PRAN Foods Ltd 1

PRAN Foods Ltd 2

International Business Strategies: PRAN Foods Ltd

Submitted to:

Ms. Syeda Shaharbanu Shahbazi Ahmed

Senior Lecturer
BRAC Business School
BRAC University

Submitted by:

Ananya Rahman, ID: 11204032

Saurov Dhar, ID: 11204033
Fariha Ahmed, ID: 11204035
Shuvonkar Das, ID: 11204085
Shahrul Habib, ID: 11204086
Upeksha Abeysekara, ID: 11204098
Afia Siddique, ID: 11304090

BUS 301: International Business

Section: 01
BRAC Business School
BRAC University

Date of submission: 07 December, 2014

PRAN Foods Ltd 3

LETTER OF TRANSMITTAL
07 December, 2014

Ms. Syeda Shaharbanu Shahbazi Ahmed

Senior Lecturer,
BRAC Business School
BRAC University

Sub: Letter of transmittal

Dear Madam,

As per the requirements for the completion of the course, BUS301: International Business, this
term paper has been prepared by us on Identifying International Business strategies of PRAN
Foods Ltd. The term paper focuses on the implementations of some of the key elements in
International Business.

During this assignment, we were able to relate the theories that we were taught in class to the
PRAN-RFL Company and understand how these theories are practiced in real life situations.

The term paper is submitted to you for examination on the 08 December, 2014.We thank you for
giving us this opportunity to learn and enhance our knowledge.

Thank you.

Yours sincerely,

Ananya Rahman 11204032

Saurov Dhar 11204033
Fariha Ahmed 11204035
Shuvonkar Das 11204085
Shahrul Habib 11204086
Upeksha Abeysekara 11204098
Afia Siddique 11304090
PRAN Foods Ltd 4

ACKNOWLEDGEMENTS

We would like to take this opportunity to express our deepest appreciation to all those who
provided us with the possibility to complete this project work. A special gratitude we give to our
course instructor, Ms. Syeda Shaharbanu Shahbazi Ahmed, whose constant help mattered a lot
regarding certain aspects of this term paper, and also for giving us the opportunity to learn how
the theories in the book are implemented in real life situations.

We would also like to thank the Chief Operating Officer (COO), Mr. Gias Uddin Bisswas,
PRAN-RFL, Best Buy, PRAN RFL Group, for sparing his valuable time in giving us the
information we needed in order to make this report a success.

Furthermore, we would also like to acknowledge with much appreciation the crucial role of the
staff of PRAN-RFL for making us feel welcome at their head office in Middle Badda, Dhaka.
PRAN Foods Ltd 5

EXECUTIVE SUMMARY

PRAN has been operating in Bangladesh successfully since many years. It has been a first mover
in the agro-processed industry because during that time, there were few companies that were
catering in this industry. PRANs successful business ventures and strategies have helped them to
gain a competitive edge in the local and international market. This report focuses on PRANs
international business and tries to shed light into key aspects that are required to operate
successfully in the dynamic global market.

This report focuses on PRANs international strategies and how it has been able to become the
largest exporter of agro-processed products. There are also insights about PRANs different
business ventures, and how it operates in dynamic markets like India. Because PRAN is a
multinational company, there are costs and benefits to both the host and the home country. These
issues are highlighted in this report. A detailed analysis of PRANs SWOT and PEST is done to
give a clear picture of where PRAN stands and how it can overcome its weaknesses by
combining its strengths and opportunities. PRAN has got tremendous opportunity both in the
national and international markets. PRAN follows an international strategy when expanding
globally. Apart from these, PRAN has a number of CSR activities that have helped them stay
ahead in the competition.

Although this report has had a number of limitations, such as time constraints, the report has
been successfully compiled and it concludes with a list of recommendations that we would like
to suggest to PRAN that will ensure sustainability and greater profitability in the long run. A few
possible recommendations include:

Expanding product line with healthy products like sugar-free biscuits.

Expanding into un-served markets like South America.
Focusing on the distribution system.
Upgrading the technology to reduce lead time.
Increasing the target market segment and cater to new segments, like the old people.
PRAN Foods Ltd 6

TABLE OF CONTENTS
LETTER OF TRANSMITTAL......................................................................................................... 3
ACKNOWLEDGEMENTS............................................................................................................. 4
EXECUTIVE SUMMARY............................................................................................................. 5
TABLE OF FIGURES AND ILLUSTRATIONS...................................................................................7
1. INTRODUCTION................................................................................................................. 8
1.1. Industry Overview.......................................................................................................... 8
1.2. Company Overview......................................................................................................... 8
1.3. General Objective......................................................................................................... 10
1.4. Specific Objective......................................................................................................... 10
1.5. Methodology............................................................................................................... 10
1.6. Scope........................................................................................................................ 11
2. INTERNATIONAL EXPANSION............................................................................................ 12
3. BUSINESS VENTURES....................................................................................................... 17
4. SWOT AND PEST ANALYSIS...............................................................................................19
4.1. SWOT Analysis............................................................................................................ 19
4.2. PEST Analysis............................................................................................................. 22
5. REGIONAL ECONOMIC INTEGRATION................................................................................26
6. HOME COUNTRY.............................................................................................................. 27
6.1. Benefits for Home Country..............................................................................................27
6.2 Costs for Home Country.................................................................................................28
7. HOST COUNTRY............................................................................................................... 28
7.1. Benefits for Host Country............................................................................................... 28
7.2. Cost for Host Country.................................................................................................... 30
8. BUSINESS STRATEGY....................................................................................................... 30
8.1. PRANs Strategy.......................................................................................................... 31
8.2. Value Creation............................................................................................................. 31
8.3. PRANs International Strategy.......................................................................................... 34
9. PRANS CSR..................................................................................................................... 36
10. CONCLUSION............................................................................................................... 39
11. RECOMMENDATIONS.................................................................................................... 40
12. APPENDICES................................................................................................................ 41
13. REFERENCES................................................................................................................ 46

TABLE OF FIGURES AND ILLUSTRATION

PRAN Foods Ltd 7

Figure 1 - Best Exporter of the Year 2009-10................................................................................13

