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NISHAT MILLS LTD

Strategic Management Plan

BY
Muhammad Salman Rasheed (Roll #:04)
Zeeshan Tauqir (Roll #:10)
Abdur Razaq (Roll #:01)

Section: B
TABLE OF CONTENTS

Page No. TOPICS

3 Company Profile

4 Vision Statement, Mission Statement

5-7 SWOT Analysis


8 THE STRATEGY FORMULATION ANALYTICAL PROCESS
9 STAGE 1ST ----- INPUT STAGE

10-11 CPM-Competitive Profile Matrix

12 External Factor Evaluation (EFE) Matrix

13 Internal Factor Evaluation (IFE) Matrix

14 STAGE 2ND ----MATCHING STAGE


15-16 SWOT Matrix

17-18 SPACE Matrix

19-20 The Boston Consulting Group (BCG) Matrix

21-22 The Internal-External (IE) Matrix


23 Grand Strategy Matrix
24 STAGE 3RD ----DECISION STAGE
25-27 The Quantitative Strategic Planning Matrix (QSPM)

28 Recommendations

29 References

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COMPANY PROFILE

The Nishat Group:


Nishat has grown from a cotton export house into the premier business
group of Pakistan with 5 listed companies, concentrating on 4 core business;
Textiles, Cement, Banking and Power Generation.

Today, Nishat is considered to be at par with multinational operating locally


in terms of its quality products and management skills.

Annual turnover of 17 billion rupees.


14 billion from textiles.
Earn foreign exchange of US $ 236 million.
Pay taxes and levis of 2,080 million rupees annually.

Nishat Mills Ltd:


Flagship Company established in 1951.
Most modern, biggest composite unit of Pakistan.
Professional and client oriented marketing.
Green company.
ISO 9001 and IKO-TEX 100 Certified.
SA 8000certification currently in progress.

NML today has 1, 73,000 spindles, 284 sulzer shuttle less looms and 244
TSUDAKOMA air jet looms. NML also has the most modern textile processing
3
unit, 2 stitching units and power generation plant with a capacity of 33.6
MW.

NML total export for the year 2009 is 38.8 billion rupees. Due to the
application of prudent management policies, consolidation of operations, a
strong balance sheet and an effective marketing strategies, this trend is
expected to continue in the years to come. The company’s production
facilities comprise Spinning, Weaving, Processing, Stitching, and Power
Generation.

Vision Statement:
To transform the Company into a modern and dynamic yarn, cloth and
processed cloth and finished product manufacturing Company with highly
professionals and fully equipped to play a meaningful role on sustainable
basis in the economy of Pakistan.

Mission Statement:
To provide quality products to customers and explore new markets to
promote/expand sales of the Company through good governance and foster
a sound and dynamic team, so as to achieve optimum prices of products of
the Company for sustainable and equitable growth and prosperity of the
Company.

4
STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS
(SWOT) ANALYSIS

Strengths Weaknesses

Relying on international
ISO 9001 and IKO-TEX 100 market only.
Certified. High cost of production.
Biggest composite unit in High employee’s turnover.
Pakistan. Transit time is more as
Highest credit rating by PACRA. compare to foreign
Self owned power plant. competitor.
Largest dyeing facility in South
East Asia.

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Opportunities Threats

WTO regime implementation. Export of raw cotton and yarn.


Cost reduction by using WTO regime implantation.
modern and technology. Exchange rate fluctuations.
Local market development. Instable political and
Entering in Energy sector. economical conditions.
(Subject to Government Government policies.
permission)

INTERPRETATIONS:

A- STRENGTHS

1- ISO 9001 and IKO-TEX 100 Certified: As NML is mainly focusing on


international markets, and with the implementation of WTO regime, these
types of certifications are very helpful to win the customer’s satisfaction.
2- Biggest Composite Unit in Pakistan: NML is enjoying the status of
being the biggest textile composite unit of Pakistan, this strengths is
helpful to create economies of scale that is key to success in international
markets.
3- Highest Credit Rating by PACRA: NML has been awarded highest
investment grade by Pakistan Credit Rating Agency (PACRA), which will
make it easy for the NML to raise long-term funds.
4- Self Owned Power Plant: Now a days, having your own power plant is
of crucial importance, because it make sure un-interrupted supply of
energy at very low cost, which is helpful to be compatible at international
level.
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5- Largest dyeing facility in South East Asia: NML’s processing division
got the largest dyeing in South East Asia, making it a candidate to accept
those contracts from other companies that involve out sourcing of dyeing
facilities.

