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Masood Textile MillsStrategic Management
Ms. Farah Zarak
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Bilal Nadeem
Humayun Tahir
Rana Ali Asad
Rizwan Khan
S. M. Sohaib Atif
Talha Bin Tariq
Zain Ali Chughtai
Section B
Lahore School of Economics
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ContentsHistory .......................................................................................................................................................... 4
Vision Statement ........................................................................................................................................... 6
Mission Statement......................................................................................................................................... 6
Review: Corporate Mission and Vision .................................................................................................... 6
Components of mission statement ........................................................................................................... 7
Proposed Vision Statement ........................................................................................................................... 9
Proposed Mission Statement ......................................................................................................................... 9
SWOT Analysis............................................................................................................................................. 10
Strengths ................................................................................................................................................. 10
Information System............................................................................................................................. 10
Financial Management System ........................................................................................................... 11
Research and Development................................................................................................................. 11
Supply Chain Management ................................................................................................................. 12
Total Quality Management ................................................................................................................. 12
Latest Machinery ................................................................................................................................ 12
Qualified and Trained Team ............................................................................................................... 12
WRAP Certification (Worldwide Apparel Response Company)........................................................ 13
Direct- to- Store System...................................................................................................................... 13
Back Tracking System ........................................................................................................................ 13
Customer Profile ................................................................................................................................. 13
ISO 9002 Certification ........................................................................................................................ 13
Adequate Financial Resources ............................................................................................................ 14
Owned Power Generation Plant .......................................................................................................... 14
Owned warehouses in USA ................................................................................................................ 14
Weaknesses ............................................................................................................................................. 14
Limited to United States and few European Market ........................................................................... 14
Too Much dependency on Exports ..................................................................................................... 14Over Staffing....................................................................................................................................... 14
Lack of productive environment (few departments) ........................................................................... 14
High cost of production....................................................................................................................... 15
Opportunities........................................................................................................................................... 15
New global penetration ....................................................................................................................... 15
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Build a brand of its ownlabel .......................................................................................................... 15
Local marketreduced emphasis of exports ...................................................................................... 15
Cost reduction is possible by proper utilization of resources.............................................................. 15
Backward IntegrationOwn cotton fields ......................................................................................... 15
Threats .................................................................................................................................................... 15
IFE .............................................................................................................................................................. 16
EFE ............................................................................................................................................................. 17
Competitive Profile Matrix (CPM) ............................................................................................................... 18
PEST Analysis ............................................................................................................................................ 19
Technological Environment .................................................................................................................... 19
Socio-Cultural Environment ................................................................................................................... 20
Economic Environment .......................................................................................................................... 20
Economy and War on Terror .............................................................................................................. 21
Pricing Trend and its Consequences ................................................................................................... 21
Energy Crises ...................................................................................................................................... 21
Political and Legal Environment............................................................................................................. 22
Inappropriate Governmental Policies...................................................................................................... 22
Facts & Figures Regarding Production ................................................................................................... 22
Research and Development..................................................................................................................... 22
PEST Conclusion ........................................................................................................................................ 23
Porters Approach ....................................................................................................................................... 23
Bargaining Power of Suppliers: .............................................................................................................. 23
Suppliers Concentration ...................................................................................................................... 23
Number of Buyers............................................................................................................................... 23
Switching Cost .................................................................................................................................... 23
Substitute Raw Material...................................................................................................................... 24
Threat of Forward Integration ............................................................................................................. 24
Threat of New Entrants ........................................................................................................................... 24
Economies of Scale ............................................................................................................................. 24
Absolute Cost Advantage.................................................................................................................... 24
Brand Identities ................................................................................................................................... 24
Access to Distribution ......................................................................................................................... 24
Switching Cost .................................................................................................................................... 25
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Government Policies ........................................................................................................................... 25
Other Stakeholders.................................................................................................................................. 25
Relative Power Unions........................................................................................................................ 25
Bargaining Power of Customers ............................................................................................................. 25
Buyer Concentration ........................................................................................................................... 25
Number of Suppliers ........................................................................................................................... 26
Switching Cost .................................................................................................................................... 26
Substitute Products.............................................................................................................................. 26
Threat of Backward Integrations......................................................................................................... 26
Threat of Substitute Products or Services ............................................................................................... 26
Functional Similarity .......................................................................................................................... 26
Ratios .......................................................................................................................................................... 26
History
Masood textile mill is a public limited company listed in all stock exchanges of Pakistan and is
leaders in responding to up-and-coming global trends of textile by creating and developing very
basic to very highly fashioned attire by developing and manufacturing of knitted products. They
transform the abstract ideas of their customers into reality through specialized insight and
technical and mechanical expertise. MTM team is the strong believers of customer satisfaction as
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they are believed are the reason of their success. MTM has got state of the art technology;
products know how and most importantly the right mind set to achieve customer satisfaction.