Figure 2 - PRAN's export regions around the globe......................................................................13
Figure 3 - Enterprise Valuation......................................................................................................31
Figure 4 - Efficiency Frontier........................................................................................................32
Figure 5 - Value Chain...................................................................................................................33
Figure 6 - International Business Strategy.....................................................................................35
Figure 7 - Business Card of the PRAN-RFL COO........................................................................42
PRAN Foods Ltd 8

1. INTRODUCTION

1.1. Industry Overview

The food and beverage industry of Bangladesh is an old, steady yet neglected industry. For many
years, the only product of the industry was Carbonated Beverage or Carbonated Soft Drink
(CSD) and the number of players was limited to only a handful. Today, the industry has
flourished considerably with a bunch of new enterprises and through the introduction of newer
and more diverse products. After the independence, the food habits of the locals have had a
drastic change over the decades. This transformation has paved way for the sustainability and
development of the food and beverage industry in Bangladesh. The shift in consumers to have
wide acceptance of western food after the 1980s enabled international food companies to flourish
in Bangladesh. Carbonated beverage entered into our market in the later part of 1980. At that
time, there were only few companies in Bangladesh. But by the change of time and western
culture influences, this sector has flourished in Bangladesh. By year 2000, more than 12 beverage companies
started operating business in Bangladesh and most of them are foreign companies.

1.2. Company Overview

Programme for Rural Advancement Nationally or most commonly known as PRAN is

currently the most well-known household name among the millions of people at home and
abroad. Since its inception on 17th March 1981 by Maj Gen (Retd.) Amjad Khan Chowdhury,
PRAN Group has grown up in stature and became the largest fruit and vegetable processor in
Bangladesh. It also has the distinction of achieving prestigious certificate like ISO 9001:2000,
and being the largest exporter of processed agro products with compliance of HALAL &
HACCP to more than 70 countries from Bangladesh. PRAN is the pioneer in Bangladesh to be
involved in contract farming and procures raw material directly from the farmers and processes
through state of the art machinery at their several factories into hygienically packed food and
drinks products. The brand PRAN has established itself in every category of food and beverage
PRAN Foods Ltd 9

industry and can boost a product range from Juices, Carbonated Drinks, Confectionery, Snacks,
and Spices to even Dairy products. Today, consumers not only value PRAN for its authentic
refreshing juice drinks products , but also for its mouthwatering quality confectionery products
with high visual appeal and exciting texture. They intend to expand their presence to every
corner of the world and strive to make PRAN a truly international brand to be recognized
globally.

Mission (Aim)

To generate employment and earn dignity & self-respect for our compatriots through profitable
enterprises.

Vision

Improving Livelihood

Products offered by PRAN

Juice
Beverage
Drink
Confectionery
Culinary
Snacks
Biscuits & Bakery
Dairy
PRAN Foods Ltd 10

1.3. General Objective

Our general and main objective of preparing this term paper is to explore the role of the company
(PRAN) in the globalized market and how it is carrying out its activities in the competitive
global market.

1.4. Specific Objective

While examining the company as a whole, we need to emphasis on some key issues regarding
the company:

The reason behind the companys international expansion.

The type of business venture(s) they are in to target other countrys comparative
advantages.
Types of products are they offering in that specific country and why.
Whether the company is getting any benefit from any Regional Economic Integration.
The reasons of allowing investment to take place for the company by the host country
governments.
The restrictions on trade and investment by the host countries applied to the company.
What might the host government gain and/or lose from such companys investment.
What entry modes have been consider by PRAN to enter the country and why.
The major barriers and opportunities of their investment internationally.

1.5. Methodology

To collect the information we will compile on both primary and secondary data. We decided to
collect internal information by communicating with Chief Operating Officer (COO) Mr. Gias
Uddin Bisswas, PRAN-RFL, Best Buy, PRAN RFL Group, and some other information will be
gathered using secondary sources such as the internet and annual reports.
PRAN Foods Ltd 11

1.6. Scope

This term paper gives us a great chance to learn about one of the biggest industries in
Bangladesh: fruit and vegetable processor. The term paper will portray how the company has
been successful in the international arena. It will also help us understand the business strategies
and structures PRAN uses to compete with global brands. However, we would like to
recommend PRAN some changes that will make sure that the brand will be even more successful
in the future.
PRAN Foods Ltd 12

2. INTERNATIONAL EXPANSION

Expanding internationally means that a company will have more opportunities. But these
opportunities are backed by several barriers. In order to operate successfully in the international
market, a firm needs to carefully design its strategies. It needs to identify its strengths and
weaknesses, and try to counter the weaknesses using the strengths and opportunities carefully. To
do it, the company needs proper management team and good leadership. Countries differ in taste
and culture, so a firm needs to adjust to all these factors before entering into a new market
internationally.

PRAN is the largest exporter of processed food from Bangladesh and has a vision of creating a
huge demand globally of agro based products produced by native farmers. Starting successful
journey to export market since 1996, PRAN currently exports to over 106 countries. PRAN is
generally expanding internationally by the means of export. The first country where PRAN has
successfully exported goods is France, in the year 1991. PRANs total customer reach globally is
approximately 300 million.(Pran: Export)

In global market, PRAN truly strives to exceed themselves every year. Therefore, they are
growing in every market they operate. To accelerate continuous growth, they have already set up
a production plant in India and production has already been started.

In many countries, especially USA (NY), Australia, UAE, Saudi-Arabia, Qatar, India, Oman,
Malaysia, Singapore and Somalia, they have got their own sales and distribution network,
equipped with full fledged office. With office, warehouse, distribution vehicles, sales force and
other sophisticated supports, they are extremely aggressive to be the market leader in each and
every category they operate. (Pran: Export)

Along with existing presence in African, Asian and the European markets, they are eagerly
looking forward to having a stronger and more vibrant presence in every corners of global
market.
PRAN Foods Ltd 13

For its outstanding performance, PRAN has achieved several awards, including the Best National
Export Award for 8 consecutive years. PRAN has also been awarded the Best Exporter of the
Year 2009-10.

Figure 1 - Best Exporter of the Year 2009-10

The map below shows the export regions of PRAN foods limited.

