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NISHAT MILLS

LTD
Strategic Management Plan
Introduction:
N i s h a t h a s g r o w n f r o m a c o t t o n e x p o r t h o u s e i n t o t h e p r e m i e r b u s i n e s s group of
Pakistan with 5 listed companies, concentrating on 4 core business; Textiles, Cement, Banking and
Power Generation.
Today, Nishat is considered to be at par with multinational operating locally in terms of its
quality products and management skills.
Annual turnover of 17 billion rupees.
14 billion from textiles.
Earn foreign exchange of US $ 236 million.
Pay taxes and levis of 2,080 million rupees annually.
Nishat Mills Ltd:
Flagship Company established in 1951.
Most modern, biggest composite unit of Pakistan.
Professional and client oriented marketing.
Green company.
ISO 9001 and IKO-TEX 100 Certified.
SA 8000certification currently in progress.
NML today has 1, 73,000 spindles, 284 sulzer shuttle less looms and 244 TSUDAKOMA
air jet looms. NML also has the most modern textile processingu n i t , 2 s t i t c h i n g u n i t s a n d
p o w e r g e n e r a t i o n p l a n t w i t h a c a p a c i t y o f 3 3 . 6 MW.
NML total export for the year 2009 is 38.8 billion rupees. Due to
t h e application of prudent management policies, consolidation of operations, a s t r o n g
b a l a n c e s h e e t a n d a n e ff e c t i v e m a r k e t i n g s t r a t e g i e s , t h i s t r e n d i s e x p e c t e d t o
continue in the years to come. The companys production f a c i l i t i e s
comprise Spinning, Weaving, Processing, Stitching, and

Vision Statement:
To t r a n s f o r m t h e C o m p a n y i n t o a m o d e r n a n d d y n a m i c y a r n , c l o t h a n d proces
sed cloth and finished product manufacturing Company with highly p r o f e s s i o n a l s a n d f u l l y
e q u i p p e d t o p l a y a m e a n i n g f u l r o l e o n s u s t a i n a b l e basis in the economy of Pakistan.
Mission Statement:
To p r o v i d e q u a l i t y p r o d u c t s t o c u s t o m e r s a n d e x p l o r e n e w m a r k e t s t o promote/
expand sales of the Company through good governance and fostera sound and dynamic team, so as to
achieve optimum prices of products of t h e C o m p a n y.

Strengths, weaknesses, opportunities and threats(SWOT ANALYSIS)

Strengths weaknesses
ISO 9001 and I K O - Ta x Relying on Market
100 certified international market
Biggest composite unit High cost of production
in Pakistan High employees
Highest credit rating by turnover.
PACRA. Transit time is more as
Self owned power plant compare to foreign
Largest dyeing facility competitor
in South East Asia
Opportunities Threats
WTO regime implementation. Export of raw cotton and yarn
Cost reduction by using modern technology. WTO regime implantation.Exchange rate
Local market development. fluctuations.
Entertaining in energy sector. (Subject to Instable political and economical condition
government permission) Government policies

INTERPRETATIONS:

Strengths

1- ISO 9001 and IKO-TEX 100 Certified:

A s N M L i s m a i n l y f o c u s i n g o n international markets, and with the implementation of WTO regime,


thesetypes of certifications are very helpful to win the customers satisfaction.

2- Biggest Composite Unit in Pakistan:


N M L i s e n j o y i n g t h e s t a t u s o f being the biggest textile composite unit of Pakistan
, t h i s s t r e n g t h s i s helpful to create economies of scale that is key to success in internationalmarkets.

3 - H i g h e s t C r e d i t R a t i n g b y PA C R A :
NML has been awarded highestinvestment grade
by Pakistan Credit Rating Agency (PACRA), which wilLmake it easy for the NML to raise long-term
funds.

