STRATEGIC MANAGEMENT
THE STRATEGY- FORMULATION ANALYTICAL PROCESS SUBMITTED TO Sir Hussnain Raza SUBMITTED BY Zara Imran Efrah Ashfaq Barka Komel Faiza Mughal Hamna Abid MAJOR Mphil Business Administration SEMESTER 1 SECTION 2 Date of submission: December 10, 2011 NISHAT MILLS LIMITED
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TABLE OF CONTENTS TOPICS
PAGE NO
Nishat Introduction & History Vision Statement, Mission Statement THE STRATEGY FORMULATION ANALYTICAL PROCESS STAGE 1ST ----- INPUT STAGE External Factor Evaluation (EFE) Competitive Profile Matrix STAGE 2ND ----MATCHING STAGE SWOT Matrix SPACE Matrix The Boston Consulting Group (BCG) Matrix The Internal-External (IE) Matrix Grand Strategy Matrix STAGE 3RD ----DECISION STAGE The Quantitative Strategic Planning Matrix (QSPM) Internal Audit of Nishates Marketing Department Strategy Implementation Strategy Evaluation References
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Mission Statement
To provide quality products to customers and explore new markets to promote/expand sales of the Company through good governance and foster a sound and dynamic team, so as to achieve optimum prices of products of the Company for sustainable and equitable growth and prosperity of the Company.
Vision Statement To transform the Company into a modern and dynamic yarn, cloth and processed cloth and finished product manufacturing Company that is fully equipped to play a meaningful role on sustainable basis in the economy of Pakistan. To transform the Company into a modern and dynamic power generating Company that is fully equipped to play a meaningful role on sustainable basis in the economy of Pakistan.
INDUSTRY ANALYSIS NISHAT GROUP INTRODUCTION Nishat Group is one of the leading and most diversified business groups in South East Asia with fixed/ current assets of over Rs.300 billion (US$ 5 billion), it ranks amongst the top five business houses of Pakistan. The group has strong presence in three most important business sectors of the region namely Textiles, Cement and Financial Services. In addition, the Group also has reasonable market share in Insurance (Adamjee and Security General), Power Generation, Paper products (Nishat Shoaiba Paper Mills) and Aviation (Phonix Aviation). It also has the distinction of being one of the largest players in each sector. The Group has a remarkable position in the market as good as any multinationals operating locally in terms of its quality of products, services and management skills.
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HISTORY OF NISHAT GROUP The history of Nishat Group dates back to 1951, when Mian Muhammad Yahya founded Nishat Mills Limited. This man of vision, courage and integrity, Mian Mohammad Yahya was born in 1918 in Chiniot. In 1947 when he was running leather business in Calcutta, he witnessed by the momentous changes that swept the Indo-Pak subcontinent. This is story of success through sheer hard work and an undaunted spirit of enterprise. Beginning with a cotton export house, he soon branched out in to ginning, cotton and jute textiles, chemicals and insurance. He was elected Chairman of all Pakistan Textile Mills Association. He died in 1969, at the age of 51 having achieved so much in so short time. After almost half a century of undaunted success, Nishat group is among the leading business houses of the country and ranks among the top 5 groups in terms of assets and sales revenue. The group has its roots firmly planted into four core business namely
Textiles
Power Generation
Banking
Cement
TEXTILES The textile business is further subdivided into 2-textile division:
Nishat Faisalabad
Nishat Chunian
The textile capacity of the group is the largest in the country. An addition of 20,000 new spindles, 100 new air jet looms and new dyeing plants has increased the existing capacity of 242,000 spindles, 740 looms and dyeing and finishing capacity of 5 million meters. The largest exporters of textile products from Pakistan, for more then decade!
POWER GENERATION
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Nishat Power Limited, incorporated under the Companies Ordinance, 1984 on 23 February 2007, is a subsidiary company of Nishat Mills Limited and is a public listed company. The principle business of the subsidiary is to build, own, operate and maintain a fuel power station having gross capacity of 200 MW in Jamber Kalan, Tehsil Pattoki, District Kasur, Punjab, Pakistan. The subsidiary has commenced its commercial production from 9 June 2010. Nishat Mills Limited owns and controls 51.01% shares of the Nishat Power Limited. Nishat Mills has established state of the art, modern, highly reliable and extremely efficient captive co-generation power plants to cater in house energy requirements at all its spinning, weaving, processing, stitching and apparel units. In the wake of current energy crisis, low cost power and self reliance has been the targeted motto behind this establishment. With depleting gas reserves and limited gas supplies in the country, they are proud to take initiative on utilization of alternative fuel for future energy requirements.
