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VISION STATEMENT OF Nishat Textile Mills To transform the company into modern & dynamic yarn, cloth &

processed cloth and finished product manufacturing Company with highly professionals and fully equipped to play a meaningful role on sustainable basis in the economy of Pakistan. To transform the company into modern & dynamic power generating company with highly professionals and fully equipped to play a meaningful role on sustainable basis in the economy of Pakistan.

Proposed Vision of Nishat Textile Mills To compete in the global market through value creation and technology."

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MISSION STATEMENT OF NISHAT MILLS LTD.

To provide Quality products to customers & explore new markets to promote/expand sales of the company through good governance & foster a sound and dynamic team, so as to achieve optimum prices of products of the company for sustainable and equitable growth & prosperity of the company.

PROPOSED MISSION STATEMENT OF NISHAT MILLS LTD. We aim to achieve Zero faults (7) in yarn clothes and apparel manufacturing (2,6) by considering cost effective technology (4), corporate social responsibility issues (8) and horizontal management system to encourage entrepreneurial ideas (9) in order to explore sales and market opportunities (5) keeping in mind customer preferences (1) in global market (3).

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Explanation:
The essential components of Mission statement cater different points which are as follows: (7) Self concept Nishat Textile Mill is reaching zero faults by controlling individual elements in process and improves productivity and the benefit is that the Mill is giving better products and services by an addition of 20000 new spindles. This distinctive feature gets competitive edge over other companies. (2) Product and services The major products produced by Nishat Mill Ltd. are yarn clothes and Nishat linen. (4) Technology Nishat Textile Mill has efficient information system which helps in making decisions to allocate financial resources in order to cut down the cost of major operations and enhance the computer based services. (8) Concern for public image The firm is functioning like good corporate citizen and also having an efficient system for the disposal of waste. Nishat Textile Mill also established in-house training for unskilled labor so that they may be trained on stitching machines and quality of work in stitching floors. (9) Concern for employees Nishat Textile Mill has decentralized system and it also involves employees in decision making and problem solving challenges. It helps to motivate, encourage and compensate employees according to the working conditions. (5) Concern for survival and growth Nishat textile mill done its operations in a way that it would be profitable and also share its profits fairly with stakeholders, shareholders, employees etc (1) Customers Nishat textile mill develops customers loyalty and trust by fulfilling their needs and facilitating them with different services. (3) Market Nishat Textile Mill is an export oriented company and not only competing globally but also doing its operations in local market too.

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INTRODUCTION
When Pakistan came into being there were only 16 textile companies out of which only 12 were in operation. It grew to 70 in 1957 as industrial development took place. Now days there are 596 textile mills out of which 442 are in operation. The export revenue of textile industry contributes a large share to the GDP of Pakistan. (Google.com: history of textile mills) We are doing our project on Nishat textile mills. The brief snapshot of NML is to manufacture spins, combs, weaves, bleaches, dyes, prints, stitches, buys and sells textiles. It deals in yarn, linen, cloth and other goods and fabrics made from raw cotton, synthetic fiber and cloth. The Group's plants are located at Faisalabad, Sheikhupura, Lahore and Feroze Watwan. Textile exports from Pakistan Textile constitutes a major exporting sector for Pakistan, which accounts for about 60% of the countrys total foreign exchange earnings. The major export items are yarn, gray cloth, finished clothes, towels & bed sheets & their major customers are USA, EU, Japan & Hong Kong & now UAE also. Many textile exports take place under quota arrangements with the EU & the United States. Gray cloth roughly accounts 16-18% of total cloth. Exports from Pakistan Nishat mills Gray cloth exports account for roughly 20% for Pakistan. The firm has been exporting to USA for many years & has recently started export to EU countries & Middle Eastern countries. In Pakistan the cotton crop season runs approximately from August to March. Prices are generally high from August to September & fall later on as supply increases.

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COMPANY INFORMATION
Board of Directors Mian Hassan Mansha Mr. Fayaz Ahmad Longi (NIT) Mr. Muhammad Bilal Sheikh (PICIC) Mr. Aftab Ahmed Khan Mr. Khalid Qadeer Qureshi Mr. Muhammad Azam Rana Muhammad Mushtaq Mr. Muhammad Ali Zeb CHIEF EXECUTIVE Mrs. Naz Mansha CORPORATE DEPARTMENT Mr. Muhammad Azam Company Secretary Mr. Khalid Mahmood Chohan Senior Manager corporate AUDITORS Riaz Ahmad and Company Chartered Accountants LEGAL ADVISOR: Mr. M. Aurangzeb Khan, Advocate, Chamber No. 6, District Court, Faisalabad.

Bankers to the Company: ABN AMRO Bank Allied Bank of Pakistan Limited American Express Bank

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Askari Commercial Bank Limited Credit Agricole Indosuez Citibank N.A. Deutsche Bank Emirates Bank International P.J.S.C Faysal Bank Limited Habib Bank Limited Habib Bank A.G. Zurich Mashreq Bank P.S.C.

