Makro Report Analyzes Wholesaler's Strategy

7/9/2011
LAHORE SCHOOL OF ECONOMICS
MAKRO: REPORT & ANALYSIS COURSE: BUSINESS POLICY (MBA-II/B)
Authors | Asad Ali, Ahmed Jawwad, M. Khurram Manzoor & Rabiya Wahid
MAKRO: REPORT & ANALYSIS
COURSE: BUSINESS POLICY (MBA-II/B)
TABLE OF CONTENTS
CHAPTER 1: INTRODUCTION ........................................................................................................... 6 HOUSE OF HABIB (MAKRO HABIB).............................................................................................. 7 VISION STATEMENT .................................................................................................................... 8 MISSION STATEMENT ................................................................................................................. 8 ORGANIZATIONAL STRUCTURE ................................................................................................... 9 CORE VALUES: ........................................................................................................................... 11 HUMAN RESOURCE AT MAKRO: ............................................................................................... 11 PRODUCTS:................................................................................................................................ 12 COMMUNICATION AT MAKRO: ................................................................................................ 13 CHAPTER 2: INTERNAL ANALYSIS .................................................................................................. 14 WORK ACTIVITIES AT MAKRO: .................................................................................................. 14 CULTURE ................................................................................................................................... 19 Structural Dimensions of MAKRO ............................................................................................. 19 HUMAN RESOURCE FUNCTION ................................................................................................. 21 Orientation & Induction ............................................................................................................ 24 Employee Relations................................................................................................................... 24 Recruitment .............................................................................................................................. 25
Payroll ....................................................................................................................................... 26 Performance Appraisal ............................................................................................................. 27 Time Management .................................................................................................................... 27 Employee Benefits & Compensation ........................................................................................ 27 Executive Compensation........................................................................................................... 29 Strength..................................................................................................................................... 30 Weakness .................................................................................................................................. 31 CHAPTER 3: EXTERNAL ANALYSIS ................................................................................................. 34 Technological Environment: ..................................................................................................... 34 Socio-Cultural Environment: ..................................................................................................... 34 Economic Environment: ............................................................................................................ 34 Political Environment: ............................................................................................................... 34 MICRO ENVIRONMENT: ............................................................................................................ 35 THREATS: ................................................................................................................................... 36 OPPORTUNITIES: ....................................................................................................................... 37 PORTERS FIVE FORCES MODEL: ................................................................................................ 38 EFAS MODEL: ............................................................................................................................ 39 Chapter 4: Strategic Factor Analysis Summary ............................................................................. 40 CHAPTER 5: PROPOSED STRATEGY & BUSINESS PLAN ................................................................. 46 LAHORE SCHOOL OF ECONOMICS
NEW VISION STATEMENT ......................................................................................................... 46 NEW MISSION STATEMENT ...................................................................................................... 46 Proposed Strategy ..................................................................................................................... 46 ORGANIZATIONAL STRUCTURE ................................................................................................. 47 Figure 3: Proposed Organizational Structure ........................................................................... 47 BLUE OCEAN THEORY................................................................................................................ 48 Industry & Business Prospects .................................................................................................. 51 PROJECT BRIEF .......................................................................................................................... 53 INITIAL COST ............................................................................................................................. 53 SALES FORECAST ....................................................................................................................... 53 BREAKEVEN ANALYSIS............................................................................................................... 54 OPERATIONS STRATEGY ............................................................................................................ 55 SALES FORCE ............................................................................................................................. 55 HUMAN RESOURCE ................................................................................................................... 55 MARKETING............................................................................................................................... 55 PROJECT EVALUATION .............................................................................................................. 55 CHAPTER 6: CONCLUSION & RECOMMENDATIONS ..................................................................... 56 References .................................................................................................................................... 57 APPENDIX ...................................................................................................................................... 59 LAHORE SCHOOL OF ECONOMICS
APPENDIX A: CAPITAL INVESTEMENT OF ARO.......................................................................... 59 APPENDIX B: YEAR 1 INCOME STATEMENTS OF ARO (6 MONTHS) .......................................... 59 APPENDIX C: YEAR 1 INCOME STATEMENTS OF ARO (6 MONTHS) .......................................... 60 APPENDIX D: FIRST MONTH SALES CALCULATION ................................................................... 60 APPENDIX E: YEAR 2 QUARTERLY INCOME STATEMENT .......................................................... 60 APPENDIX F: YEAR 3 QUARTERLY INCOME STATEMENT .......................................................... 61 APPENDIX G: BREAKEVEN ......................................................................................................... 61 APPENDIX H: YEAR 1 BALANCE SHEET ...................................................................................... 62 APPENDIX I: YEAR 2 BALANCE SHEET ........................................................................................ 62 APPENDIX J: YEAR 3 BALANCE SHEET ....................................................................................... 63 APPENDIX K: YEAR 1 CASHFLOWS ............................................................................................ 63 APPENDIX L: YEAR 2 CASHFLOWS ............................................................................................. 64 APPENDIX M: YEAR 3 CASHFLOWS ........................................................................................... 65 APPENDIX N: PROJECT EVALUATION ........................................................................................ 65
CHAPTER 1: INTRODUCTION
Makro is a leading chain of wholesale centers with outlets in several countries of Asia and South America. The mission statement of Makro is the distribution of products with excellence in price, quality and variety to professional customers, and so offering the customer advantages and opportunities of growth1. Makro is an important link in the producers distribution chain, especially to the small professional customer to whom direct delivery is becoming less and less economically viable. Makro supports energy saving initiatives and investments in the construction of its stores and stimulates staff to be efficient in the use of energy and water, separating waste and saving electricity2. At present Makro is located in 5 countries in Asia and 4 countries of South America with a total of 168 stores. Following is a summary of Makro outlets by the end of year 2006 Makro Countries THAILAND INDONESIA PHILIPPINES CHINA PAKISTAN BRAZIL ARGENTINA VENEZUELA COLOMBIA TOTAL No. of Outlets 29 19 15 05 04 51 15 24 09 192
Source: www.Makropakistan.com
Pakistan and Chile are two new Makro countries as of 2006. Makro employs more than 15,000 people and serves hundreds of thousands of professional customers every day, resulting in an annual turnover exceeding 4 billion Euros. The Makro South America head office is located in Sao Paulo; the head office of Makro Asia is in Bangkok, Thailand3. The Makro concept has been successfully introduced in Asia since 1989 with the opening of its first store in Bangkok, Thailand. Makro was the first to introduce modern wholesale and trade concepts in the region. The company has expanded rapidly in Asia by opening more stores and moving into new markets, resulting in a leading position in the cash-and-carry wholesale sector4.
HOUSE OF HABIB (MAKRO HABIB)

House of Habib is the business house of the Mohammed Ali Habib Family. Mohammad Ali Habib, a man of vision and exceptional leadership together with his brothers was the architect and builder of the Group which includes Habib Metropolitan Bank and Habib Insurance Co. Ltd., established in 1941 and 1942 respectively5. Today, HOH employs over 10,000 people who work to provide an array of products and services in Pakistan. These activities range from automobiles to audio media, buildings to banking and computers to chemicals. Managing a network of public and private companies, the House of Habib has equity and technical collaborations with British, Japanese and Norwegian companies. House of Habib despite its conservative and traditional values places great emphasis on decentralized professional management that has resulted in a progressive and dynamic organization6. LAHORE SCHOOL OF ECONOMICS
COMPANIES
House of Habib has strong presence in various vertical markets. Automobile Indus Motor Company Chemicals & Plastics DYNEA Pakistan Limited Construction Baluchistan Laminates Division Multimedia AuVitronics Limited Packaging Pakistan Paper Sack Corporation Limited, Thal Limited Jute Divison Retail Makro Habib Pakistan Limited Tractor (Vehicles) AgriAuto Industries Limited Financial Services Habib Insurance Company Limited
VISION STATEMENT
Recognized as the most respected and dynamic group with expanding and diversifying business, sustaining competitive returns to stakeholders. An employer of choice, responsibility fulfilling obligation to community, country and environment.
MISSION STATEMENT
The mission statement of Makro is the distribution of products with excellence in price, quality and variety to professional customers, offering those advantages and opportunities of growth.
ORGANIZATIONAL STRUCTURE
Source: Records of Makro Link Road Branch
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Organizational structure at MAKRO is lead by Board of Directors who are assisted by Audit committee and Executive board. Audit committee is responsible for control and audit. President is the chief executive of the firm like a CEO. Then there is functional hierarchy which is composed of Directors of different functions. Different functional directors are as follows; Human Resource Operations Finance Information service Commercial Marketing
Executive commercial director is most important post among all directors who is responsible for all supply chain and purchase of dry and non dry food items.
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CORE VALUES:
Growth and development for all Recognition and Growth Innovation Trust
HUMAN RESOURCE AT MAKRO:

