S[1].m. Final Project

Contents Vision Mission Statement Introduction History Mission Statement analysis External Assessment Internal Assessment Objectives &Goal Strategy Formulation Frame work Input stage (IFE, EFE, CPM) Matching stage (Space, Tows, Grand Strategy matrix, BCG, IE matrix) Decision stage (QSPM) Strategy Structure match Strategy Evaluation

Vision Statement We aim at seeing our firm to be model manufacturing unit producing high quality t-shirts complying with requirement of quality. Management system is continuously improving its effectiveness for total customer satisfaction. We wish to play a leading role in the knitting sector by keeping us substantial presence in the export market.

Mission statement

1- To purchase and install state of the art machinery and to acquire sophisticated process technology to achieve maximum growth in a competitive quality environment. 2- To exercise maximum care for improvement of quality of our products by implying a team of high skill technicians and professional managers. 3- To strive hard to develop new markets for the sell of our products internationally. 4- To improve customer satisfaction level by adhering strictly to quality requirements of our customers in export market and by improving communication with customers for receiving prompt feedback about quality of our product. 5- To attend to the prompt resolution of customers complaints by taking timely corrective measures to redress the quality complaints. 6- To improve logistics facilities for our customers dispatch program and issue all shipments delivery documents well in time. 7- To make comprehensive arrangements for the training of our workers technicians, managers. 8- To promote team work sense of transparency and creativity in our professional and technical people.

Introduction

Shahkam textile mills is located at 23km multan road Lahore. It was started in 1992. its total production is exported out not a single piece is sold with in the country. There are two local competitors Naveena textile and Masood textile and international competitors Srilanka , China and India. The whole textile industry is going to decline due to political instability and terrorism and load shedding issues. The competitive edge if the company is that they have strong relation with the political regularity authorities and they have their own yarn production so that they are able to fulfill any order with sixty days. The company has its own buying and purchasing center in Lahore. They also operate in Faisalabad and Sialkot. The financial crisis in USA is major setback for the firm because the demand is affect regarding products and other reason is lack of direct contact with the customer. The firm has to first contact with India. The head office of American Eagles, GAP, SPRING FIELD, is located in India. As for the relationship is concern they personally donot like to trade with Pakistan. Due to reason of terrorist attacks in Mumbai the trade or relation with India is going worst. So there is the problem of communication which is creating problem for the industry as well. And other SBU of Shahkam Textile is Shahkam sugar mills. `

History Shahkam industries (Pvt.) Limited was founded in 1992as a small, family oriented Knitwear Factory with 200 employees and a production capacity of 2000 garments a day. Over the years the Owners and Management have

actively participated in today operations and functioning of the Company. Heavy levels of re-investment and expansion have taken place in a series of a year. In 1996 Yarn dying was added, in 1998 stripers were brought, and in 2002 stitching was expanded. Today in 2009 Shahkam is Pakistan’s biggest composite, vertical Knitwear facility. It has a capacity for 60,000 dozens/month and all the subsidiary departments are within the four walls of the Factory. The total land mass is 961,352 Square Feet and total building mass is 517,733 Square Feet

Mission statement Analysis: Shahka m

Customer

Product

Market

Technology

Philosophy

Concern for growth &profitability

Concern for employees

Concern for public image

Self concept

Y

Y

Y

Y

Y

Y

Y

N

Y

`

PEST Analysis In PEST analysis we discuss the political , economical , technological and socio cultural forces which can effect the industry.