Figure 2 - PRAN's export regions around the globe

PRAN Foods Ltd 14

However, apart from exports, PRAN has FDI in India, although it is planning to set up FDIs in
Sri Lanka and Malaysia. The reasons behind PRANs international expansion include:

i. Increase in customer base PRAN can have greater customer base because by
expanding internationally, they will be able to cater to international customers. This
would give them a competitive advantage over companies that operate only in the
domestic market.
ii. Greater profitability PRANs profitability would rise because the total sales volume
would increase.
iii. Increase in efficiency PRAN would be able to increase efficiency by obtaining
economies of scale.
iv. Favourable business climate PRAN has favourable business climate in international
zones. For example, in India, the government has less restriction on foreign companies
and firms like PRAN can easily enter into their market. Indias culture and taste is
similar to that of Bangladesh, which makes it easier for PRAN to cater to the Indian
market.

However, if we take India as an example, the reasons behind PRAN expanding into India
include:

a. They can sell good quality products at a cheaper price than Indian local firms.
b. Population in India is compact, which gives PRAN the advantage to cater to a wider base
of customers.
c. There are cultural similarities between Bangladesh and India.
d. Other multinational companies are offering high priced in India. This gives PRAN a
competitive edge in the Indian market.
e. Globalization has been a vital driver for PRANs international expansion.
f. PRANs aggressive strategy has greatly helped them to expand globally.

However, despite these favourable reasons behind PRANs international expansion, there are
certain barriers and opportunities to PRAN to expand globally.

Opportunities of investing internationally Barriers of investing internationally

Stronger grab in the global market. Exchange rate issues, due to the
currency difference among countries.
PRAN Foods Ltd 15

For example, Indians buy in rupees

whereas Bangladeshis buy in taka. This
means that two people are paying
different amounts for the same product.
Greater chance of finding new market Presence of stronger domestic firms.
segments that is left un-served. For example, India has giant companies
like Amul, Kohinoor foods, etc.
Increase in brand equity, which can be Management of international supply
used to enter another country chain is difficult. For example, people
successfully. from Bangladesh cannot easily monitor
what is happening in India. This
requires PRAN to hire local Indian
people.
PRAN can achieve economies of scale Indians do not always consider
because it has to produce in bulk Bangladeshi goods to be of good
amounts to cater to international quality. This can harm the overall
markets such as India, which has a image and brand equity.
huge geographic area.
Market differentiation Language problem in different regions.

Apart from these, other benefits that PRAN gets by investing and expanding
internationally are:

i. PRAN can sell at a cheaper price.

ii. As PRANs main goal is to look for a greater picture rather than greater
profit, expanding internally gives them the opportunity to cater to a greater
customer base.
iii. The trustworthiness of the employees within PRAN increases due to greater
responsibility. Job enrichment takes place within the company.
iv. PRAN owners are self-satisfied because of PRANs presence in the global
market.

Although PRAN has 1 factory in India, it does not have any FDI in countries like
China. This is a great barrier to the future of PRAN because China is the largest
PRAN Foods Ltd 16

economy in the world and it can give them tremendous opportunity to further grow
in the global arena. PRAN does not have FDI in China because it is difficult for
PRAN to adjust to Chinese conditions. China has its own solutions, expertise and
technology. This keeps Chinese companies a step ahead and it is difficult for a
company like PRAN to set up FDI in such a market which is already well
developed.
PRAN Foods Ltd 17

3. BUSINESS VENTURES

PRANs business venture is not very complex like other multinational companies. PRANs main
strategy to expand internationally includes exports of agro-processed products. Apart from this,
PRANs major venture type is franchising. PRAN franchises and gives licenses to international
sellers to sell their products in the international domestic market. This is done through dealership
two different ways:

a PRAN directly goes to the superstores in the foreign market. For example, in India,
PRAN directly goes into contracts with superstores, who agree to sell PRANs products
and keep their shelves stocked up. This benefits both PRAN and the consumers. PRAN
benefits in a way that they are being able to sell more at a cheaper price to international
consumers. This increases their revenue. On the other hand, consumers are getting good
quality products at a lower price than domestic products. Also, other multinational
companies price skims their products, which is unlike PRANs strategy.
b PRAN sets up a separate dealership program. In this type of dealership, several local
dealers from the international market submit their proposal. PRAN evaluates them, and
selects dealers who are compatible with PRANs rules. PRAN then exports to these
dealers, and these dealers sell the products in the international domestic market.

PRANs competitive advantages

Marketing: PRAN has comparative advantages in marketing in foreign markets. They

have unique marketing strategies which help them in international marketing. As PRAN
is an Asian company, it easily caters and markets its products to countries like India,
Pakistan and Sri Lanka.
PRAN positions their products through differentiation strategy. They engage in both
marketing and product differentiation. They use logo and short advertisement so that
people can consistently see the advertisement so the product will occupy a clear,
distinctive, and desirable place in the mind of the consumer relative to competitors
product. It also uses USP (Unique Selling Proposition) for their product. However,
PRAN differentiates its products in the following ways:
PRAN Foods Ltd 18

They have unique products to be marketed for example, in India, giant companies like
Amul offers only dairy products but PRAN offers a variety of agro-processed products.
For instance, products like PRAN Jhalmuri, PRAN peanut, etc are not sold by any other
firm in India.
They communicate for their product effectively and in an integrated manner. For
example, Indian television channels like the Star Plus regularly broadcasts PRAN
advertisements to increase brand awareness in the Indian market.
They produce affordable and profitable products PRAN products are cheaper
compared to other companies offerings. This gives customers the option to purchase
good value at a reasonable price.
PRAN has strong distribution channels. They participate in international fairs to
increase their brand awareness.
PRAN has the advantage of being the franshisee of Coca-Cola Company. Coca-Cola sells the
syrup to PRAN and PRAN manufactures plastic Coca-Cola bottles in their factories in
Bangladesh. This gives PRAN a great competitive edge over competitors.
PRAN Foods Ltd 19

4. SWOT AND PEST ANALYSIS

4.1. SWOT Analysis

STRENGTHS

Brand Image: Firstly, PRAN has been operating in Bangladesh many years. So, they are
well experienced and well positioned in peoples minds. Everyone in Bangladesh is
aware of PRAN. PRAN portrays different kinds of products which already exist in the
market and people like it. People have a strong brand preference for PRAN over its
competitors.
Innovative product: There are lots of soft drinks and juice products like mango juice,
orange juice in the market, but PRAN has more varieties of unique products such as
coconut juice and litchi juice.
Superior Quality Control: PRAN maintains and controls a superior quality of product.
It is the policy of the marketing department to market products of consistent quality at
home and abroad as per world standards produced by in accordance with good
manufacturing practices.
Integrity: PRAN believes success depends upon quality and value of their product by a
safe, wholesome economically efficient and healthy environment for their customers and
by providing a fair return to their investors while maintaining the highest standards of
integrity.
Customer Satisfaction: Consumers are highly satisfied with the products offered by
PRAN. The products are also affordable, which is also a reason for customer satisfaction.

