Zain A.

Siddiqui Muhammad Bilal

Table of Contents
Acknowledgement ................................................................................................................................................................................................ - 4 Introduction ............................................................................................................................................................................................................ - 1 History ...................................................................................................................................................................................................................... - 2 Company Information .......................................................................................................................................................................................... - 3 Overview of Textile Industry .............................................................................................................................................................................. - 5 Global Development ............................................................................................................................................................................................. - 6 Domestic Overview ............................................................................................................................................................................................... - 7 Overview By Gul Ahmed ..................................................................................................................................................................................... - 9 Economy Overview ............................................................................................................................................................................................... - 9 Industry Overview ............................................................................................................................................................................................... - 10 Business Review ................................................................................................................................................................................................. - 10 Performance Highlights .................................................................................................................................................................................... - 10 Financial Performance ....................................................................................................................................................................................... - 10 Strategy Formulation ......................................................................................................................................................................................... - 12 Vision Statement ................................................................................................................................................................................................. - 12 Mission Statement .............................................................................................................................................................................................. - 12 Critical Overview of Vision and Mission Statements ................................................................................................................................ - 13 Vision Statement Evaluation ............................................................................................................................................................................ - 13 Mission Statement Evaluation ......................................................................................................................................................................... - 14 External Assessment of Gul Ahmed .............................................................................................................................................................. - 15 Gul Ahmed Opportunities ................................................................................................................................................................................. - 16 Gul Ahmed Threats ............................................................................................................................................................................................. - 16 -

EFE Matrix Gul Ahmed ...................................................................................................................................................................................... - 17 Competitive Profile Matrix Gul Ahmed .......................................................................................................................................................... - 18 Internal Assessment of Gul Ahmed ............................................................................................................................................................... - 19 IFE Matrix Gul Ahmed ........................................................................................................................................................................................ - 20 Strategy Formulation ......................................................................................................................................................................................... - 21 Intensive Strategies of Gul Ahmed..................................................................................................................................................................... 21 Integrity Strategies of Gul Ahmed ...................................................................................................................................................................... 21 Diversified Strategies of Gul Ahmed ................................................................................................................................................................. 21 BCG Matrix of Gul Ahmed ................................................................................................................................................................................ - 22 IE Matrix of Gul Ahmed...................................................................................................................................................................................... - 23 Grand Strategy Matrix of Gul Ahmed ............................................................................................................................................................. - 24 QSPM of Gul Ahmed .......................................................................................................................................................................................... - 25 Conclusion ............................................................................................................................................................................................................ - 28 Appendix A. Production Input Cost Summary ............................................................................................................................................ - 29 Appendix B. Data Sources and Notes for Production Input Cost Summary....................................................................................... - 30 -

Acknowledgement

We would like to express sincere gratitude to Mudassir Husain who gave us

greatest prospect to do Strategy Analysis of Gul Ahmed Textile Mills Limited. He gave us thought of strategist to employ strategies of association on different stages of situations and conditions by providing the tips and tricks to evaluate companies ranking. We highly appreciate the contribution of Naveed Ansari Manager Administration at Gul Ahemed Textile Mills Limited who provides us discriminating and key knowledge of Gul Ahmed Textile Mills Limited. Best Regards Zain A. Siddiqui Mohammad Bilal

Introduction
Gul Ahmed first began trading in textiles in the early 1900's, and manufacturing started in 1953 with the establishment of Gul Ahmed Textile Mills Limited. Gul Ahmed was listed on the Karachi Stock Exchange in 1972. Fifty years since its inception, the name Gul Ahmed is still synonymous with quality, innovation and reliability. Being vertically integrated Gul Ahmed is capable of producing different varieties, starting from cotton yarn to finished product involving different processing techniques. With an installed capacity of 120,000 spindles, the spinning units are able to produce a wide variety of yarns from 100% cotton yarn to poly-cotton, cotton-viscose and other blends in both coarse and fine counts. The weaving units are equipped with high speed 250 air jet looms and can produce high quality fabrics in sheeting, satins, percales, twills, drills, dobbies, voiles and an array of other finely woven fabrics including yarn dyed. Processing is equipped with sophisticated technology to ensure quality printing, dyeing, different finishing treatments with facilities to add extra value to products in terms of coating and flocking. With modern, state of the art stitching facilities Gul Ahmed is equipped with regular and specialized machines which manufacture products in many varieties and styles. Large embroidery and quilting units add versatility for embellished products to cater to all sorts of customer needs and requirements. All this is backed by systems that constantly check and control production to achieve high standards.
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History
The story of textiles in the subcontinent is the story of Gul Ahmed. The group began trading in textiles in the early 1900s. With all its know-how and experience, the group decided to enter the field of manufacturing and Gul Ahmed Textile Mills Ltd. was incorporated as a private limited company, in the year 1953. In 1972 it was subsequently listed on the Karachi Stock Exchange. Since then the company has been making rapid progress and is one of the best composite textile houses in the world. The mill is presently a composite unit with an installed capacity of 130,296 spindles, 223 wide width air jet looms, and a state of the art processing and finishing unit.

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Company Information
BOARD OF DIRECTORS BASHIR ALI MOHAMMAD ZAIN BASHIR ZIAD BASHIR MOHAMMAD ZAKI BASHIR ABDUL AZIZ YOUSUF S.M. NADIM SHAFIQULLAH ABDUL RAZAK BRAMCHARI DR. AMJAD WAHEED ADNAN AFRIDI MOHAMMED SALEEM SATTAR MOHAMMED SALEEM GAFFAR S.M. NADIM SHAFIQULLAH ZAIN BASHIR MOHAMMAD ZAKI BASHIR ABDUL AZIZ YOUSUF ALLIED BANK LIMITED BANK AL HABIB LIMITED BARCLAYS BANK PLC PAKISTAN BANKISLAMI PAKISTAN LIMITED CITIBANK N.A DUBAI ISLAMIC BANK PAKISTAN LIMITED FAYSAL BANK LIMITED HABIB BANK LIMITED HABIB METROPOLITON BANK LIMITED HSBC BANK LIMITED MCB BANK LIMITED MEEZAN BANK LIMITED NATIONAL BANK OF PAKISTAN NIB BANK LIMITED SAMBA BANK LIMITED SILKBANK LIMITED STANDARD CHARTERED BANK (PAKISTAN) LIMITED UNITED BANK LIMITED HYDER BHIMJI & CO Chartered Accountants -Chairman & Member -Member -Member -Secretary -Chairman & Chief Executive -Non Executive Director -Executive Director -Executive Director -Executive Director -Independent Non Executive Director -Non Executive Director -Independent Non Executive Director -Independent Non Executive Director