Political forces: At this level there is no favor has been so far provided to textile industrialists. As for our international competitors are concerned their government provide them many incentives like export rebate, taxes relaxations etc. As the result the textile industry is flourishing in Bangladesh and in India. They are grapping the maximum share of market. Economical forces: The financial crisis in USA and increasing inflation rate has reducing the purchasing power of customer. Most of our customers in USA divert to India and Bangladesh because they have economy of scale in their product as far our products are concerned. Technological factors: Technological changes affect many parts of the industry now customers required the digital printings on shirts. Shahkam textile has the latest technology (stypes shirts) and anti chemical technology which save the human body from allergic disease. Socio cultural:

Industry analysis Threats of new entrance

Shahkam textile has no threats of new entrance because the whole industry declining due to financial crisis and energy crisis. There are many barriers to entry 1-capital requirement A huge amount of capital is require to enter in this industry so capital requirement is a big barrier for the new entrance. 2-Economy of scale Existing firms have the economy of scale so it is difficult for the new entrance to achieve the economy of scale in such conditions where the whole industry is declining. 3-Product differentiation Existing firms like shahkam have the strong brand image in the international market as well in the mind of customers. It is difficult for the new entrance to compete the industry in such conditions where the competitors have the strong brand image. Retaliation of firms: Shahkam, Masood, Naveena textile are the major firms in textile industries there is net to net competition among these firms so its difficult for new entrance and can survive.

Bargaining power of suppliers China’s market is a most economical and big supplier of different Textile accessories in Pakistan as compare to other suppliers. In the recent conditions bargaining power of supplier is very high in this industry because satisfactory substitute products are not available to the industry.

Bargaining power of buyers Us customers have so many options because Bangladash and India is capturing the customers from USA because they have the economy of scale due to government support so the buyers have strong bargaining power.

Intensity of rivalry among competitors Visible dimensions on which rivalry is based include price and quality and stability in the country. Unfortunately due to instability the foreign buyers are shifted to other countries like Bangladash and India. All the firms are mutually dependant actions taken by one country.

Industry analysis: Following the study of industry forces the textile industry has become an unattractive industry because it has strong entry barriers. Bargaining power of suppliers and customers are very high and firms face strong competition on domestic and international level. These industry characteristics make it very difficult for firms to achieve strategic competitiveness and earn above average return.

Opportunity

1-they can deal in local market Shahkam Textile can deal in local market to open their outlets

2- Reducing cognitive dissonance Textile can reduce the cognitive dissonance by getting the USA customs Certificate (CTPAT)

3-Latest technology It can acquire new technology related to digital printing machines.

4-Expand in target marketing They can expand their target market in Europe because they just 5% trade in Europe and 95% in USA.

5-Advertisement They can do promotion online to expand their target market.

Threats 1-instable political system Due to instable political system of Pakistan the foreign customer hesitate to trade with Pakistan.

2-Terrorism Due to the increasing threats of terrorism trade and investment has effected in Pakistan.

3-International competitor Bangladesh and India are the major competitors at international level which is attracting the customers. Due to

stability of there countries and incentives given by the their Govt.

4-constant change in industry Due to the energy crisis and lack of Govt incentives there is a constant change in industry 5-

Government policies in different countries

Incentives like rebate on export are not given by the Govt to the Textile industry in current situation.

6-Inflation Financial crisis in USA effected badly and reduce the buying power of our customers.

Internal Assessment Strength: 1-Quality We have a separate team of 400 Quality Personnel who report directly to the CEO because Our Quality is our future.

2- Effective Information System We at the Shahkam have extensive information and experience of our client’s needs and requests and take special care to fulfill them.

3-Market Relations The management of Shahkam takes special pride in their integrity not only with their buyer but also their suppliers. We never right a claim that is above the actual cost price and have always paid our suppliers on time and in a fair manner.

4-Techonological edge 43 stripers in all under one roof, 49 knitting machines, mechanized calator knitting inspection machines, 97 flat knitting machines including 12 special gauge collar machines.

5-Labour Shahkam has a very strict code of conduct with regard to its attitude towards labor. The owner of the company are fully expected by the company itself uploads these rules and regulations.

6-Own Equity finance Shahkam Textile is doing its whole business on Equity base.

7-ISO certified Shahkam is certified ISO 9001 related to quality, ISO 14001 related to environmental issue.