CEMENT In 1992, Nishat Group acquired D.G Khan Cement Company Limited (DGKCC) from the second largest project of the group and is ideally located in the heart of the country, with easy access to transportation all over Pakistan. DGKCC unit No. 1 has a capacity of 2,200 tons per day. A new unit heaving the capacity of 3,300 tons was setup in 1997. International Finance Corporation and common Wealth Development Corporation have financed this unit. With the addition of unit No.2, DGKCC has become the largest manufacturer of cement in Pakistan.
BANK In 1991, Nishat Group ventured into the financial sector through the acquisition of Muslim commercial Bank. MCB has grown ever since and is now the largest bank in the private sector. MCB has a network of over 1200 branches employing over 12,000 people.
CURRENT STATUS NISHAT TEXTILE MILL Today Mian Mohammad Mansha, the chairman of Nishat Group, like his father, continues the spirit of entrepreneurship and has led the group to become a multi dimensional corporation, with wide ranging interests. Nishat Mills Limited is a public Limited Company incorporated in 6
Pakistan under the Companies Act, 1913(Now Companies Ordinance, 1984) and listed on all three Pakistani stock exchanges. The Company is engaged in the business of textile manufacturing and of spinning, combing, weaving, bleaching, dyeing printing, stitching, buying, selling and otherwise dealing in yarn, linen, cloth and other goods and fabrics made from raw cotton, synthetic fiber and cloth, and to generate, accumulate, distribute and supply electricity. Company is providing quality products to its customers within the Pakistan and outside the Pakistan to fulfill the needs and wants of their customers.
MAJOR COMPETITORS Nishat competitors are Crescent Chenab Arzoo Alkarms Sitara Kohinoor Amtex
PEST ANALYSIS Every business in the world operates in a macro-external environment. This environment affects a lot for business as external environments are very important, as it influences your business a lot. This influence could be either positive or may be negative depending on the macro-external environment. This environment depends on four factors and environment could also be analyzed on these factors, these are: P
Political
E
Economic
S
Social 7
T
Technological
POLITICAL •
Poor law & order situation is a serious threat for Pakistan textile industry.
•
Changing tax rates also badly affecting our textile sector.
•
Import & export restrictions are a barrier for the development of textile sector.
•
Pakistan is suffering from severe political crisis. If we look in to the history of Pakistan we could analyze that there is hardly any government which had covered its full tenure. Looking at the history we could see that democratic government was dismissed five times and when martial law was imposed in the country. Whenever martial law is imposed the dictator impose its own rules and regulation towards industries which effects industry a lot and the business and some new ventures are not strong enough to absorb those sudden changes.
ECONOMICAL •
Pakistan is facing very bad economic conditions that are affecting badly every business sectors.NML also facing bad economic conditions.
•
Poor monetary & fiscal policies of Pakistani government have adverse impact on NML.
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•
The economic condition of Pakistan can also affect the foreign investors increasing inflation rate make the cost of production high and thus reduce the profit margin of the investor.
SOCAL •
Higher prices are causing buyer extremely cautious in placing orders.
•
The change in the lifestyle of the people affects the growing demand of the NML products.
•
The change in the lifestyle and needs in different demographics also affect the demand of the customers.
TECHNOLOGICAL •
Coupled with Nishat capability & competency vertical production facility that can convert raw cotton to final finished consumer product always attract attention of customers.
•
Nishat has upgraded its machinery with installation and erection of most modern & efficient ring frames & cone winding machines in two spinning units & further replacement of similar machines of other units to help increase in automation & reduce cost and produce better quality yarn.
