necessary to replace worn out or damaged machinery

used in the production process.
• Expansion of existing product line or markets: expenditures to increase output related
to
• What selling prices should we set
• Should we diversify our product line

EBM uses the perpetual cost accumulation system. This helps in accumulating product

cost data through the inventory accounts that provide continuous information about raw

materials, work in process inventory, finished goods, cost of goods manufactured, cost of

goods sold. EBM’s cost accumulation system is very extensive. The main aims are:

111
• Accumulation of total cost

• Calculation of unit coast

Process Cost Accumulation System

EBM uses process costing. It produces different types of biscuits and these are

manufactured by mass production techniques. There is no major difference in the

production process of each type.

112
 35000000
30000000

25000000
TOTAL COST IN RS
20000000
PER KG COST IN RS
15000000
PRODUCTION IN RS
10000000

5000000
0
JAN98-MAR98 APR98-JUN98 JUL98-SEP98 OCT98-DEC98

COST OF DIRECT MATERIALS (MATERIALS)

5000000
4500000
4000000
3500000
3000000 TOTAL COST IN RS
2500000 PER KG COST IN RS
2000000
PRODUCTION IN RS
1500000
1000000
500000
0
JAN98-MAR98 APR98-JUN98 JUL98-SEP98 OCT98-DEC98

113
18000000

16000000

14000000

12000000
TOTAL COST IN RS
10000000
PER KG COST IN RS
8000000
PRODUCTION IN RS
6000000

4000000

2000000

0
JAN98-MAR98 APR98-JUN98 JUL98-SEP98 OCT98-DEC98

COST OF DIRECT LABOR

COST OF PACKAGING

7000000

6000000

5000000 FACTORYOVERHEAD IN RS

4000000 PER KG IN RS

3000000 PRODUCTION IN RS
2000000

1000000

0
JAN98-MAR98 APR98-JUN98 JUL98-SEP98 OCT98-DEC98

114
MARKETING FUNCTION
AUDIT

115
 MARKETING FUNCTION AUDIT

• Products

• Price

• Distribution

• Advertising, sales promotion and publicity

• Sales Force

116
The Marketing Function Audit consists of an analysis of the marketing mix defined by
the company for its operations. The “Marketing Mix” consists of marketing tools that a
firm blends to produce the response it wants in its target market.

We give an account of these tools used by EBM to market its product line in the
appropriate and well-defined market segments.

PRODUCTS
A product consists of any good or service that can be offered to the market to satisfy a
need or want 4 (Kotler).

In case of EBM, the products are the biscuits produced by the company.

Applying the three levels of product in case of EBM4 (Kotler):

• Core Product: Biscuits, as food-between-meals.

• Actual Product: The high quality level, different tastes, and shapes of the biscuits,
packaging and the Pied Piper icon.

• Augmented Product: EBML provides nourishment and hygiene as well as nutritional

ingredients.

117
Biscuits may generally be categorized as Convenience Products4 (Kotler), products which
consumers buy frequently, immediately and with minimum of comparison and buying
effort. Although in case of the Pakistani biscuit market, consumers do give preferences to
certain brands and compare quality from one brand to another, yet we would still
consider biscuits to be convenience products, as they require minimum search effort and
little planning. They are widely available and within the category of convenience
products, they come under Impulse Products4 (Kotler).

Applying the concept of Product Quality, it is essential for EBM to pursue Strategic
Quality4 (Kotler)
, gaining an edge over the competitors by consistently monitoring
consumers’ changing needs and wants and delivering better quality and satisfaction
through improved products.

Product Design4 (Kotler) may also be considered in case of EBM. EBM should alter the
style of a few of its product lines in order to attract more attention. It has successfully
applied this strategy to its brand, Ringo, which has been shaped in the form of rings as
the name suggests. Here also EBM has made a good effort of communicating this
strategy of a change in the style to the consumers through advertisements.

Branding

A brand is a term, sign, symbol or design or a combination of these intended to identify

the goods or services of a seller or a group of sellers and differentiate them from their
competitors4 (Kotler).

For EBML, the brands are E.B.M and the Pied Piper logo. This is the image the company
wants to build in the minds of the consumers. EBML desires to maintain consumer
loyalty and these brands are adding value to EBML’s products by making the company’s
product line a member of a family under these brands.