Masood operations are running throughout the world. Masood is expert in creating and
manufacturing of T-shirts, Polo shirt, Jogging suit, Henley shirt, Raglan shirt and Tank top,Bikini, Shorts, Pants and Sleepwear. Driving force behind the achievement of Masood enormous
escalation in past years is the experienced professional staff, a well groomed team of talented
merchandiser, trustworthy suppliers and up to dated technology.
Masood textile mill was incorporated on October 1986 as public limited company and started off
after its listing on Karachi. It was listed on Lahore stock exchange in 1988 and now it is listed on
all stock exchanges of Pakistan.
Its head office is located in Faisalabad (Universal House, West Canal Road, Faisalabad) with 6
units in Faisalabad, one in Lahore and one in Karachi. Masood has also invested in Bangladesh
and has one unit in Dhaka. Masood Textile also own Software Creation, a software development
company.
Chaudry Nazir bought three spinning units in 1986 in Faisalabad and started to produce araw fabric.
Knitting facility was installed in 1986. Chaudry Nazir bought three spinning units in 1986 Dying Plant in 1988 Apparel division operational in 1995 with 35 machines Shahid Nazir has different businesses as well Koshistan Transport 1973 Kakakhel Oil Mills 1994 Coca Cola Bottlers 1983 Industrial Cooperation Bank 1994 Manthar Bus Service 2004 Shahid Nazir at the age of 29 became the CEO of Masood after his MBA from UK and
several courses from LUMS.
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Vision Statement
"Our vision is of continual improvement and sustained growth, and of a family of workers. Who
are given the best compensation benefits and working conditions in the region. In this respect,
MTM continues to emphasize the need to invest in and develop its most precious resource - its
human capital. MTM continues to provide training courses and self-enhancement opportunities
for all our workers".
Mission Statement
Be dynamic profitable and growth oriented by providing good return on investment to its
shareholders and investors, quality products to its customers, a secured and friendly
environment place of work to its employees and to project Pakistans image in the international
market.
Review: Corporate Mission and Vision
MTMs corporate mission defines what the company is and what it intended to achieve through
its functional departments. MTMs corporate mission is:
Be dynamic profitable and growth oriented by providing good return on investment to its
shareholders and investors, quality products to its customers, a secured and friendly
environment place of work to its employees and to project Pakistans image in the international
market.
A vision statement is a clear, challenging picture of the future of the classis as you believe it
can and mustbe. (Malphurs)
An analysis of the current vision statement shows that it is lacking in its purpose of reflecting the
future orientation and growth of the company. The vision statement of the company seems more
like a core value or strategy rather than a depiction of the direction in which the company is
moving and what it aims to achieve. The vision statement does not reflect what the business will
look like in the next 3 to 5 to 10 years nor does it show a picture of the companys future
meaning it is not future-casting. A vision statement is also supposed to be a bit audacious in the
sense that it reflects a dream or an idea that might seem beyond what it possible as it is supposed
to the epitome of where the company is headed. Based on this criterion, the vision statement is
again lacking as there is no ambitious goal towards which it is moving. Another criterion for
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evaluating a vision statement is to check whether it is motivating or not in terms of being clear
about the strategic direction, company focus, business activities the company wishes to pursue
and capabilities that the company aims to develop. The vision does clarify that it wishes to
enhance and build on its human resource capital to allow continuous improvement and sustained
growth in the future. It does not however give a clear cut focus as to the destination for which
this is required. The goal identified is too vague and subjective to be a single motivating factor.