MICHAEL PORTERS FIVE FORCES MODEL
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BARGAINING POWER OF BUYER The bargaining power of buyer is increasing day by day. The buyer demanding more and improved quality in very cheap price weather customer are from foreign or are from local market. The competition at international level as increased to much. If we see the export to USA of textile industry from all over the world and especially from Asian countries then we can easily found that Pakistan is offering most less export prices to USA which is $0.91 permeter. But the other countries are getting more than these prices and in these countries Bangladesh is on top that is getting $3.15 per-meter from USA. Although we are offering lowest prices but due to poor quality and present condition off the textile industry. Pakistan is losing customer for there textile industry. BARGAINING POWER OF SUPPLIER Bargaining power of supplier is increasing as Pakistan government has put a barrier on import of raw material for textile which is reduced up to 70%. Due to which local suppliers are getting edge and providing raw material at expensive price. As our local cotton is not enough to
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fulfill all textiles so the bargaining power is increased. On other hand government has increased gas and petroleum prices.
RIVALRY The competition in the textile industry is becoming very tough. The textile mills are competing with each other on the basis of their prices they offer for the quality which they produce. Competition at international level is very furious for Pakistan textile industry. The major exporters for textile products are; 1) Nishat textile 2) Saphire textile 3) Chenab textile 4) Kohinoor textile 5) Al-karam textile 6) Sitara textile 7) Gulistan textile In international market major countries are; 1) China 2) India 3) Vietnam 4) Bangladesh 5) Korea 6) Pakistan 7) Iran THREAT OF NEW ENTRANCE Threats of new entrance are always there. But it is neglected as new company has to face a number of challenges and competitors in the market. And existing companies are already a big giants for new entrance. On the other hand prices of labor , fuel , are very high. Technology is also very expensive due to higher dollar prices. Political instability is also playing a key role of barriers to new entrance. 11
THREAT OF SUBSTITUTION Textile products and cloths are basic necessity which has no substitute. But now a day some local designers and companies have started there on designed production. The products they are making are according to peoples and customer demand. Such as Aroshe, Bareeze, needles impression etc.. They can be substitutes but not a big threat for the company.
OPPORTUNITIES AND THREATS EMERGING FROM PEST ANALYSIS & PORTERS FIVE FORCES MODEL
OPPORTUNITIES 1. Installation of new software’s, machineries & system can give rise to value added products. 2.
Low cost production by using modern and advance machineries.
3. To capture masses of international market by offering less export prices.
THREATS 1. Law and order instability is a big threat for NML. 2. High rate of taxes has negative impact on NML. 3. Rate of inflation is affecting consumer power which is a big threat. 4. Competitive prices leads to customer reluctantly in placing orders. 5. Imbalance of payments due to fluctuation in exchange of currency rates as compared to dollars. 6. Quota system limitize the imports of raw materials for the company.
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INTERNAL AUDIT
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STAGE: 1st ----------- INPUT STAGE EFE MATRIX Key factors OPPORTUNITIES:
Weight
Rate
Score
1. Cotton cloth export also increased to $1.13 0.12 billion during this period as compared to $1.03 billion in 2000-01. The future in the UAE markets appears promising.
4
0.48
2. Increase in production capacity.
0.02
3
0.06
3.Increase in variety of product line
0.04
2
0.08
4. More betterment could be achieved by hiring more efficient and skilled staff.
0.05
2
0.10
5. Government could apply sustainable policies for the interest of the exporters and investors
0.12
3
0.36
6. Nishat can introduce its garments in the 0.04 local market by using the same Stitching unit. This is also a great opportunity.
2
0.08
7. Various training courses could be adapted in the company to train the workforce to improve and uplift the quality.
0.02
3
0.06
8. Installation of new combined heat and power plant.
0.06
3
0.18
14
THREATS 9. There is no consistency in the government policies regarding textile sector
Weight 0.12
Rate 4
Score 0.48
10. Increasing rate of electricity and GST are also big threats.
0.12
4
0.48
11. The lack of R&D in the cotton sector of
0.03
3
0.09
12. Currency fluctuations and exchange rates can also create problems for NML.
0.08
4
0.32
13. More and more competitors (National and International) are entering in the same markets and offering attractive pric4es to the customers.
0.05
2
0.1
14. Uncertain environment (political& governmental). 15. The unstable economic condition could affect the FDI’s by reducing the investor’s profit margins.
0.05
1
0.05
0.08
4
0.32
Total
1
Pakistan has resulted in low quality of cotton in comparison to rest of Asia.
3.24
EVALUATION In above matrix, weight is assigned from 0.0(not important) to 1(very important) according to the relevant importance of that factor to being successful in the firm’s industry. Rates are assigned from 4(superior) to 1(poor) on the basis of effectiveness of firm’s strategies.3.24 the total score is indicating that NISHAT is operating well & taking adequate advantage of various opportunities & trying to minimizing the threats faced by the competitors.