A- WEAKNESSES

1. Relying On International Market only: as mentioned earlier that NML


has been focusing on international markets so there are chances that this
strategy may hurt its sales as there are rapid fluctuations in international
markets, competition and buyers preferences.
2. High Cost of Production: All Pakistani firms including NML is suffering
from high cost of production as compared to the other countries like,;
India, China and Bangladesh, they are cutting our throats by being cost
completive day by day while at the same time producing high quality stuff
as compared to Pakistani firms.
3. High employee’s Turnover: Trends has been seen in workforce data to
leave the NML on permanent basis, this is especially true for the lower
level staff.
4. Transit time is more as compare to Foreign Competitor: Foreign
countries like India, Bangladesh and China are very much efficient while
completing and consigning their orders to foreign buyers. NML has more
transit time as compared to its international competitors. The reason may
be the contracts with shipping companies or some internal process
problems.

A- OPPORTUNITIES

1. WTO regime implementation: with the abolishment of quota system,


now its an opportunity for the NML to capture the international market
share by providing low priced and high quality goods to international
customers. In this regard is cost competiveness is a special concern.
2. Cost reduction by using modern Technology: As WTO regime has
opened the doors for free trade for the whole world, now the only survival
of the firms would on the minimization of production cost and offering
innovative, high quality goods with competitive price. NML got strong
financial support from Nishat Group can do so.

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3. Local market development: Nishat Mills Limited is presently focusing
on foreign markets, so it’s an opportunity for NML to cash its name in the
local market by introducing a local retail store chain just like Chen One.
(Chenab mills ltd.)
4. Entering in Energy Sector: NML may get the privilege of generating
and providing electricity for residential and commercial areas of
Faisalabad, by negotiating with the government of Pakistan. Al though
local rules make it difficult but still there is a huge opportunity to
capitalize.

A- THREATS

1. Export of Raw Cotton and Yarn: Recent trends in the Pakistan to


export raw cotton and yarn to foreign countries is hitting like nails on the
heads of textile value addition units, although NML has its own spinning
facilities but to some how export of raw cotton is dangerous for it.
2. WTO regime implantation: Abolishment of quota system presents a
opportunity as well as a biggest threat to the Pakistani firms including
NML, as other countries are free to capture the market, we the Pakistani
firms are suffering with high cost of production may be driven out of the
competition.
3. Exchange Rate Fluctuations: NML most of the sales are comprising
exports, it is to be received payment in foreign currency especially
American dollars, ultimately these sales proceeds are to be converted to
Pakistani rupees, here come s the magic of exchange rate whose
fluctuation can change a profitable deal into a bad loss. Finally, if
Pakistani rupees got strength against other currencies we will get lower
value for our proceeds.
4. Instable Political and Economical Conditions: Changing
Governments, war on terror, decreasing buying power and altering buying
trends and preferences of customers are posing big threats to NML, in this
regard we are confronting with local an well as international political and
economical conditions.
5. Government policies: Government polices like high rates of taxes, VAT,
duties on international trades, high energy cost, re-organizing unions are
causing a serious damage to the performance of over all industry
including NML.
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THE
STRATEGY-
FORMULATION
ANALYTICAL
PROCESS
9
STAGE: 1st ----------- INPUT
STAGE

10
A-COMPETITIVE PROFILE MATRIX (CPM)

Competitive Profile Matrix

Industry: Vertically Integrated Textile Mills

Sample Company: Nishat Mills Ltd.


NISHAT MILLS CRESCENT CHENAB
LTD. TEXTILE MILLS TEXTILE MILLS
CRITICAL
SUCCESS WEIGH Ratin Weight Ratin Weight Ratin Weight
FACTORS T g ed g ed g ed
Score Score Score

Product 0.07 4 0.28 3 0.21 3 0.21


design

Technological 0.11 3 0.33 4 0.44 3 0.33


up-gradation

Research & 0.10 4 0.40 3 0.30 2 0.20


development

Market 0.07 2 0.14 2 0.14 4 0.28


Segmentatio

11
n

Distribution & 0.07 3 0.21 3 0.21 2 0.14


promotion

Capacity 0.08 3 0.24 3 0.24 2 0.16


utilization

Persistence 0.09 4 0.36 3 0.27 4 0.36


in product
quality

Efficient 0.09 3 0.27 3 0.27 3 0.27


procurement
of raw
material

Effective 0.08 3 0.24 4 0.32 2 0.16


management

Trained 0.07 4 0.28 3 0.21 3 0.21


manpower

Cost 0.10 2 0.20 2 0.20 1 0.10


competitiven
ess

Customer 0.07 3 0.21 3 0.21 2 0.14


satisfaction &
loyalty

TOTAL 1.00 3.16 2.98 2.56

INTERPRETATIONS:

A Nishat mills limited is dominating in the industry as compared to local


players. There are several competitors like Agzard 9, Kohinoor textile mills,
etc, but above taken competitors are the major ones.

