STRATEGIC MANAGEMENT FINALPROJECT

ORGANIZATION STUDIED
GUL AHMED

PERSON INTERVIEWED
Tariq Shamim Durrani
Deputy Brand Manager
Gul Ahemd Textile Mills

GROUP MEMBERS
 Muhammad Faizan Maqsood
 Behzad shami
 Pehlaj Rai

CLASS
MBA 4D

SUBMITTED TO
Sir Naveed M. Khan

SUBMITTED ON
December 20, 2010

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Contents
Corporate Profile ................................................................................................................. 4
COMPANY HISTORY ...................................................................................................... 4
Corporate Profile – Major Companies ................................................................................ 4
Corporate Profile – Business Activities .............................................................................. 4
TEXTILES .......................................................................................................................... 4
POWER............................................................................................................................... 4
MANAGEMENT ................................................................................................................ 4
Description of products and services of the company ........................................................ 5
Vision and Mission Statement of the company .................................................................. 6
External factor Evaluation Matrix ...................................................................................... 7
Competitive Profile Matrix ................................................................................................. 8
Internal Factor Evaluation Matrix ....................................................................................... 9
SWOT MATRIX .............................................................................................................. 10
Financial Performance at a Glance ................................................................................... 11
Financial Ratios ................................................................................................................ 13
SPACE MATRIX ............................................................................................................. 15
BCG MATRIX.................................................................................................................. 16
BALANCE SCORECARD............................................................................................... 17
BLUE OCEAN STRATEGY ........................................................................................... 19
CONCLUSION ................................................................................................................. 20

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Corporate Profile
COMPANY HISTORY
The story of textiles in the subcontinent is the story of Gul Ahmed. The group began
trading in textiles in the early 1900’s. With all it’s 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 103,000 spindles, 220 wide width
air jet looms, 90 Sulzer’s, 297 conventional looms and a state of the art processing and
finishing unit.

Corporate Profile – Major Companies

The following is a list of the major companies which comprise the group:

 Gul Ahmed Textile Mills Limited

 Gul Ahmed Energy Limited

Corporate Profile – Business Activities

TEXTILES
In the textile field, activities start from the spinning of cotton as well as man made fibers
and extend to weaving, processing and finishing of all types of cotton and blended
fabrics, bed linen, home furnishings, garment manufacturing, etc.

POWER
The group has been a pioneer in the field of power generation. The textile mill runs on
self-generation with an installed capacity of more than 20 MW. Gul Ahmed Energy
operates a power plant of 136 MW capacity with a project cost of US$140 million
located at Korangi, Karachi. The sponsors of this project include the IFC and Tomen
Corporation. The project has been in commercial operation since November 1997.

MANAGEMENT
Management of the group is professionally qualified and broadly experienced. The
directors have held top positions in various textile bodies, export committees and have
also assisted the Government of Pakistan in some of the major trade talks with EC and
USA authorities.

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Description of products and services of the company
The products and services of Gul Ahmed Textile Mills can be divided into two broad
categories according to their markets
 Gul Ahmed’s local Market
 Gul Ahmed’s export Market

The products in Gul Ahmed’s local market category are

 Lawn
 Pret line (women category)
 Men’s stitched wear
 Men’s unstitched
 Home textile
 Foot wear
 Perfumes
 Accessories

The products in Gul Ahmed’s export market category are

 Lawn
 Pret line (women category)
 Men’s stitched wear
 Men’s unstitched
 Home textile

What make Gul Ahmed stay?

 First ETP (Effluent Treatment Plant) in textile sector
 First yarn mercerizing facility
 Metal free safety packing zones in all sewing units
 First textile mill to register carbon credits
 First rotary machine in Pakistan
 First to install caustic recovery unit in Pakistan’s textile sector
 First compact spinner in Pakistan
 Using CAD/CAM machines to apply latest design techniques
 Largest embroidery facility dedicated to home textiles
 An extensive chain of retail outlets all over Pakistan

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Vision and Mission Statement of the company
VISION
Setting trends globally in the textile industry. Responsibly delivering products and
services to our partners

MISSION
To deliver value to our partners through innovative technology and teamwork. Fullfilling
our social and environmental responsibilities.

