strategic part 1

7/29/2019 Strategic Part 1

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Masood Textile MillsStrategic Management

Ms. Farah Zarak


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Bilal Nadeem

Humayun Tahir

Rana Ali Asad

Rizwan Khan

S. M. Sohaib Atif

Talha Bin Tariq

Zain Ali Chughtai

Section B

Lahore School of Economics


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ContentsHistory .......................................................................................................................................................... 4

Vision Statement ........................................................................................................................................... 6

Mission Statement......................................................................................................................................... 6

Review: Corporate Mission and Vision .................................................................................................... 6

Components of mission statement ........................................................................................................... 7

Proposed Vision Statement ........................................................................................................................... 9

Proposed Mission Statement ......................................................................................................................... 9

SWOT Analysis............................................................................................................................................. 10

Strengths ................................................................................................................................................. 10

Information System............................................................................................................................. 10

Financial Management System ........................................................................................................... 11

Research and Development................................................................................................................. 11

Supply Chain Management ................................................................................................................. 12

Total Quality Management ................................................................................................................. 12

Latest Machinery ................................................................................................................................ 12

Qualified and Trained Team ............................................................................................................... 12

WRAP Certification (Worldwide Apparel Response Company)........................................................ 13

Direct- to- Store System...................................................................................................................... 13

Back Tracking System ........................................................................................................................ 13

Customer Profile ................................................................................................................................. 13

ISO 9002 Certification ........................................................................................................................ 13

Adequate Financial Resources ............................................................................................................ 14

Owned Power Generation Plant .......................................................................................................... 14

Owned warehouses in USA ................................................................................................................ 14

Weaknesses ............................................................................................................................................. 14

Limited to United States and few European Market ........................................................................... 14

Too Much dependency on Exports ..................................................................................................... 14Over Staffing....................................................................................................................................... 14

Lack of productive environment (few departments) ........................................................................... 14

High cost of production....................................................................................................................... 15

Opportunities........................................................................................................................................... 15

New global penetration ....................................................................................................................... 15


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Build a brand of its ownlabel .......................................................................................................... 15

Local marketreduced emphasis of exports ...................................................................................... 15

Cost reduction is possible by proper utilization of resources.............................................................. 15

Backward IntegrationOwn cotton fields ......................................................................................... 15

Threats .................................................................................................................................................... 15

IFE .............................................................................................................................................................. 16

EFE ............................................................................................................................................................. 17

Competitive Profile Matrix (CPM) ............................................................................................................... 18

PEST Analysis ............................................................................................................................................ 19

Technological Environment .................................................................................................................... 19

Socio-Cultural Environment ................................................................................................................... 20

Economic Environment .......................................................................................................................... 20

Economy and War on Terror .............................................................................................................. 21

Pricing Trend and its Consequences ................................................................................................... 21

Energy Crises ...................................................................................................................................... 21

Political and Legal Environment............................................................................................................. 22

Inappropriate Governmental Policies...................................................................................................... 22

Facts & Figures Regarding Production ................................................................................................... 22

Research and Development..................................................................................................................... 22

PEST Conclusion ........................................................................................................................................ 23

Porters Approach ....................................................................................................................................... 23

Bargaining Power of Suppliers: .............................................................................................................. 23

Suppliers Concentration ...................................................................................................................... 23

Number of Buyers............................................................................................................................... 23

Switching Cost .................................................................................................................................... 23

Substitute Raw Material...................................................................................................................... 24

Threat of Forward Integration ............................................................................................................. 24

Threat of New Entrants ........................................................................................................................... 24

Economies of Scale ............................................................................................................................. 24

Absolute Cost Advantage.................................................................................................................... 24

Brand Identities ................................................................................................................................... 24

Access to Distribution ......................................................................................................................... 24

Switching Cost .................................................................................................................................... 25


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Government Policies ........................................................................................................................... 25

Other Stakeholders.................................................................................................................................. 25

Relative Power Unions........................................................................................................................ 25

Bargaining Power of Customers ............................................................................................................. 25

Buyer Concentration ........................................................................................................................... 25