The vision statement is also not purpose-driven as it gives no sense of a larger sense of purpose
or contribution to a greater purpose. The statement is also not inspiring as it does not create any
excitement or emotions relative to the vision. No mental image is created nor is any inspiration
leveraged from the words used to describe the vision. Therefore, our analysis shows that the
vision statement is too vague and lacks strategic direction and ambition to sustain and guide the
corporate strategies in the future. It also ignores the core competencies and capabilities of the
company and fails to connect emotionally.
Components of mission statement
CUSTOMERS What are the firm's major products or
services?
Products or services What are the firm's major products or
services?
Markets Where does the firm compete?
Technology What is the firm's basic technology?
Concern for survival, growth, and profitability What is the firm's commitment towards
economic objectives?
Philosophy What are the basic beliefs, core values,
aspirations and philosophical priorities of the
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firm?
Self-concept What are the firm's major strengths and
competitive advantages?
Concern for public image What is the firm's public image?
Concern for employees What is the firm's attitude/orientation towards
employees?
The following components of the mission statement are present in that of Masood
Textiles Mills. These are:
1-Growth: In the very initial part of the mission statement, it is stated that MasoodTextiles Mills aims to Be dynamic profitable and growth oriented. We can
clearly see that growth is an imperative part of this mission statement. As a result
it is quiet eminent that this component is present in this mission statement.
2-Customer: This mission statement also mentions its concern for customer. It saysthat its objective is to provide quality products to its customers. We can see
how the company values its customers by providing them with quality products.
3-Philosophy: Philosophy refers to the aspirations and philosophical priorities. Thismission statement mentions to project Pakistans image in the international
market. This concern leads to greater meaning of this mission statement and its
aspirations. Its a symbol of great philosophical idea on global scale. It means to
achieve excellence and great reputation with quality produce.
4-Employees: In the middle part of the mission statement, the company mentions itsconcern for employees and their working conditions by stating to provide a
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secured and friendly environment place of work to its employees. Consequently,
it is proven that concern for employees is mentioned in this mission statement.
5-Markets: There is a partial indication to this component of the mission statement.Although the mission states that its markets are abroad, it does not clearly specify
which country or countries the business is exporting to. As a result, the mission
statement does not fully recognize or explain this component. However, since it
mentions that it operates abroad, we assume it to be part of the mission statement.
Proposed Vision Statement
At Masood Textile, our vision is to be the best knitting company in Asia--in the eyes of ourcustomers, shareholders, communities and people. We expect and demand the best we have tooffer by always keeping Masood's values top of mind.
Proposed Mission Statement
Our mission is to become market leader in home textile sector and provide good return on
investment to our shareholders by achieving growth. We aim to exceed our customers
expectations by producing quality products, employing state-of-art/latest technology and best
human skills while providing safe working environment for our employees, incorporate best
practices, use integrated methodology to manufacturing technology and contribute to the
economic growth of Pakistan.
Key Risks
The major problem in textile industry as it prevails in every
other Pakistan industry is the implementation of the policies
and programs announced by the Government. Bargaining
power of the industry with the government is high because of
PACRA, Sector Study, Textile Sector-FY11
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the mounting share of 52% in total exports of the country that has resulted in favorable domestic
policies which have the tendency of being abstained from implementation. Textile industry was
successful in getting preferential access to the European market but the legalization of it was
challenged by the competing countries. Again, government was unable to resolve the issue in
favor of the local industry. Increase in cotton prices has damaged small and medium players in
the industry, making it very hard for survival.
Mergers and acquisition in the textile industry of Pakistan are not so common. Industry structure
is fragmented resulting in the limited economies of scale. The limitation due to the fragmentation
of the industry limits the exit strategy for the investor in hard times of the business.
Low-value added product dominates the industry, thus reduced margins and low differentiation
in the product category.