Government support: Being the biggest local force in the industry, Agricultural
Marketing Company Limited (AMCL) always has the government by its side. The
government is supporting PRAN in many ways like giving export subsidies, tariffs on
foreign competitors, etc.

First movers advantage: PRAN has entered the market when the food and beverage
industry was in its early days. Many of the products they introduce are innovative and are
PRAN Foods Ltd 20

preferred by the local community. Therefore PRAN had the first movers advantage
which they are still enjoying.

Internal strength: AMCL has a very powerful management team to guide a strong
gigantic workforce. Despite its huge size PRAN has been able to maintain labor
productivity and increase sales. Its labor productivity is twice as much as any other local
company in the market.

Market share: PRANAMCL has a great competitive advantage over the other
competitors. It is the largest fruit and vegetable processing industry in Bangladesh and
holds the biggest share in the Bangladeshi market among the other local companies.
PRAN has the largest sales in fruit drinks after Coca-Cola and PepsiCo.

WEAKNESSES

Limited decision taking capacity: PRAN Company exists under the rules and regulation
agricultural marketing company limited. So PRAN cannot take any instant decision if any
sudden market changes occur.
Price disadvantage: Sometimes price of the product may be varying because the prices
of raw materials vary. Raw material such as mangos and other fruits are the key
ingredients of their product line, which are comparatively expensive than that of their
competitors in Bangladesh especially the emerging ones. So this makes them to sell their
product at higher prices than their emerging competitors.
Lowest per capita consumption: Bangladesh is among the lowest per capita
consumption countries in the entire world. So upper class and middle class people can
bear the price of PRAN products but lower class people cannot cope with it.
Lack of geographical coverage: Sometimes PRAN products cannot reach the definite
geographical areas because of lack of communication and proper distribution channels.

External threats: Too much competition from international organizations, for example
Coca-Cola, PepsiCo, RC-Cola, Virgin Cola, Rasna (India), Shezan (Pakistan) etc.

Internal weaknesses: PRAN is a large business and workforce which makes it difficult
to manage perfectly. As a result it often causes internal conflict.
PRAN Foods Ltd 21

Lack of product awareness: New products fail to create proper awareness towards the
target customers due to lack of proper marketing campaigns.

Opportunities

Contribution to the GDP: The agricultural sector is the largest contributor for the GDP
of Bangladesh. So PRAN produces canned fruit and vegetables, mushrooms etc. and this
gives a great opportunity for them to contribute to GDP.

Growing number of customers: Eyeing the current situation of the beverage industry
and also the population boom in the country, it can be depicted that Bangladesh needs
more modernized technology and different types of products and this is therefore a big
opportunity for PRAN to enhance its sincere position in the customers minds through
number of quality and differentiated products.

Increasing customers awareness: Today many people are aware about their diet and
drinks. PRAN has an opportunity to intensively advertise their product so that customers
become aware of what PRAN is offering.

Lower technological cost: The worlds technology is changing rapidly to a better future.
If PRAN can manage the technology at lower cost, they can produce better quality
products in lower price than their competitors.

Changing food habit: Due to many reasons the people of our country is changing their
food habits. They are shifting towards diet products and if the shifting rate increases in
the present manner, then PRAN can identify new product lines to cater those target
consumers.

Labor intensiveness: The crop production system is highly labor intensive and there is
an abundance of labor in the country.

Employment opportunity: PRAN is a huge company. Through the expansion in

production of PRAN, the employment opportunity will increase in Bangladesh.
PRAN Foods Ltd 22

Attract the foreign investors: Through the production of the good quality product
PRAN can attract the foreign investors in Bangladesh.

Distribution system: PRAN can conduct a survey and improve their distribution system.

Threats:

Increased competition: PRANs market is in maturity stage but still many companies
are interested to join the market. If they do, the level of competition will increase further,
and sustaining in the market will be difficult. For example, Aarong has already entered
the market with dairy products and is already becoming a tough competitor.
Downward pricing measure: Due to heavy competition PRAN will always face the
challenges in pricing their products. To cope up with competition PRAN may also need to
decrease their product price.
Large number of indirect competitors: Some products such as coconut juice have
indirect competitors. Lots of coconut sellers are available all around the Bangladesh. It is
easy to collect coconut and coconut juice. So for PRAN coconut juice, they are the main
competitors.
Political instability: Bangladeshs uncertain and dynamic political situation largely
affects businesses like PRAN.

4.2. PEST Analysis

Political and Legal Environment

The political environment of Bangladesh is quite unstable and it affects the industry from
performing efficiently. In Bangladesh where the political environment is absolutely
unpredictable, the external forces constantly keep on changing. For instance, a sudden call of
Hartal or strike might end up with the cancellation of the events or may hamper the delivery
process. Thus, there is an enormous possibility of incurring a huge loss for PRAN. There is some
political and legal factor that affects PRAN. Those are:
PRAN Foods Ltd 23

1. Food and Drug Administration (FDA) Regulation: All the food products
manufacturers and producers are under the control of FDA. For instance, the food and
drug administration certifies and tests new ingredients such as high concentration
sweeteners prior to they are permitted to be used in beverages and soft drink production.
So PRAN also needs to consider this factor.

2. Human Rights Issue: Multinational corporations are facing different human rights
issues, rules, regulations, laws and policies of different governments in operating
countries. As PRAN is now multinational company, they also need to focus on this
issue.
3. Waste management and public concerns: Increasing environmental consciousness is
most important to growing legislation. The firms operation is exaggerated by federal
legislative applications that concentrate on the three objectives:

a) Decrease the quantity of packaging material inflowing the nations solid waste
management system.

b) Diminish the consumption of natural scarce resources.

c) Increase the reuse and recycling packaging materials.