118
What does EBML want to relay to its consumers through its brand?

• Attributes4 (Kotler)
: Provider of biscuits made from the finest raw materials on high
quality plants under strict quality control.

• Benefits4 (Kotler): Good tasting biscuits and crackers.

• Value4 (Kotler)
: Hygiene, good quality and good taste that cater to the wants of the
consumers.

• Personality4 (Kotler)
: A legend, a leader in all aspects. For a consumer this brand
projects a sense of loyalty to the best, the classics.

Under this brand, EBML has various categories or sub-brands such as Peek Freans,
English Biscuits and EBM Brands. Each of these Mega brands has numerous products,
which within them have Micro brands, for example Marie, or Click.

Packaging

As far as packaging is concerned of EBML’s biscuits, whichever brand is used is

generally in a typical card box. But now, EBML’s biscuits are available as Ticky Packs,
Half Rolls and Family Packs.

The Family Packs usually have many promotion strategies associated with that particular
brand. The same is the case with the other packaging forms. The Half Rolls introduced
for Tip Top was in a shiny silver syllophene paper. Although this was in response to
LU’s 50-50, it still was different from the regular EBML packaging.

119
Product Line

EBML’s product line consists of numerous brands under the three major brands, that is
Peek Freans, English Biscuits and CFL. Beside these they have various commodity
biscuits such as Chocolati Sandwich and Munna Biscuits.

In total EBML produces 9725 types of biscuits In terms of flavor, size of packages,
different brands etc.

As far as Product Line Extension is concerned, EBML has a wide “products line length4
(Kotler)
” with regard to increased quality level and increased price level and vice versa.
Thus we can say that EBML has stretched both ways, that is it has come up with products
which are better in quality and those which cater to those masses with a smaller level of
disposable income.

In our opinion EBML has spread its wings too far. The company is maintaining such a
large variety of products that it actually can not focus on all of them effectively. There is
a serious need for EBML to revise and rethink its strategy in terms of which products or
brands to continue and which ones to discontinue.

Only by reducing its spread of brands will the company be able to enhance its
promotional activities for its more profitable and front runner brands. This will surely
lead to profitable brands that can actually aggressively compete with LU, Dane Foods
and Meiji. In turn, by being able to compete effectively and efficiently, EBML can regain
its lost market leadership position.

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PRICE
Price is the amount of money charged for a product or service, or the sum of the values
that consumers exchange for the benefits of having or using the product or service4 (Kotler).

In EBML’s case, the price does play a very important part in the product mix it offers its
consumers. This is because of the high competition EBML is facing with LU. Therefore,
EBML has to set the right price for the right product, in turn maximize its profits.

Going over the various brands EBML offers, we see that different brands have different
objectives according to which they are being priced. A brand like Tip Top which is facing
great difficulty in competing with 50-50, has a comparatively lower price. The price
(Rs8.00) is due to the “Survival Objective4 (Kotler)”.

Rio, which is currently fighting for market share against Prince by LU in the creams
category, has been priced below the price of Prince in order to attract more consumers.
The reason for this is that today’s consumer has become more price conscious. The
company wants to obtain Market Share Leadership, thereby minimizing costs over the
long run thereby increasing the profit margin.

EBML bases its price on the Cost Structure, Competitors’ prices and the Value given to
a brand by the consumers. The management at EBML believes that cost efficiency would
lead to higher price margins even though the price is kept lower than the competitors. In
addition to this, we also observe that EBML is following “Competition Based Pricing”.
It largely bases its price on competitors’ prices specifically for those products that are
facing direct competition by brands which are very similar, for example Rio vs. Prince.

New Products

As far as new product launches are concerned, EBML’s launches in the past such as
“Sooper” launched in August 1996, and “Gluco Plus” launched in July 1997, have been
priced using the “Good Value Strategy”. This is specially seen in the case of Gluco Plus

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as it is currently priced at the same rate as the original Gluco biscuit. It gives of an
impression that EBML is pricing a better product at the same regular price at which it
prices the original Gluco biscuit.

Product Mix Pricing Strategies

EBML’s Product Mix Pricing Strategies can be categorized as “Product Line Pricing4
(Kotler)
”. EBML’s various brands are not widely priced, that is they do not have large price
gaps between them. They are grouped in packaging categories such as:

• Packets

• Half Rolls

• Ticky Packs

These categories are usually under the same price range with a few exceptions, such as
the wafers and cream biscuits. They are priced differently under the same category.

