Juhayna strategic project

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Juhayna strategic project

  1. 1. J u h a y n a F o o d I n d u s t r i e s S t r a t e g i c M a n a g e m e n t P r o j e c t A A S T M B A – E l D o k k i 1 0 / 3 0 / 2 0 1 2 Juhayna…
  2. 2. 2 Table of Content Contents Page Introduction………………………………………………………………………………….3 1. JUHAYNA FOOD INDUSTRIES COMPANY PROFILE 1.1. Company Background……………………………………………………………………3 1.2. Corporate Values…………………………………………………………………………3 1.3. Quick view on ProductMix……………………………………………………………....4 1.4. Vision and Mission……………………………………………………………………….5 2. KEY EXTERNAL FORCES 2.1. Industry Overview………………………………………………………………………..5 2.2. Economic Forces – PEST + L Analysis………………………………………………….7 2.3.Juhayna Food Industries Direct Competitors…………………………………………….10 2.4. The Global Challenge…………………………………………………………………….11 2.5. Competitive Profile Matrix (CPM)…………………………………………………….....13 2.6. Opportunities & Threats………………………………………………………………….13 2.7. External Forces Evaluation (EFE)………………………………………………………..14 3. KEY INTERNAL FORCES 3.1. Management / Value chain / Distribution Channels…………………………...………….15 3.2. Strengths&Weaknesses……………………………………………………….…………17 3.3. Internal Factor Evaluation (IFE)………………………………………………………….17 4. INTEGRATING STRATEGIES 4.1. Past and Current Strategies…………………………………………………………….....18 4.2. Long Term Objectives – LTOs…………………………………………………………...20 4.3. SWOT Analysis…………………………………………………………………………..21 4.4. Strategic direction “SPACE Matrix”……………………………………………………..22 4.5. Future Strategies………………………………………………………………………….23 Sources are provided when the data is used.
  3. 3. 3 Introduction The past decade has seen dramatic looses in some industries. Firms that had been performing well suddenly announced large losses. Renowned companies losing market share to other companies due to relying heavily on their own strengths and paying no/little attention to external factors representing lost opportunities or inappropriately responding to threats. Companies must continuously assess their position in the industry and know where they are heading in the future. Hence, the key issue is strategic management. In this paper we present the strategic plan for Juhayna Company-the famous dairy manufacturer. We will scan the environment, develop the company‟s vision and mission statement; assess external and internal factors, establish long term objectives, generate, evaluate, and select strategies. Flowing from the afore- mention, we will proceed with implementation with the strategy. 1. JUHAYNA FOOD INDUSTRIES COMPANY PROFILE 1.1.Company Background Juhayna Food Industries is a leading Egypt-based manufacturer specialized in the production, processing and packaging of milk, yoghurt, juice and juice concentrate. During the past three decades Juhayna has succeeded in winning the loyalty of consumers who have come to view our wide variety of quality products as trusted household names. Juhayna has the well-earned reputation as trendsetter in both manufacturing know-how and product innovation. Recent market studies indicate that Juhayna enjoys a level of brand awareness that is significantly more pronounced than its leading competitors on the Egyptian market. By building a state-of-art industrial infrastructure, Juhayna has steadily increased production capacity while developing and expanding its product range. Today the company has 209 different products on supermarket shelves that are produced at six separate manufacturing facilities with the industrial capacity to yield a total of 2,900 tons per day. 1.2.Corporate Values Our business model is based on the belief that growth must have a positive effect on society as a whole. In addition to creating new job opportunities through the expansion of our operations, our commitment to developing quality products and utilizing the most up to date production techniques has helped to upgrade quality standards in the Egyptian food industry as a whole.
