service industries limited

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Vision Statement To be a market leader providing quality footwear and allied products. To strive for excellence and global recognition by continuous improvement, innovation, dedication and growth. Mission Statement To be a result oriented and profitable Company by consistently improving market share, quality, diversity, availability, presentation, reliability and customer acceptance. To emerge as a growth oriented concern ensuring optimum return and value addition to its shareholders. To ensure cost consciousness in decision-making and operations without compromising the commitment to quality. To create an efficient resource management and conducive business environment. Evolving an effective leadership by 1

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Page 1: Service Industries Limited

Vision Statement

To be a market leader providing quality footwear and allied products. To strive

for excellence and global recognition by continuous improvement, innovation,

dedication and growth.

Mission Statement

To be a result oriented and profitable Company by consistently

improving market share, quality, diversity, availability, presentation,

reliability and customer acceptance.

To emerge as a growth oriented concern ensuring optimum return and

value addition to its shareholders.

To ensure cost consciousness in decision-making and operations

without compromising the commitment to quality.

To create an efficient resource management and conducive business

environment. Evolving an effective leadership by creating a highly

professional and motivated management team fully equipped to meet

any challenge.

To keep abreast with modern technology and design to optimize

production and enhance brand image to attain international recognition

for the company’s products.

To adopt appropriate safety rules and environment friendly policies.


Page 2: Service Industries Limited


Three college friends, Ch. Nazar Muhammad, Ch. Muhammad Hussain and Mian

Muhammad Saeed founded Service Industries in 1941 at a small scale at Lahore. At

that time, they only manufactured handbags and some other sports goods. Due to

their dedication and hard work, the business flourished remarkably and they were

supplying their products to every corner of India before partition of Indo- Pak. Almost

all departmental stores in Mumbai, Madras, Calcutta, Lahore and Karachi were

selling their products.

It was engaged in making travel goods at that time. After Independence in 1947, they

started to make Army boots and tarpaulin for Defense forces. Then company entered

into civil market by manufacturing shoes in their newly built factory in Gulberg

Lahore. In 1954, company opened its first outlet of shoes at Mall road Lahore.

In the meantime, a tannery Unit named “Hilal Tannery” had already been established

in Gujrat to provide export quality leather for shoes factory. In 1963, second shoe

factory in Gujrat was set up. The company entered into export business in 1957 and

for the last three decades, Service is the largest exporter of footwear from Pakistan.

SIL exports its products to different countries of Europe like United Kingdom,

Germany, Netherlands, Sweden and Italy.

Due to excellent quality, the company awarded “President Export Trophy” in 1968

and “Pride of Performance Trophy” in 1977. In 1988, Service group opened a new

shoe-manufacturing unit in Muridke, which is the most modern in Pakistan.


Page 3: Service Industries Limited


Service Group is well known for its products and comprised of four companies of

various kinds and sized. Service Industries Limited is the parent company and others

are sister concerns. At the moment, service group consist of following units:

Service Industries Limited (Parent Company): Dealing with

manufacturing and exports of footwear’s, manufacturing of tyres, tubes and

defense related projects.

Hilal Tanneries Limited: Manufacturing of export quality leather for SIL


Dar-us-Salaam Textile Mills: Dealing with manufacturing of export quality


Service Sales Corporation: Dealing with retail and wholesale of the

footwear products in local market.


Ch. Ahmad Saeed (Chairman)

Ch. Shahid Hussain (Chief Executive Officer)

Mr. Muhammad Ijaz Butt

Mr. Muhammad Akram

Mr. Shahid Hussain Kardar

Mr. Riaz Ahmad

Mr. Asif Jamil (Rep. Of NIT)

Mr. Anis Wahab Zuberi (Rep. Of NIT)


Page 4: Service Industries Limited

Directors Report to Shareholders

Business review

Alhamdo lillah the company has achieved a healthy sales growth in almost all

segments of the company’s business. The company has been successful in the

efficient utilization of its resources, which has cushioned the impact of steep increase

in raw material prices, financial charges and other operating costs. A significant

improvement in profitability was thus achieved.

Footwear division

The company has been successful in achieving better profit margins. Footwear sales

at Rs. 2,342 million have increased by Rs. 406 million. Exports sales grew by 27%

and local sales by 17%. It reflects the confidence reposed by our customers in our

consistent quality, customer service and dedication to meet delivery commitments.

This is very heartening when we take into consideration serve competition posed by

the cheap import of footwear from Far Eastern countries much of which is either

subsidized by the country of export or is under-invoiced. The company has been

drawing attention of the government towards this menace regularly.

Tyre & tube division

Sales of tyre and tube division have increased by 19.5% over last year. The

company has placed strong emphasis on customer services especially to OEMs.

Distribution network has been made more efficient through rationalization of

distributors territories. We have introduced tubes for cars and light trucks to

supplement our already existing product line.

We are making major investment ion new plant for production of new quality of tyres

and tube. We will keep on doing so in the year 2006 and 2007.

The global phenomenon of increase in petro-based raw materials and natural rubber

had a strong impact on out profitability. This impact was absorbed largely by

improving our efficiency and some increase in prices.


Page 5: Service Industries Limited



The ultimate goal of the Service Industries Limited is to deliver the tyres (motor cycle

& cycle) and shoes to the general consumers to their maximum satisfaction. And its

goal is being accomplished through retailing. Thus in the field of consumer

marketing, retailing is the front line, the final step and also the marketing system for

producers. It is the retailer who “takes the temperature” of the consumer and gather

information for future marketing strategies. By retail, we mean all activities and

services, at a reasonable profit for the use of general consumer.