The Human Resource departments are situated at all Sub companies and MAKRO-stores. This department is responsible for all the Human Resource activities that take place in that MAKROstore or Company Regional office. Some of the activities that are handled by this department are given below General day-to-day issues of the employees. Organizing the training programs Managing and organizing the functions like the annual employees days function effectively. Distribution of the stationery used in the office Looking after and managing all the machines and equipments used in the office for
example the fax machine, photocopying machine and the printers etc7.
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PRODUCTS:
Fruits & Vegetables Dairy & Frozen Meat & Poultry Fish & Sea Food Bakery Basic commodities Confectionary Drinks & Beverages Dry grocery Home & Personal care Electronics Office & Stationary House hold & Kitchenware Apparel Toys, Luggage and Accessories Private Brands (ARO & SAVEPAK) Q Biz Stationary (Private brand of Makro) 8
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COMMUNICATION AT MAKRO:
Communication within the MAKRO-store is very effective and efficient. The institution makes use of both the written and the verbal communication techniques. The following are used for the communication within the MAKRO-store; Intranet Internet Inter office memos Verbal communication Fax
The following are the techniques that are used for the communication across cities e.g. if the corporate head of a department has to co-ordinate to his subordinate in regional MAKRO-store, he uses the following techniques; Teleconferencing Video conferencing Telephonic conversation Courier Service Fax
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CHAPTER 2: INTERNAL ANALYSIS

WORK ACTIVITIES AT MAKRO:
Front Office Product Knowledge: The employee must have complete product knowledge including rates, terms, and operation of various room categories. He or she must also be able to generate follow ups. Documentation: When it comes to documentation, the incumbent must know all the requirements for different account types as per guidelines. They are also responsible for timely completion of documents and follow ups. System: the employee must be proficient in the use of Computer and must not require any supervision. He must be able to dispense with minor troubleshooting. Record keeping: the incumbent must update and review records daily. Customer services: must have full knowledge of identification of customer and his needs. Hospitality needs a smiling face at front office that could attract customer. Time management: the incumbent should be able to multi-task when required and also to use time gaps to complete daily tasks. Communication skills: the employee must handle customers professionally and with ease and most importantly with smiling attractive face. They should be able to diffuse difficult
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situations single-handedly and must have the ability to make them understood. Moreover, they must be able to correspond clearly and correctly. Sales Product knowledge: the incumbent is to have complete knowledge of procedures and policies, Rates and any information regarding rooms, must also have the ability to recommend rooms and Banquets to customers. Documentation: the employee should know fully all the requirements for different instruments. He should also be able to handle the Reservation softwares and manuals. System: the incumbent must be proficient in the use of the Sales Software; must not require any supervision; should have minor troubleshooting capabilities. Record keeping: he or she must update and review records on a daily basis. Customer services: must have a pleasing personality; be able to handle all related customer queries; should also have troubleshooting capabilities. Time management: the incumbent should be able to multi-task when required and also to use time gaps to complete daily tasks. Communication skills: the employee must handle customers professionally and with ease. They should be able to diffuse difficult situations single-handedly and must have the ability to make them understood. Moreover, they must be able to correspond clearly and correctly.
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MAKRO: REPORT & ANALYSIS Good receiving
1. Ensures strict implementation of Goods Receiving procedures. 2. Ensures proper and accurate checking of deliveries to ensure that the merchandise being received conforms to orders and standards. 3. Approves/rejects deliveries based on Goods Receiving standards; for new initial deliveries/ new suppliers, informs concerned Buyers. 4. Confirms all Difference Advice and Goods Return Notes. 5. Maintains good housekeeping. Ensures that all GR equipment (computers, printers, forklifts, power trucks, pallet lifters, pallets, weighing scale) are in good working conditions. Plans space requirement for incoming goods to ensure smooth transfers of goods from the Dock area to the Selling Floor. 6. Coordinates with suppliers, buyers, assistant buyers and the selling floor on articles and deliveries 7. Coordinates with HO - Invoice Control on delivery discrepancies. 8. Prepares Suppliers Delivery Service Level Report, GRN Report, Total Makro Units Received Daily and Monthly Reports. Supervises returns to suppliers and approves GRN 9. Ensures proper monitoring and documentation of Purchase Orders, Ticketing and Empty Bottles Return. 10. Monitors reception of non-trade items and endorses to concerned department. 11. Submits all delivery documents to ALC and HO - Invoice Control. 12. Ensures proper and accurate generation and placement of barcodes on merchandise. 13. Coordinates with buyers and Section Heads on problems regarding deliveries LAHORE SCHOOL OF ECONOMICS
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14. Ensures work progress by training and motivating employees, monitoring and controlling employee activities through the development and implementation of employee work plans and schedules, performance measurement and evaluation, and counseling. 15. Ensures proper documentation of goods received and timely submission to ALC 16. Performs other duties as may be assigned. Non Food 1. Improves sales by planning, recommending and implementing sales strategies. 2. Ensures customer satisfaction by building rapport and attending to their queries, complaints, and suggestions 3. Keeps abreast with competitors prices, product launches, and promotional activities. 4. Monitor achievements vs. targets; work out an action plans and its execution. 5. Constant communication with the customers on promotional activities. 6. Implement Customer Marketing Program (Internal Sales Force) within the department : a. Product files for all products b. Liaise with CDEs / CDOs on Customer Visit Forms / Feedback c. Promote cross-selling of products with other departments d. Utilizing all other tools e.g. BI, in order to meet the department sales target
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e. Obtains customer feedback in the store via customer panel. 7. Updating of Customer or Product Info from the external sales force into the Product 8. Obtain customer feedback by interacting with customers at the stores and by visiting the customers with potential Inventory Control 1. Prepares the Order Proposal List (OPL) and Emergency Purchase Orders (EPO) for the approval of the Assistant Store General Manager. 2. Prepares for, participates, and monitors the cyclic and annual stock takes; checks proposed stock corrections. 3. Monitors and minimizes shrinkage by instructing Store Assistants on how to properly handle merchandise. 4. Monitors stocks ageing (obsoletes) and recommends strategies to minimize shrinkage and/or negative effect on margins (e.g. promotions on clearance items). 5. Checks the adequacy of inventory through perpetual/ quarterly random inventory count to ensure that the standard level is available to meet projected sales and avoid over/ under stock. 6. Coordinates closely with the Buyers/Assistant Buyers/ Suppliers to ensure timely deliveries, proper pricing, adequate stocks and availability of the latest product lines; recommends additions to article assortments.
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CULTURE
Most importantly we saw that the employees are "free agents" who have highly prized skills. They are in high demand and can rather easily get jobs elsewhere. This is because a lot of new MAKRO-stores and International Chains are offering jobs and respectable positions to skilled and experienced employees. As the Hospitality sector has become very fast-paced and the employees have a lot of other options for the job therefore it has become very unusual for any employee to work with an organization for more than 2-3 years. But we found culture at MAKRO very friendly and we lived like a family there.
Structural Dimensions of MAKRO