  4. 4. 4 1.3.Quick view on Product Mix Dairy Milk: Juhayna has catered to diverse market segments with a wide range of products that are developed with specific needs to serve all tastes of their target market segments. In 1987 Juhayna became the first Egyptian company to offer safe, healthy, packed milk products to the local market. In Dairy Milk we have below brands: Juhayna Milk, Bekhero Milk, Halebo, Mix, Jino and Foam Milk Yogurt, Cream and Cheese: In 1987 Juhayna was the first company in Egypt to launch a natural, packed yoghurt product. For over two decades Juhayna has maintained market leadership with its innovative, high-quality yoghurt and yoghurt-based products. In Yogurtn Cream and Cheese we have below brands: Plain Yogurt, MIX Yogurt, Actilife, Zapado, Rayeb, Creams and Cheese Juice: Since 1987 when we first introduced our packed juice to the market we have been producing the highest- quality juices from the largest and most modern manufacturing facilities for juices and drinks in Egypt and the Middle East, equipped with the latest, state-of-the-art technology. In Juice we have below brands: Juhayna Juice, Pure, Bekhero, Jump and Tingo
  5. 5. 5 1.4. Vision and Mission Vision “Juhayna is a leading food for all ages, and a friend for all generations” Mission “Juhayna perseveres in providing Products that are healthier, tastier, and classier while increasing shareholder‟s value and focusing on the most updated state-of the art technology as well as our employees who represent our most valuable asset” 2. KEY EXTERNAL FORCES 2.1. Industry Overview Supply view: The number of larger dairy farmers has been continuously increasing; even the bulk of the national dairy herd is concentrated among small farmers. Nevertheless, with the number of cattle in the country declining in recent years, cattle farmers have often imported dairy cattle in order to maintain and expand local production. However these imports were restricted or banned when disease concerns appeared, mainly in European countries. This has resulted in production constrains. Gradually, the majority of restrictions are lifted now, including the ban on imports of US and European Holstein cows. This reflects a positive milk outlook. However, Egypt‟s dairy industry as largely underdeveloped. The numerous small-scale procedures dominating the sector produce mainly for their own consumption, with any surplus production sold to extended family members and other members of the local community. The larger-scale farms which are slowly appearing are already providing a boost to Egypt‟s dairy production and we expect that investment in the dairy sector and improving production will pick up in coming years, driven by strong demand. Demand View: Dairy products have become an important component of the Egyptian diet. It is estimated that around 75% of Egyptians consumer milk that has not been packaged or pasteurized. However, this figure is dropping rapidly as health and hygiene concerns as well as rising incomes see more consumers convert to higher-value packaged milk products. Bearing in mind these changing consumption patterns as well as strong population growth, it is believed that fluid milk consumption will rise by a robust 12.3% to 2.03mn tonnes by 2016. Given the significant domestic supply gap, demand will continue to be met by a combination of local production and imports. Meanwhile, powdered milk is forecasted to experience a 15.2% rise in consumption to 59,900 tonnes by 2016, with full demand being met through imports. Dairy sector Attracts Investment and expands internationally: In June 2010, a public share offer by Egyptian dairy goods and juice maker Juhayna Food Industries worth EGP 192mn (US$34mn) was oversubscribed by 6.8 times. Juhayna is said to be a leader in Egypt‟s packaged dairy goods sector with a 65% market share, according to some sources. Its goods are exported to more than 48 countries, including the US, Europe and the Gulf states. Dairy is among the better performing of Egypt‟s agribusiness subsectors, with numerous investment and employment opportunities throughout the value chain and, increasingly, in the manufacture of processed dairy goods. The industry has seen a real turnaround from the dynamics exhibited prior to 1998, when unregulated street trading of milk was very much the norm. In such an unregulated environment it was
  6. 6. 6 very easy for health and hygiene standards to be routinely bypassed, resulting in the need for consumers to engage in the time-consuming practice of boiling all milk purchases. GDP growth has contributed to heightened demand form locals for value-added goods such as processed cheese, ice creams and yogurts. Saudi Arabia‟s largest dairy company Almarai acquired Beyti for US $115mn on June 2009 as part of its plans to engage on a US $1.6bn expansion plan outside of the Gulf countries to 2013. Almarai is reportedly aiming to capture half of Egypt‟s dairy market by that year and will invest EGP 100mn (US $18.3mn) in upgrading Beyti‟s operations. It is thought that Almarai will strive to introduce and array of fruit-milk drinks into Egyptian market through its joint venture with PepsiCo. In December 2009, ownership of Beyti was transferred to International Dairy and Juice, Almarai‟s joint venture with Pepsi. Almarai isn‟t the only company eyeing opportunities in Egypt. In 2009, the world‟s largest dairy exporter, New Zealand‟s Fonterra, announced a partnership with Arab Dairy Products to market its products in Egypt. According to a report in National Business Review, Arab Dairy Products will manufacture and market Fonterra‟s Anchor cheese brand. Arab Dairy Products will invest EGP 100mn in upgrading their facilities to produce Fonterra products. It is expected that more international investment in Egypt‟s dairy sector in coming years as companies seek to benefit from strong demand driven by a fast-growing population and rising per capita incomes. In addition to attracting outside investment, Egypt‟s dairy sector is starting to benefit from a more international outlook aimed at improving the sectors access to raw materials. In February 2010, Reuters reported that Gozour, the food unit of Egyptian private equity firm Citadel Capital, was in advanced talks to buy an Ethiopian food firm in its bid to boost self-sufficiency in raw materials. It is therefore quite feasible that Gozour may be looking to Ethiopia as a potential source of dairy cattle and milk. The purchase of the Ethiopian firm would mean Gozour could start “contract farming” in Ethiopia. This involves financing farmers and in return reaching agreements to use the produce in factories in Egypt and eventually plants in Ethiopia. Gozour has three primary lines of business: agri-foods and dairy, Fast- moving consumer goods, and intermediate industries such as flour milling and production of skimmed milk powder. Table: Egypt Milk production & consumption, 2007-2012 2007 2008 2009 2010 2011 2012f Milk Production, „000 tonnes 1,470.0 1,530.5 1,472.0 1,654.0 1,680.5 1,706.4 Liquid Milk Consumption, „000 tonnes 1,508.0 1,577.0 1,749.0 1,763.0 1,812.0 1,826.2 Sources: FAPRI, BMI. Table: Egypt Butter production & consumption, 2007-2012 2007 2008 2009 2010 2011 2012f Butter Production, „000 tonnes 6.5 10.5 10.0 14.6 14.6 14.7 Butter Consumption, „000 tonnes 56.0 56.7 58.2 60.0 61.3 61.8 Sources: FAPRI, BMI. Table: Egypt Cheese production & consumption, 2007-2012 2007 2008 2009 2010 2011 2012f Cheese Production, „000 tonnes 420.0 420.0 445.0 454.0 456.3 460.1 Cheese Consumption, „000 tonnes 425.0 428.0 464.0 469.6 471.9 475.6 Sources: FAPRI, BMI.