Mills: Nishatabad, Faisalabad (Spinning, Weaving, Processing, Stitching units & Power Plant) 12 K.M. Faisalabad Road, Shiekhupura (Weaving units & Power Plant) 21 K.M Ferozepur Road, Lahore. (Stitching unit) 5 K.M. Nishat Avenue off 22 K.M Ferozepur Road, Lahore (Dyeing & Finishing Unit and Power Plant) 20 K.M. Shiekhupura Faisalabad Road, Froze Watwan (Spinning Unit)

Nishat Group of Companies Nishat Mills Ltd., Faislabad Nishat Dyeing and Finishing, Lahore. Nishat Fabrics, Bhikhi. Nishat Spinning, Feroze Watwan. Nishat Sewing, Lahore

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Present Status of Nishat The history of Nishat dates back to 1951, when Mian Mohammad Yahya founded Nishat Mills. After almost half a century of undaunted success, Nishat Group is among the leading business houses of the country and ranks among the top 5 groups in terms of assets and sales revenue. The group has its roots firmly planted into four-core businesses namely. 1. Textiles 2. Power generation 3. Banking 4. Cement The textile business is further subdivided into 2 textile divisions; Nishat Faisalabad Nishat Chunian

Textile Capacity
Production process consists of spinning, weaving, processing, and finishing. The processing includes dyeing, engraving. The textile capacity of the group is the largest in the country. An addition of 20000 new spindles, 100 new air jets looms and new dyeing plant has increased the existing capacity of 24000 spindles, 740 looms and dyeing and finishing capacity of 5 million meters. The group is the largest exporter of textile products from Pakistan for more than a decade.

History of NISHAT MILLS LIMITED


NISHAT MILLS LIMITED (NML) commenced business in 1951 as a partnership concern, which was converted into private limited company in 1959. In 1961, the company went public and was listed on the Karachi stock exchange, the only stock exchange in the country at that time. NML started out as a weaving unit with 500 semi-automatic looms; later 10000 spindles were added, laying the foundation on nations biggest textiles composite project. Composite project at Nishat mills limited Faisalabad covering 98 acre of land is providing all production process under one roof i.e. spinning, weaving, processing, stitching and power generation. The Founder A man of vision, courage and integrity, Mian Mohammad Yahya was born in 1918 in Chiniot. In 1947 when he was running a leather business in Calcutta, he witnessed the momentous that swept the indo-Pak sub-continent and resulted in the emergence of Pakistan. Like many of his contemporaries, he also migrated to

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the new country to help establish its industrial base. His is a story of success through sheer hard work and an undaunted spirit of enterprise. Beginning with a cotton export house, he soon branched out into ginning, cotton and jute textiles, chemicals and insurance. He was elected Chairman of All Pakistan textile Mills Association (APTMA), the prime textile body in the country. He died in 1969, at the age of 51 having achieved so much success in so short period. The Chairman Today Mian Mohammad Mansha, the chairman of Nishat Group, like his father, continues the spirit of entrepreneurship and has led the group to become a multi dimensional corporation, with wide ranging interests. Nishat has grown from a cotton export house into the premier business group of the country with 5 listed companies, concentrating on 5 core business, Textiles, Cement, Banking, and Power Generation & Insurance companies. Today, Nishat is considered to be a part with multinationals operating locally in terms of its quality products and management skills. Firmly believing in Growth through Professional Management the corporate culture of NML is based on decentralization, delegation of authority, encouraging the acceptance of responsibility and inculcating quality consciousness. It is the conviction of NML that every successful organization is a reflection on the commitment, dedication, and team spirit of its employees, and Nishat is no exception. The employees of NML are all imbued with the spirit, a fact manifested in our rapid growth and low turnover Nishat continue to strive to be a better group today than what they were yesterday, for their customers, for their shareholders, for their investors, for the environment, for the community and for their employees, for it is with them that Nishat has achieved so much success in last fifty years.

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EXTERNAL AUDIT
The purpose of the external audit is to develop a finite list of opportunities that could benefit the firm and should protect from the threats. It is the comparison of a company with its competitors. To compete the highly competitive environment Nishat performs EFE and the CPM to check its competitive edge and the compatibility in the market. Following are some key external forces: 1) Economic Forces
Key Pakistani Economic Variables to Be Mentioned

Propensity of people to spend Interest rates Inflation rates Money Market rates Consumption patterns Unemployment Trends Tax rates
i)

Value of the Rupees in world Market Imports/ export factors Income differences by region and consumer groups Price fluctuation Monetary policies Fiscal policies Trade policies

Propensity of people to spend

It tells us about the purchasing power of customers. Nishat is targeting the upper class from Pakistan and the business 2 business dealing globally.
ii) Interest rates

The interest rates in the country are higher which discourages the small investors. It directly influences negatively the Nishat Textile Mills.
iii) Inflation rates

The inflation rate is high in Pakistan which ultimately affects the Nishat Textile Mills.
iv) v) Consumption patterns Unemployment Trends

High Unemployment in Pakistan and also become a gap while dealing to its suppliers and others.
vi) Tax rates

The tax rates are high as compared to the other countries but there is a low wage rate in Pakistan which helps Nishat in making products at a better and competitive price.
vii) Value of the Rupees in world Market

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The value of PKR is very less in the global developed countries which affect NISHAT Mills while trading globally in the form of Currency conversion.
viii) Income differences by region and consumer groups

The society of Pakistan is divided into 3 major economic groups i-e, Upper class; middle class; lower class. Out of which Nishat textile mills is focusing on the Upper class and some portion of the middle class.
ix) Price fluctuation

There is a great fluctuation because of more than 200% increase in the prices within few years (2008-2010). It will affect the Nishat textile mills by damaging the competitive price margin the global world of competition. 2) Social, cultural, demographic and environmental forces

Social, cultural, demographic and environmental forces

Per Capita Income Availability of retailing, manufacturing, and services businesses Attitude towards work Buying Habits Ethical Concerns

Attitudes toward customer service Social Responsibility


Recycling Waste Management Air Pollution Water Pollution

3) Political, Governmental and legal forces


Political, Governmental and legal forces

Government regulations Changes in Tax Laws Special Tariffs 4) Competitive forces

Level of Govt. Subsidies Legislation on equal Employment Import/export regulations

i. Competitive Intelligence Programs ii. Cooperation Among Competitors

iii. Market Commonality and Resource Similarity.