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IFE MATRIX Key factors
Weight
Rate
Score
STRENGTHS 1 .The bulk of the earning is exports based.
0.06
3
0.18
2. Highly qualified and skilled management.
0.10
4
0.40
3. Own power generation plant.
0.15
4
0.60
4. Latest mechanized machinery is involved in almost the divisions replacing the old ones.
0.08
3
0.24
5. Nishat textile is a market leader and contain big market share in textile sector due to its best working environment.
0.06
3
0.18
6. High quality products.
0.05
3
0.15
7. Equipped with MIS System.
0.05
2
0.10
8. National textile provides regular personal development and training courses to its employees. 9. Nishat is a green company and has got certificates of ISO 9001, IKO –TEX 100, SA -8000 and citypad.
0.03
2
0.06
0.05
2
0.1
10. Less promotional activities.
0.05
2
0.1
11. High cost of production.
0.15
2
0.3
12. Small international market share as compared to the potential.
0.04
2
0.08
13. Fluctuations in the rates of the raw
0.05
2
0.1
WEAKNESS
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materials. 14. Lack of benefits and rewards for the employees.
0.03
2
0.06
15.Competitors from Asia have come up in a big way with lower prices resulting from lower overhead, cheaper and better raw materials and machinery
0.05
2
0.1
Total
1
2.75
EVALUATION In IFE Matrix, weights are assigned from 0.0(not important) to 1(very important) to each factor according to the relevant importance of that factor to being successful in the firm’s industry. Rates are assigned from 4(superior) to 1(poor) on the basis of effectiveness of firm’s strategies. 2.75 are higher than 2.5 the average score which is indicating that NISHAT has strong internal position. Although 2.75 is not too much high score but it’s indicating NISHAT is operating well by using its strengths & it should be overcome its weakness.
COMPETITIVE PROFILE MATRIX
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Critical Success Factors
Nishat Textiles
Kohinoor Textile Mill
Weight
Rating
Scores
Rating
Scores
0.30
3
0.9
4
1.2
Global Expansion
0.05
3
0.15
4
0.2
Market Share
0.05
2
0.10
3
0.15
Pricing
0.10
4
0.4
3
0.3
Conformance to standard
0.30
4
1.2
3
0.9
0.10
3
0.30
2
0.2
0.05
4
0.20
3
0.15
0.05
3
0.15
4
0.2
Customer Satisfaction
Promotional Activities
Persuasion Organizational involvement of employees Total
1.00
3.4
3.3
Evaluation
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•
As we know that competitive profile matrix identifies firm’s major competitors and its particular strengths and weaknesses in relation to a sample firm’s strategic position. Comparisons been made on the basis of the strengths and weaknesses encountered by careful in depth analysis of competing firms. We have grouped the strengths and weaknesses of existing firm Nishat mills in order to compare the rating s and weighted scores with its rivalry potential firm Kohinoor textile mills. This comparative analysis provides important internal strategic information.
•
In our case the two most important factors to being successful in industry are gaining and maintaining Customer Satisfaction and Quality as indicated by weights of 0.30. As satisfaction of prospective customers plays vital role in enhancing the sales and building reputation of the firm and Quality provides as a means of excellence in the product or service that fulfills or exceeds the expectations of the customer.
•
Nishat mills is strongest on maintaining quality control standards under the ISO stated standards and is indicated by the rating of 4 whereas the competitor firm is a step behind in adapting to ISO quality management systems .
•
The company has a diverse customer base with sales in both the local and export markets. The main international markets include Asia, Europe, USA and Australia. Kohinoor has a diversified customer base because of its association and partnership with most of the top leading brands of the world which has strong persuasion and brand image in market place. Zara, old navy , champion , Dockers ( san Francisco ) , wrangler, Levi Strauses signature, banana republic, Yakka ,Li & Fung Limited, Jc Penney ( everyday matters ) , Dickies, fruit of the loom, Payless (shoe source). Kohinoor is strongest in retaining more customers and is strongest on customer satisfaction indicated by rating of 4 as compare to Nishat with rating of 3.