To shelter the natural environment and human health from undesirable effects related with the
dumping of packaging materials, several measures need to be taken. For instance, Connecticut
has now passed a law that controls packaging to enlarge its recyclability.

Economic Environment

PRAN has a huge economical effect in the GDP. So there are some factors the needs to consider.

The main factors taken into deliberation are the market risks, foreign exchange rate and interest
rate. These elements are described as follows.

1. Commodity prices: Commodity prices distress the raw material cost, PRAN Company is
opened to market risk due to the commodities prices, because in competitive environment
PRAN Foods Ltd 24

where PRAN is operating it would limit its capability from improving costs during higher
pricing.
2. Foreign exchange & global economic conditions: Operating in global environment is
not as easy as operating in local market, because it involve the exposure to currency
exchange rates variations. This generally affects the interest rate, economic growth,
government actions inflation and other economic factors. These changes could affect
PRAN to adjust their operating and financing strategies. Variations in global currency
exchanging rates and macro-economic conditions could affect the international operating
profits and business of PRAN.
3. Interest rate: PRAN could control their general financing in term of harmonizing risks
and investment opportunities. To minimize overall borrowing costs, firms in beverage
industry are using currency swaps and interest rate to significantly adapt the rates in order
to minimize the borrowing cost.

Social Environment:

Bangladesh is a developing country. The national economy has been gaining momentum
recently. The national unemployment rate has been hovering at a relatively low level for two
years. On the divisional level, especially Dhaka and Chittagong continue to experience rapid
expansion and prosperity. As these regions accept many newcomers from the rust belt and other
areas, it has become more business focused. Business is booming in the grass root level. The
annual growth rates of new small businesses are soaring. Many businesses continue to expand in
the countryside.

Now-a-days consumers are not brand loyal as they were previously, now they can easily switch
to other products. Consumer choice for beverages and soft drinks is affected by two major
characteristics: ethnicity and age. Due to health reason, age factor plays a very important role
when choosing a soft drink or beverage. Some studies have been conducted and found that soft
drinks and cola products in general may result health problems, especially, kidney stones. In
comparison to adults, younger consumers specially teens and twenties have fewer interest spans
for products and have a preference of products that seems different and fun.
PRAN Foods Ltd 25

Technological Environment:

Since internet connectivity reached Bangladesh in 1997, people in Bangladesh have been able to
open their doors to the outside world more than before. Then companies within Bangladesh
became ISPs, thus paving the way for companies within Bangladesh to eventually have a web
site of their own. This means greater market penetration for Bengali business people. A major
proportion of Bangladesh is having access to the Internet. Business organizations are
increasingly adapting to the use of Internet than other time consuming modes of communication.

Technological advancement in manufacturing and new quality improvement concepts such JIT,
Six Sigma, MRP-II etc. are the significant providers to improve efficiency of bottling operations
and quality of products. Advancement in technology also helps to introduce new product lines
for example new flavors, sugar-free or diet sweeteners, caffeine free goods. It facilitates Pepsi
and Coke to launch brands that meet changing customer style, preferences and taste. In beverage
industry distribution process is a big challenge because process can be able to place the right
products at right time.
PRAN Foods Ltd 26

5. REGIONAL ECONOMIC INTEGRATION

Bangladesh launched a deep and wide-ranging trade reform strategy in the early 1990s. This
included substantial reduction and rationalization of tariffs, removal of quantitative restrictions,
move from multiple to a unified exchange rate system, convertible current account and an overall
outward orientation of trade policy regime. As a result, the countrys trade integration, measured
by the trade-GDP ratio, rose from 18% in 1990 to 43% in 2008.

Bangladesh is an active member of many of the economic unions including South Asian
Association for Regional Cooperation (SAARC), United Nations (UN), Bay of Bengal Initiative
for Multi Sectoral Technical and Economic Cooperation (BIMSTEC), World Trade Organization
(WTO) and Developing 8 Countries (D8).

PRAN does not receive much support from Regional Integration, as they have agreed on bilateral
trade. However, they do receive some common benefits such as reductions in tariffs due to
increased volume of export. The Bangladesh government also helps them by giving export
subsidies. Thereby, their export volumes have been enhanced up to a great extent.
PRAN Foods Ltd 27

6. HOME COUNTRY

PRANs one and only Foreign Direct Investment (FDI) is in India. They spent millions to start
their production in India. For example, PRAN took a loan of $15m from the International
Finance Corporation (IFC) to enhance their capacity and go for massive expansion. The factory
in India situated in the north-eastern Indian state of Tripura. The bilateral agreement has helped
Bangladesh to explore the Indian market. Any investment has benefits and costs. PRAN has to
compete with giant Indian companies such as Kohinoor Foods Limited, Parle Agro and Amul.
PRAN tries to offer products that have less competition in the Indian markets, for example,
products like Jalmuri, Peanut, etc are sold only by PRAN. These products are not seen in the
Indian market. In this way PRAN can stay away from fierce Indian competition.

6.1. Benefits for Home Country

The benefit that PRAN are receiving from the investment into India are-

Skilled employees: The first thing that PRAN will have from the FDI in India is skilled
employees. There are a number of skilled employees available in India and it helps the company
build up a strong working community between two countries. At the same time, PRAN can use
the experience and the skill of the Indian workers to become more efficient.

Foreign revenue: It is the common benefit of all FDI throughout the world. By investing
directly in India, PRAN is creating a great opportunity to gather a huge profit for the company at
the same time the financial strength of the company is also getting benefited by the investment in
India.

Technology: India is the third strongest country in the world in the perspective of economy. At
the same time it is also growing faster in the sector of technology. So, PRAN benefits in the
perspective of advance technology. Day by day the technology is growing and the process of
doing things is becoming easier. So PRAN can also come up with efficiency with the help of
India.
PRAN Foods Ltd 28

Economic benefits: As there is very few restrictions between two countries in the sense of
investment, PRAN can deal their business in India in a lower cost. There is very little percentage
of tariff and tax for FDI in India for Bangladesh and there is a good economic relationship
between the two countries. It reduces the cost of after income like tax or VAT.