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EFE MATRIX
EFE MATRIX OF NISHAT TEXTILE MILLS Key External Factors OPPORTUNITIES Opportunity to increase Target market Quality and Guaranteed Fabrics Opportunity to expand product line International Fair Trade Certificate (IFTC) Increase demand of Pakistani Cotton Made products in Overseas Market THREATS Electric Power Plants Political Instability Low Market Share in Overseas Market Least Advertising Limited Retailing Outlets TOTAL Weight Rating Weighted Score

1 2 3 4 5

0.08 0.08 0.05 0.15 0.1

2 3 3 4 4

0.16 0.24 0.15 0.6 0.4

6 7 8 9 10

0.2 0.1 0.08 0.05 0.11 1

4 2 3 1 1

0.8 0.2 0.24 0.05 0.11 2.95

Nomenclature: It is used to evaluate the external opportunities and threats Opportunities come before threats. Opportunities often receive higher weights than threats. The sum of all the weights assigned must lie between 0-1 Rating should be done w.r.t. their industry (1-4) i-e; excellent to worst. Multiply each factors weight by its rating to determine a weighted Score The weighted score should not be more than 4.0

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COMPETITIVE PROFILE MATRIX


COMPETITIVE PROFILE MATRIX NISHAT TEXTILES CHENAB WEIGHTS MILLS MILLS Weight Rating Score Rating Score 0.15 1 0.15 3 0.45 0.2 4 0.8 3 0.6 0.2 3 0.6 2 0.4 0.15 4 0.6 2 0.3 0.15 4 0.6 1 0.15 0.15 3 0.45 2 0.3 1 3.05 2.2

1 2 3 4 5 6

Critical Success Factors Advertising Product Quality Price Competitiveness Financial Position Global Expansion Market Share TOTAL

GUL AHMED FABRICS Rating Score 3 0.45 3 0.6 3 0.6 3 0.45 1 0.15 4 0.6 3

Nomenclature: In this competitive profile matrix a firm identifies its major competitors and its particular Strengths and weaknesses. Multiply the weights with rates of companies and write score in the next column. Assign weights with respect to the importance. As advertising is not much important for Nishat Textile mills because of their B2B business dealing. Take 2-3 competitors against the company like we choose gul ahmed fabrics and Chenab textile mills.

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INTERNAL AUDIT
INTERNAL FACTOR EVALUATION MATRIX Introduction
IFE matrix is a summary step in conducting an internal strategic management audit is to construct an Internal Factor Evaluation (IFE) Matrix. This strategy formulation tool summarizes and evaluates the major strengths and weaknesses in the functional areas of a business, and it also provides a basis for identifying and evaluating relationships among those areas. The IFE Matrix together with the EFE matrix is a strategy-formulation tool that can be used to evaluate how an organization or a company is performing in regards to identified internal strengths and weaknesses of an organization or a company. The IFE matrix method conceptually relates to the Balanced Scorecard method in some aspects. The IFE matrix consists of following attributes mentioned below.

Internal Factors
Internal factors are extracted after deep internal analysis of the company. Obviously every company has some weak point and strong point thats the reasons internal factors are divided into two categories namely strengths and weakness. Strengths Strengths are the strong areas or attribute of the company, which are used to overcome weakness and capitalize to take advantage of the external opportunities available in the industry. Weakness Weakness are painful for the company means these are the weak factors which needs to be improve in future otherwise if they exposed to the competitors they can take the advantage of it.

Rating
Internal weakness are further divided in two categories namely minor weakness and major weakness same goes of the strengths (minor strength and major strength) There are some important points related to rating in IFE matrix. Rating is applied to each factor. Major weakness is represented by 1.0

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Minor weakness is represented by 2.0 Minor strength represented by 3.0 Major Strength represented by 4.0

Weight
The weight range from 0.0 means not important and 1.0 means important, sum of all assigned weight to factors must be equal to 1.0 otherwise the calculation would not be consider correct.

Weighted Score
Weighted score value is the result achieved after multiplying each factor rating with the weight.

Total Weighted Score


The sum of all weighted score is equal to the total weighted score, final value of total weighted score should be between range 1.0 (low) to 4.0(high). The average weighted score for IFE matrix is 2.5 any company total weighted score fall below 2.5 consider as weak. The company total weighted score higher then 2.5 are considering as strong in position.

Steps to develop IFE Matrix


List key internal factors as identified in the internal audit process. Use a total of from ten to twenty internal factors, including both strengths and weaknesses. List strengths first and then weaknesses. Be as specific as possible, using percentages, ratios, and comparative numbers. Assign a weight that ranges from 0.0 (not important) to 1.0 (all important) to each factor. The weight assigned to a given factor indicates the relative importance of the factor to being successful in the firms industry. Regardless of whether a key factor is an internal strength or weakness, factors considered to have the greatest effect on organizational performance should be assigned the highest weights. The sum of all weights must equal 1.

