4Small Business Management

SBM Term Report

Submitted by:Ahsen Aamir MuradFaraz NafeesFaria AhmedSaad Imtiaz

HRM Term Report

[Type the document subtitle] | Maham Hussain

ContentsIncorporation of Business4About Sara Solar (Pvt) Ltd.4Muhammad Zaid Azam4Market Research5Development of Business Plan5The Actual Launch5The Decision5Taxation (Sales, Income Tax etc.) & Regulation (Patents, Trademarks, Copyrights etc.)6Red Ocean/ Blue Ocean:7Business Initiation (Finance, Marketing & Location)7Finance:7Marketing:8Promotional Strategy of Sara Solar8Target Market9The Problem9Evaluation of the Alternatives10The Final Call10Location:11Management (Layouts, HR, Operations etc.) & Use of Technology12Management12HR function:13Manpower planning, recruitment and selection:13Performance Management:13Compensation and benefits:14Training and Development:15Labor Laws:15Organizational Development:15Layout:16Managing Operations & Risk & Opportunity Analysis16Operations16Risk and Opportunity Analysis17SWOT Matrix18Formal Business Associations20Issues and Challenges20Government20City20Environment21Analysis and Recommendations21Appendix23Contact person- Mr. Zaid Azam23About Sara Solar24Solar Outdoor Lighting25Solar Stand Alone Power Systems26Solar Tubewells27

Management (Layouts, HR, Operations etc.) & Use of TechnologyManagementSara Solar is a business on a partnership. The partnerships are between family members, father, and son. It is for this reason that the management flow is very hierarchical. Management is a tool most used by the CEO and then further down used by the directors i.e. Finance Director, Marketing Director, HR manager, etc. The Organization Chart is as followsThe CEO is the main decision maker at Sara Solar, he believes everything needs to be in his control and he needs to stay as the role model for all the managers and directors working under him. Mr. Muhammad Zaid Azam is a firm believer of the quote: Effective leadership is putting first things first. Effective management is discipline, carrying it out. By Stephen Covey. Hence, it is due to this reason that he believes more in an active role in the organization where the CEO is the key decision maker as he wants to lead by example, a true characteristic of a leader.

HR function:The Human Resource department of Sara Solar is mainly managed by 3 personnel, including the HR manager. The unit of these three HR personnel is responsible for managing the entire HR division of the company which encapsulates logging, compensation and benefits, training, appraisals, recruitment and manpower planning. For a company employing over 300 people and possessing the potential of expanding this human capital base substantially in a short period of time, the HR unit of merely three personnel is not sufficient. The company requires a stronger and larger HR team to aptly manage the numerous Human Resource aspects the current team is not large enough to handle. Manpower planning, recruitment and selection:Manpower planning for Sara Solar is only designed for two years. For a company which involves functions and products that focus on being long-lasting and sustainable, surely a consistent manpower is needed that can match its pace with the life-cycle of its products and eventually the company itself. However, despite a short-term manpower planning, the attrition ratio of the company is relatively low. This can be attributed to the fact that there are not many competitors in the renewable energy market to whom Sara Solar can potentially lose its talent. The human capital requirement of Sara Solar is primarily the well-educated white-collar employees with a specialization in engineering owing to the type of products offered by the company. Keeping this requirement in perspective, the company recruits directly via penetrating into engineering universities like University of Engineering and Technology (UET), Sir Syed University of Engineering and Technology (SSUET) and National University of Science and Technology (NUST). Advertisements for job applications are solely on the internet through Rozee.pk website, without any print advertisement. Selection criterion for Sara Solar is only based on the required engineering qualification and interview. Since the company is very focused and streamlined in its recruitment strategy, only specialized and specifically qualified personnel apply and are hence selected. It works in favor of the company as it makes the process of recruitment and selection more efficient and less time-consuming. On the flipside, the applications of only engineering centric applicants deprives the company of the necessary business graduates required to drive the integral management of the company and develop it as a strong corporate entity in its respective industry.