Number of Suppliers ........................................................................................................................... 26

Switching Cost .................................................................................................................................... 26

Substitute Products.............................................................................................................................. 26

Threat of Backward Integrations......................................................................................................... 26

Threat of Substitute Products or Services ............................................................................................... 26

Functional Similarity .......................................................................................................................... 26

Ratios .......................................................................................................................................................... 26

History

Masood textile mill is a public limited company listed in all stock exchanges of Pakistan and is

leaders in responding to up-and-coming global trends of textile by creating and developing very

basic to very highly fashioned attire by developing and manufacturing of knitted products. They

transform the abstract ideas of their customers into reality through specialized insight and

technical and mechanical expertise. MTM team is the strong believers of customer satisfaction as


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they are believed are the reason of their success. MTM has got state of the art technology;

products know how and most importantly the right mind set to achieve customer satisfaction.

Masood operations are running throughout the world. Masood is expert in creating and

manufacturing of T-shirts, Polo shirt, Jogging suit, Henley shirt, Raglan shirt and Tank top,Bikini, Shorts, Pants and Sleepwear. Driving force behind the achievement of Masood enormous

escalation in past years is the experienced professional staff, a well groomed team of talented

merchandiser, trustworthy suppliers and up to dated technology.

Masood textile mill was incorporated on October 1986 as public limited company and started off

after its listing on Karachi. It was listed on Lahore stock exchange in 1988 and now it is listed on

all stock exchanges of Pakistan.

Its head office is located in Faisalabad (Universal House, West Canal Road, Faisalabad) with 6

units in Faisalabad, one in Lahore and one in Karachi. Masood has also invested in Bangladesh

and has one unit in Dhaka. Masood Textile also own Software Creation, a software development

company.

Chaudry Nazir bought three spinning units in 1986 in Faisalabad and started to produce araw fabric.

Knitting facility was installed in 1986. Chaudry Nazir bought three spinning units in 1986 Dying Plant in 1988 Apparel division operational in 1995 with 35 machines Shahid Nazir has different businesses as well Koshistan Transport 1973 Kakakhel Oil Mills 1994 Coca Cola Bottlers 1983 Industrial Cooperation Bank 1994 Manthar Bus Service 2004 Shahid Nazir at the age of 29 became the CEO of Masood after his MBA from UK and

several courses from LUMS.


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Vision Statement

"Our vision is of continual improvement and sustained growth, and of a family of workers. Who

are given the best compensation benefits and working conditions in the region. In this respect,

MTM continues to emphasize the need to invest in and develop its most precious resource - its

human capital. MTM continues to provide training courses and self-enhancement opportunities

for all our workers".

Mission Statement

Be dynamic profitable and growth oriented by providing good return on investment to its

shareholders and investors, quality products to its customers, a secured and friendly

environment place of work to its employees and to project Pakistans image in the international

market.

Review: Corporate Mission and Vision

MTMs corporate mission defines what the company is and what it intended to achieve through

its functional departments. MTMs corporate mission is:

Be dynamic profitable and growth oriented by providing good return on investment to its

shareholders and investors, quality products to its customers, a secured and friendly

environment place of work to its employees and to project Pakistans image in the international

market.

A vision statement is a clear, challenging picture of the future of the classis as you believe it

can and mustbe. (Malphurs)

An analysis of the current vision statement shows that it is lacking in its purpose of reflecting the

future orientation and growth of the company. The vision statement of the company seems more

like a core value or strategy rather than a depiction of the direction in which the company is

moving and what it aims to achieve. The vision statement does not reflect what the business will

look like in the next 3 to 5 to 10 years nor does it show a picture of the companys future

meaning it is not future-casting. A vision statement is also supposed to be a bit audacious in the

sense that it reflects a dream or an idea that might seem beyond what it possible as it is supposed

to the epitome of where the company is headed. Based on this criterion, the vision statement is

again lacking as there is no ambitious goal towards which it is moving. Another criterion for


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evaluating a vision statement is to check whether it is motivating or not in terms of being clear

about the strategic direction, company focus, business activities the company wishes to pursue

and capabilities that the company aims to develop. The vision does clarify that it wishes to

enhance and build on its human resource capital to allow continuous improvement and sustained

growth in the future. It does not however give a clear cut focus as to the destination for which

this is required. The goal identified is too vague and subjective to be a single motivating factor.

