Strategic Management Finalproject on Gul Ahmed

STRATEGIC MANAGEMENT FINALPROJECT

ORGANIZATION STUDIED GUL AHMED PERSON INTERVIEWED Tariq Shamim Durrani Deputy Brand Manager Gul Ahemd Textile Mills

GROUP MEMBERS  Muhammad Faizan Maqsood  Behzad shami  Pehlaj Rai CLASS MBA 4D SUBMITTED TO Sir Naveed M. Khan SUBMITTED ON December 20, 2010

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Contents Corporate 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 ................................................................................................................. 20

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Corporate Profile COMPANY HISTORY The story of textiles in the subcontinent is the story of Gul Ahmed. The group began trading in textiles in the early 1900’s. With all it’s know-how and experience, the group decided to enter the field of manufacturing and Gul Ahmed Textile Mills Ltd. was incorporated as a private limited company, in the year 1953. In 1972 it was subsequently listed on the Karachi Stock Exchange. Since then the company has been making rapid progress and is one of the best composite textile houses in the world. The mill is presently a composite unit with an installed capacity of 103,000 spindles, 220 wide width air jet looms, 90 Sulzer’s, 297 conventional looms and a state of the art processing and finishing unit.

Corporate Profile – Major Companies The following is a list of the major companies which comprise the group:  

Gul Ahmed Textile Mills Limited Gul Ahmed Energy Limited

Corporate Profile – Business Activities TEXTILES In the textile field, activities start from the spinning of cotton as well as man made fibers and extend to weaving, processing and finishing of all types of cotton and blended fabrics, bed linen, home furnishings, garment manufacturing, etc.

POWER The group has been a pioneer in the field of power generation. The textile mill runs on self-generation with an installed capacity of more than 20 MW. Gul Ahmed Energy operates a power plant of 136 MW capacity with a project cost of US$140 million located at Korangi, Karachi. The sponsors of this project include the IFC and Tomen Corporation. The project has been in commercial operation since November 1997.

MANAGEMENT Management of the group is professionally qualified and broadly experienced. The directors have held top positions in various textile bodies, export committees and have also assisted the Government of Pakistan in some of the major trade talks with EC and USA authorities.

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Description of products and services of the company The products and services of Gul Ahmed Textile Mills can be divided into two broad categories according to their markets  Gul Ahmed’s local Market  Gul Ahmed’s export Market The products in Gul Ahmed’s local market category are        

Lawn Pret line (women category) Men’s stitched wear Men’s unstitched Home textile Foot wear Perfumes Accessories

The products in Gul Ahmed’s export market category are     

Lawn Pret line (women category) Men’s stitched wear Men’s unstitched Home textile

What make Gul Ahmed stay?          

First ETP (Effluent Treatment Plant) in textile sector First yarn mercerizing facility Metal free safety packing zones in all sewing units First textile mill to register carbon credits First rotary machine in Pakistan First to install caustic recovery unit in Pakistan’s textile sector First compact spinner in Pakistan Using CAD/CAM machines to apply latest design techniques Largest embroidery facility dedicated to home textiles An extensive chain of retail outlets all over Pakistan

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Vision and Mission Statement of the company VISION 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  Teamwork

Analysis of Mission Statement According to our Analysis several components are missing in mission statement and the revised mission statement is as follows “To serve fashion oriented customers. We ensure that our products are of the highest quality standards by adhering to the most stringent systems and processes while carefully selecting all the best quality inputs from around the globe. Our aim is to ensure that the end customer always gets a unique blend of quality, comfort and fashion which is passionately woven into all our products. We strive to make difference in communities where we operate by following best social & environmental policies and best human resource practices to ahead of the competition and setting benchmark for industry.”