Performance Management:With respect to Performance Management, the company follows an arbitrary method. Employees are not evaluated annually, bi-annually or monthly using sophisticated techniques like the Hay management system; rather they are evaluated daily based on the number of hours they put in. The performance of the employees is measured against the production objectives. Standard process time in production is 20 minutes but in cases where this is exceeded, the supervisor is questioned and his justification impacts his performance for the day. A performance management of such kind leaves huge margin of doubt, uncertainty and requires a strong and fair judgment call from the performance evaluator. Delays in standard time of process can be caused my technical and mechanical faults too; using them as a pre-requisite for measuring an employees performance is not a very reliable and accurate system of performance management. Although a small and medium enterprise cannot invest in comprehensive performance management tools like Hay, they can devise techniques which are aligned with their vision, mission and manpower planning strategies so performance is measured against the long-term plan for that personnel.Lack of explicit and elaborate job description is also responsible for this inefficient performance management system. The absence of tailored objectives for an employee disables the performance evaluators to measure performance against set standards.

Compensation and benefits:Since 95% of the employees are educated at Sara Solar, they are offered salaries which are at par with the market and that is being offered by the comparators to their engineers. The take-home salary is divided into fixed and variable pay where the variable pay is dependent on the number of production targets being achieved. Other perks and bonuses being offered to the employees include a return ticket to employees who are not working in their hometown and medical allowance is provided to approximately 50% of the employees. Rewards in terms of bonuses are given to employees who exceed expectations against the production objectives. Hence, this reward system is individual based, calibrated against performance. In addition, if an employee possesses additional set of skills which the company requires, he/she is compensated accordingly for the extra job undertaken. Benefits provided by other companies like Provident Fund and Employees Old-Age Benefit Institution (EOBI) are all provided to Sara Solars employees. Training and Development:

The first stage of training starts immediately when a person is recruited at Sara Solar. As most of the engineers hired are graduates, they do not own the required practical skills imperative for the job they would be undertaking. This is usually an in-house training where senior and experiences employees train the newly recruited employees. During the course of their employment, employees are then sent abroad to acquire more technical skills and diversify their skill set. Furthermore, the employees have the freedom to put forward a request to attend their job related training and the company gives its approval after diligent contemplation.

Labor Laws:Sara Solar claims that it strictly adheres to all the Labor laws of Pakistan outlining the working hours, wages, holidays, overtime compensation and baseline safety precautions. The company as mentioned before majorly employs educated blue-collar engineers due to which it does not have to face issues directly involving the Labor Unions for unskilled employees.

Organizational Development:Sara Solar is a Sethiya company where this subsidiary of Sara Corporation mushroomed under the family business. The dynamics of family business is such that the control lies with the family members and they are the sole drivers of the company. Given this type of company, the company does not have a formal documented mission statement, vision or standard values which are developed in the bigger picture of corporate culture. Due to this, the company has a very primitive corporate culture which can hinder future prospects of organizational development. The limitation of a family business further hampers the entry of new and fresh talent who can attain senior managerial positions to drive the company towards corporate excellence. Hence, employees have no strategically devised growth plans which serve as motivation resulting in greater productivity.Therefore it is highly imperative for Sara Solar to focus on its succession planning whereby a family member is nurtured and trained to take over control of the family business in the coming years.Layout:The production layout used by Sara Solar is Product Layout. A product layout (also called a flow-shop layout) is one in which equipment or work processes are arranged according to the progressive steps by which the product is made. The path for each part is, in effect, a straight line. Production lines for shoes, chemical plants, and car washes are all product layouts.

As the raw material is imported from abroad and the assembling is performed in Karachi, Pakistan. A product layout suits the needs of the firm. It is a layout in which a strict format is followed in the production plant whereby there is a production line and each (for example) piece is added onto the product step by step in a confined manner. This is the practice employed at Sara Solar which has proved to be very successful and also helped Sara Solar cut down on unnecessary expenditure.

