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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2

TABLE OF CONTENTS

PAGE NO

TOPICS

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

3

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 ANALYSISNISHAT GROUPNISHAT GROUP

INTRODUCTION 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

5

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

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incorporated in 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:

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P Political

E Economic

S Social

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.

8

Poor monetary & fiscal policies of Pakistani government have adverse impact on

NML.

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 per-meter. 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 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 textile2) Saphire textile3) Chenab textile

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4) Kohinoor textile5) Al-karam textile6) Sitara textile7) Gulistan textile

In international market major countries are;

1) China2) India3) Vietnam4) Bangladesh5) Korea6) Pakistan7) 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.

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.

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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.

INTERNAL AUDIT

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STAGE: 1st ----------- INPUT STAGEEFE MATRIXEFE MATRIX

Key factors Weight Rate ScoreOPPORTUNITIES:

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.

0.12 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 local market by using the same Stitching unit. This is also a great opportunity.

0.04 2 0.08

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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

THREATS Weight Rate Score9. There is no consistency in the government policies regarding textile sector

0.12 4 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 Pakistan has resulted in low quality of cotton in comparison to rest of Asia.

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).

0.05 1 0.05

15. The unstable economic condition could affect the FDI’s by reducing the investor’s profit margins.

0.08 4 0.32

Total 1 3.24

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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.

IFE MATRIX

Key factors Weight Rate Score

STRENGTHS1 .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.

0.03 2 0.06

9. Nishat is a green company and has got certificates of ISO 9001, IKO –TEX 100, SA -8000 and citypad.

0.05 2 0.1

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WEAKNESS

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 materials.

0.05 2 0.1

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

FactorsNishat

TextilesKohinoor

Textile Mill

Weight Rating Scores Rating Scores

Customer Satisfaction

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

Promotional Activities

0.10 3 0.30 2 0.2

Persuasion

0.05 4 0.20 3 0.15

Organizational involvement of employees

0.05 3 0.15 4 0.2

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

STAGE: 2ND -----MATCHING STAGE

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SWOT MATRIX

STRENGTHS WEAKNESSES1 .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 product7. 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 material4. Lack of benefits and rewards for the employees.

OPPURTUNITIES S-O STRATEGIES W-O STRATEGIES

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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 production3. 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 quality8. 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 pro-active 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

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1. There is no consistency in the government policies regarding textile sector2. Increasing rate of electricity and GST are also big threats.3. The lack of R&D in the cotton sector of Pakistan has resulted in low quality of cotton in comparison to rest of Asia.4. Currency fluctuations and exchange rates can also create problems for NML.5. More and more competitors (National and International) are entering in the Same markets and offering attractive prices to the customers.6. Uncertain environment.(political, governmental)7. The unstable economic condition could affect the FDI’s by reducing the investors’ profit margins

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 generations plants in all the divisions & sub divisions can reduce the threat of high electricity rates. (S3,T2)4. Enforcement of solid policies and governmental laws made by the national textile training agency to provide training to the employees, this can minimize the inconsistency in textile sector. (S8,T1)5. Equipped with MIS & high quality products can reduces the competition & allows opening the doors in international markets for Nishat. (S7,S6,T5)

1. Strong brand endorsement by national and international models to capture great market share (nationally and internationally). (W1,T5)3. Increase in International market share in India, China, and Middle East because of low price fluctuations in currency. (W3, T4)4. Improve quality of raw material and reducecost by importing modern technology which in turn will make provision of goods to customers at lower prices (W4, T3,T5)5. Restructuring HR Policies for employee satisfaction and retention (W5, T5)

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

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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.+1

NML has adequate financial resources.+3

NML uses of best machinery available.+2

NML has a large domestic market.+3

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

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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

-17.0

CONCLUSION

FS Average: +21/ 7 = 3.00

IS Average: +18/ 7 = 2.57

ES Average: -22/ 7 = -3.67

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CA Average: -17/ 7 = -2.43

DIRECTIONAL VECTOR COORDINATES

X-axis

= (-2.43) + 2.57

= +0.14

Y-axis

= 3 + (-3.67)