CHIEF FINANCIAL OFFICER COMPANY SECRATORY AUDIT COMMITTEE

BANKERS

AUDITORS

INTERNAL AUDITOR

ANJUM ASIM SHAHID RAHMAN

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Chartered Accountants LEGAL ADVISORS A.K. BROHI & CO. ADVOCATES POLT NO 82 MAIN NATIONAL HIGHWAY LANDHI, KARACHI-75120 FAMCO ASSOCIATES (PRIVATE) LIMITED 1ST FLOOR, STATE LIFE BUILDING NO. 1-A OPP. I.I. CHUNDRIGAR ROAD, KARACHI-74000 PHONE NO (021)32427012, 32426597 & 32425467 FAX NO. (021)32426752 LANDHI INDUSTIRIAL AREA KARACHI-75120 finance@gulahmed.com www.gulahmed.com (+92-21) 111-486-486 6,683 June

REGISTERD OFFICE

SHARE REGISTRAR

MILLS

EMAIL URL UAN NO. OF EMPLOYEES FISCAL YEAR END REVENUE

Karachi Stock Exchange Share Prices 2010-2011

High 53.65

Low 18.53

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Overview of Textile Industry

The textile sector enjoys a pivotal position in the exports of Pakistan. In Asia, Pakistan is the 8th largest exporter of textile products. The contribution of this industry to the total GDP is 8.5%. It provides employment to about 15 million people, 30% of the country work force of about 49million. The annual volume of total world textile trade is US$18 trillion which is growing at 2.5 percent. Out of it, Pakistans share is less than one percent. The development of the Manufacturing Sector has been given the highest priority since Pakistans founding with major stress on Agro-Based Industries. For Pakistan which was one of the leading producers of cotton in the world, the development of a Textile Industry making full use of its abundant resources of cotton has been a priority area towards industrialization. At present, there are 1,221 ginning units, 442 spinning units, 124 large spinning units and 425 small units which produce textile products. The industry consists of large-scale organized sector and a highly fragmented cottage /small-scale sector. The various sectors that are a part of the textile value chain are: Spinning, most of the spinning industry operates in an organized manner with in-house weaving, dyeing and finishing facilities. Weaving comprises of small and medium sized entities. The processing sector, comprising dyeing, printing and finishing subsectors, only a part of this sector is operating in an organized state, able to process large quantities while the rest of the units operate as small and medium sized units. The printing segment dominates the overall processing industry followed by textile dyeing and fabric bleaching. The garments manufacturing segment generates the highest employment within the textile value chain. Over 75% of the units comprise small sized units. The knitwear industry mostly consists of factories operating as integrated units (knitting + processing+ making up facilities). The clothing sectors both woven and knits are mainly clustering in Karachi Lahore and Faisalabad where sufficient ladies labor is available. Pakistan is the worlds 4th largest producer and 3rd largest consumer of cotton. The Textile and Clothing Industry has been the main driver of the economy for the last 50 years in terms of foreign currency earnings and jobs creation. The Textile and Clothing Industry will continue to be an important engine for future growth of the economy; there is no alternative industry or service sector that has the potential to benefit the economy with foreign currency earnings and new
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job creation, especially if synergy is developed amongst different sub sectors and efforts are made to aggressively grow the Readymade Clothing Sector. Pakistans Textile Industry had proved its strength in global market during the last four decades. Currently, major losses are being incurred by this industry with foreclosure looming around. The reasons of this decline are largely contributed by the high cost of production due to increase in the energy costs. Cost of import has risen due to a depreciating Rupee. Rise in inflation rate and high cost of financing has also effected seriously the growth in the textile industry. The sector recorded a 10.2 percent decline in output in the first four months, July-October of FY2011. The overall growth of textile industry is noteworthy and appreciable, and regardless of some hiccups general progress and development of Pakistani textile sector is really good. The performance of this sector could have been even better if some of the existing policies and practices get revised and critically reviewed. The industry's overall contribution of taxes in 2011-12 is expected to reach Rs. 23.5 billion, including payments of withholding taxes and applicability of lower rate of sales tax of 4% - 6% on local supplies. Textile exports stood at $12.5 billion from July 2010 to May 2011. During the last fiscal year, the tax department collected Rs. 10.5 billion as 1.0% withholding tax.

Global Development
Similarly, textile industry contributed Rs. 2.5 billion at the rate of 0.25% as Export Development Fund (EDF). Break-up shows that the applicability of lower rate of 4%-6% sales tax on local supplies would contribute an additional amount of Rs. 11 billion, annually, to the national exchequer. Moreover, the collection of withholding tax amounted to Rs. 10.5 billion during ongoing fiscal year. A leading textile exporter said that the Ministry of Textile had issued three notifications to facilitate the industry in the past. Textile manufacturers will receive 3% drawback on garments, 2% on home textile and 1% on fabrics. The government has yet to issue any notification in the extension for these facilities. Financial year 2011-2011 recorded a decent ratio of textile exports to many of the European, American and Middle Eastern markets. Not only the raw material, Pakistan also managed to export hundreds and thousands of finished products to these global markets, showing the real potential lying in our textiles and garments sectors. Following tables show the growth of cotton textile industry in Pakistan.

