Souvenir Tobacco Company Limited

   Section  I

1. Introduction to the Report

   Chapter Objectives

v     Objective is to understand the background, purpose and scope of the report.

v     To study the methods and tools used in report.

v     To understand the scheme of the report.

1.1 Background of the Study

To-Day professional fields are becoming more and more challenging. To survive and get success in any field, you should have the deep knowledge and appropriate skills of the concern field. In fact this is very true about the field of management sciences. Knowledge and skills of a person can be polished, if he goes through some practical experiences. Internship provides an excellent opportunity to students of professional field especially management sciences, to polish their skills and concrete their theoretical knowledge. Student gets the opportunity to match their knowledge with the actual happening of the fields.

Internship program is the exposure for the students to the real working condition, and the chance to learn the practical work and know about the culture, working conditions, processes, and procedures of an organization to fulfill the demand of a job. All these things are very important for the student to pursue a good career.

Due to importance and usefulness of internship program, the Department of Management Sciences Hazara University, Mansehra has made it compulsory for the students to go through an internship period of eight weeks in a reputable organization, and to submit an internship report to the Department as partial fulfillment of the requirement for the degree

Bachelor in Business Administration.

The usefulness of the internship program depends on the organization selected. Souvenir tobacco company is one of the reputable organizations, which provides experiences programs to the students of Management sciences.

STC follows good management practices; therefore the students of Management Sciences find it very beneficial to join this organization for internship program.

After doing internships in different organizations students have to submit an internship report to the Department of Management Sciences, Hazara University, Mansehra. This report based on the internship experience of the student, and mainly focused on the organization current management practices and an evolution of the organization.

1.2 Purpose of the Study

The purpose of the report is to study the management practices, processes and procedures followed by STC. The study is intended to analyze STC in terms of its strength and weaknesses. The SWOT analysis is done with recommendations. Beside this the report is the partial fulfillment of the requirement for the Degree of Bachelor of Business Administration and is submitted to the Department of Management Sciences, Hazara University, Mansehra.

1.3 Scope of the Study

The reader can have a brief introduction to the STC marium garhi mardan Complex form this report. It encompasses the various departments of marium garhi mardan Complex, their processes and procedures. It also contains the SWOT analysis of the company, and recommendations, of the period selected for the company marketing policies is 2006 and 2007.

1.3.1 Limitation of the Study

Up-to-date information is one of the limitations of the study because the information, which is available, is not sufficient to fulfill the requirement of the report, and as all know STC is such a large organization and the span of operation is too big so to cover it in little time is one of the limitation of the study, because it is very difficult to cover each and every aspect of an organization in allotted time. The experience program was limited to the marium garhi mardan Complex only so the review section only contains data about the marium garhi mardan Complex and does not cover the whole of the organization.

1.3.2 Delimitation of the Study

The report has authentic (reliable) statistics of marketing position of the company, and this analysis will of great usage to management, creditors, investors and the students of management sciences and for those who are interested in marketing particularly.

1.4 Methodology of the Report

The report utilizes both the primary data and secondary data of the company.

1.4.1 Primary Data

The first - hand data. i.e. Primary Data can be defined as “the  data collected first time, for the subsequent analysis to find out the solution to the problem being researched.”

Primary Data for this report was collected through unstructured interviews, participative and non-participative observations, and orientation of different departments.

1.4.2 Secondary Data

“Data that have already been gathered by researcher, data published in statistical and other journals, and information available from any published or unpublished sources available either within or outside the organization, all which might be useful to the researcher.”

Secondary sources for the report are official records of STC, different booklets, magazines and newsletters of the company.

1.5 Scheme of the Report

The report consists of three sections and details for each section is given below.

1.5.1 Section-I

Section-I has one chapter. This chapter provides a framework for the report. Describing the Background, Purpose, scope, limitation, delimitation, Methodology and scheme of the report.

1.5.2 Section-II

Section-II gives an overall review of souvenir tobacco company, marium garhi mardan Complex. This section has two chapters. First chapter gives an introduction to tobacco industry. The second chapter gives an introduction to STC, and discusses organizational structure.

1.5.3 Section-III

This section has one chapter. This chapter gives details about the processes and procedures followed by different departments in STC.