6.2 Costs for Home Country

As cost of foreign direct investment there are very few things that PRANs home country
has to lose. First of all the balance of payment of Bangladesh had to suffer for the
investment. There is $15m leaving the country due to PRANs investment in the factory
in India. It has a great impact on the economy of the country.
There will also have impact on the unemployment of Bangladesh. PRAN can bring the
skilled employee from India and replace them in the position of the Bangladeshi
employees and it may create unemployment of many people.
They will also have an impact in the current account of balance of payment of
Bangladesh while managing the huge amount of money for FDI.

7. HOST COUNTRY

The Indian Market is open to investors from all over the world. They are rapidly developing in
every sector. The presence of different trade bodies such as the WTO has been a favour for the
Indian economy. Thus, the market attracts a lot of foreign competitions and the competition is
tough. The Indian market has fewer barriers to entry and therefore a country like Bangladesh can
get lots of investment opportunities.

7.1. Benefits for Host Country

Improved communications, easy conversion of currencies, and simplification of visa and

customs procedures are a must to boost bilateral trade between Bangladesh and India. To
promote two-way trade between Dhaka and New Delhi, Mr Chowdhury, who is also the chief
executive officer of PRAN Group, has said, "We need to promote business with India, India is a
lucrative market for us". He said that exports of the food and agro-processing conglomerate to
PRAN Foods Ltd 29

the Indian market would be doubled this year compared with the previous year. "We exported
products to India worth Tk 1.0 billion last year. This year we expect that it would be Tk 2.0
billion.

The benefits that India will get are:

Cheap product with higher quality: India will get is higher quality full product as PRAN is
one of the largest exporter of processed food from Bangladesh as well as their each of the
product are very much quality full and price of the product are much cheaper. As Bangladesh is
the neighbour country, the culture is similar with India. PRAN's product are highly applicable in
India because India always believe in quality and PRAN's group always maintain it

Mode of transportation: PRAN has only one factory in India, which is in Tripura, and is close
to Bangladesh. As because of the neighbour country they will be able to transport raw materials
for their products from Bangladesh to Tripura very easily due to the easy communications and
from this transportation cost will be much lower. As there is similarity in lifestyle, culture and
economy between the people of Bangladesh and these areas of India, adding that this is one of
the main reasons to choose Tripura.

Employment effects and technology: As PRAN group opened a factory in India so many
people from India get jobs and it creates employment in India and from this employment effect,
India's economy will boost and all the "new jobs" created by FDI represent net additions in
employment.

Foreign direct investment can make a positive contribution to a host economy by supplying
capital, technology and management resources that would otherwise not be available and thus
boost that country's economic growth rate.

Competition and Economic growth: When FDI takes the form of a Greenfield investment, the
result is to establish a new enterprise, increasing the number of players in a market and thus
customers choice and when any reputed company comes to do business, it can increase the level
of competition in a national market, thereby driving down prices and increasing the economic
welfare of consumers.
PRAN Foods Ltd 30

7.2. Cost for Host Country

Basically as a cost of foreign direct investment, India is not losing anything. As there is no high
tariff barrier or any other major restrictions, India is running their business well. If PRAN group
does something in a such a way that will create adverse effect on competition which could drive
indigenous companies out of business and allow the firm to monopolize the market and once the
market is monopolized the foreign MNE could raise prices above those that would prevail in
competitive markets with harmful effects on the economic welfare of the host nation.

8. BUSINESS STRATEGY

The prime focus of any company is to maximize their profitability. The profitability of any firm
is backed by the companys chosen business strategy. But only considering profitability would
not help a firms growth. A business that is operating in international market need to also make
sure that the products they sell in the global market are enhanced with value. Creating value for
any product is important. This ensures that customers can differentiate ones products. This ability
to differentiate is extremely important in the global arena, where a company can find itself in
severe competition, with domestic and other international brands. Adding value to the product
does happen easily it requires the company to invest in creating a value added product. Keeping
this in mind, companies should try keeping their costs as minimal as possible. Thus, it enhances
the firms ability to remain profitable, as well as keeping their customers satisfied.
PRAN Foods Ltd 31

8.1. PRANs Strategy

Figure 3 - Enterprise Valuation

A firms strategy is a plan which helps the managers actions so that they can ultimately achieve
their goals. For this a business needs to focus of creating value for the firm. The value of the firm
is determined by its profitability. And therefore we can say that the strategy of the firm proves
how profitable it is in the long run.

PRANs main motivation is to cut costs as much as possible. They reduce their costs by trying to
move into locations that have low wage costs and they also try to achieve the learning effect.
Thereby, reducing the cost of production and achieving profitability. PRAN is already exporting
to 106 countries around the world. Currently, they are also trying to enter new markets such as
Malaysia and Sri Lanka to make sure that they grow their profits in the long run. PRAN is also
planning to open a new factory in Bhola to increase their overall output and cater the Bangladesh
market more efficiently.

8.2. Value Creation

Value creation is extremely important in order to make sure that customers are satisfied with
what they are being offered by the company. A companys overall value can be enhanced in two
ways. It can be through cutting down of excessive production costs or by adding value to the
products in the form of change in packaging or providing after sales service. This increases the
value of the product, and customers will be willing to pay more for the product. PRAN adopts
PRAN Foods Ltd 32

the low cost strategy. It aims to cut down the cost of production without compromising on the
quality of the product. A clear example of this was given to us by the COO, Mr. Gias: a kilogram
of flour is 40 Taka, and they target on reducing their cost in such a manner that the company will
be able to sell bread at 40 Taka as well. Currently, a loaf of bread is around 60- 70 Taka. By
cutting down on excess production cost they are aiming to sell a loaf of bread at 40 Taka as well.
So consumers have a choice of buying either a kilogram of flour or a value added product like
loaf of bread at approximately the same price.

Figure 4 - Efficiency Frontier

But solely minimizing the cost wont help the company; they have to also make distinct changes
in their products so that consumers are willing to pay a higher price on the product that is being
offered. PRAN has to offer products that can be differentiated vastly with comparison to the
products being offered by their competitors. The figure illustrates the efficiency frontier of the
food and beverage industry of Bangladesh. The position of PRAN and some of its major
competitors are placed in the diagram. As it shows the more value added products the company
sells the higher it will cost of production. When closely studying this graph we can see that
PRAN is offering their products with reasonable differentiation to its products at a realistic cost.
PRAN Foods Ltd 33

But if you consider the position of AKIJ Foods and Beverages, the company is plotted inside the
efficiency frontier which proves that the company is not operating efficiently as it offers the
same differentiation as PRAN but their production cost is higher than that of PRAN. On the
other hand, ACI Foods and Beverages are offering highly differentiated products than both
PRAN and AKIJ Foods and Beverages. Thus, their cost of production is comparatively high.
Consumers can expect a high quality product from PRAN. The priority of PRAN is to untimely
give the customers a product that is of high quality. The area in the graph marked by the circle
indicates the area where any company in the industry does not want to operate at. This is because
the food and beverage industry is such that consumers have high expectations from the
companies of that industry. They will not tolerate low quality differentiation at low price as the
customers may think that the products produced by the company are inferior. And for PRAN they
cannot afford to operate at this level as an international brand.