•
Overall Nishat is strongest as indicated by the total weighted score of 3.4
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STAGE: 2ND -----MATCHING STAGE SWOT MATRIX
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STRENGTHS
WEAKNESSES
1 .The bulk of the earning is exports based. 2. Highly qualified and skilled management. 3. Own power generation plant. 4. Latest mechanized machinery is involved in almost the divisions replacing the old ones. 5. Nishat textile is a market leader and contain big market share in textile sector due to its best working environment. 6. High quality product 7. Equipped with MIS System. 8. National textile provides regular personal development and training courses to its employees. 9. Nishat is a green company and has got certificates of ISO 9001, IKO –TEX 100, SA -8000 and city pad.
1. Less promotional activities. 2. High cost of production. 3. Fluctuations in the rates of the raw material 4. Lack of benefits and rewards for the employees.
S-O STRATEGIES
W-O STRATEGIES
1. Cotton cloth export also increased to $1.13 billion during this period as compared to $1.03 billion in 2000-01. The future in the UAE markets appears promising. 2.Increase in production 3. Increase in variety of product line. 4. More betterment could be achieved by hiring more efficient and skilled staff. 5. Government could apply sustainable policies for the interest of the exporters and investors. 6. Nishat can introduce its garments in the local market by using the same Stitching unit. This is also a great opportunity. 7. Various training courses could be adapted in the company to train the workforce to improve and uplift the quality 8. Installation of new combined heat and power plant
1. Technical facilitation through mechanized machinery allows managerial staff to enhance business as well as production process efficiency. (S4,O2) 2. Personal & training courses encourages the human resource to developed more diversified strategy via producing quality as well as variation in products. ( S6,O7) 3. Keeping in view the energy crises, Nishat setup an independent power producer which allows automation and uptime flexible production of products.(S3,O8)
1. Efficient availability of resources can results in increasing in the production capacity. (W2,O8) 2. Creating a conductive environment to attract the proactive investments. (W1,O5) 3. Modifying the market to improve profit margins and increase local market share. (W4,O6)
THREATS
S-T STRATEGIES
W-T STRATEGIES
1. There is no consistency in the government policies regarding textile sector 2. Increasing rate of electricity and GST are also big threats. 3. The lack of R&D in the cotton
1. High quality products can reduce the uncertain environment in local markets as well as in international markets. (S6,T4) 3. Installation of more power
1. Strong brand endorsement by national and international 21 market models to capture great share (nationally and internationally). (W1,T5) 3. Increase in International
OPPURTUNITIES
SPACE MATRIX FOR NISHAT LINEN
FINANCIAL STRENGTHS:
Ratings
Earnings Per Share of Nishat is Rs. 10.50 which is greater than its competitor Kohinoor having EPS of Rs.1.91.
+4
Company has Current Ratio of 1.11, greater than Kohinoor having Current ratio of 0.51.
+2
Company’s Return on Assets is positive i-e 6.31%, compared to ROA of Kohinoor i-e -3.31%.
+5
Nishat’ Net Sales are higher as compared to Kohinoor.
+5
Debt Ratio of Nishat is 32%, lower than Kohinoor having Debt Ratio of 67.44%.
+3
Quick ratio of Nishat i-e 0.53 is slightly higher than Kohinoor (0.43).
+1
Inventory Turnover of Nishat i-e 4.21 is slightly higher than Kohinoor (4.04).
+1 +21.0
INDUSTRY STRENGTHS: NML has biggest composite unit in the country.
+4
NML is technically facilitated.
+2
NML has tremendous market positioning. NML has adequate financial resources. NML uses of best machinery available. NML has a large domestic market.
+1 +3 +2 +3
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NML is a leading exporter of textile products in the country.
+3
+18.0
ENVIRONMENTAL STABILITY: Latest yarn dying plants is installed with the capacity of 7 tons a day.
-1
Most of the Nishates competitors are offering prices that are more attractive.
-5
The bad economic position of Pakistan & currency fluctuation has adverse impact on Nishates.
-5
Changing lifestyles and preferences through the media intervention cause dramatic changes in consumer demand.
-2
Price ceiling pressure from competitors put behind Nishat in terms of retaining potential customers in domestic market.
-4
Nishat is in transformation stage to open operations in Global market, it is risky to compete global standards because of extensive competition.
