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STRATEGIC MANAGEMENT FINALPROJECT
ORGANIZATION STUDIEDGUL AHMED
PERSON INTERVIEWEDTariq Shamim DurraniDeputy Brand ManagerGul Ahemd Textile Mills
GROUP MEMBERS Muhammad Faizan Maqsood Behzad shami Pehlaj Rai
CLASSMBA 4D
SUBMITTED TOSir Naveed M. Khan
SUBMITTED ONDecember 20, 2010
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ContentsCorporate Profile.................................................................................................................4COMPANY HISTORY.......................................................................................................4Corporate Profile – Major Companies.................................................................................4Corporate Profile – Business Activities...............................................................................4TEXTILES...........................................................................................................................4POWER...............................................................................................................................4MANAGEMENT................................................................................................................4Description of products and services of the company.........................................................5Vision and Mission Statement of the company...................................................................6External factor Evaluation Matrix.......................................................................................7Competitive Profile Matrix..................................................................................................8Internal Factor Evaluation Matrix.......................................................................................9SWOT MATRIX...............................................................................................................10Financial Performance at a Glance....................................................................................12Financial Ratios.................................................................................................................14SPACE MATRIX..............................................................................................................16BCG MATRIX..................................................................................................................17BALANCE SCORECARD...............................................................................................18BLUE OCEAN STRATEGY............................................................................................20CONCLUSION..................................................................................................................21
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Corporate Profile COMPANY HISTORY
The story of textiles in the subcontinent is the story of Gul Ahmed. The group began trading in textiles in the early 1900’s. With all it’s 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 Sulzer’s, 297 conventional looms and a state of the art processing and finishing unit.
Corporate Profile – Major Companies
The 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
TEXTILES
In 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.
POWER
The 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.
MANAGEMENT
Management 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 company
The products and services of Gul Ahmed Textile Mills can be divided into two broad categories according to their markets
Gul Ahmed’s local Market Gul Ahmed’s export Market
The products in Gul Ahmed’s local market category are
Lawn Pret line (women category) Men’s stitched wear Men’s unstitched Home textile Foot wear Perfumes Accessories
The products in Gul Ahmed’s export market category are
Lawn Pret line (women category) Men’s stitched wear Men’s 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 Pakistan’s 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 company
VISIONSetting trends globally in the textile industry. Responsibly delivering products and services to our partners
MISSIONTo 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 Matrix
External Factor Evaluation Matrix
Key External FactorsWeight
Rate
Weighted score
Opportunities Growth in target market audience 0.05 4 0.2Increasing Fashion Awareness 0.08 4 0.32Online shopping 0.08 3 0.24Social Network Marketing 0.07 3 0.21Brand Consciousness 0.09 3 0.27Increasing expenditure on shopping 0.06 3 0.18Fashion Weeks in Major cities 0.04 3 0.12 Threats Counterfeiting and intellectual property rights violations 0.12 3 0.36Inflation 0.06 2 0.12Exchange rate fluctuations 0.06 3 0.18Law and order situation 0.08 2 0.16Terrorism 0.05 1 0.05Increase in interest Rates 0.08 2 0.16Cotton Yarn and other Raw material Prices 0.08 3 0.24TOTAL 1 2.81
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Competitive Profile Matrix