Basic concern is to satisfy customer

To provide good job opportunities and satisfaction to people

To provide better quality products to consumers with low price

To be ahead of its competitors

To make optimum use of the physical and financial resources to increase


Never be satisfies with the level of quality, always strive for continuous

improvement using latest techniques

Employees are assets and as important as external customers.


It sells all the varieties of tyres and shoes countrywide. It operations independently

just like the other associated companies operation. It sells the shoes to Service

Sales Corporation (SSC). SSC is a sole agent of Service Industry to buy and sell

shoes locally. Service Sales Corporation has its own marketing network in the whole

country. Its sales are carried out through its wholesale depots and retain shops that

are located in famous trade centers in different cities and towns.


Page 6: Service Industries Limited


Sales policies are considered to be the backbone of an organization, because all the

functions of the company are dependent upon this policy. It can start the production

of a certain product with full capacity if it has planed attractive sales policies.

Service industry limited has also developed some sales policies to run its business


Product policies

While deciding about the product policies service industries considered the following


Product line decision

In the product line the major decision is the expansion of product line or the

changes in the product mix which consists of the product lines. The marketing

division of the Service Industries has to check what is the relation of new

product to its existing product line. On the other hand it also has to check that

what will be the effect of introducing the new product upon the existing

products line or the company image.

The expansion in product line, in Service Industries, is such that it can

introduce a new product without pruning any product from the product line. Or

the company may introduce a new product while prune another product from

the product line. There are some reasons for the pruning of a product from

this product line. One reason may be that the product is not producing the

desired profits.

Package decision

The package decision about the product is another important area. Many

marketers have called packaging as the fifth ‘P’ of marketing. In Service


Page 7: Service Industries Limited

Industries, zonal managers do the packaging. They call the designers to make

the package design and select the best out of the total design.

Branding decision

Branding decision is also one of the most important decisions in the

marketing. Service Industries has branded its products by the name of


Style and design of product

Another way to product distinctiveness is through style and design. Some

companies stand out for design distinctiveness. Service Industries is also one

of these companies because it has its own styles and designs. In service

industries the styles and designs are made with the help of local purchase

officers who are responsible for making new design.


Page 8: Service Industries Limited


Financial Highlights:

2005 2004

Sales revenue Rs. Million 3405.19 2842.64

Profit before tax Rs. Million 74.34 37.13

Profit after tax Rs. Million 52.26 21.78

No. of shares outstanding (000’s) 12029 12029

Earning per share Rupees 4.34 1.81

Dividend Rs /Share 2.00 1.5

Shareholders’ Equity Rs. Million 555.23 523.81

Current ratio 1.21 1.2

Debt: Equity ratio 37:63 31:69


Page 9: Service Industries Limited


Equity & liabilities 2005 2004 (Rupees in Thousands)

Share Capital & Reserves Share capital Reserves Unappropriated profit

555,231 523,815

Non Current Liabilities Long term loans Liabilities against assets subject to finance lease

Deferred liabilities

Long term deposits

289,420 165,903

Current Liabilities

Short term borrowings

Current portion:

Long term loans

Liabilities against assets subject to finance lease

Trade and other payables

Provision for taxation

1,482,830 1,406,993


























Page 10: Service Industries Limited

Assets 2005 2004

(Rupees in Thousands)

Fixed Assets Property, plant & equipment Fixed assets subject to finance lease Capital work in progress

505,414 380,935

Long Term Investment 7,200 10,053

Long Term Deposits 17,336 12,260

Current Assets

Stores, spares & loose tools

Stock in trade

Trade debts

Advances, deposits, prepayments & receivables

Cash & bank balances

1,797,531 1,693,463


2,327,481 2,096,711



















Page 11: Service Industries Limited

Profit and loss accountFor the year ended December 31, 2005

2005 2004

(Rupees in Thousands)

Sales 3,405,185 2,842,640

Cost of sales 2,936,875 2,512,476

Gross profit 468,310 330,164

Operating expenses

Selling & distribution expenses

Administrative expenses

278,061 229,475

Operating profit 190,249 100,689

Other operating income 8,151 6,658

198,400 107,347

Financial expenses

Other operating expenses

124,064 70,221

Profit Before Taxation 74,336 37,126

Taxation 22,077 15,343

Profit after Taxation










52,259 21,783

Page 12: Service Industries Limited

Cash flow statementFor the year ended December 31, 2005

2005 2004(Rupees in thousands)


Cash generated from operations 190,065 69,517Financial charges paid (96,637) (63,345)Taxes paid (14,949) (13,715)Gratuity paid (10,111) (8,615)W.P.P.F. & W.W.F. paid (2,300) (1,302)

Net cash from/ (used in) operating activities 66,068 (17,460)


Purchase of property, plant & equipment (109,334) (37,378)Proceeds from sale of property, plant & equipment 5,533 2,081Security deposits (5077) 2,735Sale proceeds from sale of shares 66 --

Net cash (used in) investing activities (108,812) (32,562)


Increase in long term deposits 300 ---Lease rentals paid (28,983) (21,197)Increase in short term borrowings 49,024 2,752Increase in long term loans 40,000 82,500Dividend paid (17,851) (11,945)

Net cash from financing activities 42,490 52,110

Net increase/ (decrease) in cash & cash equivalent (254) 2,088

Cash & cash equivalent at the beginning of the year 5,011 2,923

Cash & cash equivalents at the end of the year 4,757 5,011


Page 13: Service Industries Limited




Director(Safety Products)

Director(Export & Administration)

ManagerRag Department

ManagerMarketing Department

Manager Finance/Accounts Department

ManagerImport Department

ManagerHRM Department

ManagerEstablishment Department

ManagerExport Department

Page 14: Service Industries Limited


Organizational structure is more than boxes on the chart. It is a pattern of interaction

and coordination that links. Technology and human components work together to

ensure that organization accomplishes its purpose.