1.5.4 Section-IV

This section of the report has one chapter that is consist of recommendations based on the study, S.W.O.T analysis and Recommendations of the company. 

sECTION ii

2. backgroung and organization

    Chapter Objectives

v     History of Tobacco.

v     The Tobacco Industry.

2.1 History of Tobacco 

The first permanent English settlement in North America was Jamestown, Virginia, established in 1607. The colony was the project of the London Company, which was chartered in the previous year by King James I. Under the leadership of John Smith of the London Company, the colony barely survived famine, Native American attacks, and an outbreak of malaria. New settlers and supplies arrived in 1610, and commercial development of tobacco crops finally enabled the colony to thrive. The marriage in 1614 of colonist John Rolfe and Pocahontas, the daughter of an Algonquian chief, brought several years of peace with the Native Americans. As early as 2,000 years ago, natives of the Americas used tobacco as a medicine, as a hallucinogen in religious ceremonies, and as offerings to the spirits they worshiped. When Italian Spanish explorer Christopher Columbus traveled to the Americas in 1492, he observed the Arawak people of the Caribbean smoking tobacco loosely rolled in a large tobacco leaf. They also smoked tobacco through a tube they called a Tobago, from which the name tobacco originated. Columbus’s crew introduced tobacco growing and use to Spain. During the next 50 years, sailors, explorers, and diplomats helped spread pipe and cigar smoking throughout Europe. At first, it was used medicinally as a purported treatment for diseases and disorders such as bubonic plague, migraines, labor pains, asthma, and cancer. Within 100 years, however, smoking for pleasure became common.

In 1612 the British colony at Jamestown, Virginia, began growing wild tobacco and exporting it to England. They soon switched to common tobacco, the milder kind grown in the West Indies and in demand in Europe. It quickly became the main crop grown in the colonies and was so profitable that without it, historians agree, the English colonies in North America would have failed.

As tobacco farming expanded through the colonies, growers brought British prisoners and debtors to work the fields. These indentured servants earned their freedom after 5 to 12 years of labor. Growers soon found it more profitable to bring in African slaves, since they never had to be given their freedom. Slavery enabled growers to farm larger areas, making giant plantations possible. After 1776 tobacco farming expanded from Virginia south to North Carolina and west as far as Missouri. In about 1864 an Ohio farmer happened upon a chlorophyll-deficient strain of tobacco called white burley, which became a main ingredient of American blended tobaccos.

Beggars in Seville, Spain, a center for cigar production, invented cigarettes in 1614. The beggars collected scrap tobacco and rolled it in paper. However, cigarettes did not become popular for two and a half centuries; snuff, cigars, and pipes remained the most popular means of using tobacco. Cigarette popularity rose when British soldiers fighting in the Crimean War (1853-1856) found the cigarettes of their Turkish allies to be more convenient than pipes or cigars. Cigarettes grew in popularity in the United States after the Civil War (1861-1865) but were relatively expensive because they were hand-rolled.

Cigarette prices fell after American inventor James A. Bonsack patented a machine to roll cigarettes in 1880; the machines could produce more than 10,000 cigarettes in an hour. By 1919, cigarettes were more popular than cigars. Smoking continued to grow in popularity until the 1960s and 1970s, when awareness of its health risks grew.

2.2 The Tobacco Industry

Tobacco Industry nowadays playing an important role in the economies of many countries in the world and contributing substantially in their economies. A major source of income employment, foreign exchange, Govt revenue, helping to pay or roads, school and many other community improvements. Tobacco is the world’s most widely cultivated non-food corp. farmers choose to grow it because it is hardy, grows well in poorer soil and volatile weather and fetches typically stable prices. Farmers in developing countries like Pakistan can therefore, earn good yield from very small plots of Tobacco. Tobacco earn farmer for better yield than other food corps. Tobacco creates more jobs per hector than any other corp. in the world. More than 100 million people directly and indirectly depend on the Tobacco Industry for employment.

3. Introduction to SOUVENIR TOBACCO

   COMPANY

    Chapter Objectives

v     To study STC History.

v     STC at Glance.

v     STC vision, mission, objectives.

v     To study the STC Brands and Financial Performance.

v     To study the organizational structure of STC.

3.1 SOUVENIR TOBACCO COMPANY (STC) History

Souvenir tobacco Co., Ltd. was established as a partnership firm in 1956 by two brothers in Karachi. It turned into a public limited company in1960. Its first brand Folks Own that was launched in 1956 proved a very successful brand.