Competitive Profile Matrix Gul Ahmed Chenab Group Al-Karam
IDEAS ChenOne IDENTITYCritical Success Factors Weight Rating Score Rating Score Rating ScoreAdvertising 0.20 4 0.8 3 0.6 2 0.4Product Quality 0.10 4 0.4 4 0.4 3 0.3Price competitiveness 0.10 3 0.3 3 0.3 3 0.3Management 0.15 3 0.45 4 0.6 2 0.3Financial Position 0.10 4 0.4 3 0.3 3 0.3Customer Loyalty 0.10 3 0.3 4 0.4 2 0.2Global Expansion 0.20 3 0.6 2 0.4 3 0.6Market Share 0.05 4 0.2 2 0.1 3 0.15Total 3.45 3.1 2.55
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Internal Factor Evaluation Matrix
INTERNAL FACTOR EVALUATION MATRIX
KEY INTERNAL FACTORS WeightRating
Weighted Score
STRENGTHS Highest Market share 0.15 4 0.6Creative designers 0.1 4 0.4Fully vertically integrated from fiber to fashion 0.05 4 0.2Latest technology engaged 0.15 4 0.699.99% design quality assurance 0.05 4 0.2Strong brand image 0.03 4 0.12An extensive chain of retail outlets all over Pakistan 0.03 4 0.12 WEAKNESSES Debt to equity ratio is high .81 0.1 1 0.1EBITDA Margin to sales decreased from 12.49 to 11.92 0.15 1 0.15Demand is higher than production capacity 0.05 2 0.1Supply Chain Issues 0.04 2 0.08Online shop not fully functional 0.05 2 0.1Small share in export market as compare to other local players 0.05 2 0.1TOTAL 1 2.87
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SWOT MATRIX
STRENGTHS
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
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)
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
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
SO STRATEGIES
Launch its brand in other countries (S6, S3, S6, O3)
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)
WO STRATEGIES
Make use of internet to cover lost sales (W1, O1,O2)
Improve supply chain by integrating department and processes (W3, W4, O1)
THREATS
1.Big players in export markets
2.Small share of export market
3. Foreign exchange risk
4.Volatile law and order situation
5.Other established brands in accessories, perfume foot wear
ST STRATEGIES
Dedicated mills for export market to increase export market share (S3, S8, S6, T1, T2)
FDI in other countries to take low cost advantage (S8, T4,T1)
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)
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Financial Performance at a Glance
Profit and Loss 2010 2009 2008 2007
SalesRs. Million
19,689
13,906
11,726
9,848
Gross ProfitRs. Million
3,173
2,359
1,775
1,475
Operating profitRs. Million
1,653
1,209
936
745
Profit before taxRs. Million
708
170
202
262
Profit / (loss) after taxRs. Million
478
80
103
164
DividendsRs. Million
79
-
55
-
Balance Sheet 2010 2009 2008 2007
Property Plan and EquipmentRs. Million
6,140
6,106
5,828
4,703
IntangibleRs. Million
16
29
28
30
Long term investment, loans, advances and deositsRs. Million
93
90
78
74
Net Current AssetsRs. Million
(224)
(390)
(687)
(278)
Total Assets employedRs. Million
6,025
5,835
5,247
4,529
Represented by:
Share capitalRs. Million
635
635
552
552
ReservesRs. Million
2,961
2,483
2,210
2,107
Shareholders' equityRs. Million
3,596
3,118
2,762
2,659
Long term loansRs. Million
2,223
2,567
2,354
1,772
Deffered liabilitiesRs. Million
207
149
130
98
Total capital employedRs. Million
6,025
6,025
5,247
4,529
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Cash Flow Statement 2010 2009 2008 2007
Operating activitiesRs. Million
454
442
(399)
774
Investing activitiesRs. Million
(711)
(931)
(1,649)
(713)
Financing ActivitiesRs. Million
(170)
398
680
6
Cash and cash equivalents at the end of the yearRs. Million
(5,560)
(5,233)
(514)
(3,832)
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Financial Ratios
Financial Ratios 2010 2009 2008
Profitability ratios
Gross profit ratio % 16.12
16.96
15.14
EBITDA margin to sales % 11.92
13.37
12.49
Net profit to sales % 2.43
0.58
0.88
Liquidity ratios
Current ratio 0.97
0.95
0.90
Quick / acid test ratio 0.34
0.39
0.24
Finance gearing
Debt: equity ratio 0.81
0.98
1.07
Rate of return
Return on equity % 14.22
2.73
3.79
Return on capital employed % 27.87
21.82
19.14
Interest cover ratio 1.75
1.16
1.28
Capital efficiency
Inventory turnover Days 98.00
107.00
95.00
Debtor turnover Days 45.00
66.00
72.00
Creditor turnover Days 73.00
76.00
61.00
Fixed assets turnover ratio 3.21
2.72
2.00
Total assets turnover ratio 1.40
1.07
1.05
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Financial Ratios 2010 2009 2008
Investor information
Earnings per share Rupees 7.52
1.45
1.86
Price earnings ratio 2.46
26.79
21.51
Cash dividend per share Rupees 1.25
-
1.00
Bonus shares issues % -
-
-
Dividend payout ratio % 16.60
-
53.68
Dividend cover ratio 6.06
-
1.87
Break - up value per share Rupees 56.45
49.12
50.04
Market value per share
at the end of the year Rupees 18.53
38.84
40.00
high during the year Rupees 38.84
49.00
51.40
low during the year Rupees 17.40
28.60
37.25
EBITDARs. Million
2,347
1,860
1,465
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SPACE MATRIX
SPACE MATRIX