Figure 5 - Value Chain

PRAN Foods Ltd 34

The Porters Value Chain is an in-depth analysis of the specific activities through which a firm
creates its competitive advantage. This model helps firms understand how to create value to the
products they deliver.

PRAN has a complex value chain. The production of one of their main products the PRAN
Frooto starts with the delivering of fresh mangos from their mango trees planted in Rajshahi.
The mangos are carefully transported to their factory in Gazipur where they also maintain a
proper inventory so that they can insure that the production process runs smoothly. They use
various machinery to process the mango juice. They have high technological equipment to
ensure that the quality of production is maintained throughout the production process, from the
point where the mangos are inspected to the point where they inspect the final product. PRAN
gives special emphasis on their marketing and distribution of their products. This helps them find
the opportunities that are available in the market.

8.3. PRANs International Strategy

When a company enters into the international market they have to make sure they stay ahead in
the competition. The international arena is built surrounding fierce competitors. There is always
the pressure for cost reduction. And also when a company enters a new market they are also
bound to have pressure on local responsiveness to cater the local market. The pressure of local
responsiveness and pressure for cost reduction determines what international strategy the
company is adopting. There are basically four strategies the company can choose from
depending on the level of local responsiveness and cost reduction. The global standardization
strategy focuses on profit growth by using methods such as economies of scale, learning effects,
and location economies. The Transnational Strategy is adopted to lower costs through location
economies, economies of scale, and learning effects, differentiate the product offering across
geographic markets. The international strategy takes products that are first produced in the
domestic market and then sells them in international markets with minimal customization.
Localization strategy is used to increase the firms profitability by customizing the firms good,
so that they provide a good match to tastes and preferences in different national markets.
PRAN Foods Ltd 35

Figure 6 - International Business Strategy

PRAN adopts an international strategy as portrayed in the figure. This is because they have low
cost pressure as well as local responsiveness. This is because the products are indicated in
Bangladesh and then they expanded into the global market targeting the gaps in those new
markets. For example after PRANs expansion in India, where they did not consume Litchi
Drink, it was introduced to fill a gap that was identified by the company. But in Bangladesh this
is a very popular drink, so they introduced PRAN Litchi Drink to the Indian market. This proves
that they depend on minimal level of customization for their products. This was just one example
to help illustrate PRANs business strategy internationally.
PRAN Foods Ltd 36

9. PRANS CSR

The thought of corporate social responsibility is being widely promoted all over the world and
rightly so. PRAN has a bifocal objective of making profits through the accomplishment of
corporate social responsibilities. PRAN signifies investment in agro processing: creating
demands for farm produce which create jobs in rural areas also preventing urban migration.
PRANs aim is to add value to agricultural harvest. Bangladeshs comparative advantage lies in
creating a competitive edge in value added agricultural products. This is what PRAN stands for.

Their key achievement has been trying to consolidate fragmented land holdings and organizing
farmers into contract growers of specific crops for consumption in PRANs major processed
products. With the elimination of the middlemen, farmers receive fare prices for their products
and due to technical assistance from the agro-processing industry; yields, quality and income
have risen considerably. Poverty alleviation through profitable enterprises is now a reachable
goal for many farmers. This resolution is PRANs greatest achievement.

PRANs CSR effort revolves around the four premises:

i. Environment:
Community forestation: In different locations around Bangladesh, they are planting trees
to save GREEN PLANET.
Effluent Treatment Plant (ETP): To ensure safe disposal of factory wastage, they have got
ETPs in all the establishments of their Group.
Heat Recovery Boiler: They recover the heat to save energy that they produce and utilize
in their production facilities in all locations.

ii. Energy Preservation:

They use: SKY-Light Roof to utilize daylight during factory operation;

CFL Bulbs at their Factories and offices to reduce Power Consumption;
Powered Trucks to reduce Air Pollution and use fossil fuel for all vehicles.
PRAN Foods Ltd 37

iii. Community:

Dairy Development:

To develop the dairy industry in Bangladesh, PRAN has started Dairy Hub operations in
Bangladesh at its own cost where they are organizing farmers, counseling for raring of
dairy and providing cattle food, Artificial Insemination and other veterinary support to
the farmers to increase the dairy yields.

Education Development:

PRAN is promoting education and supporting several schools in their operations

improving the salary of the teachers and staffs, providing books, arranging special
coaching for the students.

Other Social Support:

Helping Mosque, Temple and Churches.

Working together with Red Crescent.

Collecting and donating blood.

Working for the disabled.

Working with SAVE THE CHILDREN.

Helping the community in natural calamities.

Providing Airport Support for the Hajj Pilgrims every year from Bangladesh to KSA.

iv. People (to improve the quality of livelihood):

To Consumers:
PRAN Foods Ltd 38

They care for their consumers need and satisfaction. Through their communication activities,
they let their consumers know about the benefits of their products and innovations. Their
approach is to do responsible marketing and have four clearly defined principles that guide their
communications:

1. They aim at building trust through clear communication.

2. They fully support consumers right to know what is in their products and they are
transparent in terms of ingredients. They provide clear communication about their
product ingredients, date of expire, nutrition values, etc.

3. They support our consumers by listening to their suggestions, claims or feedbacks

through use of a combination of channels which include websites and care line phone
numbers, etc to reduce any kind of misconceptions.