Some characteristics of ideal organizational structure called Bureaucracy by Max

Weber is found in the organizational structure of the SIL as follows:

Position arranged in a hierarchy

Each lower office is under the control and supervision of a higher one. This

bureaucratic principle helps the management of SIL to control over every

member in the structure.

A system of abstract rules

A continuous organization of official functions should be bound by rules. This

bureaucratic principle helps the management of SIL to ensure uniformity and

coordination of effort.

In this age of complex, highly conflicting relationships, advanced technology and

empowered employees; Max Weber bureaucratic model is only the historical starting

point, not the end, of the organizational analysis.


Vertical analysis concentrates on centralization versus decentralization and on flat

versus span of control structuring.

Centralization versus Decentralization

The SIL centralization and decentralization can be discussed under three heads.


Page 15: Service Industries Limited

1) Geographical

Geographical centralization means that the organization has all its operations

under one roof. Geographical decentralization means the dispersion of

organization operations through the country. SIL has its operating office in

Lahore and Karachi, which show that it is geographically decentralized.

2) Functional

An organization has separate department that performs such as selection or

training for others is called centralized organization and if the various

functional departments (for example; marketing, production and finance)

handle their own human resources functions then it is considered

decentralized organization. In SIL, functional level is centralized.

3) Delegation

Centralization and decentralization commonly refers to delegation of decision

making command. Within the company, there is centralization to a greater


Flat versus Span of control

In SIL, the structure of the organization is tall with a few members at each level. As a

result there is narrow span of control and supervisors have close control over their



Horizontal structural analysis is concerned with organizing one level of the hierarchy.

The concept of Departmentalized and of line and staff represent this approach.


SIL has a functional departmentalized structure. The greatest single advantage of

functional departmentalization is that it incorporates the positive aspects of

specialization. It also leads to greatest efficiency and the most economical utilization

of employees.


Page 16: Service Industries Limited

Line & Staff concept of organization

Persons at the management level are in line while others persons are in staff.


Functional Level


Chief Executive

Department Heads


Executives / Officers


Office Assistants

Page 17: Service Industries Limited



Planning and distribution department is the most important department of Service

Industries Limited. Planning and distribution department serves as a link between the

factories and market. The planning and distribution officer has to be well aware of

this diverse geographical layout especially the type of articles of footwear preferred

by the people of each region.


As planning is a crucial management function that charts major organizational

directions. Nevertheless, even the most carefully devised plan at the strategic,

tactical and operational levels mean little if an organization does not have effective

means for carrying them out. That is where organizing comes into play. In fulfilling

the organizing function, managers allocate and arrange resources in way that

enables plans to be achieved successfully. In the process, the organizing function

provides a valuable tool for fostering innovation and facilitating needed change.


Promotion policies

The company also motivates its employees by promoting them to higher level

jobs after specific period. For example, an employee working as a helper is

promoted to the assistant supervisor after specific period.



Page 18: Service Industries Limited

The company also motivates its employees by giving them bonuses. These

bonuses depend on yearly profits of the company. Usually they give the

bonuses once a year according to the wages and the salaries of the workers.


When Service Industries was started, market was monopolized by foreign

brands at the time. Now no doubt Service Industries is captured 15% of the

total market share at Pakistani demand.

Linkage with banking system

The company has to import the raw material from foreign countries. For this

purpose they need the letters of credit from different banks. So, they have

strong linkage with banks.

Economical environment

The economic environment of Pakistan is not good. Their purchasing power is

going to low & low day by day so Service Industries are trying his best to

capture maximum share in the market by providing comparatively cheap & by

giving a lot of attentions on the advertisement.

CONTROLLINGQuality Improvement Circles

The basic goal of the company is to provide a quality at new product to their

customers. To satisfy their objective, they check the quality at every process. They

have a specific unit for checking the quality of product and finally, they check the

quality of the products in quality control laboratory.

Quality In Product

Product quality and reliability are the hallmarks of all Service Industries

products manufactured and marked by Service Industries. Understanding

specific customer needs and satisfying these with good value products, the


Page 19: Service Industries Limited

company has earned the reputation of a professional enterprises engaged in

he manufacturing of quality products.

Quality In People

From the chief executive to the shop floor all personal working in Service

Industries are dedicated professionals, experts in their field and fully

committed to the goals of quality and service of the company. Their

engineering and supervisory staff include gradate engineers and polytechnic

qualified operators at all levels of productions and quality control. All the sales

stag is qualified and trained for specific tasks. A number of engineers and sale

executive have experience in foreign markets and freely share their expertise

and knowledge with their less fortunate challenges.

Quality In Service And Commitment To The Customers

Keeping in mind their over-riding commitment to all customer Service

Industries pays particular attention to the quality of after sales support to

dealers and service to their customers. A comprehensive network of over-500

authorized Service Industries retail price shops, dealers, cut price shops,

agencies etc, is fully geared to meet all customers needs.

ISO 9002 Certification

To meet the challenges and opportunities in the international textile trade and

out compete with company’s major competitors, Dar Es Salaam Textile Mills

Ltd. (DTM) is striking for excellence by adopting the best quality management

practices to maintain consistent quality for its customers.

Company made significant innovations for value addition and are continuously

striving for improvement. Consequent to company commitment to Total

Quality Management, new systems are being effectively implemented, and

weaknesses are highlighted during regular assessments to eradicate system



Page 20: Service Industries Limited

DTM’s Management Systems are ISO 9002 Certified, the most efficacious

international AOQC Moody certified it, recently Lloyds Register of Quality Assurance

(LRQA) has approved the company for the manufacture of 100% Cotton Yarn to the

following Quality Management System Standards:-

ISO 9002: 1994

EN ISO 9002: 1994

BS EN ISO 9002: 1994

PS: ISO 9002: 1994

In regards to defining the policy on quality, the top management of Service Industries

has clearly defined:


1. To meet or exceed customers requirements regarding quality of the product


2. Deliver the products to the customers on time in all circumstances.

3. To provide the best quality products available in its class.

4. To incorporate emerging technological advances and improved process

controls to remain at the forefront of quality.