-5 -22.0
COMPETITIVE ADVANTAGE: NML has largest dyeing facility in South East Asia -2
NML has combined heat & power generation plant -1
NML has highly qualified and skilled management and workforce -3
NML is using latest mechanized machinery. -3
NML is producing high quality product. -3
NML is ISO 9001 -2000 and oktex 100 certified -2
NML is market leader and have big share in textile sector of Pakistan.
-3
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-17.0
CONCLUSION FS Average: +21/ 7 = 3.00 IS Average: +18/ 7 = 2.57 ES Average: -22/ 7 = -3.67 CA Average: -17/ 7 = -2.43
DIRECTIONAL VECTOR COORDINATES X-axis = (-2.43) + 2.57 = +0.14
Y-axis = 3 + (-3.67) = -0.67
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THE BOSTON CONSULTING GROUP (BCG) MATRIX
No of division
Description
Revenues
%Reve nues
Profits
%pr ofits
Market share
Relative market share
Growth rate
1
Nishat textile
Rs.48565
62.2
4844
43%
80.2
0.8%
53.99%
2
DGKCC
Rs.18577
23.8
171
1.5 %
40.3
0.4%
14%
3
Power plant
Rs.10902
13.9
6295
56.4 5
70.1
0.7%
-88%
100
Rs.11156
100
Total
Rs.78,044
25
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I
II
III
HIGH 3.0 to 4.0
Grow and Build 3.24
EFE TOTAL SCORE
MEDIUM
Grow and Build
Hold and Maintain
2.75
IV
V
VI
Grow and Build
Hold and Maintain
Harvest
VII
VIII
IX
Hold and Maintain
Harvest
Divest
2.0 to 2.99
LOW 1.0 to 1.99
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Evaluation of BCG: Nishat firms divisions are competing in different industries e.g. Nishat textiles, DGKCC, and power generation unit,. We have chosen this multidivisional firm to manage its portfolio of business by examining the market share and growth rate. The growth rate could range from +20 to -20 and the growth rate of Nishat division also lies between these upper and lower limits. The pie slice represents the profit generated, the circle represents the amount of revenues generated from each division, Nishat textiles comes in the 2nd quadrant of stars represents that Nishat should go for market development as well a penetration , can also pursue backward ,forward and horizontal integration .DGKCC comes in first quadrant of question marks its cash needs are high but its cash generation is low , its market share is low Comparative to other divisions .the power generation plants comes under the cash cow as it is at its maturity stage represents the mark share of 70% as compare to other divisions INTERPRETATION
Total IFE Score = 2.75 Total EFE Score = 3.24
Evaluation of IE The total score of IFE matrix is 2.75 which lies in quadrant to and represents the grow and build stage for Nishat textile as compare to that the EFE matrix total scores represents the sum of 3.24 which also shows that Nishat is in a stage where t can pursue the market penetration, product development, market development as well as focus on backward, horizontal and forward integration
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Grand Strategy Matrix Rapid Market Growth
Quadrant 2 Market development
Market penetration penetration Product development Horizontal integration integration
Quadrant 1 Market development
Market Product development Forward
Divesture
Backward integration
Liquidation
Horizontal integration Relate
d diversification
Quadrant 4
Quadrant 3
Retrenchment Related diversification diversification
Related
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Unrelated diversification diversification
Unrelated
Divesture venture
Joint
Liquidation Slow Market Growth
INTERPRETATION Nishat mills currently lies in the quadrant one as it is the market leader in terms of growth, sales, market share and production capacity. Nishat has got both the strong competitive position in the market and rapid market growth rate which makes it lie in this quadrant which shows that the company is in an excellent strategic position. Continuous concentration on the current strategies would be wise rather than to shift from its established competitive advantages. Nishat, being in this quadrant, can take aggressive risks as well and can afford to take the advantage of the new opportunities. The possible strategies recommended for Nishat Mills can be market development, market penetration, horizontal integration and related diversification.
STAGE: 3RD -----DECISION STAGE
QSPM MATRIX
EFE STRATEGIC ALTERNATIVES
30
Strategy # 1
Strategy #2
Related product diversification(Bags, bridal dresses bridal grooms, curtains) AS TAS
Product development in terms of increase in exports.
