NORTH SOUTH UNIVERSITY

Strategy and
Structure of the Food
and Beverage Industry
Course: Mgt 489 section: 6
Shahedul Alam (Shl)

Done By: Group 4

Fahima Ayesha Choudhury
1210030030
Zareen Tasnim Lazima 1210828030
Ashik Mahmood Andalib
1110448030
Mohammad Atikul Haque
1110244030
Saiful Alam Sunny
1110507030
Hamida Kaus Prianka
1110517030

Executive Summary
Food and beverage industry is one of the fastest growing industries around
the world as food is humans most basic necessity. Though this industry is
growing on a moderate level in US, it is the largest industry in Europe. There
is high competition in this industry. Though most companies in this sector are
SMEs, a few large companies are contributing by doing merger and
acquisition, vertical integration and expending into overseas market to
increase their sustainability and efficiency. The large companies in this sector
are- Nestl, Kraft Foods, Unilever and Cargill. Alongside US and EU, emerging
economy for food and beverage industry is China and India. They mainly
provide the raw materials for this industry. Any Economic downfall may
highly affect all other industry but food and beverage as it provides necessity
product which people need to use even in heavy economic downfall. Being
one of the fastest growing industries, this sector faces some issues such as
technological development. Due to increasing completion the R&D of this
industry should be well maintained which can be challenging to bring out
new

technologies

to

make

the

products

sustainable

and

efficient.

Manufacturers are expending their market to developing countries such as

China and Indian because of relaxed rules, large population, higher living
standard and higher growth potentials. Food and beverage industry in
Bangladesh is a potential sector and growing rapidly since 2000. This
industry alone makes up 22% of the total manufacturing production in the
country and around 2.45% of the countrys total labor force. Bangladesh
being an agricultural country with large population can contribute largely in
the food and beverage industry. Bangladesh is also impacting global market
by exporting food and beverage to 90 different countries in the world. But
many issues in Bangladesh are holding back this industry, such as unstable
political situation, high barrier to entry, corruption in the controlling quality
and lack of technological development. In the context of Bangladesh, food
2

and beverage industry is one booming industry to invest in. With the
emergence of super shops concept and new technologies now many large
companies are investing in this sector and exploring its potential. Thus this
economic crisis immune industry has become one of the stable and
sustainable industries in Bangladesh.

Table of Content
Introduction.4
Global Industry Structure5
Global Industry Issues8
Bangladesh in Global Context
Analysis and Conclusion
References
Research Method
Formal thank you letter.18

Introduction
Food and beverage industry includes harvesting, packaging, distributing,
processing of consumer products over different regions. The industry is
growing at a moderate level in United States because of which the
companies are restructuring and realigning their activities to reduce cost,
increase volume and improve profits. Furthermore, large companies are
merging different companies varying in size to gain higher market share and
widen the product line they hold. On the other hand the non-soft drink
companies are seeing growth whereas the soft drink industry is not seeing as
much. Due to the high competition companies are expanding into overseas
market to grab more market share therefore increasing competition in
different regions of the world (TB Woods Incorporated Headquarters, n.d.). In
the EU food and beverage industry is the largest industry there, with an
estimated production value of 720 billion euros, this industry accounts for
13% of the total value of manufacturing. The industry employs more than 4.4
million people and transforms 70% of the agricultural raw materials produced
in EU. In EU the industry is highly fragmented with 99.1% of the total
industry run by SMEs employing 2.7 million people. The industry is made up
of many subsectors and uses different production process and packaging
techniques. Since it is dependent on various different techniques it is highly
dependent on the R&D sector since it helps improve the product and
process to make the companies more efficient. Although the industry is
highly concentrated with SMEs , there are a few large multinational producer
who have a significant impact on the international market. These companies
also participate in vertical integration to help increase the range of products
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they can supply and increase their market. The large companies concentrate
on the global market and the SMEs focus on meeting the local demands and
specialize in different subsectors (European Commission, 2005). In terms of
Bangladeshi market the industry is growing at a fast rate with many small
companies fighting for a position in the food and beverage sector however,
the market is mostly controlled by large corporation who enjoy economies of
scales and supply a wide variety of products to the consumers. The top
contenders in the industry are Transcom Beverage ltd, Akij Food and
Beverage and Partex Beverage ltd (Businesshabit.com, 2014).

