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STRATEGIC MANAGEMENT
THE
STRATEGY- FORMULATION
ANALYTICAL PROCESS
SUBMITTED TO
Sir Hussnain Raza
SUBMITTED BY
Zara Imran
Efrah Ashfaq
Barka Komel
Faiza Mughal
Hamna Abid
MAJOR
Mphil Business Administration
SEMESTER 1
SECTION 2
Date of submission: December 10, 2011
NISHAT MILLS LIMITED
1
2
TABLE OF CONTENTS
PAGE NO
TOPICS
Nishat Introduction & History
Vision Statement, Mission Statement
THE STRATEGY FORMULATION ANALYTICAL PROCESS
STAGE 1ST ----- INPUT STAGE
External Factor Evaluation (EFE)
Competitive Profile Matrix
STAGE 2ND ----MATCHING STAGE
SWOT Matrix
SPACE Matrix
The Boston Consulting Group (BCG) Matrix
The Internal-External (IE) Matrix
Grand Strategy Matrix
STAGE 3RD ----DECISION STAGE
The Quantitative Strategic Planning Matrix (QSPM)
Internal Audit of Nishates Marketing Department
Strategy Implementation
Strategy Evaluation
References
3
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.
Vision Statement
To transform the Company into a modern and dynamic yarn, cloth and processed cloth and finished product manufacturing Company that is fully equipped to play a meaningful role on sustainable basis in the economy of Pakistan. To transform the Company into a modern and dynamic power generating Company that is fully equipped to play a meaningful role on sustainable basis in the economy of Pakistan.
INDUSTRY ANALYSISNISHAT GROUPNISHAT GROUP
INTRODUCTION INTRODUCTION
Nishat Group is one of the leading and most diversified business groups in South East Asia
with fixed/ current assets of over Rs.300 billion (US$ 5 billion), it ranks amongst the top five
business houses of Pakistan. The group has strong presence in three most important business
sectors of the region namely Textiles, Cement and Financial Services. In addition, the Group
also has reasonable market share in Insurance (Adamjee and Security General), Power
Generation, Paper products (Nishat Shoaiba Paper Mills) and Aviation (Phonix Aviation). It
also has the distinction of being one of the largest players in each sector. The Group has a
remarkable position in the market as good as any multinationals operating locally in terms of
its quality of products, services and management skills.
4
HISTORY OF NISHAT GROUP
The history of Nishat Group dates back to 1951, when Mian Muhammad Yahya founded
Nishat Mills Limited. This man of vision, courage and integrity, Mian Mohammad Yahya
was born in 1918 in Chiniot. In 1947 when he was running leather business in Calcutta, he
witnessed by the momentous changes that swept the Indo-Pak subcontinent.
This is story of success through sheer hard work and an undaunted spirit of enterprise.
Beginning with a cotton export house, he soon branched out in to ginning, cotton and jute
textiles, chemicals and insurance. He was elected Chairman of all Pakistan Textile Mills
Association. He died in 1969, at the age of 51 having achieved so much in so short time.
After almost half a century of undaunted success, Nishat group is among the leading business
houses of the country and ranks among the top 5 groups in terms of assets and sales revenue.
The group has its roots firmly planted into four core business namely
Textiles
Power Generation
Banking
Cement
TEXTILES
The textile business is further subdivided into 2-textile division:
Nishat Faisalabad
Nishat Chunian
The textile capacity of the group is the largest in the country. An addition of 20,000 new
spindles, 100 new air jet looms and new dyeing plants has increased the existing capacity of
242,000 spindles, 740 looms and dyeing and finishing capacity of 5 million meters. The
largest exporters of textile products from Pakistan, for more then decade!
POWER GENERATION
5
Nishat Power Limited, incorporated under the Companies Ordinance, 1984 on 23 February
2007, is a subsidiary company of Nishat Mills Limited and is a public listed company. The
principle business of the subsidiary is to build, own, operate and maintain a fuel power
station having gross capacity of 200 MW in Jamber Kalan, Tehsil Pattoki, District Kasur,
Punjab, Pakistan. The subsidiary has commenced its commercial production from 9 June
2010. Nishat Mills Limited owns and controls 51.01% shares of the Nishat Power Limited.
Nishat Mills has established state of the art, modern, highly reliable and extremely efficient
captive co-generation power plants to cater in house energy requirements at all its spinning,
weaving, processing, stitching and apparel units. In the wake of current energy crisis, low
cost power and self reliance has been the targeted motto behind this establishment. With
depleting gas reserves and limited gas supplies in the country, they are proud to take initiative
on utilization of alternative fuel for future energy requirements.