The vision statement is also not purpose-driven as it gives no sense of a larger sense of purpose

or contribution to a greater purpose. The statement is also not inspiring as it does not create any

excitement or emotions relative to the vision. No mental image is created nor is any inspiration

leveraged from the words used to describe the vision. Therefore, our analysis shows that the

vision statement is too vague and lacks strategic direction and ambition to sustain and guide the

corporate strategies in the future. It also ignores the core competencies and capabilities of the

company and fails to connect emotionally.

Components of mission statement

CUSTOMERS What are the firm's major products or

services?

Products or services What are the firm's major products or

services?

Markets Where does the firm compete?

Technology What is the firm's basic technology?

Concern for survival, growth, and profitability What is the firm's commitment towards

economic objectives?

Philosophy What are the basic beliefs, core values,

aspirations and philosophical priorities of the


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firm?

Self-concept What are the firm's major strengths and

competitive advantages?

Concern for public image What is the firm's public image?

Concern for employees What is the firm's attitude/orientation towards

employees?

The following components of the mission statement are present in that of Masood

Textiles Mills. These are:

1-Growth: In the very initial part of the mission statement, it is stated that MasoodTextiles Mills aims to Be dynamic profitable and growth oriented. We can

clearly see that growth is an imperative part of this mission statement. As a result

it is quiet eminent that this component is present in this mission statement.

2-Customer: This mission statement also mentions its concern for customer. It saysthat its objective is to provide quality products to its customers. We can see

how the company values its customers by providing them with quality products.

3-Philosophy: Philosophy refers to the aspirations and philosophical priorities. Thismission statement mentions to project Pakistans image in the international

market. This concern leads to greater meaning of this mission statement and its

aspirations. Its a symbol of great philosophical idea on global scale. It means to

achieve excellence and great reputation with quality produce.

4-Employees: In the middle part of the mission statement, the company mentions itsconcern for employees and their working conditions by stating to provide a


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secured and friendly environment place of work to its employees. Consequently,

it is proven that concern for employees is mentioned in this mission statement.

5-Markets: There is a partial indication to this component of the mission statement.Although the mission states that its markets are abroad, it does not clearly specify

which country or countries the business is exporting to. As a result, the mission

statement does not fully recognize or explain this component. However, since it

mentions that it operates abroad, we assume it to be part of the mission statement.

Proposed Vision Statement

At Masood Textile, our vision is to be the best knitting company in Asia--in the eyes of ourcustomers, shareholders, communities and people. We expect and demand the best we have tooffer by always keeping Masood's values top of mind.

Proposed Mission Statement

Our mission is to become market leader in home textile sector and provide good return on

investment to our shareholders by achieving growth. We aim to exceed our customers

expectations by producing quality products, employing state-of-art/latest technology and best

human skills while providing safe working environment for our employees, incorporate best

practices, use integrated methodology to manufacturing technology and contribute to the

economic growth of Pakistan.

Key Risks

The major problem in textile industry as it prevails in every

other Pakistan industry is the implementation of the policies

and programs announced by the Government. Bargaining

power of the industry with the government is high because of

PACRA, Sector Study, Textile Sector-FY11


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the mounting share of 52% in total exports of the country that has resulted in favorable domestic

policies which have the tendency of being abstained from implementation. Textile industry was

successful in getting preferential access to the European market but the legalization of it was

challenged by the competing countries. Again, government was unable to resolve the issue in

favor of the local industry. Increase in cotton prices has damaged small and medium players in

the industry, making it very hard for survival.

Mergers and acquisition in the textile industry of Pakistan are not so common. Industry structure

is fragmented resulting in the limited economies of scale. The limitation due to the fragmentation

of the industry limits the exit strategy for the investor in hard times of the business.

Low-value added product dominates the industry, thus reduced margins and low differentiation

in the product category.