STORE has a well-organized formal organization structure. In which whole the organization divided into different departments and each department is lead by its department manager. Each department has its own functionality and responsibility towards achieving corporate goal. Entire job is not done by individual or by one department but instead is broken down into many departments and divisions. Every organization will have its own specific way of classifying and grouping work activities. STORE has its own well-designed departmentalization. Formalization It is defined as the degree to which the jobs within an organization are standardized. If a job is highly formalized, then the job incumbent has a minimum amount of discretion over what is to be done, when it is to be done, how he or she should do it. Employees can be expected always to handle the same input in exactly the same way, resulting in a consistent and uniform output. LAHORE SCHOOL OF ECONOMICS
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When the formalization is low, job behaviors are relatively non-programmed and employees have a great deal of freedom to exercise in discretion of work.9 At the MAKRO-store a high degree of formalization was found. The employees have set standards and goals. They are expected to perform their job with minimum amount of discretion over what is to be done, when it is to be done, how he or she should do it. Specialization It is defined as the degree to which the tasks are sub divided into separate jobs within an organization. There is a perfect division of labor found at the MAKRO-store. The essence of work specialization is that rather than the entire job being done by one individual, it is broken down into a number of steps and a separate individual performs each step. 10 Chain of command The chain of command is unbroken line of authority that extends from the top of the organization to lowest echelon and clarifies who reports to whom. There is well-defined chain of command at the MAKRO-store. All the employees are fully aware as to whom are they supposed to report and who is final authority. 11 Centralization It is defined as the degree to which the decision-making is concentrated at a single point in the organization. As the organizational trends are changing, one of the most recent transits in the organizations has been moving to become more responsive and flexible. That is the organizations are moving from centralized to a decentralized decision making styles. So, at MAKRO it is believed that the lower management positions are closer to action and typically LAHORE SCHOOL OF ECONOMICS
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have more detailed knowledge about the problems than do the top managers. So, the low level of the management at the bank is always involved in the decision making process to a considerable extent. 12
HUMAN RESOURCE FUNCTION

Every store in different cities of Pakistan has a Cluster HR Manager who controls all the HRrelated functions of the store. He reports to the Directors at the head-office. Similarly, HR Manager is given instructions from the head-office about recruitment, T&D, payroll, etc, from the concerned Department Manager. For example, the Recruitment Manager is looking after all the hiring being done in Pakistan and when the store Cluster Managers want to hire for any position, they recruit and interview the potential candidates but the final call is made by the Recruitment Manager. Each Cluster Manager has one Assistant Manager working under him. Same goes for the Training and Development and Compensation and Benefits Department Managers. All policies are made at the head-office and trickled down to the stores where the Cluster Managers implements and regulates them.
Human resources management comprises several processes. Together they are supposed to achieve the above mentioned goal. These processes can be performed in an HR department, but some tasks can also be outsourced or performed by Cluster HR managers or other departments.
Workforce planning Recruitment (sometimes separated into attraction and selection)
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Induction and Orientation Training and development Personnel administration Compensation in wage or salary Time management Travel management Payroll Employee benefits administration Performance appraisal Executives & Employee Cafeteria Employee Relations
Workforce Planning
Strategic Workforce Planning involves analyzing and forecasting the talent that companies need to execute their business strategy, proactively rather than reactively, it is a critical strategic activity, enabling the organization to identify, develop and sustain the workforce skills it needs to successfully accomplish its strategic intent whilst balancing career and lifestyle goals of its employees.13
There are five fundamentals activities that are used by Makro for Workforce Planning:
Environment Scan Current Workforce Profile LAHORE SCHOOL OF ECONOMICS
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Future Workforce View Analysis and Targeted Future Closing the gaps
Environment Scan
Environment Scanning is a form of business intelligence. In the context of Workforce Planning it is used to identify the set of facts or circumstances that surround a workforce situation or event.14 Current Workforce Profile
Current State is a profile of the demand and supply factors both internally and externally of the workforce the Makro has today.15 Future Workforce View
Future View is determining the Makros needs considering the emerging trends and issues identified during the Environment Scanning.16 Analysis and Targeted Future
Qualitative and quantitative futuring creates the content for any Makro unit to analyze and identify critical elements. As the critical elements are identified the Targeted Future begins to take form. The targeted future is the future that the organization is going to target as being the
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best fit in terms of business strategy and is achievable given the surrounding factors (internal/external, supply/demand).17 Closing the Gaps
Closing the gaps is about the people management (human resources) programs and practices that deliver the workforce needed for today and tomorrow. The process is about determining appropriate actions to close the gaps and therefore deliver the targeted future. 18
Orientation & Induction

The purpose of this section is to ensure the successful implementation of a uniform procedure for introducing new employees and help our new employees feel part of Makro Family by providing information and assistance at the time its needed. 19 It is important that the induction process is consistent to ensure that all new employees have the same induction experience and receive the same messages. Induction if implemented effectively has the potential to reduce turnover, absenteeism and boost morale.
Employee Relations
Employee Relations at Makro involves the body of work concerned with maintaining employeremployee relationships that contribute to satisfactory productivity, motivation, and morale. Essentially, Employee Relations is concerned with preventing and resolving problems involving individuals who arise out of or affect work situations. Advice is provided to supervisors on how to correct poor performance and employee misconduct. In such instances, progressive
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discipline and regulatory and other requirements must be considered in effecting disciplinary actions and in resolving employee grievances and appeals. Information is provided to
employees to promote a better understanding of management's goals and policies. Information is also provided to employees to assist them in correcting poor performance, on or off duty misconduct, and/or to address personal issues that affect them in the workplace. Employees are advised about applicable regulations, legislation, and bargaining agreements. Employees are also advised about their grievance and appeal rights and discrimination and whistleblower protections. 20
Recruitment
There are four different categories for Hiring Hiring on permanent basis. Hiring on contracts. Hiring as Part timers. Seasonal Hiring.
There are different sources of recruitment used at Makro. Outsourcing Employment on reference. (both internal & external) Advertisement in Media. (mostly print) Walk in Interviews. (encouraged at operational level only)
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Payroll
Payroll and timekeeping clerks perform a vital function at Makro: ensuring that employees are paid on time and that their paychecks are accurate. If inaccuracies occur, such as monetary errors or incorrect amounts of vacation time, these clerks research and correct the records. In addition, they may perform other clerical tasks. Automated timekeeping systems that allow employees to enter the number of hours they have worked directly into a computer have eliminated much of the data entry and review by timekeepers and have elevated the job of payroll clerks, allowing them to perform more complex tasks. In Makro units that have not automated this function, however, payroll and timekeeping clerks still perform many of the traditional job functions.
The fundamental task of timekeeping clerks at Makro is distributing and collecting timecards each pay period. These workers review employee work charts, timesheets, and timecards to ensure that information is properly recorded and that records have the signatures of authorizing officials. These clerks also review computer reports listing timecards that cannot be processed because of errors, and they contact the employee or the employees supervisor to resolve the problem.
Work environment. Payroll and timekeeping clerks usually work in clean, pleasant, and comfortable office settings at Makro, but they also may face pressure to meet deadlines. Clerks usually work a standard 35- to 40-hour week; however, longer hours might be necessary during busy periods.
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Performance Appraisal
Performance appraisals are a regular review of employee performance within Makro. Generally, the aims are:
Give feedback on performance to employees. Identify employee training needs. Document criteria used to allocate organizational rewards. Form a basis for personnel decisions: salary increases, promotions, disciplinary actions, etc.
Provide the opportunity for organizational diagnosis and development. Facilitate communication between employee and administrator. Validate selection techniques and human resource policies to meet federal Equal Employment Opportunity requirements.21
Time Management
Human Resource Information System used by time office supports various time events mechanisms like in/out, breaks times, inter site travels and off site work. Time Office consists of manpower planning, leave management, shift management, overtime management, reporting tool and employee self-help application. It is configurable to suit even most unique time office requirements and workflows. Seamless multi-location system.22
Employee Benefits & Compensation