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The previous fiscal period starting from June 2010 to June 2011 experienced severe blows as a result of massive destruction of cotton crops due to massive floods and heavier rains throughout the country. Despite such positive figures and statistics, textile and garment industries in Pakistan have not shown any considerable progress in producing valued-added items. Our neighboring countries like India and China, on the other hand, have achieved the largest share in the global market by exporting value-added textiles and garments products, while local manufacturers in Pakistan are way behind in this. Another mistake we have already made is that we tend to export raw materials to the global textile buyers, and the same raw material comes back to the Pakistani market in form of finished value-added textile products and fashion accessories on higher prices. According to Mr. Abdul Saboor, one of the leading experts from the textile sectors, "On a domestic front, Pakistan has hardly any cotton left in the fields and stocks at ginners are not that much to feed the mills till the next crop comes. From price perspective Rs. 12000 to 13000/mound or $ 1.68/lb has now become a usual norm. These prices are driven from NY futures, World An index and India's restriction on cotton exports. Pakistani mills are still short of their minimum consumption requirements and more and more players are finding it difficult to make decisions about buying raw material at these skyrocketing prices with yarn

fabric demand showing the resistance and receivable issues from the clients. Credit limits have burst for many as cotton has reached over 150% of price since start of this season. Another interesting point is the ratio of raw material price and conversion cost in total cost of product as today raw material price makes for almost 90% of the total cost of the product, as compared to 60% a year back". Additionally, there is more focus upon supplying raw material to global textile manufacturers. Though this helps us earn much-needed foreign revenues but also eliminates the possibilities to turn the same raw material into value-added finish products locally.

Domestic Overview
Internally the increase in cost of utilities, (Power, Gas, Transport, and Petrol) has impacted viability. The power & gas outages have further deteriorated capacity utilization. The shortage of cotton crop in China increased the prices of cotton. The increased demand of yarn export created problem of yarn availability in the local market. Home Textile and made-up sectors to unviable level aggravated the production and export of yarn products. To stay in the market industry is making distress efforts. Closure, low capacity utilization, losses are heated topics of the day. Resultantly the production and export performance of Textile sector had shown a
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mixed trend. Because of a global shortage in availability of cotton, largely due to a shortfall in Chinese crop, which is the biggest producer and consumer of cotton in the world, the foreign demand for Pakistans cotton yarn has risen exceptionally. Chinese, in particular, have procured huge quantities of yarn from Pakistan, even though they are the fiercest competitor of Pakistan in the world market. In the first six months of the current fiscal year Jul-Dec. 2009, the export of cotton yarn recorded an increase of 50%. Spinning industry makes the basic raw material for the downstream industry. The existing capacity in the spinning sector is more than local demand, and hence moderate quantities of yarn are exported each year. With excessive exports during the year, the downstream industry started facing severe shortages of

yarn. Consequently, the downstream industry began to close down. In January, 2010Government imposed a quota of 50 million kg per month for export of yarn. During January 2010, 56 million kg was exported as appropriate measures to give effect to quota were not put in place in time. The availability of yarn in the local market remained scant and prices kept rising. The anxiety and pain suffered by the local industry intensified, as exports of value added textiles were declining at alarming rates (Decrease in: Cloth 16%, knitwear 8% and garments 8%). Accordingly, the quota was reduced to 35 million kg per month with effect from 1st March, 2010.Since the reduction in quota, local availability has improved. Textiles are exported in the form of Yarn, Fabric, Readymade Garments, and Bed Wear & Made Ups.

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Overview By Gul Ahmed

Economy Overview
During the year international uncertainties regarding the future economic outlook re-emerged, as growth figures for many economies had to be adjusted downward due to the devastating earthquake in Japan and doubts about the sustainability of public debt in Europe and the United States which undermined confidence in the ability of governments to take the necessary steps to restore growth. In this context, policymakers across all regions are facing difficult economic management challenges and many policy dilemmas. Keeping the international background, Pakistan is currently facing challenges like persistence of high inflation, falling private investment and low growth and rising total public debt due to a low tax to GDP ratio. At the same time, severe energy shortages and volatile security conditions have rendered the domestic economic environment least conducive for productive activities. The jolts to the economy continue in the form of adverse shocks of commodity and oil prices, fallout of the global financial crisis and the unprecedented calamity of the floods which caused a massive damage of $10 billion on countrys economic structure. For the country, the year under review (FY 2011) remained difficult. The economy grew by 2.4% against the target of 4.5% (FY 2010: 4.1%). Agriculture grew at 1.2% (FY 2010: 2.0%) against the target of 3.8%. Lower growth in agriculture is because of the impact of devastating floods destroying major crops rice, cotton and also the livestock. The large scale manufacturing sector grew at 1.7% (FY 2010: 4.4%). It mainly remained the victim of power outages and lower domestic demand. CPI inflation at 13.9% in June 2011 is higher than the target by 4.4%. Now the recent flood catastrophe, particularly in Sind, due to heavy rains has multiplied Pakistans economic problems. The economic management team of Pakistan needs to restructure the policy framework targeted to improve the welfare of public, encourage business activities in the country, broaden tax base for better resource mobilization, improve the efficiency of public sector spending and facilitate the industries to generate revenues and keep up with and increase efforts to further bring foreign currency earnings into the country and create employment. In short, more effective consolidated fiscal policy is needed.
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Industry Overview
Textile industry in Pakistan constitutes 46% of total manufacturing sector and 38% of manufacturing labor is employed in this industry. Textile sector accounted for 62% in export growth. The positive growth in the export market is mostly the effect of price and the contribution of increase in production impact is minimal. FY 2011 witnessed a significant increase in cotton prices mainly as a result of floods in Pakistan, droughts in USA and unfavorable weather conditions. This was further compounded by export ban by India as well as lower availability of cotton from the major cotton producing countries.

new style and fashion is also critically important to Gul Ahmed.

Performance Highlights
Pakistans textile industry which is the major contributor to the countrys exports is dependent on cotton. During the year local cotton prices witnessed a steep increase of around 120% as compared to the previous year. Similarly cotton prices worldwide also rose sharply. Gul Ahmeds financial performance despite the sharp increase in cotton price is par excellence.

