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UTN Trading Company ( pvt .) Ltd.

UTN Trading Company ( pvt .) Ltd. Industry Background & Company Profile . FMCG Industry in Sri Lanka. Made up of food and beverages, personal care and home care products. Major Players MNCs - Unilever, Reckitt Benckiser, Nestle Company

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UTN Trading Company ( pvt .) Ltd.

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  1. UTN Trading Company (pvt.) Ltd.

  2. Industry Background & Company Profile

  3. FMCG Industry in Sri Lanka • Made up of food and beverages, personal care and home care products. • Major Players • MNCs - Unilever, Reckitt Benckiser, Nestle Company • Local Players - Hemas Group of Companies, Darley Butler and P&G • Marketing is the new trend

  4. FMCG Industry in Sri Lanka • Market weight – Rs.141 billion 74% - Food and Beverages15% - Personal Care Products11% - Home Care Products (BartleetReligare Securities Report-2010) • Per capita income - $ 2 399 in 2012 • Expected super market growth is 30% - 40%

  5. FMCG Industry in Sri Lanka

  6. Company Profile • UTN Trading Company Private Limited • Limited Liability incorporated in Sri Lanka in 2000 • Head Office : No. 520C, Avissawella Road, Kaduwela • Managing Director: Mr. Udaya A. Nissanka • Auditor: VG Associates Chartered Accountants • Banker: Commercial Bank • Secretaries: Lameer& Lameer Corp.

  7. Company Profile • Mission Statement To attain a position of selective prominence in the consumer and personal care market of Sri Lanka as a marketer of high quality and innovative brands which enhances the lifestyle of our consumers and provide a fine return on investment for shareholders and allow our employees to realize their personal ambition. • Values • Ethics • Professionalism • Transparency • Innovation

  8. Employee Structure • Total Number of employees: 78 • Top Level Management – 3 • Middle Level Management – 6 • Lower Level Employees – 69 • Operations are divided to 3 main categories. • Sales and Marketing • Finance and Administration • Production

  9. Product Portfolio

  10. Stakeholders • Competitors • Unilever , Nimex , Hemas , Natures Secretes • Suppliers • Unza , Bashundara , Local suppliers • Customers in Sri Lanka • Government of Sri Lanka • Management of the Company • Employees • Tax Authorities • Commercial Bank

  11. Internal Analysis & External Analysis

  12. Environmental Analysis EXTERNAL INTERNAL GENERAL TASK PORTER’S PEST SWOT ANALYSIS

  13. SWOT Analysis • Strengths • Weaknesses • Opportunities • Threats

  14. Strengths • Strong brand name – e.g. Enchanteur • Quick and flexible decision making • Quality of the products • Skilled work force and dedicated management team • Wide range of products • Higher customer satisfaction due to speed of response time to the customer

  15. Weaknesses • Less coverage in some areas e.g. Nawalapitiya, Uva, Anuradhapura • Less effort on research & development • Lack of local technology • Reliance only uponthe domestic market • Location of the company • Limited marketing strategies • Lack of IT usage

  16. Opportunities • International expansion • Opportunity to go for a share issue • Flexible payment schemes

  17. Threats • High rates of import duties • Initiatives of industry giants • Emergence of small-scale companies • Increasing product costs

  18. PEST Analysis • Technological Factors • General Environment • Political Factors • Economic Factors • Socio – CulturalFactors

  19. Political Factors • Stability of the government • Rules and regulations applicable under companies act e.g. Registration number: N(PVS)26217 • Regulations related to employees e.g. Minimum wage amount – Rs. 6500 per month • Laws regarding environment protection • Tax policies

  20. Economical Factors • Exchange rates Indian Rupee : Rs. 2.2237 Malaysian Ringgit : Rs. 41.3967 (as at 20.04.2013) • Inflation rate 8.8% (dept. of census and statistics – March 2013) • Interest rates • Poverty rate 8.9 % (Department of Census and Statistics - 2010)

  21. Social Factors • Educational level of the community • Age structure 0-14 years:24.9% 15-64 years:67% 65-over:8.1% (Wikipedia -Demographics_of_Sri_Lanka) • Unemployment Level 4.1% (Department of Census and Statistics – 2010) • Income Distribution Lowest: 4.5% Low-Mid: 8.8% Middle: 13.1% Mid-Upper: 19.5% Upper: 54.1% (Department of Census and Statistics - 2010)

  22. Technical Factors • Advancements in machinery • Usage of automated systems injects the impact of rapidly changing IT to the industry • New discoveries within the country • Mobile based advertising and brand promotion

  23. Porter’s Five Forces Model Bargaining Power Of Customers Threat Of New Entrants Competitive Rivalry within the industry Bargaining Power Of Suppliers Threat Of Substitute Products Tool which is a simple but powerful for understanding where power lies in an organization under a competitive environment.The combined powerof these 5 forces determine the profit potential within the industry.