  7. 7. 7 Table: Egypt Whole Milk Powder consumption, 2007-2012 2007 2008 2009 2010 2011 2012f Whole Milk Powder consumption, „000 tonnes 35.0 44.0 47.0 50.0 52.0 51.5 Sources: FAPRI. Risks to outlook The main risk on the supply side in the form of disease, as the vast majority of the livestock herd is used primarily for dairy production and is periodically affected by outbreaks of lumpy skin disease and foot and mouth disease. The related import bans by the government are the other main risk. With world dairy prices rising and more countries looking to increase domestic production, local producers will continue to face stiff competition on the international market for high quality cattle. On the demand side, the main risk if food price inflation, as most Egyptian consumers are highly price- sensitive; any rise in prices is likely to have an impact on many consumers. If this were to continue, many consumers may drop dairy products from their diets as many still regard dairy goods as luxury products. Any sustained economic downturns would have such an effect, particularly on fresh milk consumption. 2.2. Economic Forces – PEST + L Analysis Economic Forces: Egypt has low GDP per capita. In addition to itspopulation being the largest in the region, the fact that disposable incomes are set to risemarkedly over the long term means Egypt‟s country structure benefits from probably the mostdynamic upside potential, which confirms the country‟s standing as oneof the Middle East‟s most exciting investment destinations. Key Economic variables: Availability of credit& Level of disposable income Low wages in global terms are advantages for foreign investors, however it‟s a disadvantage on the side of demand as the disposable income is low although it is slightly increasing. Interest rates 9.25%. Historically, from 1991 until 2012, Egypt Interest Rate averaged 11.8 Inflation rates Headline CPI published by the Central Agency for Public Mobilization and Statistics on October 10, 2012 reflected an inflation of 6.22% as of September of 2012. Historically, from 2001 until 2012, Egypt Inflation Rate averaged 9.0%. Government budget deficits Despite a reduction, a number of restrictive tariffs remain in place and serve asa barrier to entry for many international brands, particularly as the country has ahigh food and drink trade deficit
  8. 8. 8 Consumption patterns (July - March 2011/2012) Unemployment trends 12.6% in the second quarter of 2012. Historically, from 1993 until 2012, Egypt Unemployment Rate averaged 10.1 %. Source: http://www.tradingeconomics.com/ GDP growth & Trade balance Market: Egypt SE Indicators Figure Date Real GDP growth 1.8 (%) 2010/11 Real GDP at market prices 236 (B) USD 2010/11 Trade Balance -33.3 (B) USD 2011/12 Tax rates: 11.2%. Political/Legal Forces - Bio-security, food safety & other regulations from the ministry of health - Government future trends will most likely be more transparent, helping firms not politically connected with the government secure lucrative contracts - Following the new GATT Treaty, opportunities will increase tremendously for the export of Agricultural products in general and dairy products in particular. 2.3% 21.0% 6.8% 9.4% 0.7%19.9% 4.0%0.6% 2.6% 18.4% 3.0% 1.6% 9.7% Agriculture, Irrigation & Fishing Crude Oil, Mining & Natural Gas Manufacturing Industries & Petroleum Products Electricity & Water Construction & Building Transportation & Communication Wholesale & Retail Trade Financial Services, Insurance and Social solidarity
  9. 9. 9 - Although there is a law prohibiting Urban construction taking over on the already limited land suitable for agricultural production, however there is not much enforcement - Some lack of awareness that lead to poor irrigation and diminishing water supply - High unemployment may lead to political resistance to privatization plans. Social- Cultural Forces Social, cultural, demographic,and environmental changes: With a population of 90 million, Egypt is the largest market in the Arab world. Population growth at 2.0% is considered high compared todeveloped countries. Nearly 45.0% of the population is under the age of 18, which creates a sizeable consumerbase. Income per capita is enjoying higher than average growth as a result of ongoing economic reforms. Theexpansion of the middle class segment, economic openness and better living standards have improved health consciousness across growing segments of the Egyptian population. Industry statistics point to strong growth foryears to come, supported by favorable demographic and economic profile. Per capita income Disposable income 2008 2009 2010 2011 2012 Annual Disposable Income (US$ million) 132,591.6 159,454.1 177,250.2 186,126.6 189,522.9 Lifestyle Indicators 2008 2009 2010 2011 2012 Internet Users („000) 13,636.6 18,757.2 23,799.2 28,599.1 31,688.5 New Registrations for passenger cars („000) 55.2 53.6 69.1 75.0 0.0 Consumer expenditure on food (US$ million) 54,226.8 64,423.1 70,691.2 74,874.4 74,968.4 https://www.cia.gov/library/publications/the-world-factbook/geos/eg.html Technological Forces The use of automated systems is taking over; it helps so much in reducing the time of production while increasing the capacity and production. Example: the microchip injected in cattle to monitor and make sure that all the herd has been milked. Also there is the infrastructure of communication and connectivity that made it easier to communicate and so manage the supply chain. GDP - per capita (PPP): $6,600 (2011 est.) country comparison to the world:136 $6,600 (2010 est.) $6,400 (2009 est.) note:data are in 2011 US dollars Source: THE WORLD FACTBOOK www.cia.gov