5. To ensure complete familiarity of each employee of the above policy and a

categorical recognition of their role in achieving these objectives.


Page 21: Service Industries Limited



Reporting To:

o Managing Director/ Chief Executive


Reporting To:

o Chief Executive

Reporting Staff:

o Deputy Manager Account

o Assistant Manager Finance

Major Functions:

o Handle all accounts and finance matters of Service Industries.

o Discuss important matters related to Accounts Department with M.D.

o Deal with the leasing companies for lease arrangements.

o Handling tax matters with tax consultants.

o Export refinances matters handling including submission of various

documents to the bank.

o Preparation of daily bank report of Quota & Rebate account.

o Deal with bank and check daily bank report.

o Approval of all vouchers.


Page 22: Service Industries Limited


An organization is a set of people who strive together, move the organization in one

direction in order to reach the destination and finally achieve the objects and goals.

High profitability, high market share and high growth rate are those common

objectives every organization strives for. All this requires clear difference of

distinctive tasks and allocating these tasks to different groups of employees to be

performed separately.

For this purpose every organization establishes several set of employees for number

of activities allocated by the top management. These groups of employees are

nominated as departments. Every organization has several departments that are

assigned specific duties and tasks. These groups are not left without proper system

but hierarchy of employees is made.

SIL maintain an excellent array of different departments. These departments have

systematically arranged that facilitate the processes of achieving goals. Every

department performs its duties in collaboration with other departments, which results

in strong and viable management system. The employees of every department are

very well aware of his job responsibilities and the required performance.

The departments of SIL are as follows:-

Administration Department

HRM Department


Page 23: Service Industries Limited

Accounts/ Finance Department

Marketing Department



To work in association with other departments.

Ensure proper working atmosphere of office staff

Deal with office administration and security ( office layout, transport,

communication services, maintenance of office records)

Deal with property matters

Attend to court cases

Deal with rent and lease matters, litigation


This department has been assigned the tasks that seem to be very menial but retain

much importance. Operations of the department are discussed as follows:


The stock of the company is insured as well as the company insures

employees. This department is also liable to pay the premium of insurance

regularly. This way safety measures are provided to employees and stock as

well. A part from stock and employees the fixed asset of the company like

furniture & fixture all are insured.



Page 24: Service Industries Limited

One major duty included in this department is related to renovation. All the

dealing of related to these matters comes under this department. Fixed assets

sold and their complaints every thing responsibility lies on the shoulders of the


Law related policies

This department also deals with matters of government policies. The

department personnel handle all sorts of cases. They are also responsible for

conflicts resolving between employees, they have to be aware that no unions

should start working which disturb the working patterns of the company.

Check and Balances

One big responsibility on the shoulders of this department is that they have

proper check on employees so that company’s facilities are not misused.

They have to decide and then check that no one uses more rights than what

he has been granted. All bills (Fuel, Telephone, Electricity, Entertainment,

Renovation and other Expenses) are signed by the head of the department.


There are no unions in this organization. Reason behind this is that

employees are provided with friendly environment to work. Management takes

good care of its employees so no need for union arises. There is also no

union in all factories of service industries.



To provide and maintain Human Resources of requisite competency

To meet business execution needs of the company

To ensure that HR policies are harmonized with the Business Objectives

To properly manage employees


Page 25: Service Industries Limited

To resolve conflicts among employees and provide good working environment


Operations of this department are discussed as follows:


Staffing (includes recruiting, selecting, hiring and firing of employees) is

among the skills that become more important as the complexity and overall

level of performance organization increases. Staffing functions performed in


Forecasting HR needs within the company keeping the organizations

goals in view

Gathering employees information

Projecting availability and requirement of Human Resource

Both external and internal recruitment takes place in SIL by different methods

as follows


In-House Advertisement


Applicants Databank

Employee Referrals


Selection Tests

Staffing success is having “right person” in “right position” rather than simply

filling a position. New employees are hired whenever there are vacant


Human Resource Information System


Page 26: Service Industries Limited

When any employee is selected by top management then details regarding

his recruitment date, his personal information, his rank (executive or non-

executive) and even his termination are maintain by the department. In this

way it is acting upon as an information pool for management. It works as

controlling authority as it also maintains the attendance register. The

attendance is marked twice a day. Punch card machines are used for

attendance keeping. Attendance of every employee is stored in main

computer. This little work determines the actual salary of every employee.

Job Compensation And Rewards Management

Salary/Wages, Health Insurance, Group Life Insurance, Perk, Provident Fund,

Bonus, Leave Fare Assistant, Paid Leaves etc. all these lay in the field of

compensation and rewards management in SIL these rewards and job

compensation are given to employees for keeping their morale high. 30%

discount is given to its employees on Service all products.

Training And Development

Several changes were made in the organizational hierarchy; new positions

were created and mostly were filled up with existing employees, external

hiring is also taken in account for those positions where professionals were

missing. SIL usually provides a comprehensive orientation session to the

employees about company culture its functions, history of the organizations

and locations. However, his/her immediate supervisor provides orientation

about his/her specific job duties. Where required, SIL also sends its

employees to their factories located at Muridke and Gujrat for training


Performance Management

Performance management includes job evaluation and descriptions.

Job Evaluation


Page 27: Service Industries Limited

The major duty of HR department includes evaluating different jobs

according to their tasks, ranks, positions, salaries etc with respect to

their value and worth to the organization. Jo evaluation is used to

establish or maintain the credibility and acceptability of a grading

system. Job evaluation can be used as a basis for job matching and

external pay comparisons.