Power supply is exerting enormous pressure on the cost of production, as textile industries tries
to meet their energy requirements by internal generation of energy at quite high prices. Gas
shortages has added fire in this regard.
SWOT Analysis
Strengths
Information System
IT systems at MTM are one of the major factors in the success of the organization. It has not
only reduced the work load but has also increased the efficiency in production, processing and
quality control. All the IT systems operated in MTM are built by the Software Creation, a sister
concern of MTM and are oracle certified. Main information management systems at MTM are
following:
Human Resource Management Systemo Job Banko Human Resourceo Time Managemento Payrollo Training and developmento Admin
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o Vehicleo Cash Flow
Manufacturing Management System Inventory Management System
o Spinningo Knittingo Processingo Cutting
Back Tracking SystemFinancial Management System
Cash flow Management System
o Chart of Accountso Print Voucherso Periodic Loan Detailo Employee Loan Detailo Periodic Advance Detailo Cash Flow Summaryo Accounts Flowo Party Wise Cashflowso Bilty Wise Reporto Sales Contract Reportso Cash Flow Analysiso Imprest Ledger
Research and DevelopmentResearch and development at MTM is not just a department as a formality. It actually does an
extensive research for the development of innovative fabrics and garments. To keep the
uniqueness of the fabric alive and stop it from being intimated by the competitive firms, these
garments are shown only to the current and potential customers. Few innovative products from
MTM are:
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Anti Mosquito Fabric Heat Adjustment Fabric Water Resistant Fabric Water Absorber Blinking Clothes Fluorescent Fabric
Supply Chain Management
As MTM is complete vertically integrated textile composite, its supply chain management is
effective and efficient. Merchandising department is the one which keep follow up of every
aspect of the order from the placement of the order till the shipment of the order. Every single
unit of the MTM is connected via ERP system and every stage of the order can be tracked andmonitored. Yarn procurement is done on seasonal basis and it is pre sourced before the start of
the season and made sure that there should be no deficit when it comes to the utilization of yarn
to produce fabric.
Total Quality Management
Quality control is the essence of MTM success. Back Track system has enabled employees at
MTM to be more responsible while working and be assuring of the intended quality is produced.
It is because of the quality management, that Masood has received many international and localawards.
Latest Machinery
Masood has latest industrial machinery which has enabled it to produce products of the perfect
quality and on right time with maximum efficiency.
Qualified and Trained Team
For the production of the goods, MTM has a staff which is experienced, skillful, and
knowledgeable about the job. At the time of hiring, HR department makes sure that they hire a
right man for a right job. Employees work with a team spirit and acknowledge each others work.
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WRAP Certification (Worldwide Apparel Response Company)
Masood Textile mill has a hand on WRAP certification which shows that the legal, benevolent
and ethical manufacturing of goods at MTM. It depicts that all the practices at MTM are in the
boundary of moral principles and procedures.
Direct- to- Store System
MTM is the first company in Pakistan to develop and implement direct-to-store system has
permitted a good and long term relationship with the customer. This means, that now it is the
responsibility of MTM to not only produce the product, but also make sure its placement in the
stores of the customer. This system facilitated by the 24/7 information transfer from the sale of a
unit from the store and the relevant department can act accordingly. The sale of even a single
unit from the customers store can be received in the head office ofMTM and can be acted
accordingly. This means the visibility of the future trend has become available to MTM. Future
purchase order feasibility can be made with a great accuracy and purchase orders than can be
revised after discussion with the client.
Back Tracking System (Bar Code System for tracking various components of its product right
from spinning to the packed product)
This system is the heart of quality control. If a defect is detected by quality department
employee, the defect can be traced back to the employee who is responsible for the defect. Barcode is attached to the product at every single stage of the production and can be scanned
whenever needed.
Customer Profile
Efficient marketing team owns a heavy credit because of its ability in turning potential customer
into a permanent customer. Heavy customers portfolio is the reason of trust in the minds of the
customers and prospected customers are pitched through such foundations as well.
ISO 9002 Certification
Masood Textile mills holds ISO 9002 certification and meet quality standards given by
customers.