  10. 10. 10 The high tech laboratories that enable fast and accurate examination of the products for healthy concerns and also for the R&D 2.3. Juhayna Food Industries Direct Competitors Competitive Forces, Identifying rival firms Juhayna is well positioned in the local market supported by its long track record, brand recognition and comprehensive product offerings. Juhayna‟s wide distribution network provides it with a competitive edge compared to other players as it enables it to reach out for different market segments in an efficient manner. As mentioned earlier, given the growth potential of the Egyptian market, competition is likely to intensify which would grow the market alongside heightened competition. In the packaged milk segment, Juhayna has a controlling market share. For plain milk, market share stood at 69.0% at the end of 2009. The second largest producer had a market share of 9.0%. For flavored milk, Juhayna‟s market share stood at 74.0% in 2009 compared to 11.0% for the second in line. Market composition remained more or less stable over the past four years. The increased competition can be detected by the modest decline in Juhayna‟s market share since 2006. However, given the wide gap between Juhayna and other dairy producers and the company‟s competitive cost and distribution advantages, it is unlikely that market ranking would alter in the foreseeable future. In the yogurt segment, Juhayna is well positioned in both the spoonable and drinkable category, holding a market share of 31.0% and 86.0% in 2009, respectively. The company responded swiftly to fast growth in the yogurt market by introducing 46 SKUs including value added products, which gave strong boost to its market share.
  11. 11. 11 In the juice segment, local operators Beyti and Enjoy are the company‟s main rivals. Both local companies can potentially grow to become strong competitors. Enjoy was recently acquired by Citadel Capital‟s fully integrated food subsidiary, Gozour. Juhayna also faces stern competition from large multinational players such as Danone and Lactalis. Both Companies have become increasingly active in the yogurt segment in an effort to capitalize on the rapid market growth and size. Danone‟s success in capturing a market share followed an aggressive marketing campaign coupled with competitive pricing strategy. Similar to Juhayna, Danone is likely to be introducing additional value added products to capture a sizeable share of market growth. Lactalis recently acquired Nestle, one of the world‟s leading confectionary groups. The backing of Nestle is certain to strengthen Lactel‟s presence in markets where it is present including Egypt. 2.4. The Global Challenge To say the global dairy industry has had a colorful past would be an understatement. A history of interventionist government policies has resulted in ructions in the supply side over the past four decades, particularly in the once highly regulated European dairy industry. The slow removal of highly distortionary policies has contributed to rationalization in European dairy production. Dairy consumption has also undergone a wild ride in the past few decades. Consumption of dairy products has historically been volatile. The growth in Chinese dairy consumption is already having large implications for global production and trade in dairyproducts. Dairy trade traditionally absorbs less than 5% of global cow milk production, but global trade is already startingto lift with the expansion of Chinese demand. The rise and rise of the New Zealand dairy industry has indeed been impressive, and they look set to ride on the Dragon‟s back for some time yet. But the prosperity has not been shared in Australia over the past decade. Not because the Chinese haven‟t demanded Australian product – they have, and are Australia‟s fastest growing export market – but rather becauseAustralian dairy production has been rocked by drought throughout the 2000‟s. Australian milk production fell sharply from 2001 to 2008.
  12. 12. 12 Geographical segmentation The European Union is the largest dairy producing region, with annual (cow) milk production in 2010 of 134 million tonnes, followed by the US (86million tonnes), India (47.7million tonnes) and Russia (32.8million tonnes). India is the world‟s most significant consumer of „fluid‟ milk with annual consumption of 47.1 million tonnes in 2010 vs the EU-27‟s 33.7 million tonnes and 27.9 million tonnes in the US.