Power supply is exerting enormous pressure on the cost of production, as textile industries tries

to meet their energy requirements by internal generation of energy at quite high prices. Gas

shortages has added fire in this regard.

SWOT Analysis

Strengths

Information System

IT systems at MTM are one of the major factors in the success of the organization. It has not

only reduced the work load but has also increased the efficiency in production, processing and

quality control. All the IT systems operated in MTM are built by the Software Creation, a sister

concern of MTM and are oracle certified. Main information management systems at MTM are

following:

Human Resource Management Systemo Job Banko Human Resourceo Time Managemento Payrollo Training and developmento Admin


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o Vehicleo Cash Flow

Manufacturing Management System Inventory Management System

o Spinningo Knittingo Processingo Cutting

Back Tracking SystemFinancial Management System

Cash flow Management System

o Chart of Accountso Print Voucherso Periodic Loan Detailo Employee Loan Detailo Periodic Advance Detailo Cash Flow Summaryo Accounts Flowo Party Wise Cashflowso Bilty Wise Reporto Sales Contract Reportso Cash Flow Analysiso Imprest Ledger

Research and DevelopmentResearch and development at MTM is not just a department as a formality. It actually does an

extensive research for the development of innovative fabrics and garments. To keep the

uniqueness of the fabric alive and stop it from being intimated by the competitive firms, these

garments are shown only to the current and potential customers. Few innovative products from

MTM are:


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Anti Mosquito Fabric Heat Adjustment Fabric Water Resistant Fabric Water Absorber Blinking Clothes Fluorescent Fabric

Supply Chain Management

As MTM is complete vertically integrated textile composite, its supply chain management is

effective and efficient. Merchandising department is the one which keep follow up of every

aspect of the order from the placement of the order till the shipment of the order. Every single

unit of the MTM is connected via ERP system and every stage of the order can be tracked andmonitored. Yarn procurement is done on seasonal basis and it is pre sourced before the start of

the season and made sure that there should be no deficit when it comes to the utilization of yarn

to produce fabric.

Total Quality Management

Quality control is the essence of MTM success. Back Track system has enabled employees at

MTM to be more responsible while working and be assuring of the intended quality is produced.

It is because of the quality management, that Masood has received many international and localawards.

Latest Machinery

Masood has latest industrial machinery which has enabled it to produce products of the perfect

quality and on right time with maximum efficiency.

Qualified and Trained Team

For the production of the goods, MTM has a staff which is experienced, skillful, and

knowledgeable about the job. At the time of hiring, HR department makes sure that they hire a

right man for a right job. Employees work with a team spirit and acknowledge each others work.


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WRAP Certification (Worldwide Apparel Response Company)

Masood Textile mill has a hand on WRAP certification which shows that the legal, benevolent

and ethical manufacturing of goods at MTM. It depicts that all the practices at MTM are in the

boundary of moral principles and procedures.

Direct- to- Store System

MTM is the first company in Pakistan to develop and implement direct-to-store system has

permitted a good and long term relationship with the customer. This means, that now it is the

responsibility of MTM to not only produce the product, but also make sure its placement in the

stores of the customer. This system facilitated by the 24/7 information transfer from the sale of a

unit from the store and the relevant department can act accordingly. The sale of even a single

unit from the customers store can be received in the head office ofMTM and can be acted

accordingly. This means the visibility of the future trend has become available to MTM. Future

purchase order feasibility can be made with a great accuracy and purchase orders than can be

revised after discussion with the client.

Back Tracking System (Bar Code System for tracking various components of its product right

from spinning to the packed product)

This system is the heart of quality control. If a defect is detected by quality department

employee, the defect can be traced back to the employee who is responsible for the defect. Barcode is attached to the product at every single stage of the production and can be scanned

whenever needed.

Customer Profile

Efficient marketing team owns a heavy credit because of its ability in turning potential customer

into a permanent customer. Heavy customers portfolio is the reason of trust in the minds of the

customers and prospected customers are pitched through such foundations as well.

ISO 9002 Certification

Masood Textile mills holds ISO 9002 certification and meet quality standards given by

customers.