Commenting on the type of prices these products are given, one can say that EBML does
give its products a “Psychological Price4 (Kotler)”. Looking over the prices of the various
products, nearly all under the category of Packets are priced at Rs20.00. Keeping in mind
that these products are convenience products, the given prices do seem to be easy to
remember. Plus the fact that when one wishes to buy this any brand in the form of a
packet it does not become a hassle in the sense that two ten rupee notes do the job.

Now as far as those consumers who are price conscious are concerned, we see that the
rolls are once again priced at an easy to remember and handle price of Rs15.00. the ticky
packs are priced at Rs2.50 to Rs3.00.

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EBML also uses “Promotional Pricing4 (Kotler)”. This is visible in case of Tip Top where
EBML wants this brand to create a market share for itself against LU’s 50-50. As far as
“Value Pricing4 (Kotler)” is concerned, as we have mentioned above, EBML is trying to
create an impression of itself as a provider of good quality products at reasonable prices
(Gluco).

We feel in this regard that EBML should rethink the prices of some of its brands specially
the Tip Top brand and consider new alternatives in responding to this lack of market
share.

DISTRIBUTION
A company opens a plant and makes its products. It uses the best materials, the most
efficient machinery, and the best managerial expertise. But is that enough? Definitely not.

How does the product manufactured by the company reach its consumers? The answer is
distribution channels, independent or company owned.

EBML also wants to get its manufactured biscuit on the shelves of the millions of
retailers all over the country and in turn in the hands of the consumers. So it uses
distributors who can cater to the size of EBML and its consumer base. These distributors
make the biscuits made by EBML available to the final consumers.

Here EBML uses “Indirect Marketing Channels4 (Kotler)

”, that is it has intermediaries
(distributors) between the company itself and the retailers who in turn provide their
products to the final consumers.

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EBML’s product flow through in its channel of distribution is depicted in the following
diagram.

Customer marketing Channel of EBM

Manufacturers Distributors Retailers Consumer

In actual there are 509 distributors. These distributors break up the large consumer base
into regions and territories that they cover. In turn they cut down on the time taken for the
products to reach the final consumers. Besides making available the products of EBML to
consumers they also provide valuable information regarding the demand in different
regions for different products in the various packing they come in. Furthermore they also
promote the name and products of EBML as well as fight for shelve space.

It is also important to mention that due to the large number of distributors often the
regions they cover overlap and they start competing against each other to get their hands
on retailers in their region. We believe that on one hand this leads to healthy competition,
that is EBML’s products reach retailers fairly quickly. But on the other hand the coverage
made by these distributors is being duplicated or wasted. Optimally there should be lesser
if not few distributors who are big and capable enough to cover distinct regions
efficiently and effectively. Not only will this cater to the needs of the retailers and in turn
the consumers but also will be more convenient for EBML to deal with, evaluate and
promote.

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Ideally EBML should progress from this conventional distribution channel where every
link in the chain from EBML to its consumers seeks to maximize its own profits. It
should try to mold its distribution channel into a “Vertical Marketing System (VMS) 4
(Kotler)
” where EBML, its distributors and retailers would work together towards a unified
goal that is maximum profits for all. In this respect EBML should try to operate a
contractual VMS whereby its distributors could organize the various retailers such that
they become more effective and competitive thus benefiting themselves and EBML in
return.

However, currently EBML is taking steps to enhance the efficiency of its distributors
through incentive programs. An outline is given below.

Incentive Plan for the Distributors of EBML33

EBML considers and infact calls its distributors its “Business Partners”. The reason is
that the company’s growth and profitability depends so much on the performance of its
distributors. To enhance the performance of its distributors, EBML had worked out an
incentive program for 1997-98, which amounted up to 10% on achievement of sales
targets. But this incentive plan was not made operative. Now, for 1998-99 its has
formulated a new incentive program.

