Strategic Management Finalproject on Gul Ahmed

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STRATEGIC MANAGEMENT FINALPROJECTORGANIZATION STUDIED GUL AHMED PERSON INTERVIEWED Tariq Shamim Durrani Deputy Brand Manager Gul Ahemd Textile MillsGROUP MEMBERS Muhammad Faizan Maqsood Behzad shami Pehlaj Rai CLASS MBA 4D SUBMITTED TO Sir Naveed M. Khan SUBMITTED ON December 20, 20102ContentsCorporate Profile ................................................................................................................. 4 COMPANY HISTORY ...................................................................................................... 4 Corporate Profile Major Companies ................................................................................ 4 Corporate Profile Business Activities .............................................................................. 4 TEXTILES .......................................................................................................................... 4 POWER............................................................................................................................... 4 MANAGEMENT ................................................................................................................ 4 Description of products and services of the company ........................................................ 5 Vision and Mission Statement of the company .................................................................. 6 External factor Evaluation Matrix ...................................................................................... 7 Competitive Profile Matrix ................................................................................................. 8 Internal Factor Evaluation Matrix ....................................................................................... 9 SWOT MATRIX .............................................................................................................. 10 Financial Performance at a Glance ................................................................................... 11 Financial Ratios ................................................................................................................ 13 SPACE MATRIX ............................................................................................................. 15 BCG MATRIX.................................................................................................................. 16 BALANCE SCORECARD............................................................................................... 17 BLUE OCEAN STRATEGY ........................................................................................... 19 CONCLUSION ................................................................................................................. 203Corporate Profile COMPANY HISTORYThe story of textiles in the subcontinent is the story of Gul Ahmed. The group began trading in textiles in the early 1900s. With all its know-how and experience, the group decided to enter the field of manufacturing and Gul Ahmed Textile Mills Ltd. was incorporated as a private limited company, in the year 1953. In 1972 it was subsequently listed on the Karachi Stock Exchange. Since then the company has been making rapid progress and is one of the best composite textile houses in the world. The mill is presently a composite unit with an installed capacity of 103,000 spindles, 220 wide width air jet looms, 90 Sulzers, 297 conventional looms and a state of the art processing and finishing unit.Corporate Profile Major CompaniesThe following is a list of the major companies which comprise the group: Gul Ahmed Textile Mills Limited Gul Ahmed Energy LimitedCorporate Profile Business Activities TEXTILESIn the textile field, activities start from the spinning of cotton as well as man made fibers and extend to weaving, processing and finishing of all types of cotton and blended fabrics, bed linen, home furnishings, garment manufacturing, etc.POWERThe group has been a pioneer in the field of power generation. The textile mill runs on self-generation with an installed capacity of more than 20 MW. Gul Ahmed Energy operates a power plant of 136 MW capacity with a project cost of US$140 million located at Korangi, Karachi. The sponsors of this project include the IFC and Tomen Corporation. The project has been in commercial