Job Descriptions

HR department is responsible for listing out the general tasks or

functions of every job. Typically, it also includes describing the position

and his immediate supervisor whom he has to report. Specifications

related to job such as the qualifications needed by the person and

deciding pay/salary range for that position.


To make financial transactions possible

To provide the picture of financial condition of the company

To record every necessary accounts

To recommend the essential modification regarding financial policies

To forecast the economic condition of the company under existing



The main function of this department is that any financial transaction occurs is under

the supervision of this department. They have to deal with different banks,

companies for making transactions possible. Maintaining and recording every

financial transaction and the statistical data is in effect, a backbone of the company.

Every activity including marketing, production or managerial requires a certain

amount of financing without which nothing can be implemented and completed.

Hence this department, like other departments, performs equally important tasks and

assignments. There are some particular accounts, which are recorded and

maintained by this department.


Page 28: Service Industries Limited

1. Personal Accounts

Each and every employee’s recruitment date, their designation, their period of

work and their job responsibilities are different from each other. So the salary,

allowances and other social facilities provided by the company vary on

account of this difference. Hence, this department in several categories is

taken care of with due attention. Accounts department is responsible for

recording and maintaining every individual’s information. Their data regarding

salaries, period on job, grade and categories of employees are totally

maintained by this department. Thus in other words this department works as

the information pool of the company. It provides the complete information to

top management about every individual and management uses this data for

making decisions regarding their promotion, change in salary or even

termination. The personal accounts not only include workers and employees

but the top management and directors of the company.

2. Recording Of Salaries

Salary is cost to the company and reward for the services of every employee

rendered to the company. Salary is the potent bond between company and

employee. Motivation, job satisfaction and extent of productivity heavily hinge

upon the monetary reward. A part from the salary itself, the timing of it

payment and regularity in this process also have a profound effect on the

reduction of undesirable behaviors of employees.

3. Loan Account

Company’s one of highly motivating facility is to provide the loan to the

company employees. This loan is advanced for different purposes. Some

loans are advance to provide a car to the employee and others may lend for

house construction or any other task. A part from these conditional loans,

unconditional loans are also advanced that vary from employee to employee.

Workers and non-executives are provided with lower amount of loans while

executives can enjoy higher amount of loans.


Page 29: Service Industries Limited

The recording of the loans is also another very important work of the

department. Total data regarding the obtaining of current loan as well as past

loan is maintained. This allows the company to check those employees

applications that had already enjoyed the facility. It also helps organization to

keep safe itself from providing over amount to the employees.

4. Sales Maintaining Account

Along with employee related accounts, it also records some business

accounts like sales accounts. The total sale of the company, total cost of

current year, profit earned that year. This lays foundation for the decision

making about all the business units.

5. Financial Charges

Every company does some of its operations by receiving loans form the

financial institutions. These institutions may be banks; leasing companies or

other companies like insurance etc. These firms provide services to the

organization in requital of some monetary pay off. This pay off may be termed

as interest, premium etc. financial charges encompass all these expenditures.

Taking loan is very technical work. The utilization of make it sure that loan

must be expended on productive activities. All financial charges of SIL are

recorded in this department. The interest payable to banks, leasing and other

charges like insurance premiums are maintained under the account



The goal of advertising is better approached by setting some specific objectives. Of

course, specific objectives will be determined by the company’s overall marketing

strategies – especially the strategies related to the firm’s promotional programmed.

Some general objects of the company which are considered seriously while

allocating the resources towards advertising are as:


Page 30: Service Industries Limited


To create an image of the product among consumers

To boost up and enhance the sales through persuasion process

To maximize the profit

To meet the competition effectively

To increase the market share

To attract more and more customers


Sales head retail

Sales head retail is responsible for developing and running the country’s

operations where they are making good profits. Sales head retail is

empowered enough to take its decisions independently, to large extent. Sales

head retail can make decisions to what kink of target market they are going to

tap, what kink of business is the organization going to capture, as how to run

the operation smoothly and accurately.

Product development

The responsibility of this department includes developing full range of

products. This is done through keen observation of the market, competitors,

future needs of customers and also an eye on international market. If the

product developers fail to produce products desired by the customers then

there is no chance for increase in sales however sales can go down. SIL has

divided year in two seasons.

o Winter

o Summer

The developers have to develop new ranges for coming season much early

so that production can takes place and shoes are available on retail shops on


Page 31: Service Industries Limited

time. They have to focus in mind future trends and make product ranges

according to the future needs of people. They are acting as trend makers.

Range developers

It is very difficult to develop product range. Lots of efforts is required to

develop new articles. Developers should be well aware of the market which

articles are already present in the market, what are the demands of the

market, which articles were kick out from the market, fast moving brands etc.

they have to decide which thread should be used in that article, which sole

should be used, should shoe be narrow or wider in shape, will leather or

synthetic be used and other things related to manufacturing of the shoes.


Designers are people who actually design the shoe. Put in their efforts and

innovation in designing the shoe. Developers will tell them the idea about the

shoe and designers will actually design the shoe. Developer’s shapes the idea

of developers into real form. Design includes cutting, stitching, sole pasting

and other things related to shoe. The new design o he shoe must be

distinguished from those already present in the market therefore it needs



Sourcing mean negotiating with parties on price. Source personnel decide

from which source they have to deal to generate maximum profit. Sourcing

personnel has to deal with parties on material used in manufacturing of the

particular article and also negotiating on cost coming on that article.