Managing Operations & Risk & Opportunity AnalysisOperationsSara Solar also faced a couple of occasions when the organization ran out of cash and there was a liquidity crisis, but again managed to do well. He says, such cyclical fluctuations are inevitable whatever the size of your organization may be. He says he never had any specific long-term goals in life except for a feeling that he ought to do something substantial in life. He thinks entrepreneurship demands a lot from a person especially when it comes to managing the work-life balance. It sometimes gets a bit difficult to give time to his family, but he says the beauty of life lies in understanding and managing time. Its about fulfilling ones responsibilities towards everyone who is related to us. According to him, beside education, his family is his greatest asset. He says time required for doing business is ever-increasing. As much the business grows as does the responsibility of the entrepreneur. However, he acknowledges the fact that his job has become more managerial now, and the business is largely in a maturity phase, where it requires lesser initiative from the founder. He plans to go public in the future. He thinks it is only to a certain extent that a business can be effectively run by an entrepreneur. A time comes, when professionals should be allowed to come in and take reins. Although professionals could be brought in by the founder too, but for them to work more effectively, the ownership structure has to be made conducive for them, which can only be made possible through a public limited company. Mr. Zaid never went for creating a partnership initially because of a couple of reasons: First, it was his wish to take his business forward the way he wanted to take. He didnt want anyone elses vision get mingled with his one. Second, he thought it would be very difficult to find a person who could share your style of doing things and who thought the way you did, thus why bother. Initially, he got his finances from his father in the form of a loan that he continues to repay. Since he always wanted to be a self-sufficient individual he preferred a loan instead of a financial assistance as is common in the Pakistani society. He seems a bit tired, as he lightly says that he plans to work only 180 days a year and he would love to retire and live a peaceful life at only 45. Zaid thinks, everyone can become an entrepreneur. Its about having a clear vision and a deep understanding of a socioeconomic gap that can be filled through a venture. Moreover, he is of the school of thought that entrepreneurial attributes are largely learned and not innate. Moreover, for Zaid, spirituality and especially religious spirituality are essential for an entrepreneur to succeed. He says it is absolutely necessary to work hard for a living, but what you get is Gods blessing. He thinks, his belief is a very big source of internal strength, especially at a time when he has to confront failure in life. It is absolutely necessary that one has the spiritual strength to tackle the especially crude situations that an entrepreneur has to confront.Risk and Opportunity AnalysisFor doing this we decided to use the SWOT matrix.The Strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix The SWOT matrix is a matching tool that helps develop 4 strategies SO (strengths-opportunities) Strategies, WO (weaknesses-opportunities) Strategies, ST (strengths-threats) Strategies, and WT (weaknesses-threats) Strategies. We need to match external and internal factors to develop a SWOT matrix. By doing so we capitalize on external opportunities using internal strengths. Every firm wants to try and make their weaknesses change to their strengths. WO strategies help an organization to overcome their weakness by concentrating on opportunities. At times their might be opportunities that can be tapped on but due to internal weaknesses they might not be able to do so. ST strategies use an organizations internal strengths to overcome external threats, this does not mean that we deal with every threat face to face but it means we deal it tactfully. WT strategies require an organization to reduce internal weaknesses and avoid external threats, such firms are in trouble and they need to think about retrenchment, diversification or in worse situations even liquidation. Firms use WO, WT and ST strategies to get into situations to apply SO strategies. A SWOT matrix has 9 cells, 4 key factor cells are the ones labelled S (Strengths), W (Weaknesses), O (Opportunities) and T (Threats), 4 strategy cells are labelled SO, ST, WO, WT and the 9th cell always is a blank one. We go about making a SWOT matrix using the following steps. List down the O, T, S and W. Now match the strengths with opportunities and write the SO strategies. Then match the weakness with opportunities and write down the WO strategies. Next step match the strengths with threats and write the ST strategies and lastly match the weaknesses with threats and write down the WT strategies. SWOT Matrix

StrengthsWeaknesses

1Manufacturing setup1Lack of govt support

2Warranty2Financial constraint

3Short lead time3Lack of legislation

4Custimizablity4Lack of skilled man power and retention

5After sales service, knowledge and experince5No set law following in Customs

6Trained Work Force

7Distribution network

8Location

OpportunitiesSO StrategiesWO Strategies

1Prices of Raw Material 1Add 2 new product lines using different raw materials to beta test the price effect (S1, S4, O1)1Earn support through Government Projects (W1, O2)