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Adequate Financial Resources

At the pinnacle of success, Masood textile has a strong backbone due to adequate financial

resources and at time of threat, Masood pull its financial resources and get through such times.

Owned Power Generation PlantMasood has its own power generation plants and has invested heavily on bio-technology to

produce energy for its plants and equipment.

Owned warehouses in USA

To meet the demand of its customers in US, Masood owns warehouses in main cities where its

main customers are residing. Masood even provide this service to other Pakistani and

international firms to use their facility against threats.

CAD Product Innovation Ability Moody Certification Several Quality Awards

Weaknesses

Limited to United States and few European Market

o There is a lot of potential in South America (Brazil, Argentina) and Canada inNorth America. Other than these countries, African countries

Too Much dependency on Exports

o Dependency on export is very high and any change or hit on export license andexport policies by Government can demolish MTM business in American and

European Market.

Over Staffing

o Some of the departments are over staffedLack of productive environment (few departments)

o Few departments like HR office at spinning unit doesnt have good physicalenvironment which would work in the reduction of employees efficiency.


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High cost of production

o High cost of production because of the fact that MTM is overstaffed and results inincrease cost of production

o High transportation cost from Faisalabad to Karachi, resulting in reduced profitmargins

Opportunities

New global penetration

o South American markets such as Brazil, Argentina and Canada in North Americao African Countrieso Middle Eastern Store chains

Build a brand of its ownlabel

o To be on the safe side, Masood need to develop a local brands on the model ofCross Road, Stone Age, Outfitters and Levis. Gain more earning in coming years

and increase shareholder income.

Local marketreduced emphasis of exports

o Local label will also reduce the emphasis on exports and will put a cushion whenexport policies change.

Cost reduction is possible by proper utilization of resources

o Terminate employees who are a burden and are the reason of overstaffingBackward IntegrationOwn cotton fields

o Invest and buy agriculture land, do backward integration and reduce reliance onexternal sources of cotton

Threats

Political Instability Economics Crises Rupees Devaluation Energy Crises


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Labor Unionization Increasing Competitive pressure from Bangladesh and China Natural Calamities, disruption in Supply of raw material Fluctuation in cotton prices International Cotton Prices Increase in oil prices, thus increasing in Production cost (Energy)Cost of Production Negative Country Perception Tariff and Duties

IFE

Internal

Factors

Weight Rating Weighted

Score

Comments

Strengths

IT System 0.15 5 0.75 Information system at MTM is of the vital


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importance in the success of the company. Every IT

system has increase d the efficiency of MTM.

Supply

Chain

0.1 4 0.4 Every single operation at MTM adds value to the

product and increase efficiency

TQM 0.1 3 0.3 Good quality product is the reason of success in

international market.

DTS/BTS 0.05 2 0.1 This web based software keeps MTM up to date on

customers information

Power

Generation

0.1 2 0.2 Ability to generate power.

Weaknesses

Limited to

US and G9

0.15 3 0.45 High concentration in these markets, need to

diversify through other markets as well.

Overstaffing 0.075 4 0.3 High cost is incurred due to over employment

Leveraged

on Exports

0.15 2 0.3 No emphasis on local market

Transport

cost

0.05 3 0.15 Shrinkage of margin due to high transportation cost

High cost offinancing

0.075 5 0.375 High long term debt, high financial cost

3.325

EFE

External

Factors

Weight Rating Weighted

Score

Comments

Opportunities

New &

Potential

International

Markets

0.1 4 0.4 South America, Canada, Australia, middle east are

potential international markets for knitted apparel.


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Local Market

Potential

0.15 5 0.75 Brands like cross road, outfitters and stone age are

earning high profits in local market.

Diversify into

new industry

0.075 2 0.15 There is the need to diversify in other industries, can

form a conglomerate (high financial resources)

Backward

integration

0.1 3 0.3 Owing cotton farms will result in cost reduction, since

reducing the cost from other sources is not possible at the

moment

Leather

Products

0.075 1 0.075 MTM can capitalize on its existing infrastructure in orde

to diversify into leather business.