There are five basic tools being used at Makro for compensation or remuneration. LAHORE SCHOOL OF ECONOMICS
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a base salary short-term incentives, or bonuses long-term incentive plans (LTIP) employee benefits perquisites, or perks
Employee benefits and benefits in kind (also called fringe benefits, perquisites, perks) are various non-wage compensations provided to employees in addition to their normal wages or salaries at Makro. Where an employee exchanges (cash) wages for some other form of benefit, this is generally referred to as a 'salary sacrifice' arrangement. 23
Fringe benefits can include, but are not limited to: (employer-provided or employer-paid) housing, group insurance (health, dental, life etc.), disability income protection, retirement benefits, daycare, tuition reimbursement, sick leave, vacation (paid and non-paid), social security, profit sharing, funding of education, and other specialized benefits.24
The purpose of the benefits is to increase the economic security of employees.
The term perqs or perks is often used colloquially to refer to those benefits of a more discretionary nature. Often, perks are given to employees who are doing notably well and/or have seniority. Common perks are company cars, MAKRO-store stays, free refreshments, leisure activities on work time (golf, etc.), stationery, allowances for lunch, andwhen multiple choices existfirst choice of such things as job assignments and vacation scheduling. They may also be given first chance at job promotions when vacancies exist.25
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Executive Compensation
Executive compensation (also, director remuneration) is how top executives of business corporations are paid. This includes a basic salary, bonuses, shares, options and other company benefits for work on the board of directors. Over the past three years, director remuneration has risen dramatically beyond the rising levels of an average worker's wage. 26
The board of directors is the controlling organ of the company, so responsibility for the levels of pay for all company employees is ultimately theirs. Pay is just one element in the wide range of spending and resource allocation decisions by the heads of firms. Others include investment decisions, which suppliers to use, which business partners to contract with, how to distribute capital and dividends to shareholders, and so on. While human resource department at Makro is usually delegated the task of setting pay levels.
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Strength
1. 2. 3. 4. 5. 6. Relatively Low Prices as compared to market. Located at the prime locations in the city. Stores Capacity relatively large as compared to its competitors. Retail outlet has specious parking and separate parking for senior citizens. Pioneers in wholesale retail industry in Pakistan-first mover advantage. Manage key corporate account of the city, e.g. in Lahore they deal with Royal palm, P.C, Gym Khana. 7. 8. 9. MAKRO has a high experience in dealing with Wholesale/Retail Business internationally. Large supplier base and suppliers have low bargaining power. They have extended business hours from 8:00 am to 12 am Midnight.
10. MAKRO provides guaranteed quality product. 11. Air-conditioned and clean environment. 12. They provide bulk packing solutions for wholesale regular buyers. 13. It is open 7 days a Week including national holidays where as its competitors are closed on national holidays. 14. They provide Makro mail-a fortnightly price list with special promotions on a vast range of products. 15. Provides credit limit to certain loyal customers. 16. They have a large product line. 17. Membership cards provide benefits to customers like telephonic info provision. 18. They are using Oracle 6 for their DBMS. LAHORE SCHOOL OF ECONOMICS
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19. They have very strong private labeled brands; ARO, Q-biz, and Save Pack
Weakness
1. Low sales turnover in non-food business 2. Very high sales returns in non-food business, quality complaints. 3. Untrained store level sales staff 4. No control over promoters 5. High turnover of contractual employees at lower store level. 6. No proper demand estimation method deployed 7. High shrinkage in fresh food department. 8. Low control over shop lifting 9. Merchandise damage occurs frequently-packing tearing 10. Merchandise mishandling in stores. 11. At times wrong ordering of merchandise by the buyers due to inefficient communication. 12. Under/Over receiving of merchandise by buyers 13. Low storage capacity at back end store. 14. Short expiry product mismanagement. 15. They are operating in few cities-limited accesses to large markets. 16. Mixing of spoiled and quality deteriorated items with fresh items
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Internal Factors Strength Physical infrastructure Low Prices Large corporate customer base extended business hours Provides credit & bulk buying solutions
Weights
Rating
Weighted Scores
0.1 0.2 0.05 0.025 0.1
4 5 3 3 2
0.4 1 0.15 0.075 0.2
Weakness Merchandise shrinkage and mishandling Untrained staff Ordering Issues Backup Storage Capacity Geographic exposure. 0.15 0.125 0.1 0.05 0.1 4 5 3 2 4 0.6 0.625 0.3 0.1 0.4
Total
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Table 1: IFAS Model35
3.85
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In IFAS company has scored 3.85 which is not a bad score. Internally company is a good company and is managing its company well. Makro has a good infrastructure it is present at the prime location we have given it rating of 4 because company is present at a good location. Makro provides low prices to its customers we have given it rating of five because of its low prices. Makro has a good customer base and has a first mover advantage. They work extended business hours and work even on national holidays. Makro provides bulk buying solutions to its customers and even they also provides credit limits and they have a Makro mail service. So according to the importance of these items we have ranked them. In the weakness part shrinkage is a problem to the company we have ranked it 4 because it is important to the people. While untrained staff is the most important point to Makro and we have given it 5. Company needs geographic expansion because expansion is the key to success so we have given it 4. Overall company is internally good but it needs to expend and overcome its weaknesses.
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CHAPTER 3: EXTERNAL ANALYSIS

External environment is composed of macro and micro environment faced by the firm. 28
Technological Environment:
Technology is improving all over the world and it will also help MAKRO to manage its supply chain and information processing.
Socio-Cultural Environment:
There has been change in the life style of people and more products demand is increasing like frozen food items. People are more tend to opt large retail chains as their option and MAKRO can capitalize over it.
Economic Environment:
Economic conditions of country are point of concern for the firm as inflation and GDP do impact the purchasing power of consumers and retailers.
Political Environment:
Political turmoil in country also affects the firm and its business.
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MICRO ENVIRONMENT:
COMPETITION DEMAND FINANCIAL INSTITUTIONS
SUPPLIERS
MICRO ENVIRONMENT
TRENDS
Figure 1: Constituents of the Micro Environment29
Suppliers do have influence over the functions of company. As suppliers do influence the supply chain of company and proper management of suppliers is necessary.
Demand of products varies across the seasons and these seasonal variations do affect the sales of company.
Trends are changing every day so the demand forecasting must be very accurate. Finally competition is increasing as METRO and other retail outlets are opening new stores.
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THREATS:
1. Increased Competition from METRO: METRO has opened more stores in different cities of Pakistan. Moreover there is also competition from traditional retail stores which are big in size like Al Fatah, Haji Karim Baksh and Pot Pouri. 2. Threat of Acquisition: There is always a threat of acquisition from METRO which is still operated by International Head Quarters and financially very sound. 3. Inflation (16%): Inflation is at near 16% and it increases the purchase cost for the firm as well and subsequently decrease the purchasing power of consumers. 4. Stagnant GDP: GDP is stagnant and this economic variable does affect the business external environment. 5. High Interest rates (Cost of doing business) = 16% Interest rate increase the cost of borrowing money. 6. Seasonal variations in demand: Seasonal variations in demand do need efficient forecasting. 7. Devaluation of Rupee (Increased bill of imported items): Rupee devaluation do increase the cost of imports. 8. Low disposable income: Low purchasing power of consumers has negative impact on purchase pattern of consumers. 9. Trade union regulations: Government is opening trade unions. 10. Government instability: Instable political environment increase uncertainty.
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OPPORTUNITIES:
1. Population (More consumers): Population growth does increase number of buyers. 2. Technological advancements: New technology help firm to better manage its business like in supply chain and ordering. 3. Wage rates: Low wage rates 4. Retail Trend (Increased): There has been increased trend to shop from large retailers and whole sellers like MAKRO due to its convenient environment. 5. Private brands demand: There has been increase in the demand of private brands due to cost effectiveness. 6. Expansion opportunities in other cities: Expansion opportunities do exist in other cities. 7. Few competitors: Still there are few competitors like mentioned above and market is wide open. 8. Urbanization 9. % increase in basic consumption 10. Changing life styles
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PORTERS FIVE FORCES MODEL:
Buyers Suppliers Other stakeholders
Threat of New entrant
Industrial rivalry
Substitutes
Figure 2: Porters Five Forces Model30
Threat of new entrant exist for MAKRO as new business could be started and capture market share.
Suppliers: There is less threat of suppliers and MAKRO has backward integration policy and other credible sources of supplies.
Buyers: Bargaining power of buyers does exist as they have other retailers to buy. Substitutes: Substitute products are not the point of concern as MAKRO sell all kinds of substitutes.
Government as stakeholder does affect the affairs of business due to its regulations.
39
EFAS MODEL:
External Factors Opportunities