CEMENT
In 1992, Nishat Group acquired D.G Khan Cement Company Limited (DGKCC) from the
second largest project of the group and is ideally located in the heart of the country, with easy
access to transportation all over Pakistan. DGKCC unit No. 1 has a capacity of 2,200 tons per
day. A new unit heaving the capacity of 3,300 tons was setup in 1997. International Finance
Corporation and common Wealth Development Corporation have financed this unit. With the
addition of unit No.2, DGKCC has become the largest manufacturer of cement in Pakistan.
BANK
In 1991, Nishat Group ventured into the financial sector through the acquisition of Muslim
commercial Bank. MCB has grown ever since and is now the largest bank in the private
sector. MCB has a network of over 1200 branches employing over 12,000 people.
CURRENT STATUS NISHAT TEXTILE MILL
Today Mian Mohammad Mansha, the chairman of Nishat Group, like his father, continues
the spirit of entrepreneurship and has led the group to become a multi dimensional
corporation, with wide ranging interests. Nishat Mills Limited is a public Limited Company
6
incorporated in Pakistan under the Companies Act, 1913(Now Companies Ordinance, 1984)
and listed on all three Pakistani stock exchanges.
The Company is engaged in the business of textile manufacturing and of spinning, combing,
weaving, bleaching, dyeing printing, stitching, buying, selling and otherwise dealing in yarn,
linen, cloth and other goods and fabrics made from raw cotton, synthetic fiber and cloth, and
to generate, accumulate, distribute and supply electricity.
Company is providing quality products to its customers within the Pakistan and outside the
Pakistan to fulfill the needs and wants of their customers.
MAJOR COMPETITORS
Nishat competitors are
Crescent
Chenab
Arzoo
Alkarms
Sitara
Kohinoor
Amtex
PEST ANALYSIS
Every business in the world operates in a macro-external environment. This environment
affects a lot for business as external environments are very important, as it influences your
business a lot. This influence could be either positive or may be negative depending on the
macro-external environment. This environment depends on four factors and environment
could also be analyzed on these factors, these are:
7
P Political
E Economic
S Social
T Technological
POLITICAL
Poor law & order situation is a serious threat for Pakistan textile industry.
Changing tax rates also badly affecting our textile sector.
Import & export restrictions are a barrier for the development of textile sector.
Pakistan is suffering from severe political crisis. If we look in to the history of
Pakistan we could analyze that there is hardly any government which had covered its
full tenure. Looking at the history we could see that democratic government was
dismissed five times and when martial law was imposed in the country. Whenever
martial law is imposed the dictator impose its own rules and regulation towards
industries which effects industry a lot and the business and some new ventures are not
strong enough to absorb those sudden changes.
ECONOMICAL
Pakistan is facing very bad economic conditions that are affecting badly every
business sectors.NML also facing bad economic conditions.
8
Poor monetary & fiscal policies of Pakistani government have adverse impact on
NML.
The economic condition of Pakistan can also affect the foreign investors
increasing inflation rate make the cost of production high and thus reduce the
profit margin of the investor.
SOCAL
Higher prices are causing buyer extremely cautious in placing orders.
The change in the lifestyle of the people affects the growing demand of the NML
products.
The change in the lifestyle and needs in different demographics also affect the
demand of the customers.
TECHNOLOGICAL
Coupled with Nishat capability & competency vertical production facility that can
convert raw cotton to final finished consumer product always attract attention of
customers.
Nishat has upgraded its machinery with installation and erection of most modern &
efficient ring frames & cone winding machines in two spinning units & further
replacement of similar machines of other units to help increase in automation &
reduce cost and produce better quality yarn.
MICHAEL PORTERS FIVE FORCES MODEL
9
BARGAINING POWER OF BUYER
The bargaining power of buyer is increasing day by day. The buyer demanding more and improved quality in very cheap price weather customer are from foreign or are from local market. The competition at international level as increased to much. If we see the export to USA of textile industry from all over the world and especially from Asian countries then we can easily found that Pakistan is offering most less export prices to USA which is $0.91 per-meter. But the other countries are getting more than these prices and in these countries Bangladesh is on top that is getting $3.15 per-meter from USA. Although we are offering lowest prices but due to poor quality and present condition off the textile industry. Pakistan is losing customer for there textile industry.