4- Self Owned Power Plant:


Now a days, having your own power plant
iso f c r u c i a l i m p o r t a n c e , b e c a u s e i t m a k e s u r e u n - i n t e r r u p t e d s u p p l y o f energy
at very low cost, which is helpful to be compatible at international level.
5- Largest dyeing facility in South East Asia:
NMLs processing divisiongot the largest dyeing in South East Asia, making it a candidate to acceptthose
contracts from other companies that involve out sourcing of dyeingfacilities.

Weakness
1. Relying On International Market only:
as mentioned earlier that NMLhas been focusing on international markets so there are chances that
thisstrategy may hurt its sales as there are rapid fluctuations in internationalmarkets, competition and buyers
preferences.
2. High Cost of Production:
All Pakistani firms including NML is sufferingfrom high cost of production as compared to the
other countries like, India, China and Bangladesh, they are cutting our throats by being
costcompletive day by day while at the same time producing high quality stuff as compared to Pakistani firms.
3. High employees Turnover:
Trends has been seen in workforce data toleave the NML on permanent basis, this is especially true
for the lowerlevel staff.
4. Transit time is more as compare to Foreign Competitor:
Foreigncountries like India, Bangladesh and China are very much efficient whilecompleting and
consigning their orders to foreign buyers. NML has more transit time as compared to its international
competitors. The reason may be the contracts with shipping internal process problems.
OPPORTUNITIES

1. WTO regime implementation:


with the abolishment of quota system, n o w i t s a n o p p o r t u n i t y f o r t h e N M L t o c a p t u r e t h e
international market share by provided and high quality goods to international
customers. In this regard is cost competiveness is a special concern.
2. Cost reduction by using modern Technology:
As WTO regime hasopened the doors for free trade for the whole world, now the only survivalof the firms
would on the minimization of production cost and
offeringi n n o v a t i v e , h i g h q u a l i t y g o o d s w i t h c o m p e t i t i v e p r i c e . N M L g o t s t r o n g f i nancial
support from Nishat Group can do so.
3. Local market development

Nishat Mills Limited is presently focusingon foreign markets, so its an opportunity for NML to cash its
name in thelocal market by introducing a local retail store chain just like Chen One.(Chenab mills
ltd.)

4. Entering in Energy Sector:


NML may get the privilege of generating and providing electricity for residential and commercial
areas of Faisalabad by negotiating with the government of Pakistan. Al through local rules make
it difficult but still there is a huge opportunities to capitalize.
-

THREATS

Export of Raw Cotton and Yarn:


R e c e n t t r e n d s i n t h e P a k i s t a n t o export raw cotton and yarn to foreign countries is
hitting like nails on theheads of textile value addition units, although NML has its own
spinningfacilities but to some how export of raw cotton is dangerous for it

WTO regime implantation:


Abolishment of quota system presents aopportunity as well as a biggest threat to the
P a k i s t a n i f i r m s i n c l u d i n g NML, as other countries are free to capture the market, we the
Pakistanifirms are suffering with high cost of production may be driven out of the competition.

Exchange Rate Fluctuations:


NML most of the sales are comprising exports, it is to be received payment in
foreign currency especially American dollars,ultimately these sales proceeds are to
be converted to Pakistan rupees, here comesthee magic of exchange rate whose
fluctuation can change a profitable deal into a bad loss. Finally if Pakistani rupees
got strength other currencies we will get lower value for proceeds.

I n s t a b l e P o l i t i c a l a n d E c o n o m i c a l C o n d i
t i o n s :
ChangingGovernments,war on terror, decreasing buying power and altering buying trends and preferences of
customers are posing big threats to NML, in thisregard we are confronting with local an well as international
political andeconomical conditions.

Government policies:
Government policies like high rates of taxes, VAT, duties on international trades, high energy cost, re-
organizing unions are causing a serious damage to the performance of over all industry including NML.