Population Technology Wage rate Private brand demand Expansion Life styles Urbanization
Weight
0.15 0.1 0.05 0.1 0.15 0.05 0.05 0.14 0.12 0.03 0.03 0.03
Rating 5
4 3 3 3 4 3 3 3 5 2 2 4
Weighted score
0.6 0.3 0.15 0.3 0.6 0.15 0.15 0.42 0.6 0.06 0.06 0.12 3.51
Threats
Competition Inflation Interest rates Seasonal variations Government instability
TOTAL
1 31 Table 2: EFAS Model
3.51 show that company is performing outstanding as score is near to 5. Population is given 4 ranking because of its importance in terms of number of consumers. Technology is given 3 ranking because of its importance in terms of better management of inventory control and information management. Expansion is also given 4 because there are more expansionary opportunities available. Inflation and competition are important factors thus given higher ranking.
40
Chapter 4: Strategic Factor Analysis Summary

External Factors
Following are the list of external factors which lay the basis for the formulation of strategy & crucial strategic business decision making. Population o Population in Pakistan is increasing at a very high rate and which increases the number of consumers each day. Hence the increase in the number of people increases the number of people in the target population of Makro. Expansion o Makro Currently is operating in two major cities of Pakistan and from the financial analysis of the company, we believe that the company has a great potential to expand further in many other cities such as Faisalabad, Rawalpindi and Peshawar where the demographics of the people are same as what are ideal for any whole sale business. Private Brand Demand o MAKROs private labels have gained acceptance and are now renown in the areas which it operates. This suggest the company can capitalize their current brand name and equity and increase the product line by introducing new products to serve the same target markets.
41
Technology o Technology is one of the major factors to assess how a company operates in a market place. Companies are now becoming more of e-businesses which suggest that Makro needs to tackle the technological part accordingly if it wants to expand further.
Lifestyle o Initially there were no such wholesale markets in Pakistan and people had no concept of buying in bulk, but steadily the lifestyles and patterns of thinking have changed and people are becoming more and more price sensitive. This is a big opportunity which Makro can cash in future.
Competition o A few years back Makro enjoyed the luxury of being the sole wholesale store in the country but after METRO & Hyper Star the dynamics of the market have changed. Competition has lead to price wars & increased competition in snatching the market share. Although Hyper Markets are not direct competition but eventually they make the competition.
Inflation o Inflation in the country has been sky high, as in the previous couple of years the GDP growth rate of the country was 3 to 5 % growth rates.
Interest Rates o Cost of borrowing is very high due to high inflation rates. So if the company needs to expand in future it needs to borrow money or issue more stocks. LAHORE SCHOOL OF ECONOMICS
42
Issuance of more stock will dilute the earnings and it would not be acceptable by the current owners of the business who are the HOH group. Cost of living o Cost of living has been high and increasing since last many years and this has lead to a decrease in the middle class or the middle income people who are the primary target audience of these people. Government Instability o Government policies have been very instable in the past many years and governments keep on changing and the people in the government have direct & indirect impact on the company operations as to what level of tax & audits are applied on the companys financial & operational functions.
Internal Factors
Following are the list of external factors which lay the basis for the formulation of strategy & crucial strategic business decision making. Physical infrastructure o The prime location of the stores and the huge building & structures plus the atmosphere which include the tangible & intangible part of the infrastructure help to develop the image of the company at each store are the basic elements of its success. Low Prices
43
o MAKROs ability to get the merchandize at the lowest price has been substantial over the period and have become very good in being low price leaders in the minds of the consumers. Large corporate customer base o Makro have large customer base which include large chain restaurants, hotels, big businesses expanded across the whole country and can be catered to if the company tends to expand further. Extended business hours o Makro has a great advantage as its timings of business hours are from 8 am to 12 pm whereas its competitors are working 4 hours less and are closed on public holidays and national holidays. Provides credit & bulk buying solutions o Makro caters to its special customers and loyal customers in a special ways as they book orders on the phone, make special packing for special customers & even allows credit payment options to special accounts with a pre-settles payment terms. Merchandise shrinkage and mishandling o Companys major & most uncontrollable issue at hand is the mishandling of fresh and dry-food merchandize which leads to high shrinkages and missing of rotten merchandize with the fresh. Untrained staff
44
o The above mentioned issue is majorly caused by the untrained staff and inability to adjust to the variety of customer and their needs and treat them accordingly. Ordering Issues o There is huge gap between the buying function of the company and the store level people who are close to the operation and the customers which causes ordering issues of under & over ordering. Backup Storage Capacity o Each store has a Big Hall which is next to the Good Receiving department and during the hassle of receiving goods many of merchandize is miss handled and not accordingly placed which leads to higher shrinkages. Low capacity at the storing of the non useable & backup merchandize which is lying idle at the GRfloors leads to many operational issues.
45
SFAS Matrix
Following is SFAS Matrix which has been developed through assigning weights to the to the factors included in the model both external and internal. This can be done by review and revision of the weights given to each factor. The revised weights indicate the priority of each factor in the companys future success. The factors included in the SFAS are rated as the highest in the EFAS & IFAS.
Strategic Factor Analysis Summary

Key Strategic factors External factors Expansion Private Brand Demand Lifestyles Competition Inflation & cost of living Internal factors Low Prices Physical Infrastructure Credit & bulk buying solutions Merchandize mishandling & shrinkage Untrained staff Backup Storage Capacity Weights Ratings 0.20 0.10 0.10 0.05 0.05 0.15 0.05 0.10 0.10 0.08 0.03 1.00 Table 3: SFAS Matrix 5 4 3 3 2 4 2 3 5 3 2 32
Weighted Score 1 0.4 0.3 0.15 0.1 0.6 0.1 0.3 0.5 0.225 0.05 3.725
Duration Long term Short term Long term Long term Long term Long term Long term Long term Short term Short term Short term -
Total
46
CHAPTER 5: PROPOSED STRATEGY & BUSINESS PLAN

NEW VISION STATEMENT
To be the most leading, respected and dynamic firm in the retail/wholesale business with most extensive geographic coverage in Pakistan, committed to community, country and environment.
NEW MISSION STATEMENT