KEY EXTERNAL FACTORS OPPORTUNITIES:
Weight
AS
TAS
1. Cotton cloth export also increased to $1.13 billion during this period as compared to $1.03 billion in 2000-01. The future in the UAE markets appears promising. 2. Increase in production capacity. 3.Increase in variety of product line 4. More betterment could be achieved by hiring more efficient and skilled staff. 5. Government could apply sustainable policies for the interest of the exporters and investors 6. Nishat can introduce its garments in the local market by using the same Stitching unit. This is also a great opportunity. 7. Various training courses could be adapted in the company to train the workforce to improve and uplift the quality. 8. Installation of new combined heat and power plant.
0.12
1
0.12
4
0.48
0.02
3
0.06
4
0.08
0.04
4
0.16
1
0.04
0.05
2
0.1
3
0.15
0.12
1
0.12
4
0.48
0.04
4
0.16
1
0.04
1
0.12
3
0.36
0.02
0.06
THREATS: 9. There is no consistency in the government policies regarding textile sector
0.12
31
10. Increasing rate of electricity and GST are also big threats.
0.12
11. The lack of R&D in the
0.03
cotton sector of Pakistan has resulted in low quality of cotton in comparison to rest of Asia.
12. Currency fluctuations and exchange rates can also create problems for NML.
0.08
1
0.08
4
0.32
13. More and more competitors (National and International) are entering in the same markets and offering attractive prices to the customers.
0.05
3
0.15
4
0.2
14. Uncertain environment (political& governmental). 10. Increasing rate of electricity and GST are also big threats.
0.05
1
0.05
3
0.15
TOTAL:
0.12
1
IFE STRATEGIC ALTERNATIVES Strategy # 1
Strategy #2
Related product diversification(Bags,
Product development in terms of increase in 32
Weight
bridal dresses bridal grooms, curtains) AS TAS
exports. AS
TAS
STRENGTHS: 1 .The bulk of the earning is exports based. 2. Highly qualified and skilled management. 3. Own power generation plant. 4. Latest mechanized machinery is involved in almost the divisions replacing the old ones. 5. Nishat textile is a market leader and contain big market share in textile sector due to its best working environment. 6. High quality products.
0.06
7. Equipped with MIS System.
0.05
8. National textile provides regular personal development and training courses to its employees. 9. Nishat is a green company and has got certificates of ISO 9001, IKO –TEX 100, SA -8000 and city pad. WEAKNESS:
0.10
4
0.4
3
0.3
0.15
3
0.45
2
0.3
0.08
3
0.24
3
0.24
0.06
4
0.24
4
0.24
0.05
2
0.1
4
0.2
3
0.15
4
0.2
0.03 0.05
10. Less promotional activities.
0.05
11. High cost of production.
0.15
4
0.6
3
0.45
12. Small international market share as compared to the potential. 13. Fluctuations in the rates of the raw materials. 14. Lack of benefits and rewards for the employees. 15. Competitors from Asia have come up in a big way with lower prices resulting
0.04
1
0.04
4
0.16
0.05 0.03 0.05
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from lower overhead, cheaper and better raw materials and machinery. TOTAL:
1
3.34
4.39
EVALUATION On the basis of EFE IFE, BCG MATRIX & GEAND STRATEGY MATRICES we have constructed QSPM for Nishat mills. 1=not attractive 2=somewhat attractive 3=reasonably attractive 4=highly attractive OPPORTUNITIES •
The future expectations from the UAE markets are favorable for the product
development so it is given high rates. •
Increase in the production capacity could also be favorable for the product development
in terms of increase the market share abroad and this factor is also the base to provide the product diversification in terms of producing hand bags, bridal wear, woolen stuff, curtains and other ready made items. •
The increase in the variety of product line could be a very beneficial feature to increase
the related product diversification nationally so it is ranked higher. •
The hiring of added skilled staff would be more favorable option for the product
development in abroad because as for the product diversification at national level, the company already has enough capable workers to do the tasks. •
The governmental policies for the interest of exporters and investors are a favorable
option in the development of the products in terms of their increase in market share abroad. So, we have given it high rates.