THE STRATEGY FORMULATION


ANALYTICAL PROCESS
STAGE 1ST INPUT STAGE
A: Competitive Profile Matrix (CPM)

Nishat Textile Mills Crescent Textile Chenab Textile


Mills Mills
Critical Success Factors Weight Rating Weighted Rating Weighted Rating Weighted
score score score
Product design 0.07 4 0.28 3 0.21 3 0.21
Technological up-gradation 0.11 3 0.33 4 0.44 3 0.33
Research & development 0.10 4 0.40 3 0.33 2 0.20
Market segmentation 0.07 2 0.14 2 0.14 4 0.28
Distribution and promotion 0.07 3 0.21 3 0.21 2 0.14
Capacity utilization 0.08 3 0.24 3 0.24 2 0.16
Persistence in product quality 0.09 4 0.36 3 0.27 4 0.36
Efficient procurement of raw material 0.09 3 0.27 3 0.27 3 0.27
Effective management 0.08 3 0.24 4 0.32 2 0.16
Trained man power 0.07 4 0.28 3 0.21 3 0.21
Cost competitiveness 0.10 2 0.20 2 0.20 1 0.10
Customer satisfaction &loyalty 0.07 3 0.21 3 0.20 2 0.14
TOTAL 1.00 3.16 2.98 2.56

Interpretation:
A Nishat mills limited is dominating in the industry as compared to local players. There are several competitors
like Agzard 9, Kohinoor textile mills, etc but above competitors are the major ones.

CPM scores for NML showing aggressiveness as compared to the crescent and Chenab textile mills.

NML I number one company with in the local environment; it is basically leading the industry in the following
aspects:

Product design.
Research and development
Persistence in product quality.
Trained Manpower.
Moreover, crescent textile mill is resides at the second number and leading industry in effective management
style. Finally Chenab textile comes at number 3rd with leading position persistence in quality and market
segmentation.

B: External Factor Evaluation Matrix (EFE Matrix)


Key External Factor Weight Rating Weighted
score
OPPURTUNITIES
WTO regime implementation. 0.12 4 0.48
Cost reduction by using modern technology. 0.13 3 0.39
Local market development. 0.10 1 0.10
Entertaining in energy sector. (Subject to government permission) 0.11 2 0.22
Threats
Export of raw cotton and yarn 0.12 4 0.48
WTO regime implantation. 0.10 4 0.40
Exchange rate fluctuations. 0.09 2 0.18
Instable political and economical condition 0.12 4 0.48
Government policies 0.11 1 0.11
TOTAL 1.00 2.84
INTERPRETATIONS:
EFE score of 2.84 indicating that the NML is taking the external
opportunitiesa n d a v o i d i n g e x t e r n a l t h r e a t s q u i t e w e l l ; h o w e v e r t h
e r e i s r o o m f o r improvement is well. This score suggest NML to be aggressive but
the degree of aggressivenessn e e d s t o b e l i t t l e moderate, it should
not go for diversification, rather i t should go for penetration in the existing
market, further developing local or foreign market or it may design a new product.

C: Internal Factor Evaluation Matrix (IFE Matrix)


Key Internal Factor Weight Rating Weighted score
STRENGTH
ISO 3001 and IKO_ TEX 100 certified 0.11 3 0.33
Biggest composite unit in Pakistan 0.10 4 0.40
Highest credit rating by PACRA 0.13 4 0.52
Self owned power by plant 0.15 4 0.60
Largest dyeing facility in South East Asia 0.12 4 0.48
WEAKNESS
Relying on international market only. 0.10 2 0.20
High cost of production 0.12 2 0.24
High employees turnover 0.06 2 0.12
Transport time is more as compare to foreign competitor 0.11 1 0.11
Total 1.00 3.00
INTERPRETATIONS:
IFE score of 3.00 indicating that the NML is an internally strong organization,it represent that it is
excellent in its overall internal strategies when it cometo explore strengths and weaknesses.Overall
the main strength is financial support by the Nishat Group