CPM scores for NML showing aggressiveness as compared to the crescent


and Chenab textile mills.
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NML is number one company within the local environment; it is basically
leading the industry in the following aspects:

Product design.
Research & development.
Persistence in product quality.
Trained Manpower.

Moreover, crescent textile mills is resides at the second number and leading
industry in effective management style. Finally Chenab textile comes at
number 3rd with leading position in persistence in quality and market
segmentation.

A-EXTERNAL FACTOR EVALUATION (EFE) MATRIX

KEY EXTERNAL FACTORS Weight Rating Weight


13
ed
Score

OPPORTUNITIES

WTO regime implementation. 4 0.48

0.12

Cost reduction by using modern 0.13 3 0.39


and technology.

Local market development. 0.10 1 0.10

Entering in Energy sector. 0.11 2 0.22


(Subject to Government
permission)

THREATS

Export of raw cotton and yarn. 0.12 4 0.48

WTO regime implementation. 0.10 4 0.40

Exchange rate fluctuations. 0.09 2 0.18

Instable political and 0.12 4 0.48


economical conditions.

Government policies. 0.11 1 0.11

TOTAL 1.00 2.84

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INTERPRETATIONS:

EFE score of 2.84 indicating that the NML is taking the external opportunities
and avoiding external threats quite well, however there is room for
improvement is well.

This score suggest NML to be aggressive but the degree of aggressiveness


needs to be little moderate, it should not go for diversification, rather it
should go for penetration in the existing market, further developing local or
foreign market or it may design a new product.

B-INTERNAL FACTOR EVALUATION (IFE) MATRIX

KEY INTERNAL FACTORS Weight Rating Weighted


Score

STRENGTHS

ISO 9001 and IKO-TEX 100 0.11 3 0.33


Certified.

Biggest composite unit in 0.10 4 0.40


Pakistan.

Highest credit rating by PACRA. 0.13 4 0.52

Self owned power plant. 0.15 4 0.60

Largest dyeing facility in South 0.12 4 0.48


East Asia.

WEAKNESSES

Relying on international market 0.10 2 0.20


only.

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High cost of production. 0.12 2 0.24

0.06 2 0.12
High employee’s turnover
Transit time is more as compare 0.11 1 0.11
to foreign competitor.

TOTAL 1.00 3.00

INTERPRETATIONS:

IFE score of 3.00 indicating that the NML is an internally strong organization,
it represent that it is excellent in its overall internal strategies when it come
to explore strengths and weaknesses.

Overall the main strength is financial support by the Nishat Group.

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STAGE: 2ND -----MATCHING
STAGE

A-SWOT MATRIX

17
STRENGTHS WEAKNESSES

1. ISO 9001 certified


1. Relying on
& IKO-TEX 100
international
Certified.
market only
2. Biggest composite
2. High cost of
unit in Pakistan
production
3. Highest credit
3. High employees
rating by PACRA
turnover
4. Self owned power
4. Transit time is more
plant
as compare to
5. Largest dyeing
foreign competitor
facility in south
east Asia

OPPORTUNITIES S-O STRATEGIES W-O STRATEGIES

1. WTO regime 1. provide electricity to 1. Import modern technology


implementation residential areas ( S4, (W1, W2, O2)
O4)
2. Cost reduction
technology by using
2. Company can enter in new
modern and 2. capture local market market through retail outlets
advanced technology by providing facility of (W1, W4, O3)
outsourcing and
3. Local market
introducing company
development products through its
4. Diversification in retail outlets (S2, S5,
energy sector O3)
(Subject to
Government
permission)

THREATS S-T STRATEGIES W-T STRATEGIES

1. Export of raw cotton 1. Penetration in foreign 1. Focus on local market


and yarn market (S1, T2) (W1, W2, W4, T2, T3)
2. WTO regime
implementation
3. Exchange rate 2. Make future contracts 2. Import modern technology,
fluctuations to avoid currency and do agreements with 18
INTERPRETATIONS:

Critical Region is WO. Nishat Textiles can import new technology to


reduce its cost of production. Company can thus be able to penetrate in the
market and capture more shares by improving quality of goods and services,
and provision of goods at lower prices.