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Assign 1 to 4 rating to each factor to indicate whether that factor represents a major weakness (rating = 1), a minor weakness (rating = 2), a minor strength (rating = 3), or a major strength (rating = 4). Note that strengths must receive a 4 or 3 rating and weaknesses must receive a 1 or 2 rating. Ratings are thus company based, whereas the weights in Step 2 are industry based.

Multiply each factors weight by its rating to determine a weighted score for each variable. Sum the weighted scores for each variable to determine the total weighted score for the organization.

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Internal Factor Evaluation Matrix for Nishat Mills

Internal Factor Evaluation Matrix


KEY FACTORS STRENGTHS lowest employee turnover Highly experienced professionals Decentralized organizational structure Efficient information system Good financial position/strong group Location of plants Highest capacity of production WEAKNESS Less advertising focus Maintenance of Imported machinery High production cost Weight 0.15 0.08 0.1 0.05 0.08 0.06 0.2 0.1 0.1 0.08 1 Rating 4 3 3 3 4 4 4 2 1 1 weighted score 0.6 0.24 0.3 0.15 0.32 0.24 0.8 0.2 0.1 0.08 3.03

Discussing the NISHAT MILLS IFE MATRIX the sum of weighted score shows that company has strong internal position. Now elaborating each strength and weakness will tell that why and how it has been rated and what the company is doing that makes it strong internally. The factors are explained below:

STRENGTHS
Lowest employee turnover is one of the most attractive strength and its rating is 4 which mean company is having a great policy for this strength. Nishat mills employee turnover is almost equal to zero this is due to their good incentives and compensations for their employees. The environment of the company is very good and this helps the employees grooming Nishat gives free medical and provide transport to their employees. Highly experienced professionals are hired. The rate given to this strength is 3 which mean company is doing quite well for this strength. Well experienced people are hired at top levels. They are not compromising in this because their top management has hold of the company.

Decentralized organizational structure is also one more strength which shows efficiency of the company. This is rate 3 and it is due to the friendly

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and empowering environment of Nishat. Employees are given preference and they are motivated in decision making. Top management takes in account middle and lower level employees also and hence this company is considered in top companies of the country. Efficient information system of Nishat mills has made us rate as 3. For any company now a day its information technology should be very efficient because this is an IT era. Nishat has very good information system to handle its customer as it deals most in B2B so they have good concern to this field. Good financial position/strong group is rate as 4. As everyone knows that Nishat Mills is of Mansha group which is also in other businesses like MCB bank and in insurance business. So this group has good financial position in the market and has good credit rating which can help them in any new investment and this strength is most important for any company as there is competition in the market. Location of plants is also rate as 4 which mean that this strength is handled by Nishat mills efficiently. Nishat plant location s close to each other e.g. one is in Ferozpur road and dyeing section in chunian etc. so this helps them reduce their transportation cost and managing their plants easily. Highest capacity of production is rate as 4 because Nishat has 13600 spindles in their production which raises its capacity and this is and important and excellent strength rather than its competitors. Nishat this policy has made us to rate it the most.

WEAKNESSES
Less advertising focus is rate as 2. Nishat is an export oriented company so they less focus on advertisement. We have rated it as 2 because before Nishat don't have any policy for their advertisement but now they have focused on its advertisement department which can be seen by print media advertisement of Nishat linen. Maintenance of Imported machinery is rated as 1. As Nishat Mills uses imported machinery in their production so their maintenance is costly. For instance if any spare part is needed so they have to import it and this can be costly for them as our country's have instable environment. Nishat mills don't have any good policy to handle this weakness so we have considered it 1. High production cost for Nishat Mills is another weakness which should be handled but Nishat doesn't have much policy for it so we have rated as

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1. They make quality yarn product so their cost is also high. The imported machinery, spindles etc made it costly.

Marketing strategies of NML


Today textile industry is facing big challenges. Inflation and decline in purchasing power resulted in decline in demand, which increased the competition to a greater extent. In spite of the above facts Nishat mills ltd, had been successful in maintaining its market position and growth. NML has adopted different marketing strategies over the years to sustain its better position in the economy of Pakistan. These strategies are described below. Diversification strategy Market development strategy Contacting old customers New & innovative product development Improved quality products Diversification Strategy Market yarn is diversified to increase the customer base. Under this, diversification program, business with Malaysia, Korea, Taiwan and UK have been initiated. Product range is also increased to cater for the different needs of increased number of buyers production volume is also increased by concentrating on coarse counts with a result of increase in volume from 90-95 containers per month to around 115 containers a month. Market Development In order to reduce their dependence on a few markets especially FAR EAST, new markets were developed for grey cloth. This diversification not only reduced their dependence on Hong Kong but also gave better profit margins at times when Hong Kong market was very depressed. Under this market diversification, they started business with South Africa, Australia, Taiwan, Srilanka, Italy etc.

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Contacting Old Customers The business with some of the old buyers in Europe was also revived during this period after intense efforts. This revival gave both good volumes and better profit margins. New and Innovative Product Development They have developed fancy and special items like Cavalry Twills, Bedford Cords and dobby items, which are being sold at premium prices. They keep on modernizing their equipment in order to maintain the high quality of their products. Improved Quality Products With the increase of competition, Nishat Mills have become more quality conscious. In order to achieve their quality standards, they are maintaining better quality by getting yarn from pre-approved sources, tighter fabrics inspection in folding and providing service to their customers. They also import cotton from Australia which is known best for its Quality. NML has its cotton fields too which produce premium quality cotton.