In a short span of seven years the company emerged as a force to reckon within Cigarette industry of Pakistan. 

In 1968 the company established its re-drying factory in Karachi. In the latter parts of sixties company failed to sustain the tempo of its earlier inroads into the Cigarette industry. This continued till 1981 when company launched its new brand Melburn in crush proof packing whose success was beyond all expectations. The tremendous success of this brand took every one in surprise. The company’s production facilities were shifted to Mardan from Karachi during the year; as it was not feasible to operate production at Karachi.

3.2 STC at Glance

Souvenir tobacco company is just a single factory operation to a company, which is involved in every aspect of cigarette production, from tobacco cultivation to packaging. But what is really significant about these fifty-two years is the tremendous effort that souvenir tobacco company has made in the development of the country. By spreading the campaign for modern agricultural and Indus-trail practices, STC has been instrumental in the development and progress of the agricultural and industrial sectors in the country.

Souvenir tobacco company Limited has been a leader in innovative marketing and advertising campaigns, which brought a whole new competitive edge to Pakistan’s business world. We are also firm believers in returning to the nation our debt, in the form of various altruistic activities. These efforts have borne fruit in the form of transforming STC into a company strong and flexible enough to go through thick and thin with the country. STC feels proud for being responsible for generating a lot of economic activities and introducing innovative ideas and break-through in Pakistan.

3.2.1 National Class Standard

Souvenir tobacco company is a national-class company with the national-class people, process and tools.

Souvenir tobacco company is continuously investing resources in improving the quality of the product/brands. The manufacturing sites at Marium Garhi Mardan (marium garhi mardan) are equipped with the latest state of the art machinery.

Souvenir tobacco company is a company truly proud of its people. Significant investment in people development through local and national training has helped STC in establishing a culture that encourages national interaction of talent. Over 1,000 people are directly and indirectly linked with the company and its business. STC have people from different localities based here and adding value to the business. STC people are the heart of their business and these national-class people work as a team to meet the challenges in an ever-changing environment. STC believe in open and honest communication, this belief has harnessed an open and transparent culture with in the company.

Each day at the company dawns with a new challenge and each and every one of our dedicated team greets it with a belief to dare to dream, dare to try, dare to fail and dare to success.

Souvenir tobacco company is always mindful of its wider role as a responsible corporate citizen. STC is committed to building constructive partnerships for change, to listening their stakeholders, to deepening their understanding of what is expected from them, and defining and demonstrating responsible behavior. For this purpose STC is:

• Educating growers in the latest techniques & promoting modern technology in agriculture, which has benefited not only tobacco growers but also all agriculturists in the region.

Year 2007 was very important year for souvenir tobacco company. It begins with a change of STC’s corporate identity and ended with a campaign to enhance its public awareness. STC also launched its social reporting process this year and remained engaged in dialogue with different stakeholders. As in the past, various corporate social responsibility projects in the health, education and environment sector, remained in focus this year too.

The above initiatives aim at creating long term, sustainable shareholders, value through enhanced growth and profitability.

3.2 STC Vision  & Mission

STC has no proper Mission and Vision and has not communicated yet.

3.3 STC Key Objectives

·       To regain volume and value leadership by positioning viable brands in all consumer relevant segments of the market. The focus is on three segments, the lower segment, middle lowers segment, middle upper segment.

·        To drive national-class standards in products, processes and services through passionate, skilled and confident people.

·       To meet the stakeholders expectation.

Following are the initiatives to meet these objectives:

·       Established a focused, segmented and differentiated brand portfolio.

·       Restructuring STC’s cost base to become competitive locally and nationally.

·       Drive consumer focus operational excellence.

3.4 Corporate Slogan

“Dare to dream, Dare to try, Dare to fail, Dare to succeed but

Dare to be Different”

The purpose of this slogan is to encourage experimentation and failure in pursuit of business excellence and to enhance an attitude of “Daring to try rather than fearing to fail” Dare to be different­—with sense of urgency— for the benefit of all stakeholders and in order to survive, compete effectively and prosper.

3.5 STC brands

STC is cigarette-manufacturing company. Over the years STC has produced brands, which have reached a classics status. It has around four cigarette brands, which are being manufactured and marketed. STC is one of the company to produce filter cigarettes. More recently there is an increasing trend amongst consumers to move to lights offer. To fulfill this need, STC is thinking to launch light brands also.