STAGE: 2ND MATCHING STAGE


A:SWOT Matrix
S W
01 ISO 9001 certified & IKO- Relying on international
001 TEX 100 certified market
Biggest composite unit in High cost of production
Pakistan High employees turnover
Highest credit rating by Transit time is more as
PACRA compare to foreign
Self owned power plant competitor
Largest dyeing facility in
South east Asia

O S-O W-O
WTO regime implementation. Provide electricity to Import modern
Cost reduction by using residential areas (S4, O4). technology (W1, W2, and
modern technology. Capture local market by O2).
Local market development. providing facility of Company can enter in new
Entertaining in energy sector. outsourcing and market through retail
(Subject to government introduction company outlets (W1,W4, O3).
permission)
production through its
retail outlets (S2, S5, S3).
T S-T W-T
Export of raw cotton and Penetration in foreign Focus on local market
yarn market (S1, S2). (W1, W2, T2, T3)
WTO regime implantation. Make future contracts to Import modern
Exchange rate fluctuations. avoid currency. technology and do
Instable political and agreements.
economical condition
Government policies

INTERPRETATIONS:
Critical Region is WO.
N i s h a t Te x t i l e s c a n i m p o r t n e w t e c h n o l o g y t o reduce its cost of production.
Company can thus be able to penetrate in themarket and capture more shares by improving quality
of goods and services,and provision of goods at lower prices.
B-SPACE Matrix
Financial strength Rating Environmental stability Rating
Leverage 4 Rate of inflation -3
Net income 6 Technological changes -3
E.P.S 5 Competitive pressure -3
R.O.E 5 Risk involve in business -2
Average 5 Average -2.25
Y-axis 2.25
Competitive advantage Industry strength
Market Share -1 Growth potential 5
Product Quality -2 Financial stability 3
Customer loyalty -3 Resource utilization 3
Technological know how -2 Profit potential 2
Average -2 average 3.25
X-axis 1.25

INTERPRETATIONS:
1 . For the purpose of evaluating financial strength we have compared ourconcerned co. with
industrial average.
2 . Leverage used by Nishat mills was significantly low
a s c o m p a r e d t o industrial average that why we have ranked it at point 4
3 . .Net income of Nishat mills was highest in industry thats why it is given6 points
4 . .I t s E . P. S & r e t u r n o n e q u i t y w a s a l s o h i g h a s c o m p a r e t o i n d u s t r y thats
why they were ranked 5.
5 . Market share of Nishat mills was highest about 12% that why it is given-1 marks.
6 . T h e r e p r o d u c t i s o f g o o d q u a l i t y & t h e r e c u s t o m e r s a r e l o y a l b u t cu
s t o m e r s c a n t b e v e r y l o y a l i n t h i s i n d u s t r y t h a t s w h y t h e y w e r e ranked at -2
& -3.
7 . They have new & advanced technology thats why they are ranked
-2.R a t e o f i n f l a t i o n i s i n c r e a s i n g i t s C . G . S & t e c h n o l o g i c a l c h a n g e s i t s depr
eciation as well as there is heavy competitive pressure from china& Bangladesh thats why
they were rankes-3.
8. There is high risk now a days in this business but due to being
a s industrial giant in Pakistan they are not in such a risk that why it
i s given -2.
9 . There is high growth potential in industry because now recovery period have been started.
10. Industry is less financial stable as well as most of the companies
areproducing very below then their capacity thats why they are ranked at3.
11 . Due to increase in cost the profit potential has been declined that whythis is ranked at 2
12.
Directional vector point is :( 1.25, 2.25)

INTERPRETATION:
According to our calculations the score of our company is 1.25 on x- axis And 2.25 on
Y-axis
Which is showing that our co. should go for aggressive strategy
Further more it is telling us that our financial strength
i s t h e dominating factor in industry
Our concerned strategies can be
Backward ,forward ,horizontal ,integrations
Market penetration
Market development
Product development
Diversification(related or unrelated)
On the other hand, Nishat Textiles also has the opportunity to enterand capture the
local market. Company can do this through openingretail outlets in the local areas
and provide better goods and servicesto its domestic customers.