Global Industry Structure

The global food and beverage sector is valued $5.7 trillion USD in 2008. The
industry is the major contributor for growth in many economies and has been
historically experiencing a consistent growth. It has been estimated that the
industry will grow at 3.5% and by the year 2014 the industry will be valued
at $7 trillion USD. In terms of structure the industry is highly fragmented with
the key player- Nestl, Kraft Foods, Unilever and Cargill who hold less than
5% of the total value (IMAP, 2010).
As discussed before Europe holds the largest market share when it comes to
food and beverage items, it generates revenue of $1.4 trillion in the year
2007 while employing 4 million people. The next key playing country is USA
which has a contribution of $1 trillion USD. Although these countries are the
key players however, emerging economies such as India and China are also
contributing in the industry. The emerging economies provide raw materials
to the food and beverage industry thus having substantial impact of the
production of food and beverage. The food and beverage industry in India is
valued to be $182 billion in 2007-2008 and the food processing sector to be
valued at $72 billion in 2008. In China is industry is growing at 13.6% where

the industry value was $50 billion in 2008. Below are some of the key
players:
Compa

Key

Market

Geographic

Reven

Operati

ny

brands

covered

coverage

ue

ng

name
Nestl

Nescafe,

Products are

Americas: 30.15%;

$101.8

profit
$13.8

Maggi, Milo,

sold in 120

Europe: 25.62%;

billion

billion

Kitkat,

countries

Asia, Oceania, and

USD

USD

Gloria,

across the

Africa: 15.59%;

Nestl,

world

Rest of the world:

ARCHER

Power Bar
Monarch,

US,

32.45%.
US: 51.27%,

$69.2

$2.7

Novatol,

Caribbean,

Germany: 10.74%,

billion

billion

DANIEL

Bionature,

Canada,

Other Foreign:

USD

USD

etc

Europe,

37.99%

MIDLAN

Middle east

D
UNILEVE

Lipton,

Mainly Europe

Asia & Africa:

$59.6

$8.5

R NV

Knorr

and Asia

35.71%, Americas:

billion

billion

32.57%, Europe:

USD

USD

KRAFT

Easy

North

31.72%
US: 50.80%,

$42.2

$4.9

FOODS

Cheese,

America,

Europe: 31.13%,

billion

billion

INC

Pepito,

Europe, and

Other: 18.07%

USD

USD

Toasted

Asia

Chips,
Toblerone,
Twist,
Splendid
Source: (IMAP, 2010)

The industry went through it downs due to the problems such as increased
food prices, decreasing in consumer spending, increased transportation cost.
Although such adversities have affected many industries highly however, the
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food and beverage industry is relatively not as affected. The reason behind
this could be the fact that food is a basic necessity of the people and
regardless of how bad the economy is performing people need to use these
products.

According to the figure beside

the Dow Jones food and
beverage index has been
performing better than the S&P
500 index, which proves the
point that although other
industries have suffered greatly
due to the slowdown in the
economy however, the food and
beverage industry has performed
relatively better.
Source: (IMAP, 2010)
Mergers and acquisitions are very popular in this industry due to the level of
competition. As discussed earlier many companies merge and go into
acquisition to help increase the overall market share and increase the
number of product under their product line. The summary of transaction in
the food and beverage industry based on sector and country is given below.
Summary of transaction in the food and beverage industry in 2009

Source: (IMAP, 2010)

As it can be seen the paged food and meats are industries that hold the
highest number of mergers and acquisitions furthermore their value is also
the highest. Since that is the case it can be deduced that the packaged food
and meats industry is facing through fierce competition and to survive the
condition many companies have opted for mergers and acquisition.
In terms of opportunities in
various regions of the world the
figure shows that China shows
the highest promise followed by
India.
Source:
(Linklaters, 2013)

Global
Industry Issues
8

The food and beverage industry is overall growing due to the growth in
population however there are some global industry issues that all the
companies are facing, below are some of the issues:

1.1 Technological Development

Majority of the players in the industry believe that although there is big
movements in the industry towards sustainability and resource efficiency
however, most companies still focus on improving the quality and creating
new products. Due to the type of focus most manufacturers do not prioritize
health and wellness issues therefore not focusing on the development on
such technologies. The trend shows that the core of the development in
technology still is profit focused and companies want to mainly improve
efficiency rather than focus on sustainability. According to the same survey
the companies are more focused on product innovation rather than greener
technologies, although that is the case however many companies are
actually moving towards that direction. The food and beverage industry is
highly dependent on the technological advancement due to the need to
mass production therefore more development is made to help produce at a
large scale at a lower cost (Leatherheadfood.com, 2012).