Business Review
Gul Ahmed Textile Mills Limited (Gul Ahmed) is a Company listed on the Karachi and Lahore Stock Exchanges. It is a composite textile mill and is engaged in the manufacture of textile products. It has state of the art production facilities in its two segments, yarn and processing. We, in the industry, are pioneers in setting up a chain of our own retail outlets in Pakistan. Our passion for designing and creating the world of

Financial Performance
The Company has shown improvement in all areas sales have increased by 29%, gross profit by 46% profit after tax and earnings per share (EPS) by 150%. Table comparing the current FY 2011 with FY 2010 is given below:

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FY 2011 FY 2010 Growth Rupees in Millions %

Local Sales Exports Total Sales Gross Profit Profit before tax Profit After Tax EPS (Rs.) 8.297 17,139 25,436 4,627 1,537 1,196 18.85 8,949 10,740 19,689 3,173 708 478 7.52 (652) 6,399 5,747 1,454 829 718 11.33 (7.29) 59.58 29.19 45.82 117.09 150.21 150.66

Appropriations
Final dividend for the FY 2010 @Rs. 1.25 per share General Reserves Amount carried forward 79,349 400,000 1,197,642 1,676,991

Subsequent Effects The Board of Directors of the Company in their meeting held on October 01, 2011 has proposed the following:
Rs. 000s Balance of unappropriated profit brought forward 1,197,642 Transfer from capital reserve for issue of bonus shares 450,446 Available for appropriation 1,648,088 Transfer to reserves for issue of bonus shares in ratio of one share for every one share held (634,785) Transfer to general reserve (1,000,000) Unapprpriated profit carried forward 13,303

Operating results of the Company are summarized below:

Profit after providing depreciation / amortization of Rs. 724 million Provision for taxation Profit after tax Unappropriated profit brought forward Available amount for appropriation Rs. 000s 1,537,454 (340,997) 1,196,457 480,534 1,676,991

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Strategy Formulation

Vision Statement

Setting trends globally in the textile industry. Responsibly deliver products and services to our patterns

Mission Statement

To deliver value to our partners though innovative technology and teamwork. Fulfilling our social and environmental responsibilities.
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Critical Overview of Vision and Mission Statements

Vision Statement Evaluation

A true vision statement answers the question what business are you in? It identifies not just the products or services offered, but the companys core reason for existenceits purpose. It focuses organizational energy. A vision statement provides broad guidelines for how to proceed in fulfilling the organizations purpose, and a real vision statement offers clear pictures of what success looks like. Gul Ahmeds Vision statement shows the responsibility to setup their trends on the globe by delivering their products and services to their valued customers. But they do not show any contribution of their employees and their trading partners such as Banks, Trading bodies, Stake holders etc. Gul Ahmed is the textile industry so they obliged to have to establish some inspiration in its vision to statement to get vital curiosity by their patrons to acquire their products, employees to achieve to their best and stake holders to empower as they most.

Gul Ahmed Textile Mills Limited is one of the largest textile industry in Pakistan who serves globally and locally their services so we put forward to transform their vision statement as per prior mention point:

Setting trends globally in the textile industry as well as in the world of style by our ground-breaking creativity and delivers our product and services to our patterns

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Mission Statement Evaluation

A mission statement is more than a statement of specific details; it is a declaration of attitude and outlook. Because a mission statement is often the most visible and public part of the strategic-management process, it is important that it includes all of these essential components of mission statement:
1. 2. 3. 4. 5. 6. 7. 8. 9. Customers Product or Services Geographic Market Technology Concern for survival and growth Basic beliefs and inspiration Self-concept Concern for public image Concern for employees

Gul Ahmed Textile Mills Limited is one of the largest textile industry in Pakistan who serves globally and locally their services so we put forward to transform their mission statement as per prior mention point:

To offer the commitment of their treasured partners to fulfill their fabric and textile necessitate through our creativity and innovative technology and teamwork. Fulfilling our societal and ecological errands

Gul Ahmed mission statement shows the basic components of statement such as customers interaction, use of technology, concern for public image and concern of employees. But they do not use some crucial components which is very indispensable for presenting the textile industry such as: product and services of association, geographically where does the firm compete, philosophy and aspiration of the firm and competitive advantage.

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External Assessment of Gul Ahmed

Pakistan is one of the largest cotton-producing countries of the world. Both directly and indirectly, textile sector employs the largest number of the human resource. The industry contributes more than 60 % (US $ 9.6 billion) to the countrys total exports and contributes approximately 46 %t to the total output i.e. 8.5%of the country GDP. In Asia, Pakistan is the 8th largest exporter of textile products, catering for 38% employment. Currently, major losses are being incurred by this industry with foreclosure looming around. The reasons of this decline are largely contributed by the high cost of production due to increase in the energy costs. Cost of import has risen due to a depreciating Rupee. Rise in inflation rate and high cost of financing has also effected seriously the growth in the textile industry. The sector recorded a 10.2 percent decline in output in the first four months, July-October of FY2011. The global recession which has hit the global textile really hard is not the only cause for concern. The high cost of production resulting from an instant rise in the energy costs has been the primary cause of concern for the industry. Depreciation of Pakistani rupee during last year raised the cost of imported inputs. In addition, double digit inflation and high cost of financing has seriously affected the growth in the textile industry. Pakistan's textile exports have gone down during last three years as exporters cannot effectively market their products since buyers are not visiting Pakistan due to adverse travel advisory and it is getting more and more difficult for the exporters to travel abroad years. Slowdown in the textile sector has to be revived. High cost of doing business is because of intensive increase in the rate of interest which has increased the problems of the industry. Record increase in mark-up rates is one of the major cause of defaults in servicing the loans availed by the industry, hence, the volume of non-performing loans has reached to an alarming situation. He said that power shut downs may result in massive unemployment resulting in law & order situation. The overall growth of textile industry is noteworthy and appreciable, and regardless of some hiccups general progress and development of Pakistani textile sector is really good. The performance of this sector could have been even better if some of the existing policies and practices get revised and critically reviewed.
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Gul Ahmed Opportunities

Rise in demand globally is estimated at around 2.5 percent Increase export Pakistan is share only 1 percent out of total demand rate Expand local Expansion Move production plant to Bangladesh IDEAS expansion on local market IDEAS expansion on International market Make franchise network to expand IDEAS business Capture casual wear market Western apparel is being common in Pakistan Big potential in complete outfit apparel Big potential in cosmetics market Acquire small textile industries to developed new products ISO Certification to break technical barriers to trade Take feedback from customers to extend sales trend Increase CSR to built trust R&D for new development Make low price quality to capture local market Organize clearance sale for market penetration Sponsorship in Sports