operation since November 1997.MANAGEMENTManagement of the group is professionally qualified and broadly experienced. The directors have held top positions in various textile bodies, export committees and have also assisted the Government of Pakistan in some of the major trade talks with EC and USA authorities.4Description of products and services of the companyThe products and services of Gul Ahmed Textile Mills can be divided into two broad categories according to their markets Gul Ahmeds local Market Gul Ahmeds export Market The products in Gul Ahmeds local market category are Lawn Pret line (women category) Mens stitched wear Mens unstitched Home textile Foot wear Perfumes AccessoriesThe products in Gul Ahmeds export market category are Lawn Pret line (women category) Mens stitched wear Mens unstitched Home textileWhat make Gul Ahmed stay? First ETP (Effluent Treatment Plant) in textile sector First yarn mercerizing facility Metal free safety packing zones in all sewing units First textile mill to register carbon credits First rotary machine in Pakistan First to install caustic recovery unit in Pakistans textile sector First compact spinner in Pakistan Using CAD/CAM machines to apply latest design techniques Largest embroidery facility dedicated to home textiles An extensive chain of retail outlets all over Pakistan5Vision and Mission Statement of the companyVISION Setting trends globally in the textile industry. Responsibly delivering products and services to our partners MISSION To deliver value to our partners through innovative technology and teamwork. Fullfilling our social and environmental responsibilities.VALUES Integrity Passion Creativity TeamworkAnalysis of Mission Statement According to our Analysis several components are missing in mission statement and the revised mission statement is as follows To serve fashion oriented customers. We ensure that our products are of the highest quality standards by adhering to the most stringent systems and processes while carefully selecting all the best quality inputs from around the globe. Our aim is to ensure that the end customer always gets a unique blend of quality, comfort and fashion which is passionately woven into all our products. We strive to make difference in communities where we operate by following best social & environmental policies and best human resource practices to ahead of the competition and setting benchmark for industry.6External factor Evaluation MatrixExternal Factor Evaluation Matrix Weighted Weight Rate score 0.05 0.08 0.08 0.07 0.09 0.06 0.04 4 4 3 3 3 3 3 0.2 0.32 0.24 0.21 0.27 0.18 0.12Key External Factors Opportunities Growth in target market audience Increasing Fashion Awareness Online shopping Social Network Marketing Brand Consciousness Increasing expenditure on shopping Fashion Weeks in Major cities Threats Counterfeiting and intellectual property rights violations Inflation Exchange rate fluctuations Law and order situation Terrorism Increase in interest Rates Cotton Yarn and other Raw material Prices TOTAL0.12 0.06 0.06 0.08 0.05 0.08 0.08 13 2 3 2 1 2 30.36 0.12 0.18 0.16 0.05 0.16 0.24 2.817Competitive Profile MatrixCompetitive Profile Matrix Critical Success Factors Advertising Product Quality Price competitiveness Management Financial Position Customer Loyalty Global Expansion Market Share Total Weight 0.20 0.10 0.10 0.15 0.10 0.10 0.20 0.05 Gul Ahmed Chenab Group Al-Karam IDEAS ChenOne IDENTITY Rating Score Rating Score Rating Score 4 0.8 3 0.6 2 0.4 4 0.4 4 0.4 3 0.3 3 0.3 3 0.3 3 0.3 3 0.45 4 0.6 2 0.3 4 0.4 3 0.3 3 0.3 3 0.3 4 0.4 2 0.2 3 0.6 2 0.4 3 0.6 4 0.2 2 0.1 3 0.15 3.45 3.1 2.558Internal Factor Evaluation MatrixINTERNAL FACTOR EVALUATION MATRIX Weighted Rating Score 4 4 4 4 4 4 4 0.6 0.4 0.2 0.6 0.2 0.12 0.12KEY INTERNAL FACTORS STRENGTHSWeight 0.15 0.1 0.05 0.15 0.05 0.03 0.03Highest Market share Creative designers Fully vertically integrated from fiber to fashion Latest technology engaged 99.99% design quality assurance Strong brand image An extensive chain of retail outlets all over PakistanWEAKNESSES Debt to equity ratio is high .81 EBITDA Margin to sales decreased from 12.49 to 11.92 Demand is higher than production capacity Supply Chain Issues Online shop not fully functional Small share in export market as compare to other local players TOTAL0.1 0.15 0.05 0.04 0.05 0.05 11 1 2 2 2 20.1 0.15 0.1 0.08 0.1 0.1 2.879SWOT MATRIXSTRENGTHS 1.Highest Market share 