4. They provide clear price communication.

To Employees:
Equal opportunities are given to both male and female candidates irrespective of race,
religions, culture etc.
Selection is done based on merits and qualifications. Everyone has got clear-cut job
descriptions and got equal opportunity to contribute and share their ideas and thoughts to
grow in the company.
Employees are rewarded with salary, commission and incentives as per standards.
Workers and staffs are provided with free and subsidized food from the factory and office
cafeterias.
Employees health and hygiene are taken out most care with full time adequate numbers
of doctors, nurses and other medical supports.
To develop the human skills, both on the jobs and off the jobs trainings are constantly
being provided to all the workers and staffs. (Source: pranfoods.net).

Apart from these, PRAN has opened up an English Medium School in Narshingdi where
children of the factory workers can study at a lower cost. New school has been opened in
Gazipur too. They are also making roads around the factory area. PRAN offers discounts
PRAN Foods Ltd 39

products to their factory workers. This enables the workers to purchase PRAN products at a
lower price. Also, PRAN is planning to make a hospital in Natore, jointly with the Duke
Hospital, USA.

10. CONCLUSION

The food and beverage industry of Bangladesh has taken a twist in the past decade. There are
many varieties of products being offered by the industry. The most significant aspect of this
sector is its contribution to the countrys GDP. PRAN undertakes the responsibility of providing
nutritious food to the country. So far they have been successful in positioning themselves in the
positive mind frame of the consumers. The brand is well recognized in the entire country and
PRAN is also improving in the international market. PRAN is also helping the country by going
out to the international market and proudly portraying Made in Bangladesh on the PRAN
products. This helps the country paint a clear picture of its achievements in the industry and the
recognition that they have gained can be transferred from one country to another. Overall PRAN
has become a successful brand in illustrating that as a developing country Bangladesh has
potential to strive for the better. PRAN targets to make its presence in every country in the future.
They hope that PRAN will become a globally recognized brand. They believe that everyone will
use PRAN products for their betterment. PRANs long term plan for 2025 is to become a part of
the largest 100 companies in the world.
PRAN Foods Ltd 40

11. RECOMMENDATIONS

For a well-established brand in Bangladesh, PRAN has come a long way. Since its establishment
it has achieved great heights. For a brand that is recognized by almost everyone, it goes to show
the influence that the company has had on its locality. However, we would like to place some
recommendations for PRAN so that they can capitalize on some of their weak aspects and
improve themselves for the better. From our learning the following recommendations can be
given:

Target market: New segments need to be added with the existing market. New segment
will be for middle lower and old people.
Quality ensures: The firm should ensure quality of their products further according to
the consumers need and expectations.
Research and Development: Research and development (R&D) is very essential for
every business. The firm has to undertake R&D to ensure that they develop their product
based on customer needs and to introduce new products to the market
Identify new markets: Enter new market segments. So that they can insure more
profitability. For example, PRAN does not have much presence in South America. They
should try to expand to that region so that they can have a stronger grab globally.
Opening new production plants in new markets: Currently they only have 1
production plant in India, away from home. They can identify new regions to exploit the
benefits from economies of scale and learning effects.
Distribution: It increases its distribution coverage and enters new distribution channels.
After sales and customer trust: With the present criticisms that PRAN has received
regarding unethical activities, PRAN should try to regain customer trust by effective after
sales activities.
Healthily diet: Customers are slowly but gradually becoming health couscous. PRAN
can introduce a new product range for health couscous people. They can introduce
products like Sugar Free Biscuits and Diet Drinks.
PRAN Foods Ltd 41

12. APPENDICES

APPENDIX A: Questionnaire

An interview was conducted on 22 November with the Chief Operating Officer (COO) of
PRAN-RFL Best Buy. Questions related to PRANs international expansion were discussed
during the interview.

1. Why PRAN foods and beverages did expand into India other than PRAN RFL, PRAN
Agritech and PRAN Electronics?
2. What type of international expansion does PRAN use to enter foreign markets
(Licensing, Exports, FDI, and Franchising)? Why?
3. Does PRAN support Greenfield investment or Acquisition of other companies to enter
foreign markets? Why?
4. We know that you currently export to 106 countries. Which countries do you have FDI
in?
5. In which type of venture does PRAN have competitive advantage in foreign markets?
Why?
6. What are the products PRAN is offering in the international market and why these
products are offered?
7. As we know the main principal of economic integration is to reduce costs for both
consumers and producers, as well as to increase trade between the countries. What are the
benefits that PRAN is experiencing from Regional Economic Integration like SAARC,
SAFTA, and Asia Pacific Trade Agreement (APTA)? Is there any reduction or elimination
of trade barriers and the coordination of monetary and fiscal policies?
8. From your perspective what are the reasons why the host country, for example the Indias
government had allowed PRAN to invest in their countries although there are existing
giants like Kohinoor Foods limited, Parle Argo, Amul etc.
9. As PRAN is making a foreign direct investment in India, can u please tell us what are the
trade and investment restrictions India is applying on PRAN? For example, whether India
is increasing the tariff?
10. What is India gaining from PRANs FDI?
11. What is India losing from PRANs FDI?
12. From your opinion please tell us what kind of strategies PRAN is following in
international ventures.
PRAN Foods Ltd 42

13. Especially for home country companies, it is always challenging to adapt to host
countrys culture in case of developing strategies, for example, to cater to Indian market,
PRAN has to adapt to Indian culture and consumer needs. What are the barriers that
PRAN is facing in international investment?
14. What are the opportunities and benefits that PRAN enjoy by operating in international
markets?
15. Why does PRAN have FDI only in India and not any other countries, for example China?
16. Does PRAN have any plans to invest in other countries apart from India?
17. How do you defend your position in the market when there are criticisms such as PRAN
uses pumpkin juice instead of mango juice?
18. What CSR activities do you do? Why is it important to do CSR activities?
19. Do you publish any sustainability report like many other organizations do?
20. What support do you get from Bangladesh government to operate in international
markets?
21. What support do you get from international government, for example India, to operate in
their markets?
22. What are your targets for the future?

Figure 7 - Business Card of the PRAN-RFL COO

APPENDIX B: Products offered by PRAN Group
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13. REFERENCES

Bilkis. S., (2014). Bangladeshi agro-processed food has good prospect abroad. The Financial

Express. Retrieved from: http://www.thefinancialexpress-bd.com/2014/03/12/22986

Exports. PRAN. Retrieved from: http://www.pranfoods.net/product_brochure.php

Star Business Report. (2012). BSTI cancels fruit drinks licenses of seven companies. The Daily