1.2 Government and Regulatory Issues

Food safety regulations apply to each stage of food and beverage production,
from processing and manufacture to distribution. The laws mostly focus on
the safety of the products that are being produced and quality of distribution
around the industry. The industry is also subject to laws which bound the
companies to properly label the products and maintain minimum food safety
standards. Laws such as the Nutrition Labeling and Education Act of 1990
(NLEA) and the Food Safety Modernization Act of 2010 (FSMA) work towards
making the industry more safe for the consumers. In USA there are many
agencies that control the quality of production for the food and beverage
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industry for example Food and Drug Administration (FDA) Federal Trade
Commission (FTC) are some of the agencies that work for the government to
help maintain the basic regulation in the industry. Alongside these agencies
there are many other local agencies which help in the regulation of SMEs
thus helping the government regulate the industry properly (Hg.org, 2015).
Similar to the FDA Bangladesh has a regulatory body called BSTI which
oversees and regulates all the food and beverage industrys products thus
keeping the products safe for the consumers.

1.3 Strategic reaction to competitive pressure

The food and beverage industry is constantly under pressure due to the
increased competition from both local and international competitors, in order
to survive the constant pressure the companies could follow the following
strategies:

Deliver products with more nutritional value and fewer allergens: Since
more consumers are being interested in eating healthy the added
factor will help bring competitive advantage. Many companies have
already started acting on this by producing whole grain products to

attract the consumers (Infor, 2012).

Continually drive down costs: As discussed before the only way food
and beverage companies can survive properly is through cost cutting
and increasing efficiency. This can be done by utilizing various
technologies that are currently available. Many companies utilize these
technologies and make the production system completely automated
to help reduce labor costs greatly thus gain competitive advantage

against the competitors (Infor, 2012).

Minimize environmental impact: large companies are currently focusing
on this because they have figured that by reducing the impact on the
environment not only do they gain competitive advantage in the eyes

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of the consumers they can also reduce costs by reducing the waste.
(Infor, 2012)

1.4 New Market

As discussed before the food and beverage market is growing however, the
competition is also growing thus forcing many companies to go into new
markets to sustain. Due to the large economic growth in the emerging
economies many food and beverage companies are targeting these
countries. Furthermore, the rules and regulations in these countries are also
a lot more relaxed compared to the countries these companies originate
from. Due to the relaxed rules the companies can be more flexible hence
attracting them to those countries. Global food manufacturer respondents
consider China, India and Brazil to offer the largest growth potential among
emerging markets in 2013-2014. According to a survey
US, Singapore, Taiwan and Hong Kong and South Korea offer the highest
growth potential among developed countries in 2013-2014. The companies
are under constant pressure due to decreasing margins and consumer price
sensitivity, these problems can be overcome through going into economies
such as China, India and Russia. Furthermore countries such as China and
India have worlds largest population thus making them very lucrative
markets to enter. There are many consumers who are now able to purchase
the products due to increased standard of living hence many manufacturer
are targeting such companies (Prnewswire.com, 2013).

