Strategic Management Finalproject on Gul Ahmed

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STRATEGIC MANAGEMENT FINALPROJECT

ORGANIZATION STUDIED GUL AHMED PERSON INTERVIEWED Tariq Shamim Durrani Deputy Brand Manager Gul Ahemd Textile Mills

GROUP MEMBERS Muhammad Faizan Maqsood Behzad shami Pehlaj Rai CLASS MBA 4D SUBMITTED TO Sir Naveed M. Khan SUBMITTED ON December 20, 2010

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ContentsCorporate Profile ................................................................................................................. 4 COMPANY HISTORY ...................................................................................................... 4 Corporate Profile Major Companies ................................................................................ 4 Corporate Profile Business Activities .............................................................................. 4 TEXTILES .......................................................................................................................... 4 POWER............................................................................................................................... 4 MANAGEMENT ................................................................................................................ 4 Description of products and services of the company ........................................................ 5 Vision and Mission Statement of the company .................................................................. 6 External factor Evaluation Matrix ...................................................................................... 7 Competitive Profile Matrix ................................................................................................. 8 Internal Factor Evaluation Matrix ....................................................................................... 9 SWOT MATRIX .............................................................................................................. 10 Financial Performance at a Glance ................................................................................... 11 Financial Ratios ................................................................................................................ 13 SPACE MATRIX ............................................................................................................. 15 BCG MATRIX.................................................................................................................. 16 BALANCE SCORECARD............................................................................................... 17 BLUE OCEAN STRATEGY ........................................................................................... 19 CONCLUSION ................................................................................................................. 20

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Corporate Profile COMPANY HISTORYThe story of textiles in the subcontinent is the story of Gul Ahmed. The group began trading in textiles in the early 1900s. With all its know-how and experience, the group decided to enter the field of manufacturing and Gul Ahmed Textile Mills Ltd. was incorporated as a private limited company, in the year 1953. In 1972 it was subsequently listed on the Karachi Stock Exchange. Since then the company has been making rapid progress and is one of the best composite textile houses in the world. The mill is presently a composite unit with an installed capacity of 103,000 spindles, 220 wide width air jet looms, 90 Sulzers, 297 conventional looms and a state of the art processing and finishing unit.

Corporate Profile Major CompaniesThe following is a list of the major companies which comprise the group:

Gul Ahmed Textile Mills Limited Gul Ahmed Energy Limited

Corporate Profile Business Activities TEXTILESIn the textile field, activities start from the spinning of cotton as well as man made fibers and extend to weaving, processing and finishing of all types of cotton and blended fabrics, bed linen, home furnishings, garment manufacturing, etc.

POWERThe group has been a pioneer in the field of power generation. The textile mill runs on self-generation with an installed capacity of more than 20 MW. Gul Ahmed Energy operates a power plant of 136 MW capacity with a project cost of US$140 million located at Korangi, Karachi. The sponsors of this project include the IFC and Tomen Corporation. The project has been in commercial operation since November 1997.

MANAGEMENTManagement of the group is professionally qualified and broadly experienced. The directors have held top positions in various textile bodies, export committees and have also assisted the Government of Pakistan in some of the major trade talks with EC and USA authorities.

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Description of products and services of the companyThe products and services of Gul Ahmed Textile Mills can be divided into two broad categories according to their markets Gul Ahmeds local Market Gul Ahmeds export Market The products in Gul Ahmeds local market category are Lawn Pret line (women category) Mens stitched wear Mens unstitched Home textile Foot wear Perfumes Accessories

The products in Gul Ahmeds export market category are Lawn Pret line (women category) Mens stitched wear Mens unstitched Home textile

What make Gul Ahmed stay? First ETP (Effluent Treatment Plant) in textile sector First yarn mercerizing facility Metal free safety packing zones in all sewing units First textile mill to register carbon credits First rotary machine in Pakistan First to install caustic recovery unit in Pakistans textile sector First compact spinner in Pakistan Using CAD/CAM machines to apply latest design techniques Largest embroidery facility dedicated to home textiles An extensive chain of retail outlets all over Pakistan

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Vision and Mission Statement of the companyVISION Setting trends globally in the textile industry. Responsibly delivering products and services to our partners MISSION To deliver value to our partners through innovative technology and teamwork. Fullfilling our social and environmental responsibilities.

VALUES Integrity Passion Creativity Teamwork

Analysis of Mission Statement According to our Analysis several components are missing in mission statement and the revised mission statement is as follows To serve fashion oriented customers. We ensure that our products are of the highest quality standards by adhering to the most stringent systems and processes while carefully selecting all the best quality inputs from around the globe. Our aim is to ensure that the end customer always gets a unique blend of quality, comfort and fashion which is passionately woven into all our products. We strive to make difference in communities where we operate by following best social & environmental policies and best human resource practices to ahead of the competition and setting benchmark for industry.