  13. 13. 13 2.5. Competitive Profile Matrix (CPM) Enjoy Juhayna Almaraai Critical Success Factors Weight R WS R WS R WS Market Share Product Quality Consumer Loyalty Global Expansion Organization Structure Production Capacity Price Competitive Management Experience Advertising Financial Position 0.18 0.12 0.15 0.1 0.04 0.12 0.04 0.08 0.1 0.07 3 3 3 2 2 3 4 2 2 2 0.54 0.36 0.45 0.2 0.08 0.36 0.16 0.16 0.2 0.14 4 4 4 4 3 3 2 4 4 4 0.72 0.48 0.6 0.4 .12 0.36 0.08 0.32 0.4 0.28 4 4 4 4 2 3 2 3 3 3 0.72 0.48 0.6 0.4 0.08 0.36 0.08 0.24 0.3 0.21 Total 1.00 2.65 3.76 3.47 The CPM above implies that the weakest company is Enjoy and the strongest is Juhayna. 2.5. Opportunities & Threats Opportunities: 1- Egypt benefits from a large pool of cheap labor, particularly useful for labor intensive commodities 2- The government will continue to invest in land reclamation projects, increasing area available for agricultural output and so cattle breeding. 3- Future trends will most likely be more transparent, helping firms not politically connected with the government secure lucrative contracts 4- Efforts towards banking-sector consolidation should bring down the cost of private sector credit and fuel small business growth over the long term 5- Both global milk consumption and international dairy trade to continue to grow over the next decade 6- Current competitive position and ability to grow milk supply provide an opportunity to deliver increased economic benefits to the economy 7- There is a phenomenal scope for value addition with innovations in product development, packaging and presentation such as Butter, Yoghurt and Cheese. 8- Exports opportunities in milk proteins through Casein, Caseinates and other dietary proteins. 9- Introduction of value-added products with different flavors, Ice creams, flavored milk, Dairy sweets, etc. are to be undertaken. 10- High birth rates which opens an opportunity for Infant foods as milk is a basic for nutrition 11- Efforts are on to exploit export potential of reputed brands. 12- Following the new GATT Treaty, opportunities will increase tremendously for the export of Agricultural products in general and dairy products in particular.
  14. 14. 14 Threats: 1- Urban construction is taking over on the already limited land suitable for agricultural production 2- With the prices of many agricultural commodities increasingly volatile, Egypt will face increasing competition for many key imports 3- Poor irrigation and diminishing water supply 4- High unemployment may lead to political resistance to privatization plans. 5- Although levels of education are relatively high, there is a considerable mismatch between the skills taught in schools and those required by most employers 6- Most countries in the world have huge long-term potential to increase milk supply 7- Global competition will be tougher “USA, New Zealand, Brazil, Pakistan, China and Saudi Arabia” 8- The opportunities for growth in dairy exports may be lost if: 8. A – Regulation unnecessarily restricts production volume. 8. B - Dairying is unable to adopt more nutrient and water efficient farm systems – leading to greater need to regulate. 9- Cost of production on-farm increases to an uncompetitive level driven by production (not profit) focus and/or compliance costs. 10- Product quality/integrity is undermined through bio-security, food safety or industry reputation disasters. 11- Changes in profitability of dairy compared to beef production and cropping in areas of potential low cost production. 12- Milk vendors of the un-organized sector are occupying the pride of place in the industry. Organized dissemination of information and creation of public awareness about the harm that the Un-organized venders do to the producers and the consumers will show a steady rise day by day 2.6. External Forces Evaluation (EFE) Key External Factors Weight Rating Weighted Score Opportunities: 1- Egypt benefits from a large pool of cheap labor, particularly useful for labor intensive commodities 2- The government will continue to invest in land reclamation projects, increasing area available for agricultural output and so cattle breeding. 3- Efforts towards banking-sector consolidation should bring down the cost of private sector credit and fuel small business growth over the long term 4- Both global milk consumption and international dairy trade to continue to grow over the next decade 5- There is a phenomenal scope for value addition with innovations in product development, packaging and presentation such as Butter, Yoghurt and Cheese. 6- Introduction of value-added products with different flavors, Ice creams, flavored milk, Dairy sweets, etc. are to be undertaken. 7- High birth rates which opens an opportunity for Infant foods as milk is a basic for nutrition .05 .08 .05 .1 .05 .15 .15 3 3 2 4 4 4 2 .15 .24 .1 .4 .2 .6 .3
  15. 15. 15 Threats: 1- Urban construction is taking over on the already limited land suitable for agricultural production 2- With the prices of many agricultural commodities increasingly volatile, Egypt will face increasing competition for many key imports 3- Poor irrigation and diminishing water supply 4- Most countries in the world have huge long-term potential to increase milk supply 5- Global competition will be tougher “USA, New Zealand, Brazil, Pakistan, China and Saudi Arabia” 6- Cost of production on-farm increases to an uncompetitive level driven by production (not profit) focus and/or compliance costs. 0.12 0.06 0.08 0.03 0.05 0.03 2 2 1 2 3 3 .24 .12 .08 .06 .15 .09 Total 1.00 2.73 With a score of 2.73 Juhayna shows an above average response to existing opportunities and threats in the industry. 3. KEY INTERNAL FORCES 3.1. Management / Value chain / Distribution Channels Management Juhayna‟s operation is run by a solid management team headed by the group‟s founder and current chief executive. The company‟s top executives have a combined experience of more than 230 years in the fast moving consumer goods industry (FMCGs) with reputable international and regional firms including Procter & Gamble and Arthur Anderson. The Value Chain: On the supply side the farms of Juhayna uses Holstein cattle which is a breed of cattle known as the world‟s highest production dairy animal, there is also medical care for the herd, Bottles are made in Egypt through a fully automated system; while the cartoon packages are imported from Saudi Arabia on high quality standards.