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A-SPACE MATRIX
Financial Strength Rating Environmental Rating
Stability

Leverage 4 Rate of inflation -3

net income 6 Technological changes -3

E.P.S 5 Competitive pressure -3

R.O.E 5 Risk involve in business -2

Average 5 Average -2.75

Y-Axis strength 2.25

Competitive Rating Industry Strength Rating


Advantage

Market share -1 Growth potential 5

product quality -2 Financial stability 3

customer loyalty -3 Resource utilization 3

Technological know -2 Profit potential 2


how

Average -2 Average 3.25

X-Axis strength 1.25

INTERPRETATIONS:

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For the purpose of evaluating financial strength we have compared our
concerned co. with industrial average.
Leverage used by Nishat mills was significantly low as compared to
industrial average that why we have ranked it at point 4.
Net income of Nishat mills was highest in industry that’s why it is given
6 points.
It’s E.P.S & return on equity was also high as compare to industry
that’s why they were ranked 5.
Market share of Nishat mills was highest about 12% that why it is given
-1 marks.
There product is of good quality & there customers are loyal but
customers can’t be very loyal in this industry that’s why they were
ranked at -2 & -3.
They have new & advanced technology that’s why they are ranked -2.
Rate of inflation is increasing its C.G.S & technological changes its
depreciation as well as there is heavy competitive pressure from china
& Bangladesh that’s why they were rankes-3.
There is high risk now a days in this business but due to being as
industrial giant in Pakistan they are not in such a risk that why it is
given -2.
There is high growth potential in industry because now recovery period
have been started.
Industry is less financial stable as well as most of the companies are
producing very below then their capacity that’s why they are ranked at
3.
Due to increase in cost the profit potential has been declined that why
this is ranked at 2.

Directional vector point is :( 1.25, 2.25)

21
FS
ES
IS
CA e
Conservativ
Competitive
Defensive
Aggressiv
e

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INTERPRETATIONS:

According to our calculations the score of our company is 1.25 on x-


axis And 2.25 on Y-axis
Which is showing that our co. should go for aggressive strategy
Further more it is telling us that our financial strength is the
dominating factor in industry
Our concerned strategies can be
Backward ,forward ,horizontal ,integrations
Market penetration
Market development
Product development
Diversification(related or unrelated)
On the other hand, Nishat Textiles also has the opportunity to enter
and capture the local market. Company can do this through opening
retail outlets in the local areas and provide better goods and services
to its domestic customers.

A-THE BOSTON CONSULTING GROUP (BCG) MATRIX

Market Share

High
Low

Stars Question Mark

High

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Industrial

Growth
Cash Cow Dogs

Low

INTERPRETATIONS:

Nishat Textiles is a composite textile unit of Nishat Group. Total number of


players in the industry is 60, and Nishat Textiles is the market leader. It
captures 12% market share as a whole. In 2009, the industrial overall growth
rate is 11%, but that of Nishat Textiles is 24% as compare to the sales of
2008.
Source: KSE (Karachi stock exchange) data for 2008, and 2009.

The industrial growth is high and Nishat Textiles has high market growth as
well. So, it lies in the first quadrant (Stars) of the BCG matrix. It implies that,
company has the opportunity to go for Market penetration to capture more
share in the existing market by using new technology, and increasing

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promotional activities. It also has a tremendous option of local market
development.

Other feasible strategies may be the backward integration to secure the


supplies in order to tackle with the threat of exporting of local raw material
to foreign markets. Also Nishat Textiles goes for forward integration to
minimize its weakness of transit time of goods and services to its customers.

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B- THE INTERNAL-EXTERNAL (IE) MATRIX

C- IFE TOTAL SCORE


D-
E- Strong Moderate
Low
F-

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I II III

Grow and Build Grow and Build Hold and Maintain

IV V VI

Grow and Build Hold and Maintain Harvest

VII VIII IX

Hold and Maintain Harvest Divest

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G-

High
H-
I-
J-
K-
L-
EFE M-Medium
TOTAL N-
O-
SCORE
P-
Q-
R- Low
S-
T-
U-
V-
W-
X-
Y-

INTERPRETATIONS:

IFE Total Score (As per IFE Matrix) = 3.00


EFE Total Score (As per EFE Matrix) = 2.84
A-

It implies that Nishat Textiles is in a much strong position. But, comparatively


it is stronger internally as compare to its external position.

As per IE Matrix, Nishat Textiles lies in fourth cell, which implies that it should
go for aggressive strategies that is grow and build strategies. The possible
strategies for Nishat Textiles may be the integrations, intensive, and
diversifications.

Nishat Textiles has the opportunity to go for Market penetration to capture


more share in the existing market by using new technology, and increasing

28
promotional activities. It also has a tremendous option of local market
development.