2.Creative designers 3.Fully vertically integrated from fiber to fashion 4.Latest technology engaged 5.99.99% design quality assurance 6. Strong brand image 7. An extensive chain of retail outlets all over Pakistan 8. Financial Strength OPPORTUNITIES 1.Growing Demand 2.Internet and Online shopping 3.Global Trade 4.Fashion Weeks in major cities 5. Dubai shopping festival and other expos THREATS Follow the global trends in fashion and make presence in international trade expos and shopping festivals (S2,O5) Collaborate with some designer to make impact in fashion weeks (S6,O4) ST STRATEGIES WT STRATEGIES Drop perfumes and foot wears unless Gul Ahmed develop as a prestige brand (W5,T5) Re launch perfumes with some high profile celebrity as brand endorsement (W5, T5) Improve supply chain by integrating department and processes (W3, W4, O1) SO STRATEGIES Launch its brand in other countries (S6, S3, S6, O3) WO STRATEGIES Make use of internet to cover lost sales (W1, O1,O2) 3.Most of designs are out of stock 4.Sometime designs are there in the magazine but are launched late. 5.Perfumes and footwear are not profitable WEAKNESSES 1.Demand for Lawn is so high that sometime it exceed their production capacity 2.Online shop is not fully functional (does not contain all products of Gul Ahmed)1.Big players in export markets Dedicated mills for export market to increase export 2.Small share of export market market share (S3, S8, S6, T1, T2) 3. Foreign exchange risk FDI in other countries to take 4.Volatile law and order low cost advantage (S8, situation T4,T1) 5.Other established brands in accessories, perfume foot wear10Financial Performance at a GlanceProfit and Loss Sales Rs. Million Rs. Million Rs. Million Rs. Million Rs. Million Rs. Million 2010 19,689 2009 13,906 2008 11,726 2007 9,848Gross Profit Operating profit Profit before tax Profit / (loss) after tax Dividends Balance Sheet Property Plan and Equipment Intangible Long term investment, loans, advances and deosits Net Current Assets Total Assets employed Represented by: Share capital Reserves Shareholders' equity3,173 1,653 708 478 79 20102,359 1,209 170 80 2009 6,106 29 90 (390) 5,8351,775 936 202 103 55 2008 5,828 28 78 (687) 5,2471,475 745 262 164 2007 4,703 30 74 (278) 4,529Rs. Million Rs. Million Rs. Million Rs. Million Rs. Million Rs. Million Rs. Million Rs. Million Rs. Million Rs. Million Rs. Million6,140 16 93 (224) 6,025635 2,961 3,596635 2,483 3,118552 2,210 2,762552 2,107 2,659Long term loans Deffered liabilities Total capital employed2,223 207 6,0252,567 149 6,0252,354 130 5,2471,772 98 4,52911Cash Flow Statement Operating activities Investing activities Financing Activities Cash and cash equivalents at the end of the year Rs. Million Rs. Million Rs. Million Rs. Million2010 454 (711) (170)2009 442 (931) 3982008 (399)2007 774(1,649) (713) 680 6 (3,832)(5,560) (5,233) (514)12Financial RatiosFinancial Ratios Profitability ratios Gross profit ratio EBITDA margin to sales Net profit to sales Liquidity ratios Current ratio Quick / acid test ratio Finance gearing Debt: equity ratio Rate of return Return on equity Return on capital employed Interest cover ratio Capital efficiency Inventory turnover Debtor turnover Creditor turnover Fixed assets turnover ratio Total assets turnover ratio Days Days Days 98.00 45.00 73.00 3.21 1.40 107.00 66.00 76.00 2.72 1.07 95.00 72.00 61.00 2.00 1.05 % % 14.22 27.87 1.75 2.73 21.82 1.16 3.79 19.14 1.28 0.81 0.98 1.07 0.97 0.34 0.95 0.39 0.90 0.24 % % % 16.12 11.92 2.43 16.96 13.37 0.58 15.14 12.49 0.88 2010 2009 200813Financial Ratios Investor information Earnings per share Price earnings ratio Cash dividend per share Bonus shares issues Dividend payout ratio Dividend cover ratio Break - up value per share Market value per share at the end of the year high during the year low during the year EBITDA Rupees Rupees % % Rupees2010200920087.52 2.46 1.25 16.60 6.06 56.451.45 26.79 49.121.86 21.51 1.00 53.68 1.87 50.04Rupees Rupees Rupees Rs. Million18.53 38.84 17.40 2,34738.84 49.00 28.60 1,86040.00 51.40 37.25 1,46514SPACE MATRIXSPACE MATRIX INTERNAL STRATEGI POSITION SINANCIAL STRANGTH (FS) Return on Investment Leverage Liquidity Working capital Cash flow Inventory Turnover Earnings per Share Price Earnings Ratio EXTERNAL STRATEGIC POSITION ENVIRONMENTAL STABILITY (ES) Technological change Rate of Inflation Demand Variability Price Range of Competing Products Barriers to entry in market