BARGAINING POWER OF SUPPLIER
Bargaining power of supplier is increasing as Pakistan government has put a barrier on import of raw material for textile which is reduced up to 70%. Due to which local suppliers are getting edge and providing raw material at expensive price. As our local cotton is not enough to fulfill all textiles so the bargaining power is increased. On other hand government has increased gas and petroleum prices.
RIVALRY
The competition in the textile industry is becoming very tough. The textile mills are competing with each other on the basis of their prices they offer for the quality which they produce. Competition at international level is very furious for Pakistan textile industry. The major exporters for textile products are;
1) Nishat textile2) Saphire textile3) Chenab textile
10
4) Kohinoor textile5) Al-karam textile6) Sitara textile7) Gulistan textile
In international market major countries are;
1) China2) India3) Vietnam4) Bangladesh5) Korea6) Pakistan7) Iran
THREAT OF NEW ENTRANCE
Threats of new entrance are always there. But it is neglected as new company has to face a number of challenges and competitors in the market. And existing companies are already a big giants for new entrance. On the other hand prices of labor , fuel , are very high. Technology is also very expensive due to higher dollar prices. Political instability is also playing a key role of barriers to new entrance.
THREAT OF SUBSTITUTION
Textile products and cloths are basic necessity which has no substitute. But now a day some local designers and companies have started there on designed production. The products they are making are according to peoples and customer demand. Such as Aroshe, Bareeze, needles impression etc.. They can be substitutes but not a big threat for the company.
OPPORTUNITIES AND THREATS EMERGING FROM
PEST ANALYSIS & PORTERS FIVE FORCES MODEL
OPPORTUNITIES
1. Installation of new software’s, machineries & system can give rise to value added
products.
2. Low cost production by using modern and advance machineries.
11
3. To capture masses of international market by offering less export prices.
THREATS
1. Law and order instability is a big threat for NML.
2. High rate of taxes has negative impact on NML.
3. Rate of inflation is affecting consumer power which is a big threat.
4. Competitive prices leads to customer reluctantly in placing orders.
5. Imbalance of payments due to fluctuation in exchange of currency rates as compared
to dollars.
6. Quota system limitize the imports of raw materials for the company.
INTERNAL AUDIT
12
STAGE: 1st ----------- INPUT STAGEEFE MATRIXEFE MATRIX
Key factors Weight Rate ScoreOPPORTUNITIES:
1. Cotton cloth export also increased to $1.13 billion during this period as compared to $1.03 billion in 2000-01. The future in the UAE markets appears promising.
0.12 4 0.48
2. Increase in production capacity. 0.02 3 0.06
3.Increase in variety of product line 0.04 2 0.08
4. More betterment could be achieved by hiring more efficient and skilled staff.
0.05 2 0.10
5. Government could apply sustainable policies for the interest of the exporters and investors
0.12 3 0.36
6. Nishat can introduce its garments in the local market by using the same Stitching unit. This is also a great opportunity.
0.04 2 0.08
13
7. Various training courses could be adapted in the company to train the workforce to improve and uplift the quality.
0.02 3 0.06
8. Installation of new combined heat and power plant.
0.06 3 0.18
THREATS Weight Rate Score9. There is no consistency in the government policies regarding textile sector
0.12 4 0.48
10. Increasing rate of electricity and GST are also big threats.
0.12 4 0.48
11. The lack of R&D in the cotton sector of Pakistan has resulted in low quality of cotton in comparison to rest of Asia.
0.03 3 0.09
12. Currency fluctuations and exchange rates can also create problems for NML.
0.08 4 0.32
13. More and more competitors (National and International) are entering in the same markets and offering attractive pric4es to the customers.
0.05 2 0.1
14. Uncertain environment (political& governmental).
0.05 1 0.05
15. The unstable economic condition could affect the FDI’s by reducing the investor’s profit margins.
0.08 4 0.32
Total 1 3.24
14
EVALUATION
In above matrix, weight is assigned from 0.0(not important) to 1(very important) according to
the relevant importance of that factor to being successful in the firm’s industry. Rates are
assigned from 4(superior) to 1(poor) on the basis of effectiveness of firm’s strategies.3.24 the
total score is indicating that NISHAT is operating well & taking adequate advantage of
various opportunities & trying to minimizing the threats faced by the competitors.