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Adequate Financial Resources
At the pinnacle of success, Masood textile has a strong backbone due to adequate financial
resources and at time of threat, Masood pull its financial resources and get through such times.
Owned Power Generation PlantMasood has its own power generation plants and has invested heavily on bio-technology to
produce energy for its plants and equipment.
Owned warehouses in USA
To meet the demand of its customers in US, Masood owns warehouses in main cities where its
main customers are residing. Masood even provide this service to other Pakistani and
international firms to use their facility against threats.
CAD Product Innovation Ability Moody Certification Several Quality Awards
Weaknesses
Limited to United States and few European Market
o There is a lot of potential in South America (Brazil, Argentina) and Canada inNorth America. Other than these countries, African countries
Too Much dependency on Exports
o Dependency on export is very high and any change or hit on export license andexport policies by Government can demolish MTM business in American and
European Market.
Over Staffing
o Some of the departments are over staffedLack of productive environment (few departments)
o Few departments like HR office at spinning unit doesnt have good physicalenvironment which would work in the reduction of employees efficiency.
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High cost of production
o High cost of production because of the fact that MTM is overstaffed and results inincrease cost of production
o High transportation cost from Faisalabad to Karachi, resulting in reduced profitmargins
Opportunities
New global penetration
o South American markets such as Brazil, Argentina and Canada in North Americao African Countrieso Middle Eastern Store chains
Build a brand of its ownlabel
o To be on the safe side, Masood need to develop a local brands on the model ofCross Road, Stone Age, Outfitters and Levis. Gain more earning in coming years
and increase shareholder income.
Local marketreduced emphasis of exports
o Local label will also reduce the emphasis on exports and will put a cushion whenexport policies change.
Cost reduction is possible by proper utilization of resources
o Terminate employees who are a burden and are the reason of overstaffingBackward IntegrationOwn cotton fields
o Invest and buy agriculture land, do backward integration and reduce reliance onexternal sources of cotton
Threats
Political Instability Economics Crises Rupees Devaluation Energy Crises
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Labor Unionization Increasing Competitive pressure from Bangladesh and China Natural Calamities, disruption in Supply of raw material Fluctuation in cotton prices International Cotton Prices Increase in oil prices, thus increasing in Production cost (Energy)Cost of Production Negative Country Perception Tariff and Duties
IFE
Internal
Factors
Weight Rating Weighted
Score
Comments
Strengths
IT System 0.15 5 0.75 Information system at MTM is of the vital
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importance in the success of the company. Every IT
system has increase d the efficiency of MTM.
Supply
Chain
0.1 4 0.4 Every single operation at MTM adds value to the
product and increase efficiency
TQM 0.1 3 0.3 Good quality product is the reason of success in
international market.
DTS/BTS 0.05 2 0.1 This web based software keeps MTM up to date on
customers information
Power
Generation
0.1 2 0.2 Ability to generate power.
Weaknesses
Limited to
US and G9
0.15 3 0.45 High concentration in these markets, need to
diversify through other markets as well.
Overstaffing 0.075 4 0.3 High cost is incurred due to over employment
Leveraged
on Exports
0.15 2 0.3 No emphasis on local market
Transport
cost
0.05 3 0.15 Shrinkage of margin due to high transportation cost
High cost offinancing
0.075 5 0.375 High long term debt, high financial cost
3.325
EFE
External
Factors
Weight Rating Weighted
Score
Comments
Opportunities
New &
Potential
International
Markets
0.1 4 0.4 South America, Canada, Australia, middle east are
potential international markets for knitted apparel.
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Local Market
Potential
0.15 5 0.75 Brands like cross road, outfitters and stone age are
earning high profits in local market.
Diversify into
new industry
0.075 2 0.15 There is the need to diversify in other industries, can
form a conglomerate (high financial resources)
Backward
integration
0.1 3 0.3 Owing cotton farms will result in cost reduction, since
reducing the cost from other sources is not possible at the
moment
Leather
Products
0.075 1 0.075 MTM can capitalize on its existing infrastructure in orde
to diversify into leather business.