Gul Ahmed Threats

Political instability Economical instability Global recession Brand name infringement Piracy of designs Tough international and national competitor Lack of conducive environment of business Absence of quota under WTO Uncertain crises in the city Tax rates Western culture Currency rates Workers productivity Human diseases Stock market Rising Production Cost Increase in EFS (Export Finance Scheme) Electricity in gas crises Increase in yarn prices Increase in minimum wage Lack of transportation

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EFE Matrix Gul Ahmed

Opportunities
Rise in demand globally is estimated at around 2.5 percent Increase export Pakistan is share only 1 percent out of total demand rate Expand local Expansion Move production plant to Bangladesh IDEAS expansion on local market IDEAS expansion on International market Make franchise network to expand IDEAS business Capture casual wear market Western apparel is being common in Pakistan Big potential in complete outfit apparel Big potential in cosmetics market Acquire small textile industries to developed new products ISO Certification to break technical barriers to trade Take feedback from customers to extend sales trend Increase CSR to built trust R&D for new development Make low price quality to capture local market Organize yearly clearance sale for market penetration Sponsorship in Sports

Weight
0.035 0.027 0.027 0.038 0.03 0.02 0.038 0.03 0.02 0.02 0.027 0.02 0.02 0.03 0.03 0.028 0.0225 0.03 0.02 0.028 0.035 0.0225 0.025 0.036 0.025 0.024 0.024 0.022 0.017 0.015 0.023 0.018 0.025 0.02 0.02 0.02 0.022 0.02 0.02 0.026 1

Rating
4 4 4 4 3 3 3 3 2 2 3 2 3 3 3 2 2 2 2 4 4 3 2 3 2 2 2 2 3 1 2 1 2 2 2 2 2 1 2 2

Weighted Score
0.14 0.11 0.11 0.15 0.09 0.06 0.11 0.09 0.04 0.04 0.08 0.04 0.06 0.09 0.09 0.06 0.05 0.06 0.04 0.11 0.14 0.07 0.05 0.11 0.05 0.05 0.05 0.04 0.05 0.02 0.05 0.02 0.05 0.04 0.04 0.04 0.04 0.02 0.04 0.05 2.63

Threats
Political Instability Economical instability Global recession Brand name infringement Piracy of designs Tough international and national competitor Unfavorable weather condition Absence of quota under WTO Uncertain crises in the city Tax rates Western culture Currency rates Workers productivity Human diseases Stock market Rising Production Cost Increase in EFS (Export Finance Scheme) Electricity in gas crises Increase in yarn prices Increase in minimum wage Lack of transportation

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Competitive Profile Matrix Gul Ahmed

Critical Success Factor
Brand Name Global Expansion Product Quality Financial Position Forward Integration Backward Integration Product Lines No. of Brand Ambassador Technology Export Production Capacity Creativity & Designs Own Power Generation Plant Unrelated Diversification Transportation System Foreign Distribution HR Practices Employees Orientation Employees Incentives Employee Accommodation ERP System IT Audit Sethiya Culture Elite Class High Prices Local Market Share ISO Certifications Marketing not rigorously Local Market Expansion R&D Facilities Weak Labor Overtime Incentive Subsidiary Charges Retail Management Out Sourcing CRM Lack of Freedom Decision Power Wastage Management Environmental Pollution Labor Health and Safety

Weight
0.03 0.02 0.02 0.03 0.02 0.02 0.03 0.02 0.02 0.03 0.03 0.03 0.03 0.03 0.02 0.02 0.03 0.03 0.02 0.02 0.03 0.03 0.03 0.03 0.04 0.03 0.03 0.02 0.02 0.02 0.02 0.02 0.02 0.03 0.02 0.02 0.02 0.03 0.02 0.02 0.03 1.00

Gul Ahmed Textile Rating Weighted Score

4 4 4 4 3 4 4 3 4 3 3 3 3 3 3 3 3 3 3 3 3 3 2 1 1 2 2 2 2 1 1 1 2 2 2 2 2 2 2 2 2 0.12 0.08 0.08 0.10 0.05 0.09 0.10 0.03 0.09 0.09 0.09 0.06 0.09 0.09 0.05 0.06 0.09 0.09 0.06 0.06 0.09 0.09 0.06 0.03 0.04 0.06 0.05 0.05 0.04 0.02 0.02 0.02 0.05 0.05 0.04 0.04 0.04 0.06 0.04 0.04 0.05 2.57

Alkaram Textile Rating Weighted Score

4 2 4 4 2 1 4 3 3 3 2 3 1 2 2 2 3 2 2 3 3 3 1 2 3 3 3 2 2 2 1 1 1 1 2 3 2 2 2 4 2 0.12 0.04 0.08 0.10 0.03 0.02 0.10 0.03 0.07 0.09 0.06 0.06 0.03 0.06 0.03 0.04 0.09 0.06 0.04 0.06 0.09 0.09 0.03 0.06 0.11 0.09 0.08 0.05 0.04 0.03 0.02 0.02 0.02 0.03 0.04 0.06 0.04 0.06 0.04 0.08 0.05 2.33

Rating

Lucky Textile Weighted Score

3 2 3 3 1 1 2 1 3 3 3 3 1 4 2 4 2 1 1 1 2 2 1 2 3 1 1 2 2 1 1 2 2 1 2 2 2 2 2 2 1 0.09 0.04 0.06 0.08 0.02 0.02 0.05 0.01 0.07 0.09 0.09 0.06 0.03 0.12 0.03 0.08 0.06 0.03 0.02 0.02 0.06 0.06 0.03 0.06 0.11 0.03 0.03 0.05 0.04 0.02 0.02 0.04 0.05 0.03 0.04 0.04 0.04 0.06 0.04 0.04 0.03 1.95

Al Abid Textile Rating Weighted Score

3 2 2 2 1 1 2 1 3 2 3 3 1 3 1 2 3 2 2 1 1 2 1 2 2 1 1 2 2 2 1 1 1 1 2 2 2 2 2 2 2 0.09 0.04 0.04 0.05 0.02 0.02 0.05 0.01 0.07 0.06 0.09 0.06 0.03 0.09 0.02 0.04 0.09 0.06 0.04 0.02 0.03 0.06 0.03 0.06 0.07 0.03 0.03 0.05 0.04 0.03 0.02 0.02 0.02 0.03 0.04 0.04 0.04 0.06 0.04 0.04 0.05 1.81