Makro is committed to provide excellent quality products of wide variety to its customers ( consumer and business) in the different geographic regions of the country and at the same time ensuring the highest returns for its share holders and guardian of the interests of investors, Makro intends to be employer of the choice and committed to society, where it operates.
Proposed Strategy
To live and survive in the current era expansion is the key factor. Its like the blood line for any country so for Makro we are proposing to expand and tap the untapped market. We want Makro to go in to cities like Islamabad, Quetta Cant, Peshawar and Faisalabad. Hierarchy and organization structure will remain the same as it is in Lahore. We are proposing Makro to open its stores in the populated areas as population is the opportunity for Makro.
47
Makro should focus middle income groups as these are the people who are very price sensitive. Attracting such people is very easy for Makro. Makro should develop its Buying centers in every city it operates. If a city has more than one outlet it should have only single buying center. This buying center should act as a hub for the city. Buying center will do all sort of purchasing for its shores. A single buying center will help in reaping out maximum benefits , and will help in attaining economics as well as it will help in solving logistic related problems that company currently face.
ORGANIZATIONAL STRUCTURE
BoD
Audit Committee
Etxecutive Board
President
Internal Audit
V.P Lahore
V.P Fasilabad
V.P Karachi
V.P Islamabad
V.P Peshawar
V.P Quetta Cantt
V.P HRM
V.P Finance
Director Finance
Director HR
Director Commercia l-food
Director Informatio n
Director Business Developme nt
Director NonFood, dry Food and Supply chain
Figure 3: Proposed Organizational Structure
48
BLUE OCEAN THEORY
Figure 4: Blue Ocean Theory33
BOS is the simultaneous pursuit of differentiation and low cost. The aim of BOS is not to outperform the competition in the existing industry, but to create new market space or a blue ocean, thereby making the competition irrelevant. While innovation has been seen as a random/experimental process where entrepreneurs and spin-offs are the primary drivers as argued by Schumpeter and his followers BOS offers systematic and reproducible methodologies and processes in pursuit of blue oceans by both new and existing firms 34
49
As described by the authors of the blue ocean strategy, this is a framework to achieve differentiation and low cost simultaneously. It is a theory to create a new market place. Now we can justify its implementation as flows: We are competing in the uncontested markets of the country. We are proposing Makro to go in to cities like Quetta Cant and Peshawar. By going in to these cities Makro is making competition irrelevant and exploring its own new territories to expand. As we are proposing to go in to new cities and these are the areas where people arent aware of Low Price stores so this is a place where Makro will create its own demand. More over we are proposing Makro to introduce its private label UHT milk brand. Makro as we all know is a low price store, so at present its given its customers low priced products, we are proposing them to blend its low price with differentiation. This differentiation is geographic as well as in its product. I.e. introduction of its private labeled UHT milk.
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BUSINESS PLAN
Makro Currently has its own Private labels under the brand name of ARO, Savepak and Q-Biz. ARO and Savepak brands are available at all Makro Wholesale Centers. ARO & Savepak are those brands that offer a promising quality that their customers can trust, at a price they can afford. Makros own brands offer a wide range of quality food and non food products, especially advantageous for the needs of MAKRO-stores, restaurants and catering services. These products are also ideal for institutions and office requirements as they offer a benefit on price. This project that has been under taken aims to produce a new business strategy and opportunity for Makro in the field of Food Products. We as a group intend to plan a business prospects that will help the company not only to have a huge control over the supply of dairy milk but also capitalize on the profit side. Low cost strategy will help them to transfer the benefit to consumer by pricing their packed milk under the brand name of ARO at affordable Prices. Makro is a wholesale store where people come and buy in bulk, mainly intended to buy for the small or medium sized general or departmental stores but as the trend and psychology of the business environment has yet not developed so this is used as a bulk buying store by mostly household customers and families who come and buy their monthly groceries and other related items.
51
Report intend to present the feasibility of UHT treated packed milk under the brand name of ARO using outsourcing strategy of UHT treated milk from Shakarganj Foods.
Industry & Business Prospects

Currently there are 2-3 major players in packed milk and face a large competition from local Gawallas and milk shops. Nestle, Olpers & Haleeb are the main leaders of this industry in packed milk. For Makro this would be a challenge to break their market while they would be placed adjacent to their competitors. The advantages that Makro can have are as follows: Placement at 3 major cities, in their own stores. Under their existing Brand of ARO which is very well known to its existing customers as they provide various products under this brand which include all sorts of spices, pulses and other dry food products including butter & Oil. The advantage of its promotion and shelf spacing is one of the greatest as they have their own stores and it would initially be sold at their own stores so would provide them an edge over its competitors. A large amount of people come at Makro especially in the last and the first week of the month for shopping and buy their monthly groceries. In the process they purchase milk for their monthly usage. This is the target customer base that they can focus on which is a very large amount and includes people from the social economic classes of A, B & C. ARO bring you quality you can trust, at a price you can afford is the tagline of ARO brand. This will create an image when a customer is buying ARO milk from Makro that the customer is purchasing a quality product backed by a promising Brand Name of
52
ARO and in affordable prices as other competitors brand are offering the same product in very high pricing.
53
PROJECT BRIEF
Makro will sell UHT treated milk under the existing brand of ARO. UHT milk will be outsourced to Shakar Ganj Foods. Shakar Ganj foods will be responsible for packaging of milk as well. Outsourced milk will be transported to MAKRO stores in Lahore and existing shelves of UHT milks and ARO brand shelf space will be allocated to ARO UHT milk. Outsourcing strategy has been already under employment by MAKRO for other ARO products like Ghee.
INITIAL COST
UHT treated milk will be outsourced. Shakar Ganj foods will be given contract to sell their UHT milk at discounted rate. Shakarganj foods will be responsible for packaging of milk. Delivery charges will be bear by MAKRO. Using this outsourcing strategy, capital expenditures are restricted to branding and legal charges of ARO milk brand. These expenditures include Product design cost which includes the logo and labeling of product and other expenses related to new product design. Brand will be registered and legal charges include lawyers fee etc. For initial marketing at MAKRO stores, Ad agency will be contacted for making a brand campaign. Other charges will be included in contingencies.
SALES FORECAST
Shakarganj is currently selling its UHT milk at Rs. 750/ so MAKRO due to its bulk purchase constituting high volumes will be able to get 25% discount on every 1 Liter Pack. So our purchase price would be Rs. 562/ per Liter. We have assumed that in the first month of operations MAKRO due to its 4000 customer turnover in one store and more than 10,000 customers visiting daily in both stores, sales would be 15000 Liter in carton containing 12 Liter LAHORE SCHOOL OF ECONOMICS
54
or 12 packs of one Liter each. Cost of sales comes out to be 78% of Sales which will be carried forward to the next months as same. Transportation expenses will be bear by MAKRO which are taken as 3% of sales. Other expenses include selling expenses which are banners and sales people and handling expenses.40% of tax rate has been applied to get the Net Income. Growth in sales of 5% will be assumed for next two months then in summers milk consumptions is increased as per the reports on milk consumption in Pakistan so its has been increased to 7%. Then it will be 11% in July and August but reduced in winter season.
Milk Sales in Macro/Day 30000 Sales/ Day/liter (20% of Makro UHT sales) 6000 Sales/ Day/Carton 500 Sales/Month/carton 15000 Rs Sales/Month Rs10,875,000.00
Table 4: 1st month Sales
Cumulative growth of last quarter in previous year has been taken to calculate the units sold in first quarter of next year. As we have mentioned before that in summers consumption is more than winters so 11% growth in unit sales is used in 2 nd quarter. 3rd quarter will experience 15% growth in unit sales but it again dropped in last quarter due to winter consumption of UHT Milk. Cost of sales would be greater than last year due to inflation. One liter pack will be purchased at Rs. 750/ and sell at Rs. 825/, Gross margin will remain same at 22%.
BREAKEVEN ANALYSIS
Total expenses in the first month are Rs. 9 Million approximately, to cover these expenses and approach breakeven (No profit No loss situation), MAKRO needs to sell 13,613 Liters of ARO
55
UHT milk. At this level Operating Income will be zero. If MAKRO sell more than 13,613 Liters then they will be making profits. We are already selling 15,000 Liters in the first month of sales.
OPERATIONS STRATEGY
Project will use the current operations and logistics of MAKRO. As there is extensive operational capability of MAKRO exists so there is no need to create a separate supply chain for this project.
SALES FORCE
Current sales force for ARO brand will be utilized for the purpose of ARO UHT Milk.
HUMAN RESOURCE
Human resource department of MAKRO will handle the HRM function for ARO UHT milk brand.
MARKETING
Marketing campaign which will be launched initially will be outsourced to an Ad agency.
PROJECT EVALUATION
As per the NPV, project worth positive NPV and IRR is more than 400%. Payback period of this project is one months so its less than one year which shows the potential financial benefit of under taking this project. On the basis of this feasibility, we propose to undertake this project in future.
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CHAPTER 6: CONCLUSION & RECOMMENDATIONS