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FINANCIAL ANALYSIS of NML


LIQUIDITY RATIOS Current Ratio = Current Assets Current liability 2008 Current Ratio Interpretation This ratio tells us about short- term solvency of the organization or it is the direct evaluation of a companys liquidity. Current ratio shows the availability of the ready current assets to meet the short- term liabilities of the organization. The current ratio shows stable increase due to excessive cash available to company. But overall company is not I very good position as it is having only 0.86 asset against a single liability. 0.73:1 2009 0.86:1

Quick Ratio =

Current Assets-Inventory Current liability 2008 2009 0.38:1

Quick Ratio Interpretation

0.34:1

This ratio tells the extent to which a firm can meet its short term obligations without relying upon the sale of its inventories. The trend of 0.34 to 0.38 shows that currently company is in better position to meet its short term obligations.

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LEVERAGE RATIOS Debt-to-total Asset Ratio = Total Debt Total Assets

2008 Debt-to-total Asset Ratio Interpretation 26%

2009 25%

This ratio tells the percentage of total funds that are provided y creditors. The trend showing that this percentage is reduced from 26 to 25% in previous year i.e. the amount of assets increased over the debt.

Debt-to-Equity Ratio =

Total Debt Stakeholders Equity 2008 2009 40%

Debt-to-Equity Ratio

39%

Interpretation This ratio tells the percentage of total funds that are provided y creditors versus owners. The trend showing that this percentage is increased from 39 to 40% in previous year.

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Log term Debt-to-Equity Ratio = Log term Debt Stakeholders Equity 2008 Log term Debt-to-Equity Ratio Interpretation This ratio tells the balance between debt ad equity I a firms log term capital structure. As debt is cheaper than equity, so, the ratio is showing good performance of the company. 5% 2009 12%

ACTIVITY RATIOS Inventory Turnover Ratio = Sales Inventory of Finished Goods 2008 Current Ratio 4.7 2009 5.8

Interpretation This ratio shows whether a firm holds excessive stocks of inventories and whether a firm slowly selling its inventories compared to the industry average. Trend of increasing from 4.7 to 5.8 shows that company is currently increased its inventory level.

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Fixed assets Turnover Ratio = Markup Interest Fixed assets 2008 Fixed Assets Turnover Ratio 0.62 2009 1.03

Interpretation Fixed asset turnover indicates the efficiency with which the company uses its assets to generate sales. Generally, the higher a companys fixed asset turnover, the more efficiently its assets have been used. This ratio is showing an increase from 0.62 in 2008 to 1.03 in 2009 which is good for company.

Total assets turnover =

sales Total Assets

2008 Total Assets Turnover Ratio Interpretation 0.49

2009 0.76

Total asset turnover indicates the efficiency with which the company uses its assets to generate sales. Generally, the higher a companys total asset turn over, the more efficiently its assets have been used. The ratio for company is very good.

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Account Receivable Turnover ratio = Annual Credit Sales Account Receivable 2008 Account Receivable Turnover Ratio Interpretation The ratio tells the average length of time it takes a firm to collect credit sales, the trend of increased length is not good for the company. 51.9 2009 73.9

Average Collection Period = Account Receivable Total Credit Sales 365 2008 Average Collection Period Interpretation The ratio tells the average length of time it takes a firm to collect on credit sales. The tend of increased length of 5 days to 70 days is not good for the company. 5 days 2009 70 days

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PROFITALITY RATIOS

Gross Profit Margin = Sales-Cost of Goods Sold Sales 2008 Gross Profit Margin 14.35 2009 18.23

Interpretation The ratio tells the total margin available to cover operating expanses and yield a profit. The increasing trend from the last year is good sign for the company.

Net Profit Margin = Net Profit Sales

2008 Net Profit Margin 31.23%

2009 6.54%

Interpretation This ratio tells the after-tax profits from the sales of goods. The declining trend from 31.23% to only 6.54% is giving ad effect to the companys name.

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Return on Total Assets = Net Profit after Tax X100 Total Assets

2008 Return on Total Assets 15.19%

2009 4.95%

Interpretation Turn on total assets measures the firms overall effectiveness in generating profit with its available assets. The higher the companys return on total assets, the better it is. The return on total assets is showing a decrease from 15.15% in 2008 to 4.95% in 2009 which is not a good sign for the company.

Return on equity =

Net income Shareholder equity 2008

X100

2009 8.1%

Return on Equity Interpretation

23.1%

The return on equity indicates the equity utilization of the company to produce profits. The ratio tells the shares holders about their expected profit on their equity in a business. The ratio indicates sharply decreasing trend of net profit from 23.1% in 2008 to 8.1% in 2009. This sharply decrease in the return on equity is not a favorable point for the organization and its shareholders. It shows that company has suffered a loss.

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Earning per share Ratio

Net income No. of shares outstanding

2008 Earning Per Share 36.86

2009 6.81

Interpretation The company earnings per share are generally of interest to present or prospective stockholders and to management. The earning per share represents the number of Rupees earned on behalf of each outstanding share. The earning per share decreased from 36.86 in 2008 to 6.81 in 2009, which is not favorable for the company.