Threats

Political

Instability

0.1 5 0.5 Political instability and unrest in the country results in th

unattractiveness for the investor. A policies guideline ha

yet to be seen in practice.

Energy Crises 0.075 2 0.15 Producing energy by furnace oil is very expensive,

results in high cost of production. MTM produces energy

through bio technology.

Labor

Unionization

0.075 2 0.15 Labor union is the potential threat in such companies

which results in order delays, however MTM doesnt

have any labor union at the moment.Natural

Calamities

0.15 4 0.6 Industry is dependent on cotton, natural disasters have

been unfortunately quite consistent in past years

Increase in

Oil Prices

0.1 1 0.1 Increase in oil prices in international market results an

increase in all raw material hence increase in the cost of

production

Competitive Profile Matrix (CPM)

MTM Textile Sitara Textile Perfect Textile


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PEST Analysis

Technological Environment

Technological advancements are taking place every day throughout the world. Higher and higher

efficiency is being achieved by organizations and companies through the optimal use of

technologies. Textile industry in Pakistan has a bit of mix environment when it comes to

technology. Giant players in an industry got up to date technology and they import machinery

from developed countries. The growth of information technology sector has acted as a medium

in the direction and in the future the pace of technology will be even greater. Dependence ontechnology in every industry can provide high productivity and higher effective and efficiency.

Strategic Decision Making factors regarding technology:

Future form of the product will be changed. Different kind of fabric can be made possible

by the use of future technology

Critical Success factor Weight Rating Score Rating Score Rating Score

Advertising 0.15 2 0.30 2 0.30 2 0.30

Product Quality 0.20 4 0.80 3 0.60 3 0.16

Price Competitiveness 0.10 3 0.30 3 0.30 3 0.30

Management 0.10 2 0.20 2 0.30 3 0.20

Financial Position 0.15 2 0.30 3 0.30 2 0.45

Customer Loyalty 0.10 3 0.30 3 0.20 2 0.30

Global Expansion 0.05 1 0.15 1 0.10 2 0.05

Market Share 0.15 3 0.45 3 0.30 2 0.45

Total 2.80 2.4 2.21


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Yarn processing technology improvement

Raw material availability could be accessed

Future visibility of the demand can be possible through the use of financial models,

information processing and information data bases.

New product innovation and invention is possible

Socio-Cultural Environment

Unlike technological changes which are abrupt the socio-cultural options occurs at a slow pace.

Socio-cultural changes may have the following implications for Nishat Mills:

a) Changes in lifestyle

b) Age distribution

c) Expectations from business and social values

d) Ethical Standards.

Economic Environment

The GDP of Pakistan has a growth rate of 2.4% in 2011 which is very low as compared to the

competitive countries. Exports fell to $17.190 billion in July-March, from $17.727 billion in the

same period the previous year, according to the bureau. Imports totaled $33.285 billion, up from


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$29.016 billion previously. The trade deficit was $1.496 billion in March and $1.428 billion in

February. (Trade Analysis, 2012). The current discount rate is 12.5% as announced the state

bank of Pakistan. Also the per capita income is around $1000 which is very low. The company

has pretty adverse effect of these worse economic situations, it is resulting in rise in cost of

production and the performance is also hampered.

Economy and War on Terror

War on terrorism is taking its toll from many countries and is also the reason of high defense

budgets, neglecting many important industries. Economic recession has prolonged effect on the

industries on worldwide basis. Poverty level is increasing in Pakistan with every passing day,

very low foreign investment and high unemployment has resulted in lower purchasing power of

the consumer. Economic downfall is being witnessed at very high rate and an individual life has

been affected violently. Textile industry of the Pakistan constitutes 53% of the total exports in

Pakistan is in direct hit due to these economic factors. Many garment businesses in Pakistan has

be closed today due to these economic factors.

Pricing Trend and its Consequences

Frequent changes in the prices directly affect the garment manufacturing, as orders are received

are on different rates, and by time these orders are in processing stages, prices changes thus

damaging the business earning. This is the common in Pakistan, that after announcing the

budget, government keep in raising the prices of the raw materials used in the processing to

produce the final good. Business men cannot produce an authentic budget of their own because

of these fluctuations in the business. With such frequent prices fluctuations, garment industry

has to change its prices at which consumers are not willing to pay. Countries like Bangladesh,

India and China are giving a severe competition to the Pakistan in textile industry because of

their economic stability and lower cost of production.