1. Makro should focus on non food related business as it is their weakest link. 2. Reduce returns in non food business by focusing on quality improvements. 3. Training modules to be developed for the training of lower level staff. 4. There should be more control on promoters. 5. Contractual staff salaries to be increased to motivate them and reduce turnover. 6. SAP to be installed for demand estimation. 7. Reduce shrinkage in fresh food department. 8. Appoint controllers for shop lifting. 9. Install control mechanism for merchandise damages. 10. Train staff for the handling of merchandise. 11. Develop a Buyer-store communication system which is online. 12. Install new cost accounting software to reduce over/under receiving by buyers. 13. Acquire more storage capacity at back end. 14. Short expiry products to be handled with special care. 15. Expand operations in other cities. 16. Mixing of spoiled and quality deteriorated items with fresh items to be avoided. 17. Launch UHT treated milk under the brand name of ARO.
57
References
1. Ahmed Jawwad, 2008, Makro Pakistan: Internship Report, University of the Punjab, p. 7. 2. Ahmed Jawwad, 2008, Makro Pakistan: Internship Report, University of the Punjab, p. 8. 3. Ahmed Jawwad, 2008, Makro Pakistan: Internship Report, University of the Punjab, p. 8. 4. www.makropakistan.com. 5. Ibid. 6. Ibid. 7. Ahmed Jawwad, 2008, Makro Pakistan: Internship Report, University of the Punjab, p. 32. 8. www.makropakistan.com/products. 9. Organizational Theory By Richard L Daft, 3rd edition, pp. 102-104. 10. Stephen P. Robbins and David A. Duecento, Fundamentals of Management, Third Edition, p. 76. 11. Ibid. 12. http://www.wikipedia.org/wiki/design. 13. http://www.organizationdesign.com.html. 14. Stephen P. Robbins and David A. Duecento, Fundamentals of Management, Third Edition. 15. Ibid. 16. Ibid. 17. Ibid. 18. Ibid. 19. Ibid. LAHORE SCHOOL OF ECONOMICS
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20. Ibid. 21. Anthony P., Kacmar M., Pamela, Strategic Human Resource Management, 4 th edition, pp. 281-308. 22. Ibid. 23. Ibid. 24. http://www.wikipedia.org/wiki/compensation. 25. Dessler, Varkey, Human Resource Management 11th Edition, p. 513. 26. http://www.wikipedia.org/wiki/compensation. 27. Ibid. 28. Sirinivasan, R., 2005, Strategic Management: The Indian Context, Prentice hall, New Dehli, pp. 54-55. 29. Ibid. 30. Sirinivasan, R., 2005, Strategic Management: The Indian Context, Prentice hall, New Dehli, p. 59. 31. Sirinivasan, R., 2005, Strategic Management: The Indian Context, Prentice hall, New Dehli, p. 68. 32. Sirinivasan, R., 2005, Strategic Management: The Indian Context, Prentice hall, New Dehli, p. 94. 33. http://www.blueoceanstrategy.com/abo/redvsblue.html 34. http://www.blueoceanstrategy.com/abo/what_is_bos.html 35. Sirinivasan, R., 2005, Strategic Management: The Indian Context, Prentice hall, New Dehli, p. 90.
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APPENDIX
APPENDIX A: CAPITAL INVESTEMENT OF ARO
(In PKR) Product Design Cost Brand Registration Legal Charges Ad agency expenses Contingencies 8,00,000 15,00,000 2,00,000 1,000,000 1,75,000
Total
3,67,5000
APPENDIX B: YEAR 1 INCOME STATEMENTS OF ARO (6 MONTHS)

Months Sales Units sold Cost of Sales Gross Profit Operatinf Expenses Transportation expenses Handling Expenses Selling Expense Operating Profit Financial Charges EBT Tax Net Income Rs326,250 Rs217,500 Rs217,500 Rs1,676,250 Rs0 Rs1,676,250 Rs670,500 Rs1,005,750 Rs342,563 Rs228,375 Rs228,375 Rs1,712,813 Rs0 Rs1,712,813 Rs685,125 Rs1,027,688 Rs359,691 Rs239,794 Rs239,794 Rs1,798,453 Rs0 Rs1,798,453 Rs719,381 Rs1,079,072 Rs384,869 Rs256,579 Rs256,579 Rs1,924,345 Rs0 Rs1,924,345 Rs769,738 Rs1,154,607 Rs423,356 Rs282,237 Rs282,237 Rs2,116,779 Rs0 Rs2,116,779 Rs846,712 Rs1,270,068 Rs465,691 Rs310,461 Rs310,461 Rs2,328,457 Rs0 Rs2,328,457 Rs931,383 Rs1,397,074 1 Rs10,875,000 15000 Rs8,437,500 Rs2,437,500 2 Rs11,418,750.00 15750 Rs8,906,625.00 Rs2,512,125 3 Rs11,989,687.50 16537.5 Rs9,351,956.25 Rs2,637,731 4 Rs12,828,965.63 17695.125 Rs10,006,593.19 Rs2,822,372 5 Rs14,111,862.19 19464.6375 Rs11,007,252.51 Rs3,104,610 6 Rs15,523,048.41 21411.10125 Rs12,107,977.76 Rs3,415,071
60
APPENDIX C: YEAR 1 INCOME STATEMENTS OF ARO (6 MONTHS)

Months Sales Units sold Cost of Sales Gross Profit Operatinf Expenses Transportation expenses Handling Expenses Selling Expense Operating Profit Financial Charges EBT Tax Net Income Rs512,261 Rs341,507 Rs341,507 Rs2,561,303 Rs0 Rs2,561,303 Rs1,024,521 Rs1,536,782 Rs548,119 Rs365,413 Rs365,413 Rs2,740,594 Rs0 Rs2,740,594 Rs1,096,238 Rs1,644,357 Rs575,525 Rs383,683 Rs383,683 Rs2,877,624 Rs0 Rs2,877,624 Rs1,151,050 Rs1,726,574 Rs604,301 Rs402,867 Rs402,867 Rs3,021,505 Rs0 Rs3,021,505 Rs1,208,602 Rs1,812,903 Rs622,430 Rs414,953 Rs414,953 Rs3,112,150 Rs0 Rs3,112,150 Rs1,244,860 Rs1,867,290 Rs634,879 Rs423,252 Rs423,252 Rs3,174,393 Rs0 Rs3,174,393 Rs1,269,757 Rs1,904,636 7 Rs17,075,353.25 23552.21138 Rs13,318,775.53 Rs3,756,578 8 Rs18,270,627.97 25200.86617 Rs14,251,089.82 Rs4,019,538 9 Rs19,184,159.37 26460.90948 Rs14,963,644.31 Rs4,220,515 10 Rs20,143,367.34 27783.95495 Rs15,711,826.53 Rs4,431,541 11 Rs20,747,668.36 28617.4736 Rs16,183,181.32 Rs4,564,487 12 Rs21,162,621.73 29189.82307 Rs16,506,844.95 Rs4,655,777
APPENDIX D: FIRST MONTH SALES CALCULATION
Milk Sales in Macro/Day Sales/ Day/liter (20% of Makro UHT sales) Sales/ Day/Carton Sales/Month/carton Rs Sales/Month
30000 6000 500 15000 Rs10,875,000.00
APPENDIX E: YEAR 2 QUARTERLY INCOME STATEMENT

QUARTERS (In PKR) Sales Units sold Cost of Sales Gross Profit Operating Expenses Transportation expenses Q1 96140754 123257.4 74989788 21150966 2884223 Q2 105754829.7 135583.1149 82488767.13 23266062.52 3172644.89 Q3 121618054 155920.58 94862082 26755972 3648541.6 Q4 119185693 152802.17 92964841 26220852 3575570.8
61
Handling Expenses Selling Expense Operating Profit Financial Charges EBT Tax Net income
1922815 1922815 14421113 0 14421113 5768445 8652668
2115096.593 2115096.593 15863224.45 0 15863224.45 6345289.779 9517934.669
2432361.1 2432361.1 18242708 0 18242708 7297083.2 10945625
2383713.9 2383713.9 17877854 0 17877854 7151141.6 10726712
APPENDIX F: YEAR 3 QUARTERLY INCOME STATEMENT