Negotiating on article is very crucial stage because if the cost of article SIL

pay is more than the competitor’s pay of same design articles, then the

product has very low probability to be successful. Suppose a shoe

manufactured by service cost them Rs. 450 and its retail price is Rs. 550. The

same design shoe locally made present in market at retail price about Rs.350

then definitely people will go to purchase that shoe rather than the Service

shoe. Therefore sourcing plays a critical role.


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ImportsIn SSC more emphasis in now given to imports as compared to last few

years. The reason behind this is that greater margin can be generated

through imports. Large pool of products is imported from China others were

from Vietnam, Thailand and Germany. China is the main source much of the

orders were placed with parties of China. Merchandising manager handles all

these imports, he meets with parties, see their product quality, tell them own

specifications and settle prices with them.

StrengthHighly Qualified Management

One of the most salient advantages SIL has its highly qualified, competent and

experienced management. All heads of departments are quipped with theoretical

knowledge along with vast part of experience of getting things done properly.

Excellent Managerial PoliciesA part form highly qualified management, policies and practices are very progressive

and growth-ridden. Every personnel form top to bottom are bound to abide the rules

and regulations lay down by the board of directors. Promotions, recognition of

employees and respect for every one is the strong pillars of organizational culture.

Loyal EmployeesThe company is enjoying another strong benefit that hardly few companies enjoy that

is employee’s loyalty. Every organization does it best to hinder the employees from

leaving the job. If turnover rate is high then it had negative impact upon profitability

and vise versa.

Self Motivated Work ForceSIL enjoys another excellent competitive advantage that it has got self motivated

workforce. People at SIL take on responsibility as their duty not as burden. They

embrace every assignment whole heartedly and strain every nerve to accomplish it.


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Brands StrengthThe brands of the service industries have a good strength. Their brands like Don

Carlos, Liza, Skooz, Toz, Calza and cheetah are competing with the other

competitor, which are included Bata Pakistan, Hush Puppies, Ihsan shoes etc. Due

to quality and reasonable price which is increasing the brand strength and customers

reliability on the service brands. Innovation in brands also strength

Production UnitsThey have two production units.

Service Shoes Industries Limited, Muridke.Most of local (Don Carlos, Liza all ranges, Skooz, Toz) and export articles are

produced in Muridke Unit

Service Shoes Industries Limited, Gujrat.Local articles like (Duke, Calza, Cheetah etc.) and many articles of exports

are produced at Gujrat Unit.

Cost DepartmentOnly few companies in the world has cost department and service is one of them

who has independent cost department. Cost department control over per unit cost

with all aspects such as material cost, labour cost, and rates control by bill

verification. Cost department never compromise on quality they bear their own

rejection but they did not deliver low quality shoe to the customer that is the cause of

their effective and efficient management.

Advanced TechnologyThey have advanced technology and computerized plants and machinery in

production process. The computerized machinery and plats using at Service in the

production process are not having any other organization, even, BATA Pakistan

have not such kind of machinery and technology. The computerized machinery and

plants has the approximately value of Rs. 10000000 each.


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Pu ProductsThe major production of service industry is in Pu sole. They import Pu material from

ICI chemical, France. Pu material is very lightweight sole. By wearing Pu sole we

feel bear footed. They are leader in market in Pu product. They also have introduced

the direct injection that reduces the cost of production.

Employees Education OpportunitiesService also provides education facilities to its staff. Higher education is encouraged

for valuable increase in his staff education that up the moral of the organization and

make better/positive changes within the organization. And lead to introduce new

techniques of production.

TanneryThey have their own tannery for meeting the urgent requirements of orders. If they

purchase all the leather from outsider parties then there will be a possibility to delay

in dispatch in leather order that can be reason of delay in order dispatch.


AdvertisementNow a day electronic and print media play very important role in success of any

organization. Through media we can increase revenue for many times. As they are

popular through out the country they have not proper planning regarding to

advertisement. Like their big competitor Bata Pakistan they have not proper way to

advertisement on TV & Internet.

No Job RotationLeading companies pursues the strategy of job rotation in which one employee is

posted at different position after elapsing certain period of time. SIL does not follow

this strategy yet. The managers are appointed in particular department forever. In

case any employee abandons the job due to particular reason there becomes pause

in the department that creates some intensive problem

Little EmpowermentThe management of SIL is highly centralized and almost every decision is taken at

top management. Lack of authority is found to take independent decision by middle


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managers. Most of companies execute the policy of deregulation of authority that

plays an important role in satisfaction of consumers. In this direction because

motivation level of employees hinges greatly upon the autonomy of personnel.


E-Market Development

Service has the opportunities of establishing and exploring new market like Internet

market. Service has introduced the e- shops where customer can buys shoes & tyres

and tubes with out any botheration. It has given new dimension in sales of products

and also a way of introducing company and its products internationally.

Joint Venture

In today business to improve the efficiency of their product and to attain new

technology firms made joint venture with each other. It is also made for research and

to compete with the large firms. Keeping in view this service has made joint venture

with LEVIS and NIKE. This will open new window for service in international market

and in expanding business.

Changing Customer Preferences

This modern world is the world of continuous changes. Innovation in products is they

key element of businesses for their survival. Customers taste changing day by day.

To meet the requirement of customers and taste there is a need of continuous

introduction of variety. Services industry has the opportunity to grasp market by

bringing innovation in their design and services. Service captures a huge share of

local market by providing their products according to customer taste.


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Entering New Segments of Markets

SIL is considered as the shoes & tyres and tubes of motorcycles for some particular

and limited market. Pakistan is one of the most profitable market that consist of huge

number market segments. So, Service has a great opportunity to enter in the new

market segments. They should concentrate on entering new market segment of

ladies shoes and new coming motorcycle companies like Ghani motorcycles, Super

Asia motorcycles companies. Large revenue can be generated from this market



CompetitorsService is facing the threat in shape of new competitors in footwear market. The

competitors are both local and multinational companies. In local market Service

Industries is competing with local shoe manufacturer. In multinational competitors

Service has to compete with BATA the giant in shoe industry and other international

brands like HUSH PUPPIES. China and India are also the new threats in today’s

market for services.