IFE MATRIX
Key factors Weight Rate Score
STRENGTHS1 .The bulk of the earning is exports based. 0.06 3 0.18
2. Highly qualified and skilled management.
0.10 4 0.40
3. Own power generation plant.
0.15 4 0.60
4. Latest mechanized machinery is involved in almost the divisions replacing the old ones.
0.08 3 0.24
5. Nishat textile is a market leader and contain big market share in textile sector due to its best working environment.
0.06 3 0.18
6. High quality products. 0.05 3 0.15
7. Equipped with MIS System. 0.05 2 0.10
8. National textile provides regular personal development and training courses to its employees.
0.03 2 0.06
9. Nishat is a green company and has got certificates of ISO 9001, IKO –TEX 100, SA -8000 and citypad.
0.05 2 0.1
15
WEAKNESS
10. Less promotional activities. 0.05 2 0.1
11. High cost of production. 0.15 2 0.3
12. Small international market share as compared to the potential.
0.04 2 0.08
13. Fluctuations in the rates of the raw materials.
0.05 2 0.1
14. Lack of benefits and rewards for the employees.
0.03 2 0.06
15.Competitors from Asia have come up in a big way with lower prices resulting from lower overhead, cheaper and better raw materials and machinery
0.05 2 0.1
Total 1 2.75
EVALUATION
In IFE Matrix, weights are assigned from 0.0(not important) to 1(very important) to each factor
according to the relevant importance of that factor to being successful in the firm’s industry.
Rates are assigned from 4(superior) to 1(poor) on the basis of effectiveness of firm’s strategies.
2.75 are higher than 2.5 the average score which is indicating that NISHAT has strong internal
position. Although 2.75 is not too much high score but it’s indicating NISHAT is operating
well by using its strengths & it should be overcome its weakness.
COMPETITIVE PROFILE MATRIX
16
Critical Success
FactorsNishat
TextilesKohinoor
Textile Mill
Weight Rating Scores Rating Scores
Customer Satisfaction
0.30 3 0.9 4 1.2
Global Expansion 0.05 3 0.15 4 0.2
Market Share 0.05 2 0.10 3 0.15
Pricing 0.10 4 0.4 3 0.3
Conformance to standard
0.30 4 1.2 3 0.9
Promotional Activities
0.10 3 0.30 2 0.2
Persuasion
0.05 4 0.20 3 0.15
Organizational involvement of employees
0.05 3 0.15 4 0.2
Total 1.00 3.4 3.3
Evaluation
17
As we know that competitive profile matrix identifies firm’s major competitors and its
particular strengths and weaknesses in relation to a sample firm’s strategic position.
Comparisons been made on the basis of the strengths and weaknesses encountered by
careful in depth analysis of competing firms. We have grouped the strengths and
weaknesses of existing firm Nishat mills in order to compare the rating s and weighted
scores with its rivalry potential firm Kohinoor textile mills. This comparative analysis
provides important internal strategic information.
In our case the two most important factors to being successful in industry are gaining
and maintaining Customer Satisfaction and Quality as indicated by weights of 0.30. As
satisfaction of prospective customers plays vital role in enhancing the sales and building
reputation of the firm and Quality provides as a means of excellence in the product or
service that fulfills or exceeds the expectations of the customer.
Nishat mills is strongest on maintaining quality control standards under the ISO stated
standards and is indicated by the rating of 4 whereas the competitor firm is a step
behind in adapting to ISO quality management systems .
The company has a diverse customer base with sales in both the local and export
markets. The main international markets include Asia, Europe, USA and Australia.
Kohinoor has a diversified customer base because of its association and partnership with
most of the top leading brands of the world which has strong persuasion and brand
image in market place. Zara, old navy , champion , Dockers ( san Francisco ) , wrangler,
Levi Strauses signature, banana republic, Yakka ,Li & Fung Limited, Jc Penney
( everyday matters ) , Dickies, fruit of the loom, Payless (shoe source). Kohinoor is
strongest in retaining more customers and is strongest on customer satisfaction indicated
by rating of 4 as compare to Nishat with rating of 3.
Overall Nishat is strongest as indicated by the total weighted score of 3.4
STAGE: 2ND -----MATCHING STAGE
18
SWOT MATRIX
STRENGTHS WEAKNESSES1 .The bulk of the earning is exports based.2. Highly qualified and skilled management.3. Own power generation plant.4. Latest mechanized machinery is involved in almost the divisions replacing the old ones.5. Nishat textile is a market leader and contain big market share in textile sector due to its best working environment.6. High quality product7. Equipped with MIS System.8. National textile provides regular personal development and training courses to its employees.9. Nishat is a green company and has got certificates of ISO 9001, IKO –TEX 100, SA -8000 and city pad.