QUARTERS Sales Cost of Sales Gross Profit Operating Expenses Transportation expenses Handling Expenses Selling Expense Operating Profit Financial Charges EBT Tax Net income Q1 136375937 106373231 30002706 4091278.1 2727518.7 2727518.7 126829622 0 126829622 50731849 76097773 Q2 150013531 117010554 33002977 4500405.9 3000270.6 3000270.6 139512584 0 139512584 55805034 83707550 Q3 165014884 128711610 36303274 4950446.5 3300297.7 3300297.7 153463842 0 153463842 61385537 92078305 Q4 168315182 131285842 37029340 5049455.5 3366303.6 3366303.6 156533119 0 156533119 62613248 93919871
APPENDIX G: BREAKEVEN
Expenses/ month Break even Units ( in carton) 9869250 13612.76
62
APPENDIX H: YEAR 1 BALANCE SHEET
Assets
Current Assets Cash Accounts Receivable Inventory Prepayments Trade Mark Non Current Assets Fixed Assets Total Assets
In PKR
Liabilities
Current Liabilities Account Payables Taxes Payables Other Short Term Liabilities
In PKR
1,599,646.30 0 7054207.243 300000 2,300,000.00
4952053 0 50000
7,350,000 18,603,853.54
Equity Owner's Equity Retained Earnings Total Liabilities & Shareholder's equity
3675000 9926800 18603854
APPENDIX I: YEAR 2 BALANCE SHEET
Assets
Current Assets Cash Accounts Receivable Inventory Prepayments Trade Mark Non Current Assets Fixed Assets Total Assets
In PKR
Liabilities
In PKR
Current Liabilities 7,133,882.42 Account Payables 0 Taxes Payables 10329427 Other Short Term Liabilities 300000 2300000 Equity Owner's Equity 7,350,000 Retained Earnings 27,413,309 Total Liabilities & Shareholder's equity
11918569 0 50000
3675000 11769740 27413309
63
APPENDIX J: YEAR 3 BALANCE SHEET
Assets
Current Assets Cash Accounts Recievable Inventory Prepayments Trade Mark Non Current Assets Fixed Assets Total Assets
In PKR
13,592,442.17 0 14587316 300000 2300000
Liabilities
Curent Liabilities Account Payables Taxes Payables Other Short Term Liabilities
In PKR
16831518 0 50000
7,350,000 38,129,758
Equity Owner's Equity Retained Earnings Total Liabilities & Shareholder's equity
3675000 17573240 38129758
APPENDIX K: YEAR 1 CASHFLOWS

Profit Before Taxation Changes in Current assets Stock in Trade Trade Debts Advances Deposits & Prepayments Other Receivables Changes in Current Liabilities Accounts Payables Other Liabilities Cash Flow from operating activities Cash Flow from investing activities product design cost Brand Registration Legal Charges ad agency exp contingencies 800000 1500000 200000 1000000 175000 3675000 17426800.06
-7054207.243 0 -300000 -2300000
4952053.485 50000 12774646.3
64
Cash Flow from financing activities Dividend Paid/ with drawls Net Cash or cash Equivalents
7500000 23,949,646.30
APPENDIX L: YEAR 2 CASHFLOWS

Profit Before Taxation Changes in Current assets Stock in Trade Trade Debts Advances Deposits & Prepayments Other Recievables Changes in Current Loabolotoes Acpunts Payables Other Liabilities Cash Flow from operating activities Cash Flow from investing activities Cash Flow from financing activities Dividend Paid/ with drawals Net Cash or cash Equivalents 0 38,000,000 5,534,236 IN PKR 39842939.79
-3275219 0 0 0
6966516 0 43534236
65
APPENDIX M: YEAR 3 CASHFLOWS

Profit Before Taxation Changes in Current assets Stock in Trade Trade Debts Advances Deposits & Prepayments Other Receivables Changes in Current Liabilities Accounts Payables Other Liabilities Cash Flow from operating activities Cash Flow from financing activities Dividend Paid/ with drawls Net Cash or cash Equivalents IN PKR 345,803,500
-4257889 0 0 0 4912949 0 346458560 340,000,000 6,458,560
APPENDIX N: PROJECT EVALUATION

IN PKR Cash Flow Change in Networking Capital Capital Expenditures Free Cash Flows NPV IRR PBP -3675000 Rs. 459,248.53 419% Less Than one year Year 0 -3675000 Year 1 127747801 26001800.1 0 153749601 Year 2 43534236 1842940 0 45377176 Year 3 346458559.7 31805299.95 0 378263859.7

Makro Report Analyzes Wholesaler's Strategy

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Makro Report Analyzes Wholesaler's Strategy

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7/9/2011

LAHORE SCHOOL OF ECONOMICS

MAKRO: REPORT & ANALYSIS COURSE: BUSINESS POLICY (MBA-II/B)

MAKRO: REPORT & ANALYSIS

COURSE: BUSINESS POLICY (MBA-II/B)

LAHORE SCHOOL OF ECONOMICS

MAKRO: REPORT & ANALYSIS

COURSE: BUSINESS POLICY (MBA-II/B)

MAKRO: REPORT & ANALYSIS

COURSE: BUSINESS POLICY (MBA-II/B)

MAKRO: REPORT & ANALYSIS

COURSE: BUSINESS POLICY (MBA-II/B)

LAHORE SCHOOL OF ECONOMICS

MAKRO: REPORT & ANALYSIS

COURSE: BUSINESS POLICY (MBA-II/B)

LAHORE SCHOOL OF ECONOMICS

MAKRO: REPORT & ANALYSIS

COURSE: BUSINESS POLICY (MBA-II/B)

HOUSE OF HABIB (MAKRO HABIB)

MAKRO: REPORT & ANALYSIS

COURSE: BUSINESS POLICY (MBA-II/B)

LAHORE SCHOOL OF ECONOMICS

MAKRO: REPORT & ANALYSIS

COURSE: BUSINESS POLICY (MBA-II/B)

Source: Records of Makro Link Road Branch

LAHORE SCHOOL OF ECONOMICS

MAKRO: REPORT & ANALYSIS

COURSE: BUSINESS POLICY (MBA-II/B)

LAHORE SCHOOL OF ECONOMICS

MAKRO: REPORT & ANALYSIS

COURSE: BUSINESS POLICY (MBA-II/B)

HUMAN RESOURCE AT MAKRO:

LAHORE SCHOOL OF ECONOMICS

MAKRO: REPORT & ANALYSIS

COURSE: BUSINESS POLICY (MBA-II/B)

LAHORE SCHOOL OF ECONOMICS

MAKRO: REPORT & ANALYSIS

COURSE: BUSINESS POLICY (MBA-II/B)

LAHORE SCHOOL OF ECONOMICS

MAKRO: REPORT & ANALYSIS

COURSE: BUSINESS POLICY (MBA-II/B)

CHAPTER 2: INTERNAL ANALYSIS

LAHORE SCHOOL OF ECONOMICS

MAKRO: REPORT & ANALYSIS

COURSE: BUSINESS POLICY (MBA-II/B)

LAHORE SCHOOL OF ECONOMICS

MAKRO: REPORT & ANALYSIS Good receiving

COURSE: BUSINESS POLICY (MBA-II/B)

MAKRO: REPORT & ANALYSIS

COURSE: BUSINESS POLICY (MBA-II/B)

LAHORE SCHOOL OF ECONOMICS

MAKRO: REPORT & ANALYSIS

COURSE: BUSINESS POLICY (MBA-II/B)

LAHORE SCHOOL OF ECONOMICS

MAKRO: REPORT & ANALYSIS

COURSE: BUSINESS POLICY (MBA-II/B)

Structural Dimensions of MAKRO

MAKRO: REPORT & ANALYSIS

COURSE: BUSINESS POLICY (MBA-II/B)

MAKRO: REPORT & ANALYSIS

COURSE: BUSINESS POLICY (MBA-II/B)

HUMAN RESOURCE FUNCTION

Workforce planning Recruitment (sometimes separated into attraction and selection)