Bangladesh in Global Context

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Bangladesh possesses a very large and rapidly growing food and beverages
industry which stands as a major potential sector of the economy in terms of
employment, and value addition. In fact, the food and beverages industry of
Bangladesh makes up about 22% of the total manufacturing production in
the country, and employs around 20% of the industrial manufacturing labor
force, and around 2.45% of the countrys total labor force. It is a 4.5 billion
dollar industry which has around approximately 700 food manufacturing and
processing businesses. The major sub-sectors in the food industry consist of
rice, wheat, fruits and vegetables, tea, sugar, dairy, and edible oils. Being a
country with one of the largest populations in the world, and with the
population base growing ever more rapidly, the demand for food and
beverages is always rising. Moreover, due to factors such as the growth in
the economy and rising incomes, demand is being shifted away from
traditional foods and more towards high value foods. (Kundu, 2015). The
food and beverages industry was initially very small and limited to a few
domestic and family businesses which emphasized on basic agricultural
commodities. The industry did not gain significance in terms of operation
until the 1980s. Since the early 2000s the food processing industry of
Bangladesh grew at a rate of 7.7% annually and the range of variety of food
products in Bangladesh increased drastically since the last decade due to the
entrance of a number of both domestic and international food companies
into the industry. (Md. Khairul Akter, 2015)
Moreover, the geographical agrarian setting Bangladesh is situated on, and
its strategic location, is very beneficial to the agricultural production. (Md.
Khairul Akter, 2015) Agriculture contributes greatly to the food industry of
Bangladesh. As of the 2012 2015 Bangladeshs export policy, the agro
sector remains one of the top most priorities. Out of the total Gross Domestic
Product, 32% of it is made up by the agro foods and beverages industry. (Md.
Khairul Akter, 2015)

12

However, even with all this crop produced, constraints such as population
pressures continue to make it hard for farmers to meet demand and
therefore lead to food deficits and losses. For instance, the Bangladesh Sugar
and Food Industries Corporation BSFIC has recently incurred a loss of TK
5.3billion last year alone. These food deficit gaps are met and matched by
commercial imports from other countries.
The Bangladeshi food and beverages industry plays an important role in both
the domestic and the global market. The impact globally can be noticed
through the increased exports of agro foods from Bangladesh to countries
around the world. Although the agricultural sector of the food industry is
falling, the country has great prospect if and when viewed as an industry
which exports food. Moreover, when it comes to labor intensive agricultural
manufacturing and processing and production of horticultural goods,
Bangladesh has a comparative advantage over other countries. The
Bangladesh Agro-Processors Association has been focusing on
manufacturing, processing, and exporting approximately 90 different
products to around 70 different countries. Moreover, the country is aiming to
increase its GDP through the food and beverages industry by exporting
certain agro foods. For instance, the fertility of Bangladesh is suitable for
growing maize and corn which is in turn is exported to maize/corn consuming
countries such as Egypt and Nigeria (Agroprocessed industry in Bangladesh,
n.d.).

The figure below shows the market share of various industries in Bangladesh
in 2001-2002. Since the Bangladesh food and beverage industry is growing
fast it can be assumed that the market has expanded however, the overall
structure to some extent has remained same.

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Source: (MINISTRY OF FOREIGN AFFAIRS OF DENMARK, 2009)

Below the key player in the Bangladesh food and beverage industry is discussed

Company
Transcom Beverage Limited

Global Beverage Co.

Globe Soft Drink Ltd. & AST
Beverage Ltd.
Pran Beverage
Partex Beverage

Akij food and beverage

Products
Pepsi range of beverages-Pepsi, 7up,
Mirinda Orange, Mirinda Lemon, Slice
and Soda.
Shark Energy Drinks, Zam Zam Cola,
Appy Fizz
Royal Tiger, Uro Cola, Uro Orange,
Uro Lemon, Fizz Up
Maxx Cola, Cloudy Lemon, Clear
Lime. Power Drink
RC Cola, RC Orange, Upper 10, RC
Lemon, MUM Mineral Water, Danish
Condensed Milk
Mojo, Lemu, Clemon, Speed, Frutik

Source: (Bangladeshtrades.com, n.d.)

Strategic issues in Bangladesh

Bangladesh frequently faces political crisis which hinders the daily business
activities thus affecting the industries adversely. The food and beverage
industry faces problems in delivering the products on time thus lose sales.
Furthermore since all these products have strict expire date many products
are not sold before date due to the low sales during political crisis. This
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overall creates a disadvantage for the food and beverage company in

Bangladesh
The barriers to entry while entering this industry is relatively high due to the
large initial investment required. Most of the companies have fully
automated production system therefore making it difficult for new entrants
to produce at the same scale as the major competitors and sustain in the
market. Furthermore, the major competitors have already gained large
market share and brand loyalty which makes it harder for new companies to
enter the market and sell their products.
Although this factor has helped the food and beverage industry however, it
has also affected the industry adversely. The regulatory body for controlling
the quality of the product sold in the food and beverage industry is not as
efficient therefore hampering the controlling activities for the corporation. On
the other hand the officers in the regulatory body are rather corrupt thus
making it easier for many companies to bribe them and get unsafe products
into the market. This means more products are in the market however, the
consumers lose confidence in the products since they believe that the quality
is not maintained. Due to the heavy level of corruption many companies face
difficulty in getting safe products out into the market without having to bribe
the officers, thus creating an issue for the industry.