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•
By using the already installed stitching unit the company can diversify its productions
that are why we have ranked it higher. THREATS •
The monetary policies, economic and regulatory policies and inflation are the factors
that reasonably affect the development of products abroad. •
Exchange rate fluctuation will impact us only in that case when we will go for foreign
trade so we will rate it high in that case. •
Increase in the competition is risky for both markets, national and international. But
nationally the brand image of Nishat is much developed as compared to the markets abroad. •
The uncertainty in the political and economic conditions will more affect the exports as
compared to the related product diversification nationally. STRENGTHS •
Highly qualified management is the best factor for related diversification in terms of
efficiency so its rated high & for product development in terms of exports its rated reasonably attractive. •
Own power generation plant is reasonably attractive for related diversification because
if we go for this strategy Nishat has to installed more power generation plants & in terms of product development it’s somewhat attractive. •
Latest machinery is rated 3 reasonably attractive for both strategies because to
implement both strategies this factor has an important impact on Nishat. •
Market leader is rated higher for both strategies because this factor can help to make
strong brand image in local as well as in foreign markets. •
High quality products is rated higher 4 for product development in terms of exports
because Pakistan is under developed country & require certain ISO standards to meet the requirements in foreign countries.
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•
Green company & ISO certified is a certificate to operate in foreign markets so its rated
higher 4 foe strategy # 2. WEAKNESS •
High cost of production is rated higher for related diversification because this factor can
badly affect to implement strategy # 1. •
Small international market share is rated higher for strategy # 2 because this factor can
effect to implement strategy # 2.
CONCLUSION The result of QSPM clearly showing that strategy # 2 product development in terms of exports have high attractive score as compared to related diversification strategy #1.this TAS (total attractive score)is showing that Our strengths are more supportive to implement strategy # 2 and its favorable for Nishat to implement strategy # 2.
STRATEGY IMPLEMENTATION DOMESTIC TO GLOBAL EVOLUTION •
As we have selected the strategy number two, the Product Development in terms of increase in exports, now we need to prepare the action plans to implement it. The main objective of our strategy implementation is to expand our business in the United States, European Union, India, UAE and further countries where there is a need to cater the textile sector. Nishat is planning to form partnerships with local incorporated cloth companies in other countries, still develop products, services, and marketing campaigns designed to appeal to customers in other countries.
•
NML develop a strategy taking into account known governmental regulations, one language (generally), and one currency in a domestic market, it must consider and plan
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for different levels and kinds of governmental regulation, multiple currencies, and several languages in the global market. The policies made for the strategy implementation includes: •
Intercultural managerial policies incorporated according to international market.
•
Development of international strategies
•
Focus on Regiocentricism
•
focus shifted from domestic to geocentricism by inculcating world market strategies
•
Nishat policies addressing the social accountability issues
•
Policies based on ISO 14001 standards to controls activities that have an effect on the environment.
•
Employee training activities.
•
Issues related to suppliers management in abroad.
•
Assurance of the proper implementation of the ISA 9001 internationally.
The resources required for the strategy implementation includes the: 1. Financial resources: Capital and budgeting required supporting the product Development in terms of increase in exports 2. Physical resources: The use of mechanized machinery, automation and installation to reduce the manpower efforts in producing excessively for the exports. 3. Technological resources: The use of increased number of software, hardware and communication tools.
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4. Human resources: Human resources are the core competencies of the firm. To manage them workshops, training programs and seminars are organized by using the efficient leadership skills.
EVALUATION AND CONTROL We answer the following checklist to check the benefits determined by the implemented strategy to Nishat: •
Is the strategy following the time management policy? YES .They can adhere to
time management constraints the ability to plan. Make appointments, to think, and stick to our plan. •
What is the response to Industry and market? Through Environmental scanning and
market analysis we will be able to encounter what others in industry are doing, who the market leaders are and where our company stacks up, and what the best practices are. •
Is the strategy assuring R&D practices? YES. By hiring more competent personals
we need to make sure the company is developing the right new products for the markets we serve and for new markets we want to enter. •
Knowledge about the competition. Having a good idea what our competition is up to.
We must also know what new competition might arise from technological or regulatory changes. •
What kind of Strategic hiring is required? Hire local researchers which are doing more acquisition and competitor studies, segmentation and market structure analyses, and basic strategic position assessments. To the costs and methods that are workable in local markets. •
Is the strategy financially stable? YES .we need to know the cash ramifications of our decisions and the company’s progress. We must focus on cash flow not profit. And we need a business model that explains the ramifications of our decisions, and what happens beyond our control.
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REFERENCES http://www.referenceforbusiness.com/management/Str-Ti/Strategy-in-the-GlobalEnvironment.html#ixzz1gWwCBgZm
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