Competitive Pressure Ease of exit from marker Risk involved in business6 3 3 4 3 5 6 5 4.375-4 -5 -4 -5 -3 -3 -1 -4 3.6250.75COPETITIVE ADVANTAGE (CA) Market Share Product Quality Product life Cycle Customer loyalty Competition's capacity utilization Technological know how Control over suppliers and distributors-1 -5 -3 -4 -4 -5 -1 3.286INDUSTRY STRENGTH (IS) Growth Potential Profit Potential Financial stability Technological know how Resource utilization Ease of entry in market Productivity capacity utilization6 4 4 5 5 3 5 4.571 1.28615BCG MATRIXSTARSQUESTION MARK MENS STITCHED WEAR ACCESSORIESPRET LINECASH COWS DOGS LAWN MENS UNSTITCHED HOME TEXTILE FOOT WEAR PERFUMES16BALANCE SCORECARDOBJECTIVES CUSTOMERS Target Market: LSM : 8 & above SEC: A+ & A B2B customers Attract new customers Retain customers Design Accuracy Quality INTERNAL PROCESS Superior R&D Finest Designers Design quality Engraving for Color Differentiation Laboratory Color Testing Color Development Printing Quality Superior Production Facility Supply chain Environmental Friendly Socially Responsible Community building and empowerment of women and disadvantaged Color matching and quality Nominal wastages Product delivery Technology Asset utilization CO2 emission Cover up lost sales by increasing sales growth by 20% 1000 women in work force at various positions 99.9% design matching 99.9% color matching 1% wastages Fulfill 100% online orders Reduction in scrap sale Continuous improvement in plant efficiency in order to reduce wastages, carbon emission and increase energy efficiency. Training program for disadvantaged and special people Separate unit for women Child care facility for women Customer satisfaction level MEASUREMENT TARGETS STRATEGIC INITIATIVES Market development Customer loyalty programs On time delivery for online buyers Product availability Product quality leadershipMarket share70 % market shareCustomer retention100% customer retention ratio 95% customer satisfaction levelNew product development cyclenew seasonal collections twice a yearFollowing global trends in fashion and setting benchmark in local markets Investment in new technology to maintain edge on design and color quality17LEARNING & GROWTH Cultivate culture of learning, creativity, target orientation and adopting positive values Attract and develop high caliber human resourceNew designs, ideas and conceptslead position in terms of new designsLow employee turnoverreduce employee turnover by 5% year on year basisContinuous investment for learning and development of employees to maintain an edge Confidentiality policy to ensure business secrets are not leakedFINANCIALS ProfitabilitySales growth by segment Customer and product line profitability20% sales growth targets Cost reduction by 5%Increase in gross margin18BLUE OCEAN STRATEGYBlue Ocean Strategy on which Gul Ahmed is working are A dedicated Gul Ahmed Fashion magazine to promote their new collection twice a year First one to launch online shop in Pakistan www.gulahmedshop.com , currently no other player in the industry has online shop19CONCLUSIONGul Ahmed has launched its online shop www.gulahmedshop.com for online shopping but the problem is not all of their products are currently available one internet. Mostly it happens on the first day of launch of their new collection, which is done twice a year (one in winter and other in summer), the customers (mostly ladies) rush into ideas and Gul Ahmed shop and start purchasing whole lot of a design and as a result that design get short in the market. And customers who come become frustrated when they cant find a print. Gul Ahmed is facing serious supply chain issue in this area, they cant meet the demand. One thing that can be done in this is the use of online shop to make sure availability of all their hot designs for a sustainable period of time. This will be a one good strategy to retain their customers. Gul Ahmed can also use nontraditional communication channels like facebook and twitter to interact with their customers and to get feedback. This online medium is one very effective way of analyzing consumer choices. Google analytics and facebook page analyzer can provide very useful information about user preferences. For instance it can tell you which are the most favorite design liked by the audience, based on that information Gul Ahmed can start producing more of that particular design and meet that customer demand.20