Price War with Competitors

Today’s world is the world of competition and to compete with the competitors

companies rapidly changes their price strategy. Organizations set their prices

according to their competitors to survive in the market. In shoe market service have

the price war with BATA, and other local competitors. Now service also has price war

with china. In price war the firm who control their cost of production and provide their

products at cheap prices can one this war.

Rebate ReductionRebate is the subsidy which government provides to exporters to enhance exports. If

Rebate has reduced which increases cost of production due to which company has

to face tough competition. Since last two years government has reduces rebate from

12% to 5 %, which increase the cost of production. Due to which service industry

facing tough competition.


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Increase in TaxesThere are many types of taxes which service industry has to face imposed by

Government. There is high rate of taxes due to which it increases the expenses and

cost of production. Mainly taxes imposed by government are sales tax, income tax


Increase in Rate of Duties

Government has also increased the rate import and exports duties, which is also a

threat for service because it increases the rate of raw material and cost of

production. The rate of duties is 25% while rebate has reduced to 5%. There is high

freight cost.

Political Instability

Pakistan is a country that politically not stable. There is no stable government from

last 55 years. This has a great impact on industrialists and investors. Service

industry has threat due to political instability because in instable government there is

rapid change in laws, rules and regulations.

WTO Regime

WTO means world trade organization. It is an international organization responsible

for global rules governing trade among nations. It ensures trade free and smoothly. It

was established in 1995. Due to WTO regime service have to face many hardships

in shoe industry because it increase the number of competitors. And also reduce the

share in shoe market. The main threats due to WTO are china and India as they

provide their product at low price because of cheap labor.

Economic Threat

The service industries have to face economic threats. The first economic threat is the

high prices of electricity. There are no subsidies for the service. Another threat is the

rate of inflation, which causes the rise in prices of things. In recent years oil prices

have gone up due to which it has increased the transportation cost which increase

the cost of production.


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The marketing mix is a strategic combination of four variables.





Each of these ingredients is closely interrelated with the other variables in the mix.

The development of a successful marketing strategy depends upon the effective

combination of these four elements. As the ingredients are interrelated with each

other so the decision in one area is definitely going o affect the other. Thus the

management must select the combination of these, which will best be adapted to the


Service Industries is surrounded by the stiff competition thus, cannot be said

monopolists. A well-known name Bata is major competitor of Service. Both of these,

Bata and Service have to face the local cottage industry, which has a big market

share i.e., 80% of the total market. Service share is 9% while Bata has a share of

11% of the total local market.

In such circumstances the company’s main intention is to sell those products which

are accepted by the consumer due to their quality and price. Management of service


Page 39: Service Industries Limited

industries has a keen eye in seeking different pricing strategies to compete in the

market. Thus, a mixture of different strategies is being made to serve the consumers.

Following are the major policies, which the management prefers.

Unit Pricing

Unit price means to sell the products on fixed price. In this case no bargaining

is made. Service has developed unit pricing system for its retail chain stores.

Odd Pricing

This is just a psychological approach; after following different techniques, the

company fix odd prices just to ensure the customers that they are not paying

full rupee. For example, instead of Rs. 126, Rs. 125.95 is printed on shoes.

However this policy is not in the favor of customers because most of them

never take back their balancing paisa.

Discount & Allowances

Discount and allowances result in a deduction from the base price. The

deduction may be in different types e.g. reduced price, free merchandise or

advertising allowances etc.

a) Quantity Discount

When the sales exceed a specific limit, the dealers and wholesales are

given some quantity discount. It is also a technique for sale promotion.

In this way clients are encouraged.

b) Cash Discount

A cash discount is a deduction granted to buyers for paying their bills

within a specific period of time. The discount is computed on the net

amount due. This type of discount is generally, given to dealers etc.

c) Trade Discount


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Trade discount, sometimes called functional discounts. These are

reductions from the list price offered to buyers in payment for marketing

functions that they will perform. Wholesalers are given 16% discount

(in case of an article of Rs. 200). On an article of more than Rs.200/-

18% discount is given. A class dealers are further given 7% and B

class dealers are given 6% discount.

d) Price Discount

Sometimes, general consumers are given price discount for limited

articles. As a matter of fact it is the company’s policy to get rid of old

designs and dead stock articles. But these discounts are offered

sometimes to encourage the sales. For this purpose service industries

arranges clearance sales when it feels necessary. Discount in those

clearance sales is offered from 10% to 30%.


Page 41: Service Industries Limited



First of all, Mr. Khalid told me about the procedure of bank reconciliation of service

industries. I have learnt to prepare bank reconciliation statement in first three weeks

of my internship in Service Industries Limited. Bank Reconciliation is a schedule

explaining any differences between the balance shown in the bank statement and

the balance shown in the depositor’s (SIL) accounting record. Cash is the most liquid

asset and most subject to theft and fraud. It is therefore essential to have a system

of accounting procedures and records that will maintain adequate control over cash.

Each month, accounts department of SIL prepares bank reconciliation to verify that

these independent sets of record are in arrangement.


Individual deposits listed on the bank statement are compared with

unrecorded deposits appearing in the preceding period’s reconciliation and

with deposit receipt or other records of deposits. Deposits not recorded by the

bank are added to the bank balance.


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Paid checks are compared with outstanding checks appearing on the

preceding period’s reconciliation and with checks recorded. Checks issued

that have not been paid by the bank are outstanding and are deducted from

the bank balance.

Bank credit memorandums are compared to entries in the journal. For

example, a bank would a credit memorandum for a note receivable and

interest that it collected for a customer. Credit memorandums that have not

been recorded are added to the book balance.