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SWOT MATRIX
Here is the SWOT Matrix of NISHAT Mills Ltd. The input of this matrix has been extracted from IFE, CPM, & EFE matrices. It comprises of four strategies which are i. strengths/opportunity strategies (SO strategies) ii. weakness/opportunity strategy (WO strategies) iii. strengths/threats strategy (ST strategies) iv. weakness/threats strategy (WT strategies) This matrix is presented as follows:
STRENGTHS lowest employee turnover Highly experienced professionals Decentralized organizational structure Efficient information system Good financial position/strong group Location of plants Highest capacity of production OPPORTUNITIES Opportunity to increase Target market Quality and Guaranteed Fabrics Opportunity to expand product line International Fair Trade Certificate Increase demand of Pakistani Cotton internationally SO strategies Designer wear garments for gents(S5,O1,O3) Open retail outlets in gulf (S5,O1) WEAKNESS Less advertising focus Imported machinery High production cost

WO strategies Concentrate on electronic advertising domestically(W1,O1)

THREATS Political Instability Low Market Share in Overseas Market Focus more on export oriented Limited Retailing Outlets Shortage of electricity supply

ST strategies Open retail outlets in suburbs areas(S5,T4) More domestic production(S7,T3)

WT strategies Advertising internationally (w1,T2) Increase machine handling training for employees(W2,T1)

Strengths & opportunity strategies:


Our first strategy proposed by us to the company by taking into account strength # 5 & opportunity # 1 & 3 is designer wear garments for gents. We have made this strategy because the company is making ladies outfits right now. They are not in gents garments profession. Company can invest for expanding its product line because it has strong financial back ground.

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Our second strategy by taking into account strength # 5 & opportunity # 1 is open retain outlets in gulf countries. The company can increase its target market by increasing its number of retail stores in gulf countries because a lot of Pakistanis live in those countries so it would be beneficent for the company to increase its target market.

Opportunities & Weaknesses strategies (WO strategies)


The strategy by taking into account opportunity # 1 & weakness # 1 is concentrate on electronic advertising domestically. We have proposed this strategy because Nishat has a threat of strong advertising by its competitors Gul Ahmad & Chenab textiles but Nishat is not in electronic media. By concentrating on electronic advertising the can compete by increasing their target market. The main reason for electronic advertising is customers have televisions & internets in their homes, they can easily know about its products.

Strengths & threats strategies (ST strategies):


The first strategy we made by considering strength # 5 & threat # 4 is open retail outlets in suburb areas. Nishat has limited retailing outlets where every customer cannot go. It has an opportunity of strong group i.e Mansha group & good financial history. This company can invest in opening retailing outlets in suburbs areas & can earn more profits by reaching more customers. The second strategy by considering strength # 7 & threat # 3 is more domestic production. As Nishat is an export oriented organization its 90% products are exported. But there are other international brands also in other countries which are competitors of Nishat that is why the company should increase its domestic production. Nishat can easily do this because it has 173000 looms; the highest textile capacity of any textile mill in Pakistan.

Weaknesses & threats strategies (WT strategies):


The first strategy we propose to NISHAT by taking into account weakness # 1 & threat # 2 is advertising internationally. Nishat as an export oriented organization should increase its advertising in foreign markets. By increasing its advertising focus can get high market share in overseas markets. The second strategy by considering weakness # 2 & threat # 1 is increase machine handling training for employees. If proper training is given to employees about handling of imported machinery then there will be no impact of political instability on the company because all spare parts will be imported.

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THE QUANTITATIVE STRATEGIC PLANNING MATRIX (QSPM)


The quantitative strategic planning matrix is a technique which is designed to determine the relative attractiveness of feasible alternative actions. This technique objectively indicates which alternative strategies are best based on previously identified external and internal critical success factors. It requires good intuitive judgment. Left column of a QSPM consists on key external and internal factors and the top row consists of a feasible alternative strategies. And the left column of it consists of information obtained directly from EFE Matrix and IFE Matrix. In a column adjacent to the critical success factors, the respective weights received by each factor in the EFE Matrix and IFE Matrix are recorded. The top row of QSPM consists of alternative strategies derived from SWOT Matrix. The QSPM determines the relative attractiveness of various strategies based on the extent to which key external and internal critical success factors are capitalized upon or improved. The relative attractiveness of each strategy- within a set of alternatives is computed by determining cumulative impact of each internal and external critical success factor. Here is given the basic format of the QSPM. We have developed QSPM Matrix for Nishat Mills by using the six steps as follows: Step 1 In the 1st step we made a list of Nishat mills key internal strengths/weaknesses and external opportunities/threats in the left column of the QSPM. The key internal success factors include lowest employee turnover, Highly experienced professionals, Decentralized organizational structure, Efficient information system, Good financial position/strong group, Location of plants, Highest capacity of production, Less advertising focus, Maintenance of Imported machinery, High production cost and key external success factors include Opportunity to increase Target market, Quality and Guaranteed Fabrics, Opportunity to expand product line, International Fair Trade Certificate (IFTC), Increase demand of Pakistani Cotton internationally, Political Instability, Low Market Share in Overseas Market, Focus more on export oriented, Shortage of electricity supply.