Threats
Political
Instability
0.1 5 0.5 Political instability and unrest in the country results in th
unattractiveness for the investor. A policies guideline ha
yet to be seen in practice.
Energy Crises 0.075 2 0.15 Producing energy by furnace oil is very expensive,
results in high cost of production. MTM produces energy
through bio technology.
Labor
Unionization
0.075 2 0.15 Labor union is the potential threat in such companies
which results in order delays, however MTM doesnt
have any labor union at the moment.Natural
Calamities
0.15 4 0.6 Industry is dependent on cotton, natural disasters have
been unfortunately quite consistent in past years
Increase in
Oil Prices
0.1 1 0.1 Increase in oil prices in international market results an
increase in all raw material hence increase in the cost of
production
Competitive Profile Matrix (CPM)
MTM Textile Sitara Textile Perfect Textile
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PEST Analysis
Technological Environment
Technological advancements are taking place every day throughout the world. Higher and higher
efficiency is being achieved by organizations and companies through the optimal use of
technologies. Textile industry in Pakistan has a bit of mix environment when it comes to
technology. Giant players in an industry got up to date technology and they import machinery
from developed countries. The growth of information technology sector has acted as a medium
in the direction and in the future the pace of technology will be even greater. Dependence ontechnology in every industry can provide high productivity and higher effective and efficiency.
Strategic Decision Making factors regarding technology:
Future form of the product will be changed. Different kind of fabric can be made possible
by the use of future technology
Critical Success factor Weight Rating Score Rating Score Rating Score
Advertising 0.15 2 0.30 2 0.30 2 0.30
Product Quality 0.20 4 0.80 3 0.60 3 0.16
Price Competitiveness 0.10 3 0.30 3 0.30 3 0.30
Management 0.10 2 0.20 2 0.30 3 0.20
Financial Position 0.15 2 0.30 3 0.30 2 0.45
Customer Loyalty 0.10 3 0.30 3 0.20 2 0.30
Global Expansion 0.05 1 0.15 1 0.10 2 0.05
Market Share 0.15 3 0.45 3 0.30 2 0.45
Total 2.80 2.4 2.21
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Yarn processing technology improvement
Raw material availability could be accessed
Future visibility of the demand can be possible through the use of financial models,
information processing and information data bases.
New product innovation and invention is possible
Socio-Cultural Environment
Unlike technological changes which are abrupt the socio-cultural options occurs at a slow pace.
Socio-cultural changes may have the following implications for Nishat Mills:
a) Changes in lifestyle
b) Age distribution
c) Expectations from business and social values
d) Ethical Standards.
Economic Environment
The GDP of Pakistan has a growth rate of 2.4% in 2011 which is very low as compared to the
competitive countries. Exports fell to $17.190 billion in July-March, from $17.727 billion in the
same period the previous year, according to the bureau. Imports totaled $33.285 billion, up from
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$29.016 billion previously. The trade deficit was $1.496 billion in March and $1.428 billion in
February. (Trade Analysis, 2012). The current discount rate is 12.5% as announced the state
bank of Pakistan. Also the per capita income is around $1000 which is very low. The company
has pretty adverse effect of these worse economic situations, it is resulting in rise in cost of
production and the performance is also hampered.
Economy and War on Terror
War on terrorism is taking its toll from many countries and is also the reason of high defense
budgets, neglecting many important industries. Economic recession has prolonged effect on the
industries on worldwide basis. Poverty level is increasing in Pakistan with every passing day,
very low foreign investment and high unemployment has resulted in lower purchasing power of
the consumer. Economic downfall is being witnessed at very high rate and an individual life has
been affected violently. Textile industry of the Pakistan constitutes 53% of the total exports in
Pakistan is in direct hit due to these economic factors. Many garment businesses in Pakistan has
be closed today due to these economic factors.
Pricing Trend and its Consequences
Frequent changes in the prices directly affect the garment manufacturing, as orders are received
are on different rates, and by time these orders are in processing stages, prices changes thus
damaging the business earning. This is the common in Pakistan, that after announcing the
budget, government keep in raising the prices of the raw materials used in the processing to
produce the final good. Business men cannot produce an authentic budget of their own because
of these fluctuations in the business. With such frequent prices fluctuations, garment industry
has to change its prices at which consumers are not willing to pay. Countries like Bangladesh,
India and China are giving a severe competition to the Pakistan in textile industry because of
their economic stability and lower cost of production.