Under this plan, EBML has classified its distributors under categories of sales volume.
These categories are as follows:

• 12 Million plus per annum

• 6 Million to 12 Million per annum

• 3 Million to 6 Million per annum

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• 1.2 Million to 3 Million per annum

• 0.6 Million to 1.2 Million per annum

Under these categories there are various prizes and perks given to those distributors who
perform better than the rest under the same category. This is based on a Point System
based on parameters. The parameters are as follows:

• Sales Growth 15 Marks

• Sales Volume 10 Marks

• Market Penetration / Product Service 05 Marks

• Payment / Stock Inventory 05 Marks

• Suggestions / Feedback 05 Marks

TOTAL32 40 Marks

Under these parameters first, second and third positions are determined on the basis of
the marks secured out of the total 40 Marks. Estimated total annual prizes for EBML’s
distributors amounted to 1.0 Million, which comes to 0.15 % of the Net Sales Volume.
Now this is lesser than last years proposed incentives to EBML’s distributors, but is still
substantial.

As far as the performance of these distributors is concerned, the management at EBML is

of the view that they can do a better job, which is the reason why this new incentive plan
is being brought up. The company believes that an increase in the performance level of
these distributors can and surely will help EBML in regaining its lost market share.

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ADVERTISING, SALES PROMOTION AND
PUBLICITY

What makes a company’s products known to its consumers? Its physical existence on the
shelves of the store around the corner…. Yes, but that’s not all. It is the company’s
promotional activities or the “Promotion Mix4 (Kotler)
” that actually tell the consumers
about the company’s product and its attributes.

What is EBML’s Promotional Mix? It is a combination of its advertising, sales

promotion activities, publicity campaigns and personal selling tactics. But this
promotional mix comes from the overall promotional objective of EBML. So what is
EBML’s promotional objectives.

Informative Promotion4 (Kotler)

Recently EBML has decided to concentrate on its leading products. However, its has to
continue to inform the masses of the various new perks and promotions it associates with
its other existing products. In addition to this all new products EBML launches have to be
presented to the public highlighting its features, its taste etc.

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Example: The promotion of Click biscuit as a biscuit for health conscious people tried to
build its share in that health conscious segment of the market. Its association with Lipton
Tea also tried to make it a biscuit to be eaten with tea.

Persuasive Promotion4 (Kotler)

Various promotional activities conducted by EBML are centered towards persuasion.

Considering the tough competition it faces from LU, EBML has to convince people into
switching to or building preference for its brands. This has to be done in the wake of the
competition that has taken away EBML’s leadership in the market.

Example: The promotion for Gluco which shows a baby growing into a healthy young
boy who is running is basically persuading the masses to buy this product as a health
oriented biscuit for young kids.

Comparison Promotion4 (Kotler)

Once again, in the wake of competition EBML has to directly or indirectly position its
products against other products in the market. In EBML’s case, comparison promotion is
extremely important because every new or existing product of EBML, which is
competing against LU’s product, has to be given an edge, a comparison, and a foothold.

Example: The Rio Godzilla Consumer Campaign had a clear objective, that is to increase
the sale of family packets in the short run and to increase brand loyalty for Rio’s
Sandwich Biscuit in the long run. Along with that EBML’s aggressive V for Vanilla
campaign for Rio also pitted Rio in comparison to LU’s Prince biscuit. Although the
success achieved from these campaigns is not as was expected but it was a bold move
towards attacking the competition in their own stronghold, that is the Cream Biscuit
category.

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Budgets(% construction—footnote)

EBML, as evident through its advertisements, billboards, sponsorships and other

promotional activities, spends quite a lot on advertisements and promotion. In fact, for
the year 1998-99 the budget is around Rs60 Million. Of this, approximately Rs40 Million
has been spent. The remaining has been allocated to the various leading products of
EBML as mentioned before that EBML is and will be focusing on specific products.

These leading products of EBML and their approximated allocations are as follows22:

RINGO 23.00%

GLUCO 13.50%

CLICK 07.00%

RIO 22.50%

MARIE 11.50%

OTHERS 22.50%

But how does EBML’s management allocate these funds? What are the criteria?

EBML’s allocation depends on various factors such as the State of the Produc4 (Kotler)t, its
Market Share and the Competition it faces. Marie which one might think to be in the
maturity stage, although has been there since a very long time but current performances
do say that it still grows slowly. Thus it satisfies the 11.50%22-constructed percentage
of the
remaining budget allocated to Marie.

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Rio we see a brand that is fighting to build a market share in the wake of a strong
competitor, that is Prince by LU. This therefore does require a high budget allocation as
far as advertising and promotion are concerned. Thus the 22.50% allocation is once again
justified.