C: Boston Consulting Group Matrix (BCG Matrix)


INTERPRETATIONS:
Nishat Textiles is a composite textile unit of Nishat Group. Total number of p l a y e r s i n
t h e i n d u s t r y i s 6 0 , a n d N i s h a t Te x t i l e s i s t h e m a r k e t l e a d e r. I t captures 12% market
share as a whole. In 2009, the industrial overall growthr a t e i s 11 % , b u t t h a t o f N i s h a t
Te x t i l e s i s 2 4 % a s c o m p a r e t o t h e s a l e s o f 2008.
Source: KSE (Karachi stock exchange) data for 2008, and 2009.
The industrial growth is high and Nishat Textiles has high market growth as well. So,
it lies in the first quadrant (Stars) of the BCG matrix. It implies that, company has the opportunity
to go for Market penetration to capture more s h a r e s i n t h e e x i s t i n g m a r k e t b y
u s i n g n e w t e c h n o l o g y, a n d i n c r e a s i n g p r o m o t i o n a l a c t i v i t i e s . I t a l s o h a s
a t r e m e n d o u s o p t i o n o f l o c a l m a r k e t development.
Other feasible strategies may be the backward integration to secure
t h e supplies in order to tackle with the threat of exporting of local raw material t o f o r e i g n
m a r k e t s . A l s o N i s h a t Te x t i l e s g o e s f o r f o r w a r d i n t e g r a t i o n t o minimize its weakness
of transit time of goods and services to its customers.
D: The Internal External Matrix (IE Matrix)
High Average Low
High I. grow and build II. grow and build III. hold and maintain

Average IV. grow and build V. hold and maintain VI. harvest

Low VII. hold and maintain VIII. harvest IX. harvest

INTERPRETATIONS:

IFE Total Score (As per IFE Matrix) = 3.00


EFE Total Score (As per EFE Matrix) = 2.84
It implies that Nishat Textiles is in a much strong position. But, comparatively it is stronger internally
as compare to its external position. As per IE Matrix, Nishat Textiles lies in fourth cell, which implies
that it should go for aggressive strategies that is grow and build strategies. The possible
s t r a t e g i e s f o r N i s h a t Te x t i l e s m a y b e t h e i n t e g r a t i o n s , i n t e n s i v e ,
a n d diversifications.
Nishat Textiles has the opportunity to go for Market penetration to capture more
share in the existing market by using new technology, and increasing p r o m o t i o n a l
a c t i v i t i e s . I t a l s o h a s a t r e m e n d o u s o p t i o n o f l o c a l m a r k e t development.

O t h e r f e a s i b l e s t r a t e g i e s m a y b e t h e b a c k w a r d i n t e g r a t i o n t o s e c u r e t h e supplies
in order to tackle with the threat of exporting of local raw material t o f o r e i g n m a r k e t s .
A l s o N i s h a t Te x t i l e s g o e s f o r f o r w a r d i n t e g r a t i o n t o minimize its weakness of transit
time of goods and services to its customers

.
E: The Grand Strategy Matrix (GSM) :

Interpretation

To t a l n u m b e r o f p l a y e r s i n t h e i n d u s t r y i s 6 0 , a n d N i s h a t Te x t i l e s i s t h e m a r k e t
l e a d e r . I t c a p t u r e s 1 2 % m a r k e t s h a r e a s a w h o l e . I n 2 0 0 9 , t h e industrial
overall growth rate is 11%, but that of Nishat Textiles is 24% as compare to the sales of
2008.
As the market growth is high, and Nishat Textiles has strong comparative p o s i t i o n i n t h e
m a r k e t . S o , i t l i e s i n t h e f i r s t q u a d r a n t o f G r a n d s t r a t e g y matrix, which implies that it
should go for aggressive strategies. The possibles t r a t e g i e s f o r N i s h a t T e x t i l e s m a y
b e M a r k e t D e v e l o p m e n t , M a r k e t Penetration, Backward and Forward Integrations.