Bank debit memorandums are compared to entries recording cash payments.

For example, a bank normally issues debit memorandums for service charges

and check printing charges. A bank also issues debit memorandums for not-

sufficient-funds checks. Debit memorandums that have not been recorded are

deducted from the book balance.

Errors discovered during the preceding steps are listed separately on the

reconciliation. For example, if the depositor has recorded an amount

incorrectly, the amount of the error should be added to or deducted from the

book balance.

To complete the process, all items that reconcile the book balance to the

adjusted amount of cash need to be journalized so they are posted to the

cash ledger account. This is necessary so the records are updated.


Financial ratios are useful indicators of a firm’s performance and financial situation.

Most ratios can be calculated from information provided by the financial statements.

Financial ratios can be used to analyze trends and to compare the firm’s financials to

those of other firms. In some cases, ratio analysis can predict future bankruptcy.

Financial ratios can be classified according to the information they provide. The

following types of ratios frequently are used by me during the internship analysis:

o Liquidity ratioso Asset turnover ratios


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o Financial ratios

o Profitability ratios

o Dividend policy ratios

Liquidity Ratios

Liquidity ratios provide Information about a firm’s ability to meet its short-term

financial obligations. They are of particular interest to those extending short-term

credit to the firm. Two frequently used liquidity ratios are the current ratio and the

quick ratio.

Current assetsCurrent ratio = ---------------------------------

Current liabilities

1797531 = ----------------------- = 1.21 1482830

Current assets - inventoryQuick ratio = ------------------------------------------

Current liabilities

1797531- 778765= --------------------------------- = 0.69 1482830


o Short term investors prefer a high current ratio since it reduces their risk but the current ratio of Service Industries is very low which should be near about ‘2’. And it can be improve by the reducing their current liabilities and increase in most liquidate assets such as bank balance, cash in hand and marketable securities.

o Quick also include all the item of current ratios except inventory because inventory may include many items that are difficult to liquidate quickly and that have uncertain liquidation value. The quick ratio of Service Industries is also low because it should be equal to the current liabilities.


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Asset Turnover Ratio

Asset turnover ratio Indicate of how efficiently the firm utilizes its assets. Two commonly used asset turnover ratios are Receivables Turnover and Inventory Turnover

Accounts receivable x 365Receivable turnover in days = --------------------------------------------

Credit sales 785172 x 365 = ------------------------- = 84 days


Another major asset turnover ratio is inventory turnover. The inventory turnover often is reported as the inventory period, which is the number of day’s worth of inventory on hand, calculated as follows:

Inventory x 365Inventory turnover in days = --------------------------------

Cost of goods sold

778765 x 365 = ------------------------- = 97 days



o Receivable turnover is an indicator of how quickly the firm collects its accounts relievable. The average collection period of Service Industries is 84 days which is much delayed time for the recovery of the dues. And there is need of reducing the collection days.

o Inventory turnover is days are 97 days which mean service industries near about purchase 4 times inventory in a year for running their operations.

Financial Leverage Ratios

Financial leverage ratios provide an indication of the long-term solvency of the firm. Unlike liquidity ratios that are concerned with short-term assets and liabilities, financial leverage ratios measure the extent to which the firm is using long term debt.

Debt-to-total asset ratio:


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Total debt Debt ratio = ---------------------- x 100

Total assets

1772250 = -------------------- x 100 = 76.14 %


Debt to equity ratio:

Total debt Debt – equity ratio = ----------------------------------

Shareholders equity

1772250 Debt – equity ratio = -------------------- x 100 =


Interest coverage ratio:

Earning before interest and taxes Interest coverage ratio = ----------------------------------------------------

Interest expenses

190249 Interest coverage ratio = ------------------- = 1.64


Analysiso Debt-to-total asset ratio highlights the relative importance of debt financing to

the firm by showing the percentage of the firm’s assets that is supported by debt financing.

Profitability ratios:

Profitability ratio offer several different measures of the success of the firm at generating profits.

Gross profit margin:Gross profit

Gross profit margin = ---------------------------- x 100 Sales



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= -------------------- x 100 = 13.75 % 3405185

Return on assets:

Profit after tax Return on assets = ---------------------------- x 100

Total assets

52259 = --------------------- x 100 = 2.25 %


Return on equity:

Profit after tax Return on equity = ------------------------------------ x 100

Shareholder’s equity

52259 Return on equity = ------------------ x 100 = 9.4 %


Earning per share:

Net profit after tax Earning per share = --------------------------------

No. of shares issued

52259 Earning per share = ------------------ = Rs. 4.34


Dividend policy ratios:

Dividend policy ratios provide insight into the dividend policy of the firm and the prospects for future growth. Two commonly used ratios are the Dividend Yield and Payout Ratio.

Dividend yield:

Dividend per share


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Dividend yield = ---------------------------------Share price


The company must reduce its operating expenses in order to compete in the

market on price basis because operating expenses are controllable factor.

Footwear industry is highly fashion industry; hence SIL must improve the

efficiency of the product development in order to bring new design and style in

the market to satisfy the consumers.

The advertisement of the company is a little bit weakening area. The company

must increase its advertising budget so that it can create a favorable image in

the minds of company. The advertisement to some extend must me according

to comparison purpose of the product is better than their competitor because

if their competitor first start the trend of comparing the products with other

then the company will be more in trouble and will be in the position to stay in

the market for longer.


Page 48: Service Industries Limited

Company must pay a continuous attention to the quality of the products so

that competitors may not surpass it.

The company must seek new market segments, as it is operating in the highly

potential market of Pakistan.

Internet is a broad medium so they should also improve their e- business.

They should increase their exports all over the world through participate expo