Other feasible strategies may be the backward integration to secure the


supplies in order to tackle with the threat of exporting of local raw material
to foreign markets. Also Nishat Textiles goes for forward integration to
minimize its weakness of transit time of goods and services to its customers.

E- THE GRAND STRATEGY MATRIX

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Quadrant II Quadrant I

Quadrant III Quadrant IV

Rapid Market Growth

Weak Strong
Competitive Competitive
Advantage Advantege

Slow Market Growth

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INTERPRETATIONS:

Total number of players in the industry is 60, and Nishat Textiles is the
market leader. It captures 12% market share as a whole. In 2009, the
industrial overall growth rate is 11%, but that of Nishat Textiles is 24% as
compare to the sales of 2008.
As the market growth is high, and Nishat Textiles has strong comparative
position in the market. So, it lies in the first quadrant of Grand strategy
matrix, which implies that it should go for aggressive strategies. The possible
strategies for Nishat Textiles may be Market Development, Market
Penetration, Backward and Forward Integrations.

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STAGE: 3RD -----DECISION
STAGE

THE QUANTITATIVE STRATEGIC PLANNING MATRIX


(QSPM)

Strategy 1 Strategy 2

LOCAL PENETRATING
MARKET IN FOREIGN
DEVELOPMEN MARKET
T
Weight AS TAS AS TAS

32
KEY INTERNAL FACTORS

STRENGTHS
ISO 9001and IKO-TEX 100 0.10 1 0.10 3 0.30
Certified.

Biggest Composite Unit in 0.11 4 0.44 2 0.22


Pakistan.

Capacity utilization. 0.13 3 0.39 2 0.26

Self-Owned Power Plant. 0.14 2 0.28 3 0.42

Largest Dyeing Facility in South 0.12 2 0.24 1 0.12


East Asia.

WEAKNESSES
Relying on international markets 0.10 4 0.40 2 0.20
only.

High Cost of Production. 0.12 3 0.36 4 0.48

Market Segmentation. 0.07 3 0.21 1 0.07

Transit time is more as Compared 0.11 2 0.22 1 0.11


to Foreign Competitors.

SUBTOTAL 1.00 2.64 2.18

Strategy 1 Strategy 2

LOCAL PENETRATING
MARKET IN FOREIGN
DEVELOPMEN MARKET
T
Weight AS TAS AS TAS

KEY INTERNAL FACTORS

OPPORTUNITIES
WTO regime Implementation. 0.12 1 0.12 4 0.48

33
Cost reduction through 0.13 2 0.26 4 0.52
introducing modern technology.

Local market development. 0.11 3 0.33 1 0.11

Entering in Energy Sector. 0.11 - - - -

THREATS
Export of raw cotton and yarn. 0.12 3 0.36 2 0.24

WTO regime Implementation. 0.1 1 0.10 3 0.30

Exchange rate fluctuations. 0.09 2 0.18 1 0.09

Instable Political and Economic 0.11 3 0.33 2 0.22


Conditions.

Government Policies. 0.11 2 0.22 3 0.33

SUBTOTAL 1.0 1.90 2.29

GRAND TOTAL 4.54 4.47

INTERPRETATIONS:

I.S.O certification will only be helpful in market penetration so that’s


why it is given high marks.
Biggest composite unit & less capacity utilization will be helpful or will
be used better by open chain store rather then market penetration so
it is given higher marks.
Increasing sales in foreign will better use energy rather then chain
store so it is given higher marks.
Largest dying facility has its goodwill so we have ranked it higher in
chain store.
Reliance on international market can be decreased by opening chain
store that’s why it is given higher marks.

34
Higher cost of production can be decreased by exporting more
quantity but opening new store will increase expenses for that’s why
penetration is given higher marks.
Open chain store will increase our segmentation & it will decrease on
reliance on exports so problem of transit time will impact us less that’s
why these are given higher marks.
WTO regime will be useful only in penetration so it Is given higher
marks.
Local market development will be done only in that case when we will
go for chain store so it is given higher marks.
If we will open chain store we will be able to charge higher prices due
to our goodwill so yarn’s export problem will not affect us as it is
effecting.
WTO regime implementation will be covered only in that case when we
will go for market penetration.
Exchange rate fluctuation will impact us only in that case when we will
go for foreign trade so opening retail store will reduce its impact that’s
why it is given higher score.
Due to bankruptcy of foreign customers the political & economical
conditions will have less impact on us if we will go for chain store that’s
why it is given higher marks.
Government polices regarding opening a new store can be difficult to
meet so it is given lower marks.

RECOMMENDATIONS

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REFERENCES

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