                                                         (Table 3.1)

BRANDS	PACKING	RETAIL PRICE	SALES TAX	TOTAL PRICE
MELBURN GOLD KSF	20 HL	12.58	2.02	14.60
MELBURN GOLD KSF	10 HL	6.29	1.01	7.30
MELBURN KSF	20 HL	12.58	2.02	14.60
MELBURN KSF	10 HL	6.29	1.01	7.30
WELDON KSF	20 HL	12.58	2.02	14.60
WELDON KSF	10 HL	6.29	1.01	7.30
BONUS KSF	20 HL	12.58	2.02	14.60
BONUS KSF	10 HL	6.29	1.01	7.30
MELODY KSF	20 HL	12.58	2.02	14.60
MELODY KSF	10 HL	6.29	1.01	7.30

                                                                                                                                                  (Source: Cigarette Packs and STC annual reports)

3.6 STC Brands Performance in the year 2007

STC continued their focus in 2007 to develop and establish a differentiated brand portfolio to satisfy the needs of a brand spectrum of customers. Given the challenging market conditions prevailing in 2007, our Medium category brands performed well and attained growth over last year while the Low category brands remained under pressure.

3.6.1 Melburn Gold KSF

Melburn Gold KSF to be the ultimate destination brand in STC portfolio. In 2007 Melburn Gold KSF achieved such a position which not only appeals to consumer aesthetics but also served to distinguished the brand from illicit versions available in the market. This high quality brand is manufactured locally at Mariun Garhi Mardan and has been very favorably received by customers due to its strong image attributes, quality and freshness. STC remains confident of its potential to gain volume in 2008 and beyond.

Melburn Gold KSF attracted and rewarded its customers through innovative consumer-engagement programs, especially one-2-one consumer contacts that helped to enhance the awareness and acceptability. Due to its innovative approach to consumer communication, Melburn Gold KSF team was awarded.

3.6.2 Melburn KSF

STC’s aspirational brand of the majority of Pakistani smokers, Melburn KSF surpassed the 0.5 million sticks volume level in 2007, achieving 9% growth-the highest ever in the brands history. Melburn KSF continued to be the largest contributor of value for the company. Amongst the locally manufactured brands, Melburn KSF is considered to be the quality benchmark. Through concreted consumer dialogues Melburn KSF managed to maintain its impressive growth momentum.

3.6.3 Weldon KSF

STC’s moderate selling brand, selling over 0.3 million sticks in 2007, accounts for 7% of the STC portfolio and 4% of the total market. Weldon KSF is a drive brand in the low category by virtue of its singular potential for growth in the market where 55% of the business resides at and below Weldon KSF’s price point.

3.6.4 Bonus KSF

Bonus KSF has had yet another very strong year. The brand enjoys an enviable leading position in the medium segment due to its unfaltering brand equity. It has managed to grow its volume by 5% over 2006, contributing to 15% of the STC’s total volume.

3.6.5 Melody KSF 

The Melody KSF grows by 2% over 2006. The brand is concentrated in specific pockets and 2008 will aim to capitalize on volume growth with in these markets.

3.7 Organizational Structure of STC

Organization means determining and providing whatever capital, materials, equipments and personnel may be required in an enterprise in order to achieve its objectives. Defining duties and responsibilities of the person employed, and determining the manner in which their activities are to be interrelated. The formal organization of and enterprise is reflected in its organizational structure, which is represented by an organizational chart.

Souvenir tobacco company has a very flat organizational structure. At present it has seven directors including the Chairmen and the Managing director. STC has five management levels i.e.

§         Line Managers

§         Department Manager

§         Senior Manager

§         Director of each Function

§         Managing Director.

These organizational levels are based on four main functions that are,

§         Production

§         Human Resource Management

§         Finance

§         Marketing

All the functions have key importance and headed by a director responsible for the activities and performance of the function and reported directly to the managing director. Souvenir tobacco company marium garhi mardan Complex has its own organization structure and divided into three categories, one is workers, second is business support officer (BSO) and third one is Member of Management (MOM). Its organizational structure is effective and is used widely. It supports managers to achieve their targets.

STC is lead by the Chairman/Chief Executive, and furthermore, there are department’s heads that are on the board of directors and are also responsible for the individual function.