INTERNAL STRATEGI POSITION EXTERNAL STRATEGIC POSITION SINANCIAL STRANGTH (FS) ENVIRONMENTAL STABILITY (ES) Return on Investment 6 Technological change -4Leverage 3 Rate of Inflation -5Liquidity 3 Demand Variability -4
Working capital 4Price Range of Competing Products -5
Cash flow 3 Barriers to entry in market -3Inventory Turnover 5 Competitive Pressure -3Earnings per Share 6 Ease of exit from marker -1Price Earnings Ratio 5 Risk involved in business -4
4.375
-3.62
5 0.75
COPETITIVE ADVANTAGE (CA) INDUSTRY STRENGTH (IS) Market Share -1 Growth Potential 6Product Quality -5 Profit Potential 4Product life Cycle -3 Financial stability 4Customer loyalty -4 Technological know how 5Competition's capacity utilization -4 Resource utilization 5Technological know how -5 Ease of entry in market 3Control over suppliers and distributors -1 Productivity capacity utilization 5
-3.28
64.57
11.28
6
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BCG MATRIX
STARS
PRET LINE
QUESTION MARK
MEN’S STITCHED WEARACCESSORIES
CASH COWS
LAWNMEN’S UNSTITCHED
HOME TEXTILE
DOGS
FOOT WEARPERFUMES
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BALANCE SCORECARD
OBJECTIVES MEASUREMENT TARGETS STRATEGIC INITIATIVES
CUSTOMERSTarget Market:LSM : 8 & aboveSEC: A+ & A
B2B customers
Attract new customers
Retain customers
Design AccuracyQuality
Market share
Customer retention
Customer satisfaction level
70 % market share
100% customer retention ratio
95% customer satisfaction level
Market development
Customer loyalty programs
On time delivery for online buyers
Product availability
Product quality leadership
INTERNAL PROCESSSuperior R&D
Finest Designers
Engraving for Color Differentiation
Laboratory Color Testing
Color Development
Printing Quality
Superior Production Facility
Supply chain
Environmental Friendly
Socially Responsible
New product development cycle
Design quality
Color matching and quality
Nominal wastages
Product delivery
Technology
Asset utilization
CO2 emission
Community building and empowerment of women and disadvantaged
new seasonal collections twice a year
99.9% design matching
99.9% color matching
1% wastages
Fulfill 100% online orders
Cover up lost sales by increasing sales growth by 20%
1000 women in work force at various positions
Following global trends in fashion and setting benchmark in local markets
Investment in new technology to maintain edge on design and color quality
Reduction in scrap sale
Continuous improvement in plant efficiency in order to reduce wastages, carbon emission and increase energy efficiency.
Training program for disadvantaged and special people
Separate unit for womenChild care facility for women
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LEARNING & GROWTHCultivate culture of learning, creativity, target orientation and adopting positive values
Attract and develop high caliber human resource
New designs, ideas and concepts
Low employee turnover
lead position in terms of new designs
reduce employee turnover by 5% year on year basis
Continuous investment for learning and development of employees to maintain an edge
Confidentiality policy to ensure business secrets are not leaked
FINANCIALSProfitability
Increase in gross margin
Sales growth by segment
Customer and product line profitability
20% sales growth targets
Cost reduction by 5%
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BLUE OCEAN STRATEGY
Blue Ocean Strategy on which Gul Ahmed is working are
A dedicated Gul Ahmed Fashion magazine to promote their new collection twice a year
First one to launch online shop in Pakistan www.gulahmedshop.com , currently no other player in the industry has online shop
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CONCLUSIONGul Ahmed has launched its online shop www.gulahmedshop.com for online shopping but the problem is not all of their products are currently available one internet. Mostly it happens on the first day of launch of their new collection, which is done twice a year (one in winter and other in summer), the customers (mostly ladies) rush into ideas and Gul Ahmed shop and start purchasing whole lot of a design and as a result that design get short in the market. And customers who come become frustrated when they can’t find a print.Gul Ahmed is facing serious supply chain issue in this area, they can’t meet the demand. One thing that can be done in this is the use of online shop to make sure availability of all their hot designs for a sustainable period of time. This will be a one good strategy to retain their customers.Gul Ahmed can also use nontraditional communication channels like facebook and twitter to interact with their customers and to get feedback. This online medium is one very effective way of analyzing consumer choices. Google analytics and facebook page analyzer can provide very useful information about user preferences. For instance it can tell you which are the most favorite design liked by the audience, based on that information Gul Ahmed can start producing more of that particular design and meet that customer demand.
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