  24. Threat of New Entrants • Initial investment needed Capital is needed to form distribution channels and to buy machinery • Access to distribution channels UTN works with15,000 outlets and 50 dealers • Use of specialized assets Machinery used in production are highly sophisticated and costly • Government rules and regulations Companies Act and Import regulations

  25. Threat of Substitutes Substitution can be seen as,wafer sticks – chocolates, toffeestissues – handkerchiefsglucose – energy drinks (e.g. Redbull) • Switching cost • Differentiation between products and substitutes

  26. Bargaining Power of Suppliers • Fewer number of suppliers • Unza and Bashundara are the sole suppliers of Enchanteur and Mint products respectively. • Switching cost between suppliers • Finding a new supplier would mean moving to a new brand which is a series of cumbersome activities. • Contribution to the final product

  27. Bargaining Power of Customers • Large number of suppliers • Hemas, Nature’s Secrets, Nimex, GSK • Importance of the product to the customer • Not essential products • Economic conditions of the country • Disposable income level of the consumers are low

  28. Rivalry Within the Industry • Number of competitors • Hemas, Nature’s Secrets, Nimex, GSK • Exit cost • Machinery are specialized • Redundant schemes for employees • Product differentiation • Cosmetics, Baby care, Food, Health care, Paper • Market growth • Super markets are expected to grow by 30%-40%

  29. Management Issues & Solutions

  30. Issue 1- Employee Structure of the Organization

  31. Analysis of the Existing Structure • No functional distinction of operations • Administration and Finance are controlled together • Stores and Production are controlled together • Some functions are not present • Marketing is done by a single manager • No Human Resources function • Advantages of the existing structure • Decision making is quick and flexible • Most of the employees have an overall idea about all the functions of the organization

  32. Drawbacks of the Existing Structure • Top level managers have to spend time on operational level problems • Reporting is problematic • Role confusion • Poor communication • Loss of control to the managers

  33. Proposed Solution to the Issue • Functional Departmentalization In functional departmentalization, departments are segregated.i.e. Separated from each other based on functions or tasks they perform.

  34. Benefits of proposed Solution • Development of skills • Expedited decision making • Coherent chain of command • Qualified supervision • Specialized results • Maximizes performance by putting together similar specialties and people with common skills, knowledge, and orientations • Accountability • Clarity

  35. Issue 2 - Lack of Essential Functions • No functional departments are present for HR, Marketing and IT. • HR is handled by the top management. • Marketing is solely handled by the Brand Manager. • IT is outsourced to CSoftNet Web Services provider.

  36. Drawbacks of Not Having Essential Functions • Human Resources relatedfunctions are not handled effectively. • Late bonus payments • Top management time is wasted • Not enough attention on trainees • As training is done by managers it disrupts the normal routine work

  37. Drawbacks of Not Having Essential Functions • Marketing functions are not handled effectively. • Too much work for the brand manager • Productivity is minimal • IT functions are not handled effectively. • Outcome is not worth the money spent • Information on web site is not consistent with operations and it is not reliable

  38. Proposed solution to the issue • Start separate HR, Marketing and IT departments. • Appoint managers whose having expertise in the respective functionality and allocate resources accordingly. • Divide the responsibilities to the managers and employees of those departments accordingly.

  39. Benefits of the proposed solution • Managers and employees have expert knowledge on the respective domains. • Performance appraisal would be efficient. • Management time is not wasted • There will not be delays • Training would be efficient • Employees can focus on their jobs • Traineesget more attention and therefore, more knowledge and experience

  40. Benefits of the proposed solution • Website would be more appealing. • A controlled outcome could be achieved • Reliable and accurate data • No extra cost on updates and maintenance • Attracting more customers would be easy. • Workload of brand manager would be lesser • Productivity would be higher

  41. Issue 3 - No Long Term Focus • Company only has a mission statement. No vision statement. • Next year budgets are prepared only by considering the previous year budgets. • No long term plans are prepared.e.g. 5 year plans • Past information is not used effectively

  42. Drawbacks of not having a long term focus • Unclear goals • Lack of motivation among employees • Sustainability of the company is questionable • Feeling of job insecurity • Negative impact on customers • Would be seen as irresponsibility and incompetency of the company • Loss of reputation • Would lead to loss of sales due to doubtfulness of customers

  43. Proposed Solution to the Issue • Prepare a vision statement and make it public in order to gain more loyalty from employees, customers and other relevant parties. • Devise 5 year flexible plans which can be revised if needed based on past information.

  44. Benefits of the Proposed Solution • More focused employees • There would be clear goals to be achieved • Higher staff morale • Stable goals would lead to hard and disciplined work of employees • Higher customer satisfaction • Doubts of the customers could be avoided • Higher reputation of the company • Company name would be well established and well defined. • Increases productivity and product quality.

  45. IT Usage &Possible Improvements

  46. IT Usage Company operates with a two tiered system where they have a, • Web site • http://www.utntrade.com/index.html • Internal system • This comprises of billing and stock controlling.

  47. Web Contents Web site is categorized to 5 main categories. • Overall view of the website – Home page • Product details – Product enquiry page • Sales details – Sales network page • Communication with the company – Feedback and Contact us pages • Company details – About us page

  48. How it can be improved • Look and feel wise it can be developed • Integrate suppliers and customers through website • Move into e-business • Make details more accurate and consistent • Form an IT department within the company

  49. Internal System Contents The system which is used within the company is used for following purposes. • To produce Bill of Materials and purchase orders • For stock controlling purposes • To prepare invoices • To make the preparation of financial statements easier

  50. How it can be improved • Develop the system in a way that suppliers are automatically acknowledged when the inventory levels go down. • Incorporate e-payment mechanisms • Upgrade the system to a much sophisticated ERP system • Monthly report generation

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