1. Less promotional activities.2. High cost of production.3. Fluctuations in the rates of the raw material4. Lack of benefits and rewards for the employees.
OPPURTUNITIES S-O STRATEGIES W-O STRATEGIES
19
1. Cotton cloth export also increased to $1.13 billion during this period as compared to $1.03 billion in 2000-01. The future in the UAE markets appears promising.2.Increase in production3. Increase in variety of product line.4. More betterment could be achieved by hiring more efficient and skilled staff.5. Government could apply sustainable policies for the interest of the exporters and investors.6. Nishat can introduce its garments in the local market by using the same Stitching unit. This is also a great opportunity.7. Various training courses could be adapted in the company to train the workforce to improve and uplift the quality8. Installation of new combined heat and power plant
1. Technical facilitation through mechanized machinery allows managerial staff to enhance business as well as production process efficiency. (S4,O2) 2. Personal & training courses encourages the human resource to developed more diversified strategy via producing quality as well as variation in products.( S6,O7)3. Keeping in view the energy crises, Nishat setup an independent power producer which allows automation and uptime flexible production of products.(S3,O8)
1. Efficient availability of resources can results in increasing in the production capacity. (W2,O8)2. Creating a conductive environment to attract the pro-active investments. (W1,O5)3. Modifying the market to improve profit margins and increase local market share. (W4,O6)
THREATS S-T STRATEGIES W-T STRATEGIES
20
1. There is no consistency in the government policies regarding textile sector2. Increasing rate of electricity and GST are also big threats.3. The lack of R&D in the cotton sector of Pakistan has resulted in low quality of cotton in comparison to rest of Asia.4. Currency fluctuations and exchange rates can also create problems for NML.5. More and more competitors (National and International) are entering in the Same markets and offering attractive prices to the customers.6. Uncertain environment.(political, governmental)7. The unstable economic condition could affect the FDI’s by reducing the investors’ profit margins
1. High quality products can reduce the uncertain environment in local markets as well as in international markets. (S6,T4)3. Installation of more power generations plants in all the divisions & sub divisions can reduce the threat of high electricity rates. (S3,T2)4. Enforcement of solid policies and governmental laws made by the national textile training agency to provide training to the employees, this can minimize the inconsistency in textile sector. (S8,T1)5. Equipped with MIS & high quality products can reduces the competition & allows opening the doors in international markets for Nishat. (S7,S6,T5)
1. Strong brand endorsement by national and international models to capture great market share (nationally and internationally). (W1,T5)3. Increase in International market share in India, China, and Middle East because of low price fluctuations in currency. (W3, T4)4. Improve quality of raw material and reducecost by importing modern technology which in turn will make provision of goods to customers at lower prices (W4, T3,T5)5. Restructuring HR Policies for employee satisfaction and retention (W5, T5)
SPACE MATRIX FOR NISHAT LINEN
FINANCIAL STRENGTHS: Ratings
Earnings Per Share of Nishat is Rs. 10.50 which is greater than its competitor Kohinoor having EPS of Rs.1.91.
+4
21
Company has Current Ratio of 1.11, greater than Kohinoor having Current ratio of 0.51.
+2
Company’s Return on Assets is positive i-e 6.31%, compared to ROA of Kohinoor i-e -3.31%.
+5
Nishat’ Net Sales are higher as compared to Kohinoor. +5
Debt Ratio of Nishat is 32%, lower than Kohinoor having Debt Ratio of 67.44%.
+3
Quick ratio of Nishat i-e 0.53 is slightly higher than Kohinoor (0.43). +1
Inventory Turnover of Nishat i-e 4.21 is slightly higher than Kohinoor (4.04).
+1
+21.0
INDUSTRY STRENGTHS:
NML has biggest composite unit in the country. +4
NML is technically facilitated. +2
NML has tremendous market positioning.+1
NML has adequate financial resources.+3
NML uses of best machinery available.+2
NML has a large domestic market.+3
NML is a leading exporter of textile products in the country.+3
+18.0
ENVIRONMENTAL STABILITY:
Latest yarn dying plants is installed with the capacity of 7 tons a day. -1
Most of the Nishates competitors are offering prices that are more attractive.
-5
The bad economic position of Pakistan & currency fluctuation has adverse impact on Nishates.
-5
Changing lifestyles and preferences through the media intervention cause dramatic changes in consumer demand.