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Internal Assessment of Gul Ahmed

In this epoch when the world hit by the global recession specially in Pakistan where lots of uncertain crises, applying high tax rate , continuously the value of Rupees is going down, increase 150% prices of cotton, shortage water, gas and electricity, and lots of uncertainty is going to held here. At this time most of the industries survives in crises due to this these crises but Company is doing tremendous job just because of their influential strengths. So far, the Companys production facilities have not faced any significant gas curtailment, on which its power generation system depends. Future shortages will affect its production schedule. Just because of this they take advantage of this great act by saving their cost of production and make continuity to fulfillment the desires of their customers. Company serving their customers from 1900s and they have good market reputation and strong market share but they have to compete with their strong competitors, so they have to perform strong market penetration, make some market development plans and also develop new products to capture local and export market to give strong competition to their competitors. The Company operates in a challenging environment which may affect its financial and non financial performance. The management has developed a system built in its strategy to separately identify, evaluate, timely address and manage each and every risk. To ensure the smooth running of operations safety and security are important. The incidents of terrorism, violent strikes and extortion force the business to remain closed. It affects the full utilization of production capacity and meeting the shipment targets as agreed with the customers. The Company has set in environment friendly steps within the production processes. The management is fully aware with this scenario and is incurring substantial cost for protection of employees by deploying security guards and has established a system of surveillance through IP cameras installed at every location. The Company has also obtained insurance cover for terrorism risks.

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IFE Matrix Gul Ahmed

Strength
Brand Name Global Expansion Financial Position Forward Integration Backward Integration Product Lines Technology Export Production Capacity Creativity & Designs Own Power Generation Plant Unrelated Diversification Transportation System Foreign Distribution HR Practices Employees Orientation Employees Incentives Employee Accommodation ERP System

Weight
0.03 0.02 0.03 0.02 0.03 0.03 0.025 0.03 0.03 0.02 0.03 0.03 0.02 0.02 0.03 0.03 0.02 0.02 0.03 0.028 0.032 0.036 0.03 0.025 0.024 0.024 0.022 0.017 0.015 0.02 0.023 0.025 0.02 0.02 0.02 0.028 0.02 0.02 0.026 1

Rating
4 4 4 3 4 4 4 3 3 3 3 3 3 3 3 3 3 3 3 2 1 1 2 2 2 2 2 1 1 1 2 2 2 2 2 2 2 2 2

Weighted Score
0.12 0.08 0.12 0.06 0.12 0.12 0.1 0.09 0.09 0.06 0.09 0.09 0.06 0.06 0.09 0.09 0.06 0.06 0.09 0.056 0.032 0.036 0.06 0.05 0.048 0.048 0.044 0.017 0.015 0.02 0.046 0.05 0.04 0.04 0.04 0.056 0.04 0.04 0.052 2.57

Weakness
Sethiya Culture Elite Class High Prices Local Market Share ISO Certifications Marketing not rigorously Distribution of Ideas Local Market Expansion R&D Facilities Weak Labor Overtime Incentive Subsidiary Charges Franchise Network Out Sourcing Customer Relationship Management System Lack of Freedom Decision Power Wastage Management Environmental Pollution Labor Health and Safety

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Strategy Formulation
Intensive Strategies of Gul Ahmed
Gul Ahmed's fine textile products represent a unique fusion of the century old traditions of the east and the latest textile technology of the west. The purest of cotton fibers, produced from the fertile lands of the Indus Valley, are spun, woven and processed into the finest quality cotton and blended products through a combination of latest technology, skills and craftsmanship of this traditional industry. Gul Ahmed continuous doing there market penetration of Yarns using a wide variety of synthetic fibers including polyester, rayon and other man-made fibers, they also make curiosity in fashion by providing new prints of fabric in different styles of confectioning and embroidery, packed to buyers specific requirement. The only thing poor consumers get to see these days is lawn brands, lawn billboards and their accident causing models everywhere. Therefore, Gul Ahmed decided to diversify into new ventures with its conglomerate diversification, thereby producing land mowers and land mowing facilities.

Diversified Strategies of Gul Ahmed

The primary concerns of the Gul Ahmed Group include Gul Ahmed Textile Mills Limited, Gul Ahmed Energy Limited, and Habib Metropolitan Bank. More recently, a chain of retail outlets has been founded under the name "Ideas by Gul Ahmed". The group's other concerns go by the name of Swisstex Chemicals (Private) Limited. The group has also extended in to the information technology sector and made vast investments in its fastest developing concern Arwen Technologies. Some other companies of Gul Ahmed are: Gul Ahmed International Limited GTM Europe Limited Gul Ahmed Energy

Integrity Strategies of Gul Ahmed

With the lawn fever going on its better to break free from the clutter and come up with something new.

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BCG Matrix of Gul Ahmed

Gul Ahmed's fine textile products represent a unique fusion of the century old traditions of the east and the latest textile technology of the west. The purest of cotton fibers, produced from the fertile lands of the Indus Valley, are spun, woven and processed into the finest quality cotton and blended products through a combination of latest technology, skills and craftsmanship of this traditional industry.

Running meter fabrics, packed to specific requirement.

Bath Accessories Decoration Accessories

Curtain Bed-Linen

Yarn

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IE Matrix of Gul Ahmed

The Internal External Matrix is based on an analysis of internal and external business factor which is combining into one suggestive model, EFE Matrix score plotted on the y-axis i.e. 2.63 and IFE Matrix score plotted in x-axis i.e. 2.57. The point where horizontal line meets vertical line shows the determinant that company should hold and maintain their state. Strong Average Weak

4 I 3
EFE 2.63

II V

III

High

IV 2 VII 1 4 3
IFE 2.57

VI

Medium

VIII 2

IX 1

Low

Gul Ahmed in Hold and Maintain State

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Grand Strategy Matrix of Gul Ahmed

During the year international uncertainties regarding the future economic outlook re-emerged, as growth figures for many economies had to be adjusted downward due to the devastating earthquake in Japan and doubts about the sustainability of public debt in Europe and the United States. Currently, major losses are being incurred by this industry with foreclosure looming around. The reasons of this decline are largely contributed by the high cost of production due to increase in the energy a cost. That is why Gul Ahmed facing slow market growth in strong competitive position.