Analysis and Conclusion

Food and beverage industry is the source of growth for many countries, an
example of such a continent would be Europe. The same strategy could be
used by Bangladesh to stimulate growth in the economy. Since there is a
large industry dedicated to the agricultural sector in Bangladesh, it would be
rather easy to move into food and beverage industry for many corporations.
The raw materials are available and cheap therefore making it a lucrative
industry to enter. There is a large dairy, fruits and vegetable and fisheries
15

industry in Bangladesh and not many companies are there to take the
market. As discussed before there is a growing demand for fruits and
vegetable products therefore corporation could fixate on that industry.
Abroad many companies make profitable business out of producing
packaged fruits and vegetable, Bangladesh could go into a similar movement
and expand the horizon of food and beverage industry.
The food and beverage industry in Bangladesh is a lucrative market since the
competition is not as fierce as it is in the global market due to the lack of
competitors. Furthermore, the range of products produced in Bangladesh is
also less therefore creating a gap in the industry. There are many small
companies producing variety of products however, due to lack of
technological development the companies are not being able to be the most
efficient. If more research and development could be done to improve the
efficiency of producers in Bangladesh the market would become more
competitive thus forcing corporations to become even more efficient.
Previously there were not many super shops in Bangladesh therefore most
food and beverage items were brought from local vendor, now due to
development in the super shop industry many super shops invest in making
their own label which attracts the consumers more. The trend of generic food
and beverage items has reduced greatly due to the influence of the super
shops and is thought to change more in the future years. Furthermore, these
super shops also have similar products from different food and beverage
companies alongside their products which is allowing the consumers to
compare and choose what they like best thus inevitably increasing
competition.
In the beginning most food and beverage items were imported from various
countries; products such as Ketchup, dairy items, bakery items and fruits and
vegetables were not as widely produced in Bangladesh. Due to recent
development many local companies such as Pran and BD Food are producing
16

the same standard items in the local market at a much cheaper cost. This is
lead to a new movement in the food and beverage industry which is to bring
positive changes in the Bangladesh economy. Furthermore due to recent
R&D many new types of fruits and vegetables are being produced in
Bangladesh for example strawberry and dragon fruit are now widely
available. If similar type of research is done more variety of products can be
produced in the country thus reducing the need to import the products.
In conclusion the food and beverage industry seems to be an a highly
profitable and stable industry. Although it is dominated by few multinational
there is scope for development by the SMEs. Food is a basic necessity of
every human being hence making it an inelastic product for all consumers
therefore it is clear that this industry is not bound to become extinct rather
grow. Also as discussed earlier the food and beverage industry is immune to
the economic crisis thus making it a rather interesting industry to work with.
The government and the local authority has been trying to protect the SMEs
for a very long time, this is to initiate healthy competition as well as create
scope for development. In Europe the SME food and beverage industry is
highly protected by the government and often given subsidies to help them
sustain. A similar approach could be taken by the Bangladeshi government to
stimulate the growth in the food and beverage industry. Overall the industry
seems to be booming not only because it is an inelastic product but also
because of the growing population therefore more investment should be
done in this industry by more corporations in Bangladesh. Since the
population is growing the opportunity seems to be the best one to grab in
Bangladeshi context.