  16. 16. 16 Operations: The herd is cleaned via an automated system to make sure they are clean before milking, then air drying, then to milking, milking is also automated. After finishing they clean the cows again for bacteria, and thenthe milk is taken to 3 degrees fridges, then to storing towers then to trucks; the trucks leave the factory in 1 hour time, the trucks are cleaned before and after they are filled, trucks go to another area to be pasteurized. Quality Assurance and Control: Milk Pasteurization: through tubes heating up to 78 degree to kill bacteria, then the bottles are prepared and the expiry date is printed with rate of 50000 bottles per hour, filling takes 6 seconds per bottle, then the milk is checked again & defected products are removed manually and good products are taken to storage unit using a bar code system to store all the products, this system is fully automated. Also the R&Dhardly checks products and check the juice tasting. Then the products are taken to distribution center and then to distributors
  17. 17. 17 3.2. Strengths & Weaknesses Strengths: 1- Biggest Market share 2- Strong brand name 3- Strong & high experienced management team 4- Wide variety of business portfolio & products 5- Well established distribution matrix 6- Well established and financed R&D division 7- Reasonable product price which enables strong competition in the market 8- Concentration on healthy products 9- Spread in a large number of countries all over the world 10- Availability of capital for expansion or expenses Weaknesses: 1- Lack of resources for packaging 2- Lack of skilled functional& technical skilled workers 3- Seasonality of production reduces plant capacity utilization increasing capital requirements and it restricts product mix 4- Instable prices of fruits which affects the profit margin 5- Dependability on imports in areas of shortages, such as milk powders 6- Processing industry is smaller in scale thanthemain international competitors. 7- Scale in marketing is better than average but also below main international competitors, leading to cost disadvantages 8- Emergence of strong competitors such as Almaraai 3.3. Internal Factor Evaluation (IFE) Key External Factors Weight Rating Weighted Score Strengths: 1- Biggest Market share 2- Strong brand name 3- Strong & high experienced management team 4- Wide variety of business portfolio & products 5- Well established distribution matrix 6- Well established and financed R&D division 7- Reasonable product price which enables strong competition in the market 8- Concentration on healthy products 9- Spread in a large number of countries all over the world 10- Availability of capital for expansion or expenses 0.14 0.08 0.04 0.07 0.05 0.08 0.06 0.04 0.05 0.09 4 4 4 3 3 4 4 3 3 4 0.56 0.32 0.16 0.21 0.15 0.32 0.24 0.12 0.13 0.36 Weaknesses: 1- Lack of resources for packaging 2- Lack of skilled functional & technical skilled workers 3- Seasonality of production reduces plant capacity utilization increasing capital requirements and it restricts product mix 4- Instable prices of fruits which affects the profit margin 0.03 0.04 0.05 0.03 2 2 1 1 0.06 0.08 0.05 0.03
  18. 18. 18 5- Dependability on imports in areas of shortages, such as milk powders 6- Processing industry is smaller in scale than the main international competitors. 7- Scale in marketing is better than average but also below main international competitors, leading to cost disadvantages 8- Emergence of strong competitors such as Almaraai 0.04 0.02 0.01 0.08 2 2 2 1 0.08 0.04 0.02 0.08 Total 1.00 3.01 Conclusion of the IFE: Juhayna has a strong internal position with a score of 3.01 4. INTEGRATING STRATEGIES 4.1. Past and Current Strategies Juhayna‟spursued strategies are centered on building an integrated operation and implementing vertical and horizontal expansion plans. The existing business structure provides the company with presence across the different segments of the value chain starting with the supply of quality raw milk and fruits passing through production and ending with distribution. The recent addition of farming to the group‟s operations was aimed at gaining control over the quality and supply of raw materials. Owning a distribution fleet and network has the added benefit of optimizing distribution costs and monitoring customer satisfaction. Going forward, the company intends to replicate its business model in a number of regional markets. Juhayna accomplished integration strategies that were designed to achieve three objectives: 1- Backward integrations, including supply of raw milk, fruits and fruit concentrates through owning and operating agricultural farms, 2- Horizontal and vertical integration through product and geographic expansion, and 3- Forward integration where Juhayna delivers its products to end customers via its own distribution network. Illustration of an Integrated Business Model Horizontal Integration Product Expansion Geographic Expansion Backward Integration Supply of Raw Material Raw Material Fruits Fruits Concentrate Forward Integration Distribution