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QSPM of Gul Ahmed

The previous fiscal period starting from June 2010 to June 2011 experienced severe blows as a result of massive destruction of cotton crops due to massive floods and heavier rains throughout the country. Despite such positive figures and statistics, textile and garment industries in Pakistan have not shown any considerable progress in producing valued-added items. Our neighboring countries like India, China and Bangladesh, on the other hand, have achieved the largest share in the global market by exporting valueadded textiles and garments products, while local manufacturers in Pakistan are way behind in this. Production cost of textile has risen due to increasing interest rate, double digit inflation & decreasing value of Pakistani rupee. All this is creating problem for the textile industry to compete in international market. The global recession which has hit the global textile really hard is not the only cause for concern. The high cost of production resulting from an instant rise in the energy costs has been the primary cause of concern for the industry. Depreciation of Pakistani rupee during last year raised the cost of imported inputs. In addition, double digit inflation and high cost of financing has seriously affected the growth in the textile industry. Pakistan's textile exports have gone down during last three years as exporters cannot effectively market their products since buyers are not visiting Pakistan due to adverse travel advisory and it is getting more and more difficult for the exporters to travel abroad years. Slowdown in the textile sector has to be revived. High cost of doing business is because of intensive increase in the rate of interest which has increased the problems of the industry. Record increase in mark-up rates is one of the major cause of defaults in servicing the loans availed by the industry. The QSPM shows the key factors to diversify their business into another country i.e. China, India or Bangladesh.

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China Opportunities Move production plant to Another Country Rise in demand globally is estimated at around 2.5 percent Make franchise network to expand IDEAS business Export Trend Labor Cost Electricity Cost Capture casual wear market ISO Certification to break technical barriers to trade R&D for new development Big potential in complete outfit apparel Threats Economical instability Political Instability Piracy of designs Global recession Lack of transportation Tax rates Brand name infringement Tough international and national competitor Human diseases Lack of conducive environment of business 0.07 0.06 0.05 0.08 0.07 0.07 0.04 0.04 0.02 0.03 1.00 3 2 4 3 4 1 2 2 4 4 0.21 0.12 0.20 0.24 0.28 0.07 0.08 0.08 0.08 0.12 Weight 0.07 0.1 0.05 0.06 0.06 0.06 0.03 0.02 0.01 0.01 AS 2 4 1 2 2 3 3 3 4 3 TAS 0.14 0.40 0.05 0.12 0.12 0.18 0.09 0.06 0.04 0.03

Bangladesh AS 4 4 3 4 4 4 3 3 2 3

India TAS 0.28 0.40 0.15 0.24 0.24 0.24 0.09 0.06 0.02 0.03 AS 3 4 3 3 3 2 3 3 3 3 TAS 0.21 0.40 0.15 0.18 0.18 0.12 0.09 0.06 0.03 0.03

3 3 2 3 1 4 2 2 3 1

0.21 0.18 0.10 0.24 0.07 0.28 0.08 0.08 0.06 0.03

4 4 1 3 2 3 2 2 2 2

0.28 0.24 0.05 0.24 0.14 0.21 0.08 0.08 0.04 0.06

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China Strength Brand Name Financial Position Backward Integration Product Lines Technology Export Production Capacity Own Power Generation Plant Unrelated Diversification HR Practices Weakness Local Market Share Sethiya Culture Decision Power Labor Health and Safety ISO Certifications Franchise Network Marketing not rigorously Distribution of Ideas Subsidiary Charges Local Market Expansion Weight 0.053 0.053 0.053 0.053 0.048 0.053 0.053 0.053 0.053 0.053 AS 1 3 2 4 4 2 4 3 1 3 TAS 0.05 0.16 0.11 0.21 0.19 0.11 0.21 0.16 0.05 0.16

Bangladesh AS 4 4 3 4 3 4 3 3 1 3

India TAS 0.21 0.21 0.16 0.21 0.14 0.21 0.16 0.16 0.05 0.16 AS 2 2 2 4 2 3 2 3 1 3 TAS 0.11 0.11 0.11 0.21 0.10 0.16 0.11 0.16 0.05 0.16

0.053 0.051 0.051 0.049 0.048 0.048 0.047 0.047 0.046 0.045 1.00

4 2 1 1 2 4 3 4 1 3

0.21 0.10 0.05 0.05 0.10 0.19 0.14 0.19 0.05 0.13 5.31

2 2 2 3 2 2 2 2 4 2

0.11 0.10 0.10 0.15 0.10 0.10 0.09 0.09 0.18 0.09 5.84

1 2 3 2 2 1 2 1 2 1

0.05 0.10 0.15 0.10 0.10 0.05 0.09 0.05 0.09 0.04 4.94

Appendix A provides detailed production input costs for India, China, Pakistan and Bangladesh; data sources for the table are provided in Appendix B. Most data were generated after consulting numerous resources, including published information.

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Conclusion
The textile industry of Pakistan plays an important role in earning foreign exchange, providing employment to the country. But with the ending of quota system in world, Pakistan textile loses share in world trade of textile products. Pakistan textile products will have a big potential to capture big share of world trade but there are lots of reasons which forces to step back from using the full capacity of textile machinery to earn more and more foreign exchange for the country. In upcoming year, Pakistan textile exports are 10-11 billion US dollars approximately. Government of Pakistan is not serious in resolving problems like shortage of electricity and gas which forces the textile exporters not to take orders because not fulfill the orders on time. With these reasons import of textile machinery declined year on year basis. With all these reasons Pakistan textile owners use old machinery which is less efficient and not up to the mark with the competing countries. If Government of Pakistan does not take immediate steps to counter all these problems then Pakistan trade deficit will raise more as compared to FY09-10 due to this Pakistan rupee will depreciate more.