8-Effective management Shahkam Textile measures effectiveness and efficiency of all level of managers and how it will achieve appropriate objectives.

9-Loyal customer In B2B market it has some major loyal customers in USA like GAP (1500 outlets) and Hawk etc.

10-top ranking Shahkam textile is top ranking firm of Pakistan Textile industry.

Weakness 1-Spinning unit Lack of Spinning unit as compare to its competitors

2-lack of energy resources It has no alternative or self energy resources.

3-Weak R&D In Pakistan there is no suitable research and development system regarding to knitting industry.

4-No direct marketing It is not dealing with USA customers directly lack of direct

contact with the customer. The firm has to first contact with India. The head office of American Eagles, GAP, SPRING FIELD, is located in India.

5-Lack of efficiency in solid garment The firm has lesser machines regarding to manufacturing solid garments and digital printing garments. 6-lack of innovation

Due to mechanistic culture and constant change in industry there is no innovation in the firm.

Strategy Formulation Frame work Strategy formulation frame depends upon three stages  Input stage  Matching Stage  Decision Stage Input Stage

External factor Evaluation Matrix (EFE)

Key external factors

Weight Rating

Weighted Score

Dealing in local market

.1

4

.4

Reducing Cognitive dissonance

.1

4

.4

Latest technology

.1

3

.3

Expansion in target market

.1

3

.3

Advertisement

.1

2

.2

Instable political system

.1

4

.4

Terrorism

.1

2

.2

International competitor

.1

3

.3

Constant change in industry

.1

2

.2

Inflation

.1

2

.2

Opportunities:

Threats:

TOTAL

2.9

This company is earning above average return.

Strengths Quality Effective management Market relations Technological edge Labour Self finance ISO certified Loyal customers Top ranking Effective information system Weakness Spinning Unit Lack of energy resources Weak R&D Lack of Direct Marketing Lack of Efficiency in solid garments Lack of innovation Total

Weight

Rating

Weighted score .4 .36

.1 .09

4 4

.08

4

.32

.07

4

.28

.07 .05 .04 .04

3 3 3 3

.21 .15 .12 .12

.03 .03

3 3

.09 .09

.1

1

.10

.1

2

.2

.1 .05

2 1

.2 .05

.03

1

.03

.02

1

.02 2.62

IFE matrix(internal factor evaluation)

Shahkam Masood

Critical success factors

Weight Rating

Score

Rating

Score

Price competitive

.2

4

.8

4

.8

Product quality

.2

4

.8

3

.6

Staff management

.15

4

.6

3

.45

Financial work

.15

3

.45

3

.45

Customer relation

.1

3

.3

3

.3

Good will

.1

3

.3

2

.2

Share of market

.1

4

.4

2

.2

Total

3.65

CPM(competitive profile matrix)

3.0

SPACE Matrix Conservative

+6 +5

FS

Aggressive

+4 +3 +2 +1

CA

-6

-5

-4

-3

-2

-1

(

-1

+1

(1.34, 0.33)

+2 +3

+4

+5

IS

+6

-2 -3 -4 -5

Defensive

Competitive

-6

ES

Ch 6 75

Copyright 2007 Prentice Hall

Financial Strengths: 1) The firm is doing its business on self equity finance based.

+5 2) Highest revenue generator. Firm total income is 20.8 million dollar in

2007.

+6

3) The firm has strong relation with banks and they can gain the loan

easily from banks.