17

References
Agroprocessed industry in Bangladesh. (n.d.). 1st ed. [ebook] Dhaka.
Available at: http://www.hortex.org/Employment%20and%20GDP_Agroprocessed_171113.pdf [Accessed 10 Jul. 2015].
Bangladeshtrades.com, (n.d.). Bangladesh Beverage Industry | Bangladesh
beverage company list. [online] Available at:
http://www.bangladeshtrades.com/bd-company-list/bangladeshbeverage-company-list.html [Accessed 9 Jul. 2015].
Businesshabit.com, (2014). Top 10 beverage companies in Bangladesh.
[online] Available at: http://www.businesshabit.com/2014/12/top-10beverage-company-in-bangladesh.html [Accessed 9 Jul. 2015].
European Commission, (2005). ICT and electronic business in the Food and
Beverage industry. [online] Available at:
http://ec.europa.eu/enterprise/archives/e-businesswatch/studies/sectors/food/documents/Food_2005_I.pdf [Accessed 9 Jul.
2015].
Hg.org, (2015). Food and Beverages Law - HG.org. [online] Available at:
http://www.hg.org/food-and-beverages-law.html [Accessed 9 Jul. 2015].
IMAP, (2010). Food and Beverage Industry Global Report 2010. [online]
Available at:

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http://www.imap.com/imap/media/resources/IMAP_Food__Beverage_Repor
t_WEB_AD6498A02CAF4.pdf [Accessed 9 Jul. 2015].
Infor, (2012). White Paper How food & beverage companies gain competitive
advantage. [online] New York. Available at:
http://www.infor.com/content/whitepapers/howfoodandbevgainadvantage
.pdf/ [Accessed 9 Jul. 2015].
Kundu, S. (2015). Wheel :: Business Magazine. [online] Wheel.com.bd.
Available at: http://www.wheel.com.bd/cover_story.php?id=26 [Accessed
10 Jul. 2015].
Leatherheadfood.com, (2012). Emerging technology in the food and
beverage industry | Leatherhead. [online] Available at:
https://www.leatherheadfood.com/emerging-technology-in-the-food-andbeverage-industry [Accessed 9 Jul. 2015].
Linklaters, (2013). Food and beverage. The Linklaters Emerging Opportunity
Index. London.
Md. Khairul Akter, M. (2015). Sector profile and strategic planning for the
agro-base food industry of Bangladesh. [online] Bangladesh Textile Today.
Available at: http://www.textiletoday.com.bd/newsite/sector-profile-andstrategic-planning-for-the-agro-base-food-industry-of-bangladesh/
[Accessed 10 Jul. 2015].
MINISTRY OF FOREIGN AFFAIRS OF DENMARK, (2009). FOOD PROCESSING IN
BANGLADESH.
Prnewswire.com, (2013). Global Food and Beverage Survey 2013-2014 Market Trends, Buyer Spend and Procurement Strategies in the Global
Food and Beverage Industry. [online] Available at:
http://www.prnewswire.com/news-releases/global-food-and-beveragesurvey-2013-2014---market-trends-buyer-spend-and-procurementstrategies-in-the-global-food-and-beverage-industry-218839341.html
[Accessed 9 Jul. 2015].

19

TB Woods Incorporated Headquarters, (n.d.). An Introduction to Food and

Beverage Industry. Pennsylvania, p.1.

Research Method
The report Strategy and Structure of the Food and Beverage Industry is based on both
secondary research and primary research. The information was collected from various online
resources in different journals and articles. The primary data was collected through an interview
session with an employee from Partex Star Group. He helped us give more insight about the
local market and help give us suggestion. The referencing format for the whole document was
Harvard referencing style.
Limitation of this research is that there was a lack of data in the local market and most data was
outdated. Therefore, most of the information connecting to the recent years is based on the
estimations provided in the secondary sources.

Formal Thank You letter

02-07-15
Dear,
Mr. Kazi Abul Hassan
Thank you for meeting with us last Thrusday morning for discussing the topic regarding food
and beverage industry. It was both enjoyable and informative. Your insightful presentation
contained several innovative ideas that we are now considering for our report writing.

20

To make a dynamic report it was very important for us to gather the latest and specific
information regarding the food and beverage industry. We got some information from the
secondary sources, but it was not the most fruitful one. Finally, it was our pleasure to meet you.
We have learned a lot regarding the food and beverage industry such as the present market
scenario, how they adapt themselves to the customers need, want and demand, their limitations
and most importantly their impact on global and domestic economic trend. Apart from this, we
have also learned some practical knowledge which will be very much useful in our near future.
Once again, thank you for taking the time to meet with us. We hope that you feel as good about
our interview as we do. We look forward to hearing from you, and We hope to be working with
you and your co-operation soon.
Sincerely,
On behalf of managers group

21