  19. 19. 19 Backward Integration Raw milk is the main input for dairy and yogurt, the two largest business segments for the group. Together, theygenerated 80.6% of consolidated revenues in 2009. Dairy products encompass milk, cheese and cream. One ofthe main risks in this industry is the strong bargaining power of milk suppliers which can cause interruption tosupply of raw materials and quality inconsistency. Juhayna‟s strong market presence enables it, to some degree,to minimize such risk through maintaining a good network of milk suppliers with the appropriate quality standards. Raw milk is close to 50.0% of total production cost thus securing supply of quality raw milk has always been at the top of management‟s agenda. Besides working closely with milk suppliers, the company ventured into farming in order to secure its raw milk requirements from within the group. In 2008, Juhayna bought an indirect 40.0% stake in Milkes Dairy, a company that runs a state of the art dairy farm. Following the acquisition, the group‟s animal headcount reached 2,500 from 1,460 and the milk yield grew to 35 kg per cow per annum from 30 kg per cow in2008. The investment is expected to have a positive impact on the quality of milk supply which is measured by the average bacterial count per milliliter (TBC thousand/ML). Currently the ratio of Juhayna‟s raw milk input is 70. Milkes Dairy‟s ratio is at par with international standards at 50. The farm presently provides the company with7.0% of its raw milk requirements. Management is intending to expand its farming operations to ultimately achieve self sufficiency in its raw milk requirements. In its continuous efforts to strengthen control over the production chain, Juhayna built a concentrate production facility, Modern Concentrate Company, to secure its needs of fruit concentrates for the juice production operation which generates 18.2% of total revenues. In 2009, the company bought 10,000 acres of farm land that it intends to use to grow a portion of its own fruits in order to produce concentrates. Currently, nearly 76.0% of juice requirements are sourced in house and the balance is sold to third parties. Horizontal Integration Juhayna‟s horizontal expansion is a major pillar in its strategy. Horizontal expansion encompasses enhancing the product portfolio and increasing production capacity to capitalize on market growth. In 2009, Juhayna consolidated all of its products under the Juhayna brand name and logo. The motive behind this move was to create consumer awareness of the product‟s brand quality and grow market share. Products fall under four lines namely dairy, yoghurt, juice and concentrates. Forward Integration Time is a crucial element in the dairy industry due to the short life span of the product. Timely delivery of raw materials and end products in and out of the factory is vital. Juhayna has therefore invested heavily in building its own distribution network at both ends of the spectrum. The company‟s network is divided into its own distribution outlets and sub-distributors in remote areas. The distribution coverage provides Juhayna with comprehensive access to consumers across the country. The company has direct access to 25,000 outlets and indirect access to 50,000 outlets through sub-distributors. In addition, the company owns a fleet of 523 vans, both chilled and dry. The wide distribution coverage provides the company with direct interaction with the different income and market segments. For example, in rural areas Juhayna distributes brands targeted at low and middle income consumers, while in urban areas it markets the more costly, high end products. Juhayna‟s distribution network is comprehensive in terms of its geographic footprint and customer categories which could be difficult to replicate by other producers thus providing the company with a competitive edge: • Having a wide distribution network and own fleet enforces continuous brand awareness and lowers marketing and distribution expenses, • Direct access to customers ensures that customer service and satisfaction are under the company‟s own supervision and is therefore not compromised in addition to allowing it to monitor market trends and consumers‟ behavior,
  20. 20. 20 • More effective market penetration and customer reach, • Continuous tracking of replacement levels and sales volume. Management indicated that major supermarket chains and hypermarkets, are becoming the company‟s fastestgrowing customer base. Accordingly, the company‟s current sales strategy includes strengthening relationshipswith major chains in order to grow market share further. 4.2. Long Term Objectives – LTOs Juhayna is aiming to accomplish the long-term objectives listed below: 1- Amongst future capital expenditure is heavy investment in the company‟s 10,000 acre farm dedicated tosatisfy its raw material requirements. 2- Additional investment is planned in acquiring additional land andexpanding the farming business in attempt to securing raw milk supply internally 3- Product diversification through expanding the range of existing products as well as entering new productsegments 4- Enhancing the regional operations in markets such as Libya, Jordan and Lebanon where the companyhas established brand recognition 5- Replicating the business model in Egypt in other markets 6- Regional and local acquisitions of complementary businesses.