Energy Crises
The biggest problem Pakistan textile industry facing these days is the power failure. Long hours
electric load shedding has greatly affect the total production of the industry. Per unit increase in
the prices of electricity every month, shortage of gas, shortage of petroleum products are some of
most obvious causes of downfall of the textile industry.
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Political and Legal Environment
As far as the political and legal environment is concerned, in Pakistan the legal environment is a
bit weak. There are no as such environment protections laws, tax laws, special incentives and
stability of government. The legal framework is quite weak in Pakistan. Stability of government
is also quite a big issue; as every time the government changes the policies of government
changes and with new policies the trade policies changes which also hampers the performance.
Inappropriate Governmental Policies
Political environment in Pakistan throughout the years has raised many problems for all
industries. Lack of conducive industrial policies, no FDI, export processing units are insufficient
in relation to the number of exporter in Pakistan, trade fares in the country are near to non where
companies have the chance to exhibit their product. Government do invest its expertise in
developing polices regarding industries but these policies doesnt see the light of
implementation. If government do take care of the factors mentioned earlier, export- led
industrialization can be possible. There should be advantage to the local producers to develop the
products which are exportable through duty free import of raw materials. Rule and regulations
existence on papers are useless unless implemented. Lack of good governances, corruption every
single government department and complex bureaucracy are the areas where a lot is need to be
done for better business future in the country. Development of infrastructure to support the
business in the country is also vital for business community in the country.
Facts & Figures Regarding Production
There is no statics available as for garment industry of Pakistan. Reasons are:
Most garment businesses are working on small scale.
There is no step taken by government to keep record of their growth
Many garments and apparel factories close each year because low instability except for
few bigger players in the market.
Research and Development
The education system in Pakistan doesnt pay any emphasis on research and development on
new products. This lack of orientation towards research leads to the deficiency of improvements
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of industry. Textile industry in some countries pay a heavy emphasis on the development of
innovative products but Pakistan lags behind in this arena too.
PEST Conclusion
With such mega environment factors, maintenance of product quality is very hard to keep from
deteriorate. Consumer now days are bombarded with the information and more aware of the
product quality requirements doesnt waste their money on poor quality products. To remain
competitive in the market and reduce cost, companies dont pay much on promotion, marketing
of the product and its publicity. Unemployment is rising due to such reasons as businesses are
firing people to cut costs thus increasing the poverty level in the economy. The textile industry
potential of Pakistan is not a news in any sector, be it the human capital, raw material and its
abilities to produce superior quality product but the platform to develop and progress is not
compatible.
Porters Approach
Bargaining Power of Suppliers:
Suppliers Concentration
Pakistan is an agriculture based economy and development and growth of textile industry solely
depends upon the Pakistans agriculture sector. The concentration of suppliers is quite highbecause of this premise and huge raw material market.
Number of Buyers
Textile industry can be divided into three categories large companies, medium manufacturing
and small business and that is why there is quite a number of buyers of the raw material in the
market. Every year there is surplus of cotton produced by the farmers which enable government
to export raw and processed cotton. Government put a cap and floor prices on cotton but
government does not consistently follow these prices thus fluctuations in the prices.
Switching Cost
The switching cost of suppliers is very low considered the given fact that there are not fixed
suppliers. It is solely based on the rate given the quality specifications are met. After this there is
not discrimination of special or a normal supplier; they just buy it from the market.
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The switching cost of the supplier is very low due to the fact there are large number of supplier
in the market. If the required quality is met, there is no reason for a buyer to switch to a new
supplier. Masood Textile buys cotton from the supplier who can provide the raw cotton of a
specified quality. Masood textile purchase cotton in advance of the season.
Substitute Raw Material
There is no substitute raw material available for the cotton.
Threat of Forward Integration
The threat of forward integration is low because huge capital investment is required. The cost of
production is rising in Pakistan because of the energy crisis and increase in other factors of
production.