STAGE 3rd: THE DECISION STAGE


A: Quantitative Strategy Planning Matrix (QSPM)
Strategy 1 Strategy 2
Local Market Development Penetrating in Foreign Market
KEY INTERNAL FACTORS Weight AS TAS AS TAS
STRENGTH
ISO 9001 certified & IKO-TEX 0.10 1 0.10 3 0.30
100 certified
Biggest composite unit in 0.11 4 0.44 2 0.22
Pakistan
Highest credit rating by PACRA 0.13 3 0.39 2 0.26
Self owned power plant 0.14 2 0.28 3 0.42
Largest dyeing facility in South 0.12 2 0.24 1 0.12
east Asia
WEEKNESS
Relying on international 0.10 4 0.40 2 0.20
market
High cost of production 0.12 3 0.36 4 0.48
High employees turnover 0.07 3 0.21 1 0.07
Transit time is more as 0.11 2 0.22 1 0.11
compare to foreign competitor
SUB TOTAL 1.00 2.64 2.18
KEY EXTERNAL FACTORS
OPPURTUNITIES
WTO regime implementation. 0.12 1 0.12 4 0.48
Cost reduction by using 0.13 2 0.23 4 0.52
modern technology.
Local market development. 0.11 3 0.33 1 0.11
Entertaining in energy sector. 0.11
THREATS
Export of raw cotton and yarn 0.12 3 0.36 2 0.24
WTO regime implantation. 0.1 1 0.10 3 0.30
Exchange rate fluctuations. 0.09 2 0.18 1 0.09
Instable political and 0.11 3 0.33 2 0.22
economical condition
Government policies 0.11 2 0.22 3 0.33
SUB TOTAL 1.0 1.90 2.29
GRAND TOTAL 4.54 4.47

INTERPRETATION:
I.S.O certification will only be helpful in market penetration so thats why it is given high
marks.
Biggest composite unit & less capacity utilization will be helpful or willbe used better by open
chain store rather then market penetration so it is given higher marks.
I n c r e a s i n g s a l e s i n f o r e i g n w i l l b e t t e r u s e e n e rg y r a t h e r t h e n c h a i n store so it is
given higher marks.
Largest dying facility has its goodwill so we have ranked it higher in chain store.
Reliance on international market can be decreased by opening chain store thats why it is
given higher marks.
Higher cost of production can be decreased by exporting
m o r e quantity but opening new store will increase expenses for thats why penetration is
given higher marks.
Open chain store will increase our segmentation & it will decrease on reliance on exports so
problem of transit time will impact us less thatswhy these are given higher marks.
W TO r e g i m e w i l l b e u s e f u l o n l y i n p e n e t r a t i o n s o i t I s g i v e n h i g h e r marks.
Local market development will be done only in that case when we willgo for chain store so it is given
higher marks.
If we will open chain store we will be able to charge higher prices due t o o u r g o o d w i l l
s o y a r n s e x p o r t p r o b l e m w i l l n o t a f f e c t u s a s i t i s effecting.
WTO regime implementation will be covered only in that case when wewill go for market penetration.
Exchange rate fluctuation will impact us only in that case when we willgo for foreign trade so opening
retail store will reduce its impact thatswhy it is given higher score.
D u e t o b a n k r u p t c y o f f o r e i g n c u s t o m e r s t h e p o l i t i c a l & e c o n o m i c a l conditions will
have less impact on us if we will go for chain store thatswhy it is given higher marks.
Government polices regarding opening a new store can be difficult to meet so it is given
lower marks.

RECOMMENDATIONS:
The total attractiveness score of local market development and penetrating the foreign
marketis 4.54and 4.47 respectively that analysis indicates the business should develop
local market and penetrating the foreign market.