Energy Crises

The biggest problem Pakistan textile industry facing these days is the power failure. Long hours

electric load shedding has greatly affect the total production of the industry. Per unit increase in

the prices of electricity every month, shortage of gas, shortage of petroleum products are some of

most obvious causes of downfall of the textile industry.


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Political and Legal Environment

As far as the political and legal environment is concerned, in Pakistan the legal environment is a

bit weak. There are no as such environment protections laws, tax laws, special incentives and

stability of government. The legal framework is quite weak in Pakistan. Stability of government

is also quite a big issue; as every time the government changes the policies of government

changes and with new policies the trade policies changes which also hampers the performance.

Inappropriate Governmental Policies

Political environment in Pakistan throughout the years has raised many problems for all

industries. Lack of conducive industrial policies, no FDI, export processing units are insufficient

in relation to the number of exporter in Pakistan, trade fares in the country are near to non where

companies have the chance to exhibit their product. Government do invest its expertise in

developing polices regarding industries but these policies doesnt see the light of

implementation. If government do take care of the factors mentioned earlier, export- led

industrialization can be possible. There should be advantage to the local producers to develop the

products which are exportable through duty free import of raw materials. Rule and regulations

existence on papers are useless unless implemented. Lack of good governances, corruption every

single government department and complex bureaucracy are the areas where a lot is need to be

done for better business future in the country. Development of infrastructure to support the

business in the country is also vital for business community in the country.

Facts & Figures Regarding Production

There is no statics available as for garment industry of Pakistan. Reasons are:

Most garment businesses are working on small scale.

There is no step taken by government to keep record of their growth

Many garments and apparel factories close each year because low instability except for

few bigger players in the market.

Research and Development

The education system in Pakistan doesnt pay any emphasis on research and development on

new products. This lack of orientation towards research leads to the deficiency of improvements


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of industry. Textile industry in some countries pay a heavy emphasis on the development of

innovative products but Pakistan lags behind in this arena too.

PEST Conclusion

With such mega environment factors, maintenance of product quality is very hard to keep from

deteriorate. Consumer now days are bombarded with the information and more aware of the

product quality requirements doesnt waste their money on poor quality products. To remain

competitive in the market and reduce cost, companies dont pay much on promotion, marketing

of the product and its publicity. Unemployment is rising due to such reasons as businesses are

firing people to cut costs thus increasing the poverty level in the economy. The textile industry

potential of Pakistan is not a news in any sector, be it the human capital, raw material and its

abilities to produce superior quality product but the platform to develop and progress is not

compatible.

Porters Approach

Bargaining Power of Suppliers:

Suppliers Concentration

Pakistan is an agriculture based economy and development and growth of textile industry solely

depends upon the Pakistans agriculture sector. The concentration of suppliers is quite highbecause of this premise and huge raw material market.

Number of Buyers

Textile industry can be divided into three categories large companies, medium manufacturing

and small business and that is why there is quite a number of buyers of the raw material in the

market. Every year there is surplus of cotton produced by the farmers which enable government

to export raw and processed cotton. Government put a cap and floor prices on cotton but

government does not consistently follow these prices thus fluctuations in the prices.

Switching Cost

The switching cost of suppliers is very low considered the given fact that there are not fixed

suppliers. It is solely based on the rate given the quality specifications are met. After this there is

not discrimination of special or a normal supplier; they just buy it from the market.


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The switching cost of the supplier is very low due to the fact there are large number of supplier

in the market. If the required quality is met, there is no reason for a buyer to switch to a new

supplier. Masood Textile buys cotton from the supplier who can provide the raw cotton of a

specified quality. Masood textile purchase cotton in advance of the season.

Substitute Raw Material

There is no substitute raw material available for the cotton.

Threat of Forward Integration

The threat of forward integration is low because huge capital investment is required. The cost of

production is rising in Pakistan because of the energy crisis and increase in other factors of

production.