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External factor Evaluation MatrixExternal Factor Evaluation Matrix Weighted Weight Rate score 0.05 0.08 0.08 0.07 0.09 0.06 0.04 4 4 3 3 3 3 3 0.2 0.32 0.24 0.21 0.27 0.18 0.12

Key External Factors Opportunities Growth in target market audience Increasing Fashion Awareness Online shopping Social Network Marketing Brand Consciousness Increasing expenditure on shopping Fashion Weeks in Major cities Threats Counterfeiting and intellectual property rights violations Inflation Exchange rate fluctuations Law and order situation Terrorism Increase in interest Rates Cotton Yarn and other Raw material Prices TOTAL

0.12 0.06 0.06 0.08 0.05 0.08 0.08 1

3 2 3 2 1 2 3

0.36 0.12 0.18 0.16 0.05 0.16 0.24 2.81

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Competitive Profile MatrixCompetitive Profile Matrix Critical Success Factors Advertising Product Quality Price competitiveness Management Financial Position Customer Loyalty Global Expansion Market Share Total Weight 0.20 0.10 0.10 0.15 0.10 0.10 0.20 0.05 Gul Ahmed Chenab Group Al-Karam IDEAS ChenOne IDENTITY Rating Score Rating Score Rating Score 4 0.8 3 0.6 2 0.4 4 0.4 4 0.4 3 0.3 3 0.3 3 0.3 3 0.3 3 0.45 4 0.6 2 0.3 4 0.4 3 0.3 3 0.3 3 0.3 4 0.4 2 0.2 3 0.6 2 0.4 3 0.6 4 0.2 2 0.1 3 0.15 3.45 3.1 2.55

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Internal Factor Evaluation MatrixINTERNAL FACTOR EVALUATION MATRIX Weighted Rating Score 4 4 4 4 4 4 4 0.6 0.4 0.2 0.6 0.2 0.12 0.12

KEY INTERNAL FACTORS STRENGTHS

Weight 0.15 0.1 0.05 0.15 0.05 0.03 0.03

Highest Market share Creative designers Fully vertically integrated from fiber to fashion Latest technology engaged 99.99% design quality assurance Strong brand image An extensive chain of retail outlets all over PakistanWEAKNESSES Debt to equity ratio is high .81 EBITDA Margin to sales decreased from 12.49 to 11.92 Demand is higher than production capacity Supply Chain Issues Online shop not fully functional Small share in export market as compare to other local players TOTAL

0.1 0.15 0.05 0.04 0.05 0.05 1

1 1 2 2 2 2

0.1 0.15 0.1 0.08 0.1 0.1 2.87

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SWOT MATRIXSTRENGTHS 1.Highest Market share 2.Creative designers 3.Fully vertically integrated from fiber to fashion 4.Latest technology engaged 5.99.99% design quality assurance 6. Strong brand image 7. An extensive chain of retail outlets all over Pakistan 8. Financial Strength OPPORTUNITIES 1.Growing Demand 2.Internet and Online shopping 3.Global Trade 4.Fashion Weeks in major cities 5. Dubai shopping festival and other expos THREATS Follow the global trends in fashion and make presence in international trade expos and shopping festivals (S2,O5) Collaborate with some designer to make impact in fashion weeks (S6,O4) ST STRATEGIES WT STRATEGIES Drop perfumes and foot wears unless Gul Ahmed develop as a prestige brand (W5,T5) Re launch perfumes with some high profile celebrity as brand endorsement (W5, T5) Improve supply chain by integrating department and processes (W3, W4, O1) SO STRATEGIES Launch its brand in other countries (S6, S3, S6, O3) WO STRATEGIES Make use of internet to cover lost sales (W1, O1,O2) 3.Most of designs are out of stock 4.Sometime designs are there in the magazine but are launched late. 5.Perfumes and footwear are not profitable WEAKNESSES 1.Demand for Lawn is so high that sometime it exceed their production capacity 2.Online shop is not fully functional (does not contain all products of Gul Ahmed)

1.Big players in export markets Dedicated mills for export market to increase export 2.Small share of export market market share (S3, S8, S6, T1, T2) 3. Foreign exchange risk FDI in other countries to take 4.Volatile law and order low cost advantage (S8, situation T4,T1) 5.Other established brands in accessories, perfume foot wear

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Financial Performance at a GlanceProfit and Loss Sales Rs. Million Rs. Million Rs. Million Rs. Million Rs. Million Rs. Million 2010 19,689 2009 13,906 2008 11,726 2007 9,848