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External factor Evaluation Matrix External Factor Evaluation Matrix

Key External 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 TOTAL

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 0.12

0.12 0.06 0.06 0.08 0.05 0.08 0.08 1

3 2 3 2 1 2 3

0.36 0.12 0.18 0.16 0.05 0.16 0.24 2.81

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Competitive Profile Matrix Competitive 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 2.55

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Internal Factor Evaluation Matrix INTERNAL FACTOR EVALUATION MATRIX

KEY INTERNAL FACTORS STRENGTHS

Weight

Weighted Rating Score

Highest 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 Pakistan

0.15 0.1 0.05 0.15 0.05 0.03 0.03

4 4 4 4 4 4 4

0.6 0.4 0.2 0.6 0.2 0.12 0.12

WEAKNESSES 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 TOTAL

0.1 0.15 0.05 0.04 0.05 0.05 1

1 1 2 2 2 2

0.1 0.15 0.1 0.08 0.1 0.1 2.87

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SWOT MATRIX STRENGTHS

WEAKNESSES

1.Highest Market share

1.Demand for Lawn is so high that sometime it exceed their production capacity

2.Creative designers 3.Fully vertically integrated from fiber to fashion

2.Online shop is not fully functional (does not contain all products of Gul Ahmed)

4.Latest technology engaged 5.99.99% design quality assurance 6. Strong brand image 7. An extensive chain of retail outlets all over Pakistan

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

8. Financial Strength OPPORTUNITIES

SO STRATEGIES

WO STRATEGIES

1.Growing Demand

Launch its brand in other countries (S6, S3, S6, O3)

Make use of internet to cover lost sales (W1, O1,O2)

Follow the global trends in fashion and make presence in international trade expos and shopping festivals (S2,O5)

Improve supply chain by integrating department and processes (W3, W4, O1)

2.Internet and Online shopping 3.Global Trade 4.Fashion Weeks in major cities 5. Dubai shopping festival and other expos

Collaborate with some designer to make impact in fashion weeks (S6,O4)

THREATS

ST STRATEGIES

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)

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)

5.Other established brands in accessories, perfume foot wear

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Financial Performance at a Glance Profit and Loss Sales

Gross Profit Operating profit Profit before tax Profit / (loss) after tax Dividends

Rs. Million Rs. Million Rs. Million Rs. Million Rs. Million Rs. Million

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' equity

Long term loans Deffered liabilities Total capital employed

Rs. Million Rs. Million Rs. Million Rs. Million Rs. Million Rs. Million Rs. Million Rs. Million Rs. Million Rs. Million Rs. Million

2010

2009

2008

19,689

13,906

11,726

9,848

3,173

2,359

1,775

1,475

1,653

1,209

936

745

708

170

202

262

478

80

103

164

79

-

55

-

2010

2009

2008

2007

6,140

6,106

5,828

4,703

16

29

28

30

93

90

78

74

(224)

(390)

(687)

(278)

6,025

5,835

5,247

4,529

635

635

552

552

2,961

2,483

2,210

2,107

3,596

3,118

2,762

2,659

2,223

2,567

2,354

1,772

207

149

130

98

6,025

6,025

5,247

4,529

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2007

Cash 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. Million

2010

2009

2008

2007

454

442

(399)

774

(711)

(931)

(1,649) (713)

(170)

398

680

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(5,560) (5,233) (514)

(3,832)

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Financial Ratios Financial Ratios

2010

2009

2008

Profitability ratios Gross profit ratio

%

16.12

16.96

15.14

EBITDA margin to sales

%

11.92

13.37

12.49

Net profit to sales

%

2.43

0.58

0.88

Current ratio

0.97

0.95

0.90

Quick / acid test ratio

0.34

0.39

0.24

0.81

0.98

1.07

Liquidity ratios

Finance gearing Debt: equity ratio Rate of return Return on equity

%

14.22

2.73

3.79

Return on capital employed

%

27.87

21.82

19.14

1.75

1.16

1.28

Interest cover ratio Capital efficiency Inventory turnover

Days

98.00

107.00

95.00

Debtor turnover

Days

45.00

66.00

72.00

Creditor turnover

Days

73.00

76.00

61.00

Fixed assets turnover ratio

3.21

2.72

2.00

Total assets turnover ratio

1.40

1.07

1.05

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Financial Ratios

2010

2009

2008

Investor information Earnings per share

Rupees

Price earnings ratio

7.52

1.45

1.86

2.46

26.79

21.51

Cash dividend per share

Rupees

1.25

-

1.00

Bonus shares issues

%

-

-

-

Dividend payout ratio

%

16.60

-

53.68

6.06

-

1.87

Dividend cover ratio Break - up value per share Market value per share

Rupees

56.45

49.12

50.04

at the end of the year

Rupees

18.53

38.84

40.00

high during the year

Rupees

38.84

49.00

51.40

low during the year

Rupees Rs. Million

17.40

28.60

37.25

2,347

1,860

1,465

EBITDA

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SPACE MATRIX SPACE MATRIX INTERNAL STRATEGI POSITION SINANCIAL STRANGTH (FS) Return on Investment Leverage Liquidity Working capital Cash flow Inventory Turnover Earnings per Share Price Earnings Ratio