Threat of New Entrants

Economies of Scale

Pakistans textile industry is losing on its competitive advantage because of the increase in cost

of production. In the past, companies were able to achieve economies of scale because there was

no power shortage; no shortages of raw materials but now the conditions are getting worse for

the textile sector. Rising raw material costs, rising production costs reduce economies of scale.

Absolute Cost Advantage

Pakistan used to have absolute cost advantage in regard to the labor but now India and

Bangladesh has beaten Pakistan in terms of cost. Per second rate in Bangladesh is 4 cents where

as in Pakistan its 7 cents.

Brand Identities

Masood Textile has favorable brand equity in International and local market as it is the largest

textile composite in Asia.

Access to DistributionMasood textile mill has developed its own distribution network, known as DTS. Direct to store

works with the partnership with the clients. It has its own warehouses in US where it stocks its

products to neglect any delay in the order. It has its own fleet of trucks and containers to provide

logistical services to the consignments.


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Switching Cost

There are many competitors in local market as well as in international markets like China, India

and Bangladesh. These countries are low cost producers of textile products and give a fighting

competition to Pakistan. So, the switching cost of the customer is low in this industry.

Government Policies

There is this tendency of every government whether its a democratically elected or its a

dictatorship, government policies do not remain consistent once they are announced. This lack of

consistency in the policy implementation results in unattractiveness of doing business efficiently.

Capital investment requirement for business is not in align with the savings people have. So

borrowing money from commercial banks is the option available to the business oriented people.

High cost of financing i-e 14-15% is high when compared with the rest of the world. The

business earning around 20% would remain in the market when it is leveraged by debt from the

bank. Handsome portion of business earnings goes to the banks and then the tax further reduces

the net income. Corporate structure in Pakistan is unsupportive to the business because of this

huge tax and no incentive to the business.

Other Stakeholders

Relative Power Unions

There is no labor union in Masood textile mill that can hamper its performance. But when it

comes to protest against the government, unions arise and result in the strikes and respites which

hurt the business. Whenever MTM observes that there are potent of unionization in the making,

they find the one who is igniting the spark and transfer him to another unit, few weeks in new

unit and again transfer to another unit and eventually out of the company.

Bargaining Power of Customers

Buyer Concentration

There is no deficiency of customer in domestic and international market. There are chain stores

in the world that expands from one pole to another covering almost every single continent.

Concentration of buyers is high making it very tough to survive for the manufacturer unless it

remains consistent on quality, timing and quantity. To remain competitive in the global market,

Masood Textiles has to cover every single aspect from purchase order to the placement of the

product in the market, better than the competitor.


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Number of Suppliers

The competition is not only from domestic market but from countries like India, Bangladesh,

Thailand and Vietnam and the market going towards the maturity stage.

Switching CostReduced cost of production in the countries like China, Bangladesh and Vietnam gave a tough

competition to Pakistan textile sector. Switching cost of the customer is very low. Its only than

the quality of the product on the basis of which you have to remain competitive to keep the

switching cost high.

Substitute Products

Masood Textile mills do not manufacture formal wear garments, lawn, house decorative fabric

etc. However, many other textile firms covers many areas such as formal/casual wear, ladiessuiting, home decorative fabrics and raw fabric for further processing.

Threat of Backward Integrations

The threat of backward integration is very low majorly because of the economics and energy

conditions in Pakistan.

Threat of Substitute Products or Services

Functional Similarity

Local brands in Pakistan are in functional similarity with the apparel production in MTM.

Crossroads, Stoneage are the substitute products and will give competition if these companies

start doing export business.

Ratios

2011 2010 2009

Gross Profit Margin 16 18 19

Net Profit Margin 0.04 0.05 0.04

Return on Total Assets 0.05 0.06 0.05

Return on stockholder Equity 0.19 0.23 0.21


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Current Ratio 1.12 1.22 1.25

Quick Ratio

Inventory turnover

1.05

10.46

1.15

14.88

1.17

19.47

Total Assets turnover 1.24 1.20 1.14

strategic part 1

Documents