-2
22
Price ceiling pressure from competitors put behind Nishat in terms of retaining potential customers in domestic market.
-4
Nishat is in transformation stage to open operations in Global market, it is risky to compete global standards because of extensive competition.
-5
-22.0
COMPETITIVE ADVANTAGE:
NML has largest dyeing facility in South East Asia
-2
NML has combined heat & power generation plant
-1
NML has highly qualified and skilled management and workforce
-3
NML is using latest mechanized machinery.
-3
NML is producing high quality product.
-3
NML is ISO 9001 -2000 and oktex 100 certified
-2
NML is market leader and have big share in textile sector of Pakistan. -3
-17.0
CONCLUSION
FS Average: +21/ 7 = 3.00
IS Average: +18/ 7 = 2.57
ES Average: -22/ 7 = -3.67
23
CA Average: -17/ 7 = -2.43
DIRECTIONAL VECTOR COORDINATES
X-axis
= (-2.43) + 2.57
= +0.14
Y-axis
= 3 + (-3.67)
= -0.67
THE BOSTON CONSULTING GROUP (BCG) MATRIX
No of division
Description Revenues %Revenues
Profits %profits
Market share
Relative market share
Growth rate
1Nishat textile
Rs.48565 62.2 4844 43% 80.2 0.8% 53.99%
2 DGKCC Rs.18577 23.8 171 1.5 40.3 0.4% 14%
24
%
3 Power plant Rs.10902 13.9 629556.4
570.1 0.7% -88%
Total Rs.78,044 100 Rs.11156 100
25
26
Evaluation of BCG:
Nishat firms divisions are competing in different industries e.g. Nishat textiles, DGKCC, and power generation unit,. We have chosen this multidivisional firm to manage its portfolio of business by examining the market share and growth rate. The growth rate could range from
27
I
Grow and Build
II
Grow and Build
III
Hold and Maintain
IV
Grow and Build
V
Hold and Maintain
VI
Harvest
VII
Hold and Maintain
VIII
Harvest
IX
Divest
3.24 2.75
HIGH
3.0 to 4.0
2.0 to 2.99
MEDIUM
1.0 to 1.99
LOW
EFE
TO
TAL
SCO
RE
+20 to -20 and the growth rate of Nishat division also lies between these upper and lower limits. The pie slice represents the profit generated, the circle represents the amount of revenues generated from each division, Nishat textiles comes in the 2nd quadrant of stars represents that Nishat should go for market development as well a penetration , can also pursue backward ,forward and horizontal integration .DGKCC comes in first quadrant of question marks its cash needs are high but its cash generation is low , its market share is low Comparative to other divisions .the power generation plants comes under the cash cow as it is at its maturity stage represents the mark share of 70% as compare to other divisions
INTERPRETATION
Total IFE Score = 2.75
Total EFE Score = 3.24
Evaluation of IE
The total score of IFE matrix is 2.75 which lies in quadrant to and represents the grow and build stage for Nishat textile as compare to that the EFE matrix total scores represents the sum of 3.24 which also shows that Nishat is in a stage where t can pursue the market penetration, product development, market development as well as focus on backward, horizontal and forward integration
Grand Strategy Matrix
Rapid Market Growth
28
Quadrant 2 Quadrant 1
Market development Market development
Market penetration Market penetration
Product development Product development
Horizontal integration Forward integration
Divesture Backward integration
Liquidation Horizontal integration
Related diversification
Quadrant 4 Quadrant 3
Retrenchment
Related diversification Related diversification Unrelated diversification Unrelated diversification
Divesture Joint venture
Liquidation
Slow Market Growth
INTERPRETATION
Nishat mills currently lies in the quadrant one as it is the market leader in terms of growth,
sales, market share and production capacity. Nishat has got both the strong competitive
29
position in the market and rapid market growth rate which makes it lie in this quadrant which
shows that the company is in an excellent strategic position. Continuous concentration on the
current strategies would be wise rather than to shift from its established competitive
advantages. Nishat, being in this quadrant, can take aggressive risks as well and can afford to
take the advantage of the new opportunities. The possible strategies recommended for Nishat
Mills can be market development, market penetration, horizontal integration and related
diversification.
STAGE: 3RD -----DECISION STAGE
QSPM MATRIX
EFE
STRATEGIC ALTERNATIVES
Strategy # 1
Related product diversification(Bags, bridal dresses bridal
grooms, curtains)
Strategy #2
Product development in terms of increase
in exports.