6 3 3 4 3 5 6 5

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 business

4.375 COPETITIVE 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 3.286

INDUSTRY STRENGTH (IS) Growth Potential Profit Potential Financial stability Technological know how Resource utilization Ease of entry in market Productivity capacity utilization

-4 -5 -4 -5 -3 -3 -1 -4 3.625

0.75

6 4 4 5 5 3 5 4.571 1.286

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BCG MATRIX

STARS

QUESTION MARK

PRET LINE

MEN’S STITCHED WEAR ACCESSORIES

CASH COWS DOGS LAWN MEN’S UNSTITCHED HOME TEXTILE

FOOT WEAR PERFUMES

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BALANCE SCORECARD OBJECTIVES CUSTOMERS Target Market: LSM : 8 & above SEC: A+ & A

MEASUREMENT

TARGETS

STRATEGIC INITIATIVES

Market share

70 % market share

Market development

Customer retention

100% customer retention ratio

B2B customers Attract new customers

Customer satisfaction level

95% customer satisfaction level

Customer loyalty programs On time delivery for online buyers

Retain customers

Product availability

Design Accuracy Quality

Product quality leadership

INTERNAL PROCESS Superior R&D

New product development cycle

Finest Designers

new seasonal collections twice a year

Design quality Engraving for Color Differentiation

Color matching and quality

99.9% design matching

Laboratory Color Testing

Nominal wastages

99.9% color matching

Color Development

Product delivery

1% wastages

Printing Quality

Technology

Superior Production Facility

Asset utilization CO2 emission

Supply chain Environmental Friendly Socially Responsible

Community building and empowerment of women and disadvantaged

Fulfill 100% online orders

Cover up lost sales by increasing sales growth by 20% 1000 women in work force at various positions

Following global trends in fashion and setting benchmark in local markets Investment in new technology to maintain edge on design and color quality Reduction in scrap sale Continuous improvement in plant efficiency in order to reduce wastages, carbon emission and increase energy efficiency. Training program for disadvantaged and special people Separate unit for women Child care facility for women

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LEARNING & GROWTH Cultivate culture of learning, creativity, target orientation and adopting positive values Attract and develop high caliber human resource

FINANCIALS Profitability

Increase in gross margin

New designs, ideas and concepts

lead position in terms of new designs

Low employee turnover

reduce employee turnover by 5% year on year basis

Sales growth by segment

20% sales growth targets

Customer and product line profitability

Cost reduction by 5%

Continuous investment for learning and development of employees to maintain an edge Confidentiality policy to ensure business secrets are not leaked

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BLUE OCEAN STRATEGY Blue Ocean Strategy on which Gul Ahmed is working are  

A dedicated Gul Ahmed Fashion magazine to promote their new collection twice a year First one to launch online shop in Pakistan www.gulahmedshop.com , currently no other player in the industry has online shop

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CONCLUSION Gul Ahmed has launched its online shop www.gulahmedshop.com for online shopping but the problem is not all of their products are currently available one internet. Mostly it happens on the first day of launch of their new collection, which is done twice a year (one in winter and other in summer), the customers (mostly ladies) rush into ideas and Gul Ahmed shop and start purchasing whole lot of a design and as a result that design get short in the market. And customers who come become frustrated when they can’t find a print. Gul Ahmed is facing serious supply chain issue in this area, they can’t meet the demand. One thing that can be done in this is the use of online shop to make sure availability of all their hot designs for a sustainable period of time. This will be a one good strategy to retain their customers. Gul Ahmed can also use nontraditional communication channels like facebook and twitter to interact with their customers and to get feedback. This online medium is one very effective way of analyzing consumer choices. Google analytics and facebook page analyzer can provide very useful information about user preferences. For instance it can tell you which are the most favorite design liked by the audience, based on that information Gul Ahmed can start producing more of that particular design and meet that customer demand.

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