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Quantitative Strategic Planning Matrix


STRATEGIC ALTERNATIVES Open retail outlets Open retail outlets in in gulf suburbs areas KEY FACTORS STRENGTHS lowest employee turnover Highly experienced professionals Decentralized organizational structure Efficient information system Good financial position/strong group Location of plants Highest capacity of production WEAKNESS Less advertising focus Maintenance of Imported machinery High production cost OPPORTUNITIES Opportunity to increase Target market Quality and Guaranteed Fabrics Opportunity to expand product line International Fair Trade Certificate (IFTC) Increase demand of Pakistani Cotton internationally THREATS Political Instability Low Market Share in Overseas Market Focus more on export oriented Shortage of electricity supply TOTAL Weight 0.15 0.08 0.1 0.05 0.08 0.06 0.2 0.1 0.1 0.08 1 0.08 0.08 0.05 0.15 0.1 0.17 0.1 0.12 0.15 1 AS 2 1 3 1 4 1 TAS 0.16 0.1 0.24 0.06 0.8 0.1 AS 2 2 2 3 3 2 TAS 0.16 0.2 0.16 0.18 0.6 0.2 -

4 3 2 3 3 1 3 3 1

0.32 0.24 0.1 0.45 0.3 0.17 0.3 0.36 0.15 3.85

3 2 3 1 1 2 1 1 2

0.24 0.16 0.15 0.15 0.1 0.34 0.1 0.12 0.3 3.16

Step 2 In the second step we assign weights to each external and internal factor. These weights are identical to those in the EFE Matrix and IFE Matrix. The weights are presented in a straight column just to right to the external and internal critical success factors. The weights are given to the internal and external factors as Opportunity to increase Target market (0.08) Quality and Guaranteed Fabrics (0.08) Opportunity to expand product line (0.05) International Fair Trade Certificate (IFTC) (0.15)

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Step 3

Increase demand of Pakistani Cotton internationally (0.1) Political Instability (0.17) Low Market Share in Overseas Market (0.1) Focus more on export oriented (0.12) Shortage of electricity supply (0.15) And key internal success factors include Lowest employee turnover (0.15) Highly experienced professionals (0.08) Decentralized organizational structure (0.1) Efficient information system (0.05) Good financial position/strong group (0.08) Location of plants (0.06) Highest capacity of production (0.2) Less advertising focus (0.1) Maintenance of Imported machinery (0.1) High production cost. (0.08)

In the third step we examined the SWOT Matrix and identified alternative strategies that the Nishat mills should consider implementing. Then we recorded these strategies in the top row of the QSPM, these are open retail outlets in gulf OR open retail outlets in suburbs areas. Step 4 In the 4th step we determined the Attractiveness Scores (AS). AS defined as numerical values that indicate the relative attractiveness of each strategy in a given set of alternatives. We determined the attractiveness score by examining each key internal and external factor, one at a time, and asking the question Does this factor affect the choice of strategies being made? The range for Attractiveness Score is 1=not attractive, 2= somewhat attractive, 3=reasonably attractive, 4=highly attractive. But if the answer to the previous question is no, this will indicate that the respective key factor has no affect upon the specific choice being made. So, we used dash to indicate that the key factor does not affect the choice being made.

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The factors which do not have any affect upon the choice being made includes the lowest employee turnover, efficient information system, maintenance of imported machinery, and high production cost. The factors which are not attractive for the choice being made and received AS 1 for the first alternative that is open retail outlets in gulf are decentralized organizational structure, less advertising focus, political instability, and shortage of electricity supply. The factors which are not attractive for the choice being made and received AS 1 for the second alternative that is decentralized organizational structure, International Fair Trade Certificate (IFTC), increase demand of Pakistani cotton internationally, low market share in overseas market and focus more on export oriented. As these factors do not show much attractiveness for the first alternative, so they all received AS equal to 1. The factors which are somewhat attractive for the first choice are highly experienced professionals and opportunity to expand product line, and for the second choice being made are decentralized organizational structure, good financial position/strong group, quality and guaranteed fabrics, political instability and shortage of electricity supply. As these factors have some attraction to the choices being made like they have highly experienced professionals will be helpful in marinating the new outlet. They have the opportunity to expand the product line so can easily capture the new market. Similarly they have decentralized organizational structure so it will be easy to communicate throughout the organization for opening a new retail outlet nationally, they have good financial position so if they launch their product at low introductory prices will also be effective and later on profitable for them, and as there is shortage of electricity but they have their own power supply plants so it will be easy for them to increase their production and cater more customers. As all these factors are somewhat attractive so, all these receive AS equal to 2. The factors which are reasonably attractive for the first choice are good financial position/strong group, quality and guaranteed fabrics, International Fair Trade Certificate (IFTC), increase demand of Pakistani cotton internationally, low market share in overseas market and focus more on export oriented and for the second choice are location of plants, highest capacity of production, opportunity to increase target market, and opportunity to expand product line. They have good financial position so if they launch their product at low introductory prices will also be effective and later on profitable for them; they are catering upper middle and upper class that are all quality conscious than price conscious, so opening new retail outlets will be very profitable for them. They are export oriented and there is high demand of Pakistan cotton made products internationally, so opening retail outlet in gulf countries will be more beneficial for them. As all these factors are reasonably attractive for the choices being made so receive AS equal to 3.