Threat of New Entrants
Economies of Scale
Pakistans textile industry is losing on its competitive advantage because of the increase in cost
of production. In the past, companies were able to achieve economies of scale because there was
no power shortage; no shortages of raw materials but now the conditions are getting worse for
the textile sector. Rising raw material costs, rising production costs reduce economies of scale.
Absolute Cost Advantage
Pakistan used to have absolute cost advantage in regard to the labor but now India and
Bangladesh has beaten Pakistan in terms of cost. Per second rate in Bangladesh is 4 cents where
as in Pakistan its 7 cents.
Brand Identities
Masood Textile has favorable brand equity in International and local market as it is the largest
textile composite in Asia.
Access to DistributionMasood textile mill has developed its own distribution network, known as DTS. Direct to store
works with the partnership with the clients. It has its own warehouses in US where it stocks its
products to neglect any delay in the order. It has its own fleet of trucks and containers to provide
logistical services to the consignments.
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Switching Cost
There are many competitors in local market as well as in international markets like China, India
and Bangladesh. These countries are low cost producers of textile products and give a fighting
competition to Pakistan. So, the switching cost of the customer is low in this industry.
Government Policies
There is this tendency of every government whether its a democratically elected or its a
dictatorship, government policies do not remain consistent once they are announced. This lack of
consistency in the policy implementation results in unattractiveness of doing business efficiently.
Capital investment requirement for business is not in align with the savings people have. So
borrowing money from commercial banks is the option available to the business oriented people.
High cost of financing i-e 14-15% is high when compared with the rest of the world. The
business earning around 20% would remain in the market when it is leveraged by debt from the
bank. Handsome portion of business earnings goes to the banks and then the tax further reduces
the net income. Corporate structure in Pakistan is unsupportive to the business because of this
huge tax and no incentive to the business.
Other Stakeholders
Relative Power Unions
There is no labor union in Masood textile mill that can hamper its performance. But when it
comes to protest against the government, unions arise and result in the strikes and respites which
hurt the business. Whenever MTM observes that there are potent of unionization in the making,
they find the one who is igniting the spark and transfer him to another unit, few weeks in new
unit and again transfer to another unit and eventually out of the company.
Bargaining Power of Customers
Buyer Concentration
There is no deficiency of customer in domestic and international market. There are chain stores
in the world that expands from one pole to another covering almost every single continent.
Concentration of buyers is high making it very tough to survive for the manufacturer unless it
remains consistent on quality, timing and quantity. To remain competitive in the global market,
Masood Textiles has to cover every single aspect from purchase order to the placement of the
product in the market, better than the competitor.
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Number of Suppliers
The competition is not only from domestic market but from countries like India, Bangladesh,
Thailand and Vietnam and the market going towards the maturity stage.
Switching CostReduced cost of production in the countries like China, Bangladesh and Vietnam gave a tough
competition to Pakistan textile sector. Switching cost of the customer is very low. Its only than
the quality of the product on the basis of which you have to remain competitive to keep the
switching cost high.
Substitute Products
Masood Textile mills do not manufacture formal wear garments, lawn, house decorative fabric
etc. However, many other textile firms covers many areas such as formal/casual wear, ladiessuiting, home decorative fabrics and raw fabric for further processing.
Threat of Backward Integrations
The threat of backward integration is very low majorly because of the economics and energy
conditions in Pakistan.
Threat of Substitute Products or Services
Functional Similarity
Local brands in Pakistan are in functional similarity with the apparel production in MTM.
Crossroads, Stoneage are the substitute products and will give competition if these companies
start doing export business.
Ratios
2011 2010 2009
Gross Profit Margin 16 18 19
Net Profit Margin 0.04 0.05 0.04
Return on Total Assets 0.05 0.06 0.05
Return on stockholder Equity 0.19 0.23 0.21
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Current Ratio 1.12 1.22 1.25
Quick Ratio
Inventory turnover
1.05
10.46
1.15
14.88
1.17
19.47
Total Assets turnover 1.24 1.20 1.14