KEY EXTERNAL FACTORS
Weight AS TAS AS TAS
OPPORTUNITIES:
1. Cotton cloth export also increased to $1.13 billion during this period as compared to $1.03 billion in 2000-01. The future in the UAE markets appears promising.
0.12 1 0.12 4 0.48
2. Increase in production capacity.
0.02 3 0.06 4 0.08
3.Increase in variety of product line
0.04 4 0.16 1 0.04
4. More betterment could be 0.05 2 0.1 3 0.15
30
achieved by hiring more efficient and skilled staff. 5. Government could apply sustainable policies for the interest of the exporters and investors
0.12 1 0.12 4 0.48
6. Nishat can introduce its garments in the local market by using the same Stitching unit. This is also a great opportunity.
0.04 4 0.16 1 0.04
7. Various training courses could be adapted in the company to train the workforce to improve and uplift the quality.
0.02
8. Installation of new combined heat and power plant.
0.06
THREATS:
9. There is no consistency in the government policies regarding textile sector
0.12 1 0.12 3 0.36
10. Increasing rate of electricity and GST are also big threats.
0.12
11. The lack of R&D in the cotton sector of Pakistan has resulted in low quality of cotton in comparison to rest of Asia.
0.03
12. Currency fluctuations and exchange rates can also create problems for NML.
0.08 1 0.08 4 0.32
13. More and more competitors (National and International) are entering in the same markets and offering attractive prices to the customers.
0.05 3 0.15 4 0.2
14. Uncertain environment 0.05 1 0.05 3 0.15
31
(political& governmental).
10. Increasing rate of electricity and GST are also big threats.
0.12
TOTAL: 1
IFE
STRATEGIC ALTERNATIVES
Strategy # 1
Related product diversification(Bags, bridal dresses bridal
grooms, curtains)
Strategy #2
Product development in terms of increase
in exports.
Weight AS TAS AS TASSTRENGTHS:
1 .The bulk of the earning is exports based.
0.06
2. Highly qualified and skilled management.
0.10 4 0.4 3 0.3
3. Own power generation plant.
0.15 3 0.45 2 0.3
4. Latest mechanized machinery is involved in almost the divisions replacing the old ones.
0.08 3 0.24 3 0.24
5. Nishat textile is a market leader and contain big market share in textile sector due to its best working environment.
0.06 4 0.24 4 0.24
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6. High quality products. 0.05 2 0.1 4 0.2
7. Equipped with MIS System.
0.05
8. National textile provides regular personal development and training courses to its employees.
0.03
9. Nishat is a green company and has got certificates of ISO 9001, IKO –TEX 100, SA -8000 and city pad.
0.05 3 0.15 4 0.2
WEAKNESS:
10. Less promotional activities.
0.05
11. High cost of production. 0.15 4 0.6 3 0.45
12. Small international market share as compared to the potential.
0.04 1 0.04 4 0.16
13. Fluctuations in the rates of the raw materials.
0.05
14. Lack of benefits and rewards for the employees.
0.03
15. Competitors from Asia have come up in a big way with lower prices resulting from lower overhead, cheaper and better raw materials and machinery.
0.05
TOTAL: 1 3.34 4.39
EVALUATION
On the basis of EFE IFE, BCG MATRIX & GEAND STRATEGY MATRICES we have constructed QSPM for Nishat mills.
1=not attractive
2=somewhat attractive
3=reasonably attractive
4=highly attractive
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OPPORTUNITIES
The future expectations from the UAE markets are favorable for the product development
so it is given high rates.
Increase in the production capacity could also be favorable for the product development
in terms of increase the market share abroad and this factor is also the base to provide the
product diversification in terms of producing hand bags, bridal wear, woolen stuff,
curtains and other ready made items.
The increase in the variety of product line could be a very beneficial feature to increase
the related product diversification nationally so it is ranked higher.
The hiring of added skilled staff would be more favorable option for the product
development in abroad because as for the product diversification at national level, the
company already has enough capable workers to do the tasks.
The governmental policies for the interest of exporters and investors are a favorable
option in the development of the products in terms of their increase in market share
abroad. So, we have given it high rates.
By using the already installed stitching unit the company can diversify its productions
that are why we have ranked it higher.
THREATS
The monetary policies, economic and regulatory policies and inflation are the factors that
reasonably affect the development of products abroad.
Exchange rate fluctuation will impact us only in that case when we will go for foreign
trade so we will rate it high in that case.