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The factors which are highly attractive for the first alternative are high capacity of production, and opportunity to increase target market. They have high production capacity so they can open new outlets in gulf countries and sell their products there and can capture more market as they are export oriented and financial strong group so by selling their products at low introductory prices they can capture mare market area and can get higher profits later on. As these two factors are highly attractive for the first choice being made that is open retail outlet in gulf countries. Step 5 In the fifth step we compute the Total Attractiveness Scores (TAS). (TAS) are defined as the product of multiplying the weights by the Attractiveness Scores in each row. The Total Attractiveness Scores indicate the relative attractiveness of each alternative strategy considering only the impact of the adjacent internal or external critical success factors. The higher the total Attractiveness Score the more attractive the strategic alternative (considering only the adjacent critical success factors). Step 6 In the final step compute the Sum Total Attractiveness Score. For this we added Total Attractiveness Scores in each strategy column of the QSPM. The Sum Total Attractiveness Scores (SATS) reveal which is most attractive in each set of the alternatives. Higher scores indicate more attractive strategies, considering all the relevant internal and external factors that could affect the strategic decisions. The magnitude of the difference between the Sum Total Attractiveness Scores in a given set of strategic alternatives indicates the relative desirability of one strategy over another. As the Total Attractiveness Score is more for the first alternative (open retail outlets in gulf) that is 3.85 than the second alternative (open retail outlets in suburbs areas) that is 3.4 so, the first alternative choice being made is the best choice for Nishat mills. So, best choice is to go for open retail outlets in gulf.

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CONCLUSIONS
Nishat Textile is considered to be the leading organization in the field of textile. The name Nishat has become has become a symbol of quality and standard. The quality of cloth is dependent of textile yarn to finished cloth. Which is totally imported form various countries. Major machine are mercerizing machines, sober machine and J-Zimmer that con print cloth with 12 colors. All the sub department of processing like bleaching, dyeing, printing, and finishing are working under laboratory instructions so laboratory is playing role of executive in quality control. All the schedules of bleaching, dyeing printing and finishing are prepared by the laboratory. The customer satisfaction is a basic criterion of Nishat Textile. They are producing good quality products and 80% products are exported. Great care is taken for export Products regarding. Marketers of Nishat Textile know the competition in the international market. They put their level best efforts to satisfy the customer keeping in view the costs of products and quality. Nishat has also a big share in local market. Local marketers are performing their jobs efficiently to enhance the sales and to satisfy the customers however in local market quality is lower then export market. So Nishat has greater capability to preclude what they claim for. If we turn to human resource department we see that there are certain gaps in human resources management of Nishat Textile. This department is not established and not considered to be very much important. Low attention is paid to this department by upper level management. There is lack of human resources planning, lack of recruiting activities lack of job analysis, compensation and reward system is not very much attractive and employees are not well motivated in Nishat textile. One good thing of this department is that the department let the employees follow the rules and regulations set by the organization strictly. Attendance is strictly checked 7 leaves as well. So there are good and bad both present in the human resources management of Nishat Textile. We developed QSPM Matrix for Nishat Mills by following different steps like firstly we made a list of key internal and external factors than assign weights to those factors, identified alternative strategies, computed Total Attractiveness Scores and in the final we computed Sum Total Attractiveness Scores and reached at the strategic decision that the best choice is to go for open retail outlets in gulf.

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Nishat textile has the ability to produce what their customers want through excellent machinery and skilled workers in processing department and qualified marketing staff. But there are problems regarding human resource management and financial management. Despite having problems Nishat has good and increasing sales figures that will lead the organization to prosperity again.

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RECOMMENDATIONS /SUGGESTIONS
Organizations with more or less profitability or unprofitably have problems and there are always chances of improvements. This is also the condition for Nishat textile. As problems and difficulties have been identified, now here are some suggestions that may help the organization to improve. In processing department there is a need of skilled workers. There are certain departments of processing in which employees have been working since long but there efficiency is not improved and unsatisfactory results come out sometimes. The skilled labor will not only improve the efficiency but also will improve effectiveness. There should be chances given to skilled workers to enter the organization. There should be female artists and designers in design department as females have naturally more esthetical qualities than males. They will really improve the quality of designs and will introduce more innovative designs. Expanding product lines that will give more variety to people of country could extend local marketing and ultimately sales would be increased. There should be more staff in local marketing department to enhance the sales figure and to capture wide area of local market. There is need to increases the staff in this department only three or four persons are working with all the affairs regarding let the employees abide by the rules 7 regulation, recruiting, selecting and other activities. This area should carefully be handle to attract skilled employees and ultimately to enhance efficiency and effectiveness. Job analysis should be done to know what are the jobs needed in the organization. I know some persons who are doing the job of two or three persons. Compensation and reward system should be brought at higher level in order to let the employees be motivated and happy. There should be more fringe benefits for the employees taking into consideration there devotion skill and experience. This higher level would make the employees more efficiency & effective. There should be little compensation for trainees as well, as they can fulfill their day to day traveling and food expenses. By doing this trainees will show more interest, more devotion, more potentials and will work with their full mental and physical efforts.

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The first aid and other medical facilities should be provided to the employees with in the mill area. There is continuous working in the mill and every time there are chances of any accident or unpleasant incident. So in order to handle this type of situation the first aid dispensary should be there with in the mill area. As Nishat Mills is export oriented company, have high production capacity, International Fair Trade Certificate (IFTC), and good financial position, even if they offer their products at lower introductory prices will be effective for them and will be more profitable later on. So they should go for open retail outlets in gulf.

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REFERENCES
1. Web: www.nishatmills.com www.wikipedia.com www.investopedia.com

2. Annual Report, 2009, Nishat Textile Mills Ltd. 3. Marketing Department

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