2Government Projects

3Non reliability of local eletric supply

4Duty on import of solar panels from China

5Expensive Subsitute Energy Fuel

ThreatsST StrategiesWT Strategies

1Exchange Rate Fluctuation1Purchase Dollars as soon as an order arrives to quote price on today's Dollars rate (S3, T1, T2)Lobby to have a regulated law following in Customs for Solar Panel Imports (W5, T2)

2Volatile input cost2Increase distribution network by 20% (S7, T6)

3Fraud3Increase Warranty Expense by 5% to enhance after sales service (S2, T5)

4Uneducated Customers

5Competition (Chinese Solar panels)

6Limited number of Quality Solar Cell Producers

SO Strategies:1. Add 2 new product lines using different raw materials to beta test the price effect: Since Sara Solar has a manufacturing setup (S1), and it has been dealing in customized solar cells (S4), it can capitalize on the decline in the prices of raw materials (O1) through introducing 2 new product lines; a 500watt solar cell line and a 200 watt solar cell line. These product lines will enhance the output potential of the company, in case of bulk orders. WO Strategies:1. Earn support through Government Projects: Sara Solar can divert its efforts to gain the support of Government (W1) in its solar energy business through obtaining Government tenders (O2). Government is looking forward towards alternate energy solutions and is a potential customer for Sara Solar.ST Strategies:1. Purchase Dollars as soon as an order arrives to quote price on today's Dollars rate: Exchange rate fluctuation (T1) causes the prices of raw materials for Sara Solar to vary a lot (T2). Raw material acquisition takes time; therefore purchasing dollars as soon as an order arrives will help in reducing the price variations caused by exchange rate fluctuations. The short lead time (S3) of Sara Solars cell production will enable it to transfer these costs to its customer, thereby further reducing the price variations.2. Increase distribution network by 20%: One of Sara Solars strengths is its distribution network (S7). It can further enhance its network through a 20% increase, which will enable the company to overcome the competition from Chinese solar panels (T5).3. Increase Warranty Expense by 5% to enhance after sales service: The competitive threats from Chinese solar panels can further be reduced through introducing customer oriented after sales services. The introduction of these services will increase the warranty charges, but will give a competitive edge to the company over Chinese cells.WT Strategies:1. Lobby to have a regulated law following in Customs for Solar Panel Imports: A major source of volatility in input costs (T2) is non-documented polices followed by the Customs Office (W5) in applying import duties on the raw materials imported by the firm. The firm can lobby, with support of other solar panel distributors to introduce a documented set of policies for solar cell and raw material imports.

The purpose of a matching tool like SWOT matrix is to identify alternate strategies and not to decide the feasibility of either options or which one to pursue. SWOT matrix has its own limitations. Since SWOT does not show how to do something it should not be the end in itself but means to ends. With the help of this matrix we should be able to start thinking about how we can implement strategies. Since SWOT is a matrix that talks about one point in time, the S, W, O and T might change. And lastly we might overemphasise on a single internal or external factor in making a strategy, and the relationships amongst these factors internally arent expressed in the SWOT either. Formal Business Associations

The formal business associations Sara Solar is linked to are REAP (Renewable Energy Association of Pakistan) and PRCET (Pakistan Council for Renewable Energy and Technology) which is government owned. REAP is the very first registered Association in the field of Renewable Energy, of Pakistan. REAP, is a membership based, non political, nongovernmental, non-profit and non sectarian association, committed to achieve energy independence & reduce green house gases. To achieve its goal, REAP has been organizing events addressing various communities aimed at creating awareness and capacity building regarding Renewable and Alternative energy opportunities. It does lobbying by creating awareness about the industry through promotion efforts from industry as a whole, directed towards legislators and policy makers. It strives to create favorable circumstances for firms within the industry. It also arranges seminars for the awareness of alternate source of energy in the local business environment so that people get to know about how they can use other sources to electrify their setups, whether businesses or houses. The second association that Sara Solar attracts attention of is PCRET, this is government owned. It is brought into existence for the wellbeing of the end customers inlike REAP that is there to help the firms associated with alternate source of energy. They give recommendations to government about policy related issues like subsidies etc.