= -0.67

THE BOSTON CONSULTING GROUP (BCG) MATRIX

No of division

Description Revenues %Revenues

Profits %profits

Market share

Relative market share

Growth rate

1Nishat 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%

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%

3 Power plant Rs.10902 13.9 629556.4

570.1 0.7% -88%

Total Rs.78,044 100 Rs.11156 100

25

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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

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I

Grow and Build

II

Grow and Build

III

Hold and Maintain

IV

Grow and Build

V

Hold and Maintain

VI

Harvest

VII

Hold and Maintain

VIII

Harvest

IX

Divest

3.24 2.75

HIGH

3.0 to 4.0

2.0 to 2.99

MEDIUM

1.0 to 1.99

LOW

EFE

TO

TAL

SCO

RE

+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

Grand Strategy Matrix

Rapid Market Growth

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Quadrant 2 Quadrant 1

Market development Market development

Market penetration Market penetration

Product development Product development

Horizontal integration Forward integration

Divesture Backward integration

Liquidation Horizontal integration

Related diversification

Quadrant 4 Quadrant 3

Retrenchment

Related diversification Related diversification Unrelated diversification Unrelated diversification

Divesture Joint venture

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

29

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

Strategy # 1

Related product diversification(Bags, bridal dresses bridal

grooms, curtains)

Strategy #2

Product development in terms of increase

in exports.

KEY EXTERNAL FACTORS

Weight AS TAS AS TAS

OPPORTUNITIES:

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.

0.12 1 0.12 4 0.48

2. Increase in production capacity.

0.02 3 0.06 4 0.08

3.Increase in variety of product line

0.04 4 0.16 1 0.04

4. More betterment could be 0.05 2 0.1 3 0.15

30

achieved by hiring more efficient and skilled staff. 5. Government could apply sustainable policies for the interest of the exporters and investors

0.12 1 0.12 4 0.48

6. Nishat can introduce its garments in the local market by using the same Stitching unit. This is also a great opportunity.

0.04 4 0.16 1 0.04

7. Various training courses could be adapted in the company to train the workforce to improve and uplift the quality.

0.02

8. Installation of new combined heat and power plant.

0.06

THREATS:

9. There is no consistency in the government policies regarding textile sector

0.12 1 0.12 3 0.36

10. Increasing rate of electricity and GST are also big threats.

0.12

11. The lack of R&D in the cotton sector of Pakistan has resulted in low quality of cotton in comparison to rest of Asia.

0.03

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 0.05 1 0.05 3 0.15

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(political& governmental).

10. Increasing rate of electricity and GST are also big threats.

0.12

TOTAL: 1

IFE

STRATEGIC ALTERNATIVES

Strategy # 1

Related product diversification(Bags, bridal dresses bridal

grooms, curtains)

Strategy #2

Product development in terms of increase

in exports.

Weight AS TAS AS TASSTRENGTHS:

1 .The bulk of the earning is exports based.

0.06

2. Highly qualified and skilled management.

0.10 4 0.4 3 0.3

3. Own power generation plant. 

0.15 3 0.45 2 0.3

4. Latest mechanized machinery is involved in almost the divisions replacing the old ones.

0.08 3 0.24 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 4 0.24 4 0.24

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6. High quality products. 0.05 2 0.1 4 0.2

7. Equipped with MIS System.

0.05

8. National textile provides regular personal development and training courses to its employees.

0.03

9. Nishat is a green company and has got certificates of ISO 9001, IKO –TEX 100, SA -8000 and city pad.

0.05 3 0.15 4 0.2

WEAKNESS:

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.

0.04 1 0.04 4 0.16

13. Fluctuations in the rates of the raw materials.

0.05

14. Lack of benefits and rewards for the employees.

0.03

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

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

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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.

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

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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.

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.

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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 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.

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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.

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.

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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.

REFERENCEShttp://www.referenceforbusiness.com/management/Str-Ti/Strategy-in-the-Global-Environment.html#ixzz1gWwCBgZm

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