Taking these allocated funds and observing the various particular activities they are spent
in, we can judge whether these promotional activities have come out with the desired
results. Focusing on Rio we see that their main activity was advertisement followed by
the Karachi Attack plan which was the Rio Vanilla Campaign with the pop group Awaz.
This has resulted in the impressive increase in sales of Rio from approximately 540 to
950 tons.

Coming to Click, we see that nearly 77% of the allocated promotion expenditures have
been spent in advertising. But the results have been quite subtle, as sales have remained
more or less constant at approximately 155 tons24.

The same is the case with Gluco where advertising is the major mode of expenditure. But
in Gluco’s case, this has resulted in an increase in sales from 380 to 430 tons. Gluco’s
situation has also been observed in Marie’s case where the allocated expenditures have
resulted in an increase in sales.

THE MESSAGE

“The Legend Leads”

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This message, which is focused on the Pied Piper, is a blend of various message
execution styles such as Fantasy, Image, Musical4 (Kotler)
and most importantly a
Personality Symbol. The story of the Pied Piper is a sad one where all the children of the
town are lost as they follow the Pied Piper into some cave. But EBML has made the Pied
Piper into a hero figure who carries the qualities of fun, quality, strength, good taste.
Over all the Pied Piper is legend that leads23.

As far as the Marie advertisements are concerned, these depict a Lifestyle4 (Kotler). They
show a lady singing a song saying that she has looked far and wide for the best taste but
she has concluded that it is Marie which is the best. It shows a classic lifestyle of comfort
and luxury. That is what Marie is depicted as, “A Classic”.

SALES FORCE
The sales force consists of salespeople, sales representatives, account executives, sales
consultants, sales engineers, agents, district managers and marketing representatives4
(Kotler)
.

At EBM, the sales force serves as a critical link between the company and its customers.

The Sales Force Structure

EBM offers a wide product line to consumers in different geographic locations within the
country. In this case, it uses a “Territorial Sales Force Structure4 (Kotler)
”. Under this
structure, EBM has assigned sales persons to each of its well-defined zones and sells
through these sales people.

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EBM only operates through “Inside Sales Force4 (Kotler)” which conducts business from
offices and business deals with distributors.

Recommendation:

It is recommended that the company provide adequate training to its sales force. Since
EBML is faced with tough competition from its major competitor, LU, it should aim for
“Service Differentiation4 (Kotler)” by hiring personnel and providing training to the sales
force for operations within the company as well as field operations. Sales people must
know EBML’s product line inside out, should be aware of the entire production process,
they need to know the strategies and characteristics of the competitors and should possess
an adequate knowledge of the needs and wants of the consumers.

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CONCLUSION

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 CONCLUSION

EBML had been the market leader in the biscuit industry since a long time. It was in the
late 1980s when Continental Biscuit Limited came into the market with their brand LU.
Eventually EBML was removed from its leadership position. Currently EBML is trying
to regain that position and increase its profitability by focusing on few brands that are
either profitable or they are promising.

Our audit on EBML is an analysis of its environment and the various Marketing
Functions that assist the company in its goal of higher market share and profits. The
analysis that we have done and the recommendations incorporated in them are based on
our perception of what we think EBML should do. It is important to know that any step
or recommendation which is implemented should be compatible with the internal as well
as the external conditions prevailing in the firm and the market.

However, we would like to identify the following points of importance in this report:

• Focus on profitable brands.

• Divest brands that are low market share holders and loss makers.
• Promote promising brands as long as they do not cannibalize the existing front
runners.
• Concentrate more on Value Based Pricing Strategy.
• Converge the existing multi based distributors into large based high coverage
channels.

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APPENDICES

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BIBLIOGRAPHY

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 BIBLIOGRAPHY

♦ Strategic Analysis of EBML’s Brands Vs Competing Brands

An M.B.A report by Lahore University of Management Sciences.

♦ Principles of Marketing, Seventh Edition

By Philip Kotler and Gary Armstrong.

♦ Economic Survey of Pakistan, 1997-98.

♦ State Bank of Pakistan Annual Report, 1997-98.

♦ Excerpts from Board Presentations of the Marketing Department, EBML.

♦ Cost Report by Zehra Rizvi, BBA III (Hon) Morning.

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