Issues and Challenges

GovernmentCustom duties are not applicable on Sara Solar, since our custom officials are corrupt Sara Solar has to face inconsistencies in terms of cost of custom clearance. This makes it difficult to calculate costs for the firm and then market accordingly. There is no fixed policy by government for this industry therefore making further investments by those who are already present and those interested to enter becomes difficult.

City Law and order situation in the country is extremely volatile leading to a difficult for businesses to operate. Secondly power outages increase the cost of doing business thus adversely affecting the profitability of firms. Bhatta is taken as an additional cost by all the manufacturers working in Karachi, you can either call it safety money or extortion but everyone working in the local industrial areas need to pay this to the relevant parties in their areas.

EnvironmentThe competition is highly fragmented therefore there is no significant threat from a single source but the sheer number of competitors makes the competitive environment tough.

Analysis and Recommendations

The two product lines of standardized and customized solar panels, simultaneously offered by Sara Solar do not bring out a coherent strategic positioning. Instead, it gives a confused outlook about what actually differentiates Sara Solar against its competitors. Although, just dealing in premium, customized products will drastically increase the cost of selling, it will create room for charging premium prices. Moreover, not to leave the standard specs market to importers, Sara Solar can create a separate division or Business unit, which shall have distinct process capabilities and separate organizational structure and culture. This particular initiative might be costly in the short run, but is expected to reap very high profits in the long-run. Sara Solar occasionally peeps into the installation business for relatively smaller customers, apart from the large ones that cannot be served by the specialized installation companies. This diminishes the magnitude of business for Sara Solars core clients, i.e. the installation companies, resulting in a sort of conflict between the supplier and customer. A way around to tackle this issue, without letting go of the installation business, is to create a new company with a different name and same ownership that handles installation services for Sara Solars clients. This alternative will enable Sara Solar to retain its specialization in B2B business and also allow for greater profits across the value-chain. So far, Sara Solars focus, generally has been building the internal capacity of the organization, rather than paying attention to the environmental forces affecting the profitability of the firm. Notwithstanding the prime significance of internal organizational strength, efforts towards maneuvering the external factors in the companys favor carry no less weight. The company needs to spend on promotion for awareness and demand creation, in addition to committing resources behind the industry association to push the government to strengthen legislation for solar industry. Also, promotional efforts are needed towards strengthening Solar energys image as a feasible alternate energy source For further growth, theres a need for a leaner organizational structure, where more and more decisions are delegated down the organization. With the current decision framework, where almost all the decisions are concentrated with the office of the owner, it is very difficult to achieve growth beyond a certain point. In fact, for Sara Solar to achieve its vision of diversifying into other segments of the alternate energy industry, it is imperative that professionals are given decision rights and responsibilities for different divisions. A sound example can be found in the case of IKEA, where the original founder has reduced his role to one that of monitoring and supervision only. One of Sara Solars shortcomings is its weak supplier power. All the raw materials for Sara Solars products are imported from abroad, which makes it vulnerable to fluctuations in the value of Dollar. Accuracy in cost estimates becomes a goal, difficult to attain, thus adversely affecting profitability. Sara Solar can go about investing in development of local suppliers, especially for raw materials which, in other forms, are already being produced, such as the aluminum and glass sheets. Nevertheless, developing manufacturers of the Solar Cell may be a far-fetched goal in the near future. In the Solar industry, the availability of trained manpower is absolutely crucial. It is a completely engineering based industry in which specialized skills are essential for design, manufacturing, and development of solar panels. However, there is no presence of educational organizations that train such personnel. Rather than sending employees abroad for training, Sara Solar should sponsor one of the local engineering universities to develop a training centre for solar technology.

Appendix

Contact person- Mr. Zaid Azam

About Sara Solar

Solar Outdoor Lighting

Solar Stand Alone Power Systems

Solar Tubewells