Gross Profit Operating profit Profit before tax Profit / (loss) after tax Dividends Balance Sheet Property Plan and Equipment Intangible Long term investment, loans, advances and deosits Net Current Assets Total Assets employed Represented by: Share capital Reserves Shareholders' equity

3,173 1,653 708 478 79 2010

2,359 1,209 170 80 2009 6,106 29 90 (390) 5,835

1,775 936 202 103 55 2008 5,828 28 78 (687) 5,247

1,475 745 262 164 2007 4,703 30 74 (278) 4,529

Rs. Million Rs. Million Rs. Million Rs. Million Rs. Million Rs. Million Rs. Million Rs. Million Rs. Million Rs. Million Rs. Million

6,140 16 93 (224) 6,025

635 2,961 3,596

635 2,483 3,118

552 2,210 2,762

552 2,107 2,659

Long term loans Deffered liabilities Total capital employed

2,223 207 6,025

2,567 149 6,025

2,354 130 5,247

1,772 98 4,529

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Cash Flow Statement Operating activities Investing activities Financing Activities Cash and cash equivalents at the end of the year Rs. Million Rs. Million Rs. Million Rs. Million

2010 454 (711) (170)

2009 442 (931) 398

2008 (399)

2007 774

(1,649) (713) 680 6 (3,832)

(5,560) (5,233) (514)

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Financial RatiosFinancial Ratios Profitability ratios Gross profit ratio EBITDA margin to sales Net profit to sales Liquidity ratios Current ratio Quick / acid test ratio Finance gearing Debt: equity ratio Rate of return Return on equity Return on capital employed Interest cover ratio Capital efficiency Inventory turnover Debtor turnover Creditor turnover Fixed assets turnover ratio Total assets turnover ratio Days Days Days 98.00 45.00 73.00 3.21 1.40 107.00 66.00 76.00 2.72 1.07 95.00 72.00 61.00 2.00 1.05 % % 14.22 27.87 1.75 2.73 21.82 1.16 3.79 19.14 1.28 0.81 0.98 1.07 0.97 0.34 0.95 0.39 0.90 0.24 % % % 16.12 11.92 2.43 16.96 13.37 0.58 15.14 12.49 0.88 2010 2009 2008

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Financial Ratios Investor information Earnings per share Price earnings ratio Cash dividend per share Bonus shares issues Dividend payout ratio Dividend cover ratio Break - up value per share Market value per share at the end of the year high during the year low during the year EBITDA Rupees Rupees % % Rupees

2010

2009

2008

7.52 2.46 1.25 16.60 6.06 56.45

1.45 26.79 49.12

1.86 21.51 1.00 53.68 1.87 50.04

Rupees Rupees Rupees Rs. Million

18.53 38.84 17.40 2,347

38.84 49.00 28.60 1,860

40.00 51.40 37.25 1,465

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SPACE MATRIXSPACE MATRIX INTERNAL STRATEGI POSITION SINANCIAL STRANGTH (FS) Return on Investment Leverage Liquidity Working capital Cash flow Inventory Turnover Earnings per Share Price Earnings Ratio EXTERNAL STRATEGIC POSITION ENVIRONMENTAL STABILITY (ES) Technological change Rate of Inflation Demand Variability Price Range of Competing Products Barriers to entry in market Competitive Pressure Ease of exit from marker Risk involved in business

6 3 3 4 3 5 6 5 4.375

-4 -5 -4 -5 -3 -3 -1 -4 3.625

0.75

COPETITIVE ADVANTAGE (CA) Market Share Product Quality Product life Cycle Customer loyalty Competition's capacity utilization Technological know how Control over suppliers and distributors

-1 -5 -3 -4 -4 -5 -1 3.286

INDUSTRY STRENGTH (IS) Growth Potential Profit Potential Financial stability Technological know how Resource utilization Ease of entry in market Productivity capacity utilization

6 4 4 5 5 3 5 4.571 1.286

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BCG MATRIX

STARS

QUESTION MARK MENS STITCHED WEAR ACCESSORIES

PRET LINE

CASH COWS DOGS LAWN MENS UNSTITCHED HOME TEXTILE FOOT WEAR PERFUMES

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BALANCE SCORECARDOBJECTIVES CUSTOMERS Target Market: LSM : 8 & above SEC: A+ & A B2B customers Attract new customers Retain customers Design Accuracy Quality INTERNAL PROCESS Superior R&D Finest Designers Design quality Engraving for Color Differentiation Laboratory Color Testing Color Development Printing Quality Superior Production Facility Supply chain Environmental Friendly Socially Responsible Community building and empowerment of women and disadvantaged Color matching and quality Nominal wastages Product delivery Technology Asset utilization CO2 emission Cover up lost sales by increasing sales growth by 20% 1000 women in work force at various posit...