+4

Total

+15

Industry strength: 1) Strong Entry barriers

+4 2) Strong brand image in the foreign market

+4 3) Retaliation among the firms

+2

+10

Total Environmental stability:

1) Underdeveloped country like Pakistan has experiencing high inflation & political instability. -4 2) Due to energy crisis this industry is depressed. -3 3) Terrorism has created the instability throughout the industry. -4

Total

-11

Competitive Advantage: 1) Best quality provider -2 2) Concern for labour -5 3) Firm has large customer base -2

Total

-9

FS+ES =

5+-3.66=

1.34

CA+IS =

-3+3.33=

0.33

Strength

Weakness

1-Quality 2-Effective information 3-Market relation 4-Economy of scale 5-Labour 6-Self finance 7-Effective management system 8-Loyal customer 9-ISO certified 10-Top ranking

1-spinning Unit 2-lack of energy resources 3-weak R&D 4-No direct marketing 5-Lack of efficiency in solid garments 6-Not serving Asian market

Opportunity

SO Strategy

WO Strategy

1-Deal in local market 2-Reducing cognitive dissonance 3-Latest technology 4-Expension in target market 5-Advertisement

S(6)O(1) New market Development

W(5)O(3) Using latest technology to increase efficiency in solid garments

Threats

ST strategy

WT Strategy

S(4)T(3) Cost leadership

W(6)T(5) Research viability of entering other foreign market.

1-Instable political system 2-Terrorism 3-Competitors 4-Constant change in industry 5-Chsnging Govt regulations

Tows matrix

Grand Strategy Matrix:

Rapid Market growth

Quadrant2

Quadrant 1 Market Development

Weak Competitive Strong Competitive Position

Position

Quadrant 3

Quadrant 4

Slow Market Growth

(BCG) Boston Consulting Group Matrix:

1 0.9

0.8

0.7

0.6

0.5 0.4

+20 +15

0.3

0.2

0.1

0

?

+10 +5

Pickle s

0

-5 -15 -2 0

Division RMSP 1-Knitting

0

Sales(millions) % sale IG Rate% Our market share x 100 Benchmark 30427857 x 100= 100% 30427857

profit &profit

 The textile growth rate is -8.8 and firm’s share is 100% because they

are market leader. Shahkam Textile division positioned in Quadrant 3 have a high market share position but compete in a low growth industry called CASH COWS because they generate cash in access of their need. They should be managing to maintain their strong position for as long as possible.

According to recent figures, the Pakistan textile industry contributes more than 60% to the country’s total exports, which amounts to around 5.2 billion US dollars. The industry contributes around 46% to the total output produced in the country. In Asia, Pakistan is the 8th largest exporter of textile products. Shahkam Textile in Pakistan has a distinctive image in the industry. Contribution to GDP and employment The contribution of this industry to the total GDP is 8.5%. It provides employment to 38% of the work force in the country, which amounts to a figure of 15 million. However, the proportion of skilled labor is very less as compared to that of unskilled labor.

Organizational Hierarchy Chairman&CEO

Marketing MANAGER

Finance MANAGER

Production MANAGER

HR MANAGER

Functional Structure for implementation of new market development: Chairman CEO R&D

Marketing

New product

Marketing

Operation

Finance Human Resources

 Marketing is the main function for new market development  For new market development R&D is emphasized to position the product in the mind of customer in new market.  More functions are decentralized but marketing may have centralized staffs that work closely with each other.

Strategy Evaluation: New market development strategy is very suitable strategy for Shahkam Textile because it is consistent with our long term objectives to increase the market share. It is phisible because it is compatible to our operation and resources. It also gives advantage over the competitor to enhance the market share and target population.

Income Statement PROFIT AND LOSS ACCOUNT FOR THR YEAR ENDED DECEMBER 31, 2007

SALES – NET COST OF SALES GROSS PROFIT OPERATING EXPENSES ADMINISTRATIVE SELLING&DISTRIBUTING OPERATING PROFIT FINANCIAL AND OTHER CHARGES OTHER INCOME

NOTE

31-Dec 2007 DOLLARS

20 21

30427857 8970501 21457356

22

253601 226446 20977309

23

24 25

BEFORE TAXATION TAXATION PROFIT AFTER TAXES

43036 385 20934658

27

53326 20881332