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Appendix A. Production Input Cost Summary

Cost
Labor cost (a) Hours worked (b) Hours per operator Hours per week National holidays days/year W/o overtime-weekly less national holidays + 10 days vacation Electricity cost (c) Transport (d) Ocean Land Building cost Taxation Corporate tax on profits Sales tax VAT % of profit % of sales % value added 33.6 -12.5 25 -17 35 15 15 35 -15 $/sqm Hours/year US$/Kwh US$/TEU US$/hour 8 48 17 2,280 0.086 2,100 400 140 8 48 11 2,328 0.065 1,800 470 97 8 49 18 2,324 0.071 2,000 300 150 8 48 10 2,336 0.053 1,900 250 120

Unit

India
0.83

China
1.44

Pakistan
0.55

Bangladesh
0.32

(a) From Werner Salary Survey. Adjusted for holiday, vacation, and social charges but excludes severance. (b) Without overtime. (c) Energy information agency: www.eia.doe.gov - for industry and industry sources. (d) Source to Long Beach. SOURCE: Werner International.

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Appendix B. Data Sources and Notes for Production Input Cost Summary
Various sources were consulted to produce the data in Appendix A. In some cases, representatives of factories and freight forwarders were interviewed. Labor Cost The main source of wage data was the Werner International Labor Cost Comparison. (http://www.wernerinternational.com/html/hourly_wage_report/register.html). Values are collected from a large number of companies in each country, and average values are shown in the annual analysis and report. Hours Worked Hours per year are taken from the operator hours per day and per week, with national holidays and an assumed 10 days of vacation (which may not be applicable to all companies and contracts of employment) deducted. Electricity Rates The general source of information is the Energy Information Administration (www.eia.doe.gov). Our primary research found that rates varied considerably depending on the area of the country (different states with different tariffs) and rates have been significantly more volatile in 2008 and 2009, with big swings in the price per barrel of oil making comparisons, even over a short period, uncertain. Werner International collected information on actual kWh costs from various companies over the 20082009 period. In many instances, we found companies reported significantly different costs than the official rate schedule. Table B-1 summarizes the data we found. Transport Costs The ocean transport cost of a standard 20-foot container from various ports has a variable value. Several transport companies were approached for information. It should be noted that, even for the same route, prices could vary by as much as 40 percent with only weeks separating the shipping quotes.

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Land Transport The cost of transporting a container by road from factory to seaport depends on distance, from less than 50 miles to 2,500 miles. The figures in Appendix A are representative of information collected from individual companies in major production hubs. Building Costs Building costs per square meter are for a steel construction and for a garment factory with little requirement for special facilities such as steam pipes, reinforced floors, and other features of the primary textile industries. Again, the figures can vary significantly from one region to another. Many companies rent rather than own factories. Taxes Taxes, such as sales, profit and value-added, vary significantly from country to country. Most countries offer production incentives, especially for export-bound sales, that lower or eliminate these taxes. According to the rules of the World Trade Organization (WTO), countries are supposed to phase out such export subsidies. Phasing out has been slow, however, and the WTO has issued many countries extensions. Further complicating matters, most export promotion programs provide full credits or tax reductions for a few years (and some up to 10 years) then phase them out, which slowly raises taxes on export industries. Nearly every country in our benchmark exercise has free trade zones and bonded warehouse programs in which companies operate tax free or nearly so. Furthermore, every country has some type of program to provide tax credits for capital equipment investments, further distorting official tax rates. Duty drawback programs for imported inputs for re-export are universal, but the conditions under which a company can obtain drawbacks varies significantlyeven within the same country. For example, companies exporting 95 percent or more of their production are provided efficient rebate programs and credits, but firms exporting less than 90 percent often have trouble getting rebates. For the purposes of our analysis, we tracked tax rates as generally applied, understanding that many tax programs could reduce or eliminate them entirely. Pakistan A value-added tax (VAT) of 15 percent applies to textiles and apparel. Only recently has the uniform rate of 15 percent been applied. Earlier, the system included numerous rates B- 3 depending on sector and stage of production. Export producers may file for full exemption from VAT. The corporate tax on profits is 33 percent, but the government plans to reduce it to 30 percent. Our research, including company interviews, revealed that producers unanimously see that the whole textile chain, from raw ma- 31 -

terials to finished product, is free of taxes on inputs. The one exception is on packaging and materials to which VAT applies but can be refunded within 3 to 6 months. Factory managers had a more nuanced perspective on corporate taxes, indicating that their final liability for tax was 1 percent of total export value. There are a number of ways to reduce local profit taxes, especially in the first years of investment. In addition to existing export processing zones, which provide relief from most taxes and tariffs, the government is considering establishing new reconstruction zones that may obtain duty-free exports to the EU (free from EU duties). The U.S. Government is considering a similar program for reconstruction. China The VAT applied to textiles in China is 7 percent. Exports are either not subject to VAT or are eligible for VAT rebates ranging from 50 to 100 percent. A 13 percent VAT is collected on tap water, heating, cooling, hot air supplying, hot water, gas, liquefied petroleum gas, natural gas, and coal/charcoal products. Coal and gas supply for industry is exempt. Corporate tax on profits of 25 percent applies as of January 2008. India India charges textiles and apparel producers a 12.5 percent VAT. Companies meeting certain conditions are charged rates as low as 1 to 4 percent. Companies seeking relief from VAT for export production must file monthly or quarterly to obtain a rebate. It has been reported that VAT is not yet universal in India (the current program was started in 2005) and that some regions may still apply a sale tax. Local taxes in India are common, with local bodies levying tax on property and utilities such as waste and drainage. Effective corporate tax on profits in India is 33.66 percent, consisting of a 20 percent corporate tax plus 10 percent surcharge and 3 percent education levy. Bangladesh A VAT of 15 percent is charged in Bangladesh. Goods for export are exempt from VAT. Corporate tax on profits is 37.5 percent and applies to any income collected or gained by a company doing business in Bangladesh, whether resident or not. A lower rate is available for publicly traded companies. A tax holiday for textile and apparel producers is in force through 2011. Additionally, fiscal incentives exist for capital investment (http://www.nbr-bd.org/incometax.html).

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