  21. 21. 21 4.2. SWOT Analysis Strengths: 1- Biggest Market share 2- Strong brand name 3- Strong & high experienced management team 4- Wide variety of business portfolio & products 5- Well established distribution matrix 6- Well established and financed R&D division 7- Reasonable product price which enables strong competition in the market 8- Concentration on healthy products 9- Spread in a large number of countries all over the world 10- Availability of capital for expansion or expenses Weaknesses: 1- Lack of resources for packaging 2- Lack of skilled functional & technical skilled workers 3- Seasonality of production reduces plant capacity utilization increasing capital requirements and it restricts product mix 4- Instable prices of fruits which affects the profit margin 5- Dependability on imports in areas of shortages, such as milk powders 6- Processing industry is smaller in scale than the main international competitors. 7- Scale in marketing is better than average but also below main international competitors, leading to cost disadvantages 8- Emergence of strong competitors such as Almaraai Opportunities: 1- Egypt benefits from a large pool of cheap labor, particularly useful for labor intensive commodities 2- The government will continue to invest in land reclamation projects, increasing area available for agricultural output and so cattle breeding. 3- Efforts towards banking-sector consolidation should bring down the cost of private sector credit and fuel small business growth over the long term 4- Both global milk consumption and international dairy trade to continue to grow over the next decade 5- There is a phenomenal scope for value addition with innovations in product development, packaging and presentation such as Butter, Yoghurt and Cheese. 6- Introduction of value-added products with different flavors, Ice creams, flavored milk, Dairy sweets, etc. are to be undertaken. 7- High birth rates which opens an opportunity for Infant foods as milk is a basic for nutrition SO Strategies: Using the Strength of our R&D to introduce Value Added products Taking advantage of our Market Share and brand name to hunt the opportunity of the high birth rate and the shortage in the market. WO Strategies: Filtering and seeking of good skilled workers Going global makes us cooperate and integrate the processes to achieve the economies of scale The government aid will support in stabilizing the prices of supplies and raw materials. Threats: 1- Urban construction is taking over on the already limited land suitable for agricultural production 2- With the prices of many agricultural commodities increasingly volatile, Egypt will face increasing competition for many key imports 3- Poor irrigation and diminishing water supply 4- Most countries in the world have huge long-term potential to increase milk supply 5- Global competition will be tougher “USA, New Zealand, Brazil, Pakistan, China and Saudi Arabia” 6- Cost of production on-farm increases to an uncompetitive level driven by production (not profit) focus and/or compliance costs. ST Strategies: Exporting will be done carefully choosing the target markets to access easily and smoothly The availability of capital will facilitate the access to any market and operations will function successfully in all alike markets WT Strategies: To secure resources of supplies and raw materials It is so important, the research and development functions are of very high importance Cooperation and integration of processes with suppliers of packages and know-how transfer for future further expansion
  22. 22. 22 4.3. Strategic direction “SPACE Matrix” Internal Strategic Position External Strategic Position Financial Strength (FS) Leverage = 0.66 Liquidity Quick Ratio = 1.05 LiquidityCurrent Ratio = 1.54 Leverage (debtTotal Assets) = 0.38 Environmental Stability (ES) Technological changes = - 0.5 Rate of inflation = - 1 Demand variability = - 2 Price range of competing products = -3 Barriers to entry = -2 Competitive Advantage (CA) Market share = -2 Product quality = -2 Product life cycle = -3 Customer loyalty = -1 Competition‟s capacity utilization = -1 Technological know-how = -3 Control over suppliers & distributors = -2 Industry Strength (IS) Growth potential = 3 Profit potential = 4 Financial stability = 3 Technological know-how = 3 Resource utilization = 2 Ease of entry into market = 2 Productivity, capacity utilization = 1 FS=.9075 ES=-2 IS=3 CA=-2 X=-2+3=1 Y=-2+.9075=-1.0925 FS 6 Conservative Aggressive 5 4 3 2 1 CA -6 -5 -4 -3-2 -1 1 2 3 4 5 6 IS -1 -2 -3 -4 -5 Defensive Competitive -6 ES
  23. 23. 23 The SPACE matrix draws the attention to the direction of Competitive which implies the following of below strategies: 1- Integration 2- Market Penetration 3- Market Development 4- Product Development Combining above with the older strategies we followed “integration strategies” and the trend we are following in exporting and expanding abroad “Market Development” leaves us to Market Penetration and Product Development Strategies. 4.4. Future Strategies The conclusion of both the SPACE matrix and the SWOT analysis resulted strategies will formulate the combination of the below strategies to follow: 1- SWOT SO Strategies with SPACE Product Development strategy Via using the Strength of our R&D to introduce Value Added products Market Penetration strategy taking advantage of our Market Share and brand name to hunt the opportunity of the high birth rate and the shortage in the market. 2- WO Strategies with Market Development strategy Filtering and seeking of good skilled workers Going global makes us cooperate and integrate the processes to achieve the economies of scale Market Development would best fit. The government aid will support in stabilizing the prices of supplies and raw materials. 3- ST Strategies with Market Developmentstrategy Market Development will be done carefully choosing the target markets to access easily and smoothly The availability of capital will facilitate the access to any market and operations will function successfully in all alike markets
  24. 24. 24 4- WT Strategies with integration & product development strategy Further backward integration to secure resources of supplies and raw materials Product Development is so important; the research and development functions are of very high importance. Cooperation and integration of processes with suppliers of packages and know-how transfer for future further expansion by backward integration. Sources are provided when the data is used.

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