Increase in the competition is risky for both markets, national and international. But
nationally the brand image of Nishat is much developed as compared to the markets
abroad.
The uncertainty in the political and economic conditions will more affect the exports as
compared to the related product diversification nationally.
STRENGTHS
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Highly qualified management is the best factor for related diversification in terms of
efficiency so its rated high & for product development in terms of exports its rated
reasonably attractive.
Own power generation plant is reasonably attractive for related diversification because if
we go for this strategy Nishat has to installed more power generation plants & in terms of
product development it’s somewhat attractive.
Latest machinery is rated 3 reasonably attractive for both strategies because to implement
both strategies this factor has an important impact on Nishat.
Market leader is rated higher for both strategies because this factor can help to make
strong brand image in local as well as in foreign markets.
High quality products is rated higher 4 for product development in terms of exports
because Pakistan is under developed country & require certain ISO standards to meet the
requirements in foreign countries.
Green company & ISO certified is a certificate to operate in foreign markets so its rated
higher 4 foe strategy # 2.
WEAKNESS
High cost of production is rated higher for related diversification because this factor can
badly affect to implement strategy # 1.
Small international market share is rated higher for strategy # 2 because this factor can
effect to implement strategy # 2.
CONCLUSION
The result of QSPM clearly showing that strategy # 2 product development in terms of
exports have high attractive score as compared to related diversification strategy #1.this TAS
(total attractive score)is showing that Our strengths are more supportive to implement
strategy # 2 and its favorable for Nishat to implement strategy # 2.
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STRATEGY IMPLEMENTATION
DOMESTIC TO GLOBAL EVOLUTION
As we have selected the strategy number two, the Product Development in terms of
increase in exports, now we need to prepare the action plans to implement it. The
main objective of our strategy implementation is to expand our business in the United
States, European Union, India, UAE and further countries where there is a need to
cater the textile sector. Nishat is planning to form partnerships with local incorporated
cloth companies in other countries, still develop products, services, and marketing
campaigns designed to appeal to customers in other countries.
NML develop a strategy taking into account known governmental regulations, one
language (generally), and one currency in a domestic market, it must consider and
plan for different levels and kinds of governmental regulation, multiple currencies,
and several languages in the global market.
The policies made for the strategy implementation includes:
Intercultural managerial policies incorporated according to international market.
Development of international strategies
Focus on Regiocentricism
focus shifted from domestic to geocentricism by inculcating world market strategies
Nishat policies addressing the social accountability issues
Policies based on ISO 14001 standards to controls activities that have an effect on the
environment.
Employee training activities.
Issues related to suppliers management in abroad.
Assurance of the proper implementation of the ISA 9001 internationally.
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The resources required for the strategy implementation includes the:
1. Financial resources:
Capital and budgeting required supporting the product Development in terms of increase
in exports
2. Physical resources:
The use of mechanized machinery, automation and installation to reduce the manpower
efforts in producing excessively for the exports.
3. Technological resources:
The use of increased number of software, hardware and communication tools.
4. Human resources:
Human resources are the core competencies of the firm. To manage them workshops,
training programs and seminars are organized by using the efficient leadership skills.
EVALUATION AND CONTROL
We answer the following checklist to check the benefits determined by the implemented
strategy to Nishat:
Is the strategy following the time management policy? YES .They can adhere to time
management constraints the ability to plan. Make appointments, to think, and stick to our
plan.
What is the response to Industry and market? Through Environmental scanning and
market analysis we will be able to encounter what others in industry are doing, who the
market leaders are and where our company stacks up, and what the best practices are.
Is the strategy assuring R&D practices? YES. By hiring more competent personals we
need to make sure the company is developing the right new products for the markets we
serve and for new markets we want to enter.
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Knowledge about the competition. Having a good idea what our competition is up to.
We must also know what new competition might arise from technological or regulatory
changes.
What kind of Strategic hiring is required? Hire local researchers which are doing more acquisition and competitor studies, segmentation and market structure analyses, and basic strategic position assessments. To the costs and methods that are workable in local markets.
Is the strategy financially stable? YES .we need to know the cash ramifications of our decisions and the company’s progress. We must focus on cash flow not profit. And we
need a business model that explains the ramifications of our decisions, and what happens beyond our control.
REFERENCEShttp://www.referenceforbusiness.com/management/Str-Ti/Strategy-in-the-Global-Environment.html#ixzz1gWwCBgZm
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