VALUES
 Integrity
 Passion
 Creativity
 Teamwork

Analysis of Mission Statement

According to our Analysis several components are missing in mission statement and the
revised mission statement is as follows

“To serve fashion oriented customers. We ensure that our products are of the highest
quality standards by adhering to the most stringent systems and processes while carefully
selecting all the best quality inputs from around the globe. Our aim is to ensure that the
end customer always gets a unique blend of quality, comfort and fashion which is
passionately woven into all our products. We strive to make difference in communities
where we operate by following best social & environmental policies and best human
resource practices to ahead of the competition and setting benchmark for industry.”

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External factor Evaluation Matrix
External Factor Evaluation Matrix

Weighted
Key External Factors Weight Rate score
Opportunities
Growth in target market audience 0.05 4 0.2
Increasing Fashion Awareness 0.08 4 0.32
Online shopping 0.08 3 0.24
Social Network Marketing 0.07 3 0.21
Brand Consciousness 0.09 3 0.27
Increasing expenditure on shopping 0.06 3 0.18
Fashion Weeks in Major cities 0.04 3 0.12

Threats
Counterfeiting and intellectual property rights violations 0.12 3 0.36
Inflation 0.06 2 0.12
Exchange rate fluctuations 0.06 3 0.18
Law and order situation 0.08 2 0.16
Terrorism 0.05 1 0.05
Increase in interest Rates 0.08 2 0.16
Cotton Yarn and other Raw material Prices 0.08 3 0.24
TOTAL 1 2.81

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Competitive Profile Matrix
Competitive Profile
Matrix Gul Ahmed Chenab Group Al-Karam
IDEAS ChenOne IDENTITY
Critical Success Factors Weight Rating Score Rating Score Rating Score
Advertising 0.20 4 0.8 3 0.6 2 0.4
Product Quality 0.10 4 0.4 4 0.4 3 0.3
Price competitiveness 0.10 3 0.3 3 0.3 3 0.3
Management 0.15 3 0.45 4 0.6 2 0.3
Financial Position 0.10 4 0.4 3 0.3 3 0.3
Customer Loyalty 0.10 3 0.3 4 0.4 2 0.2
Global Expansion 0.20 3 0.6 2 0.4 3 0.6
Market Share 0.05 4 0.2 2 0.1 3 0.15
Total 3.45 3.1 2.55

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Internal Factor Evaluation Matrix

INTERNAL FACTOR EVALUATION MATRIX

Weighted
KEY INTERNAL FACTORS Weight Rating Score
STRENGTHS
Highest Market share 0.15 4 0.6
Creative designers 0.1 4 0.4
Fully vertically integrated from fiber to fashion 0.05 4 0.2
Latest technology engaged 0.15 4 0.6
99.99% design quality assurance 0.05 4 0.2
Strong brand image 0.03 4 0.12
An extensive chain of retail outlets all over Pakistan 0.03 4 0.12

WEAKNESSES
Debt to equity ratio is high .81 0.1 1 0.1
EBITDA Margin to sales decreased from 12.49 to 11.92 0.15 1 0.15
Demand is higher than production capacity 0.05 2 0.1
Supply Chain Issues 0.04 2 0.08
Online shop not fully functional 0.05 2 0.1
Small share in export market as compare to other local players 0.05 2 0.1
TOTAL 1 2.87

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SWOT MATRIX
OPPORTUNITIES
1.Growing Demand
2.Internet and Online shopping
3.Global Trade
4.Fashion Weeks in major
cities
5. Dubai shopping festival and
other expos
THREATS
1.Big players in export markets Dedicated mills for export
2.Small share of export market market share (S3, S8, S6, T1,
3. Foreign exchange risk
4.Volatile law and order
situation
5.Other established brands in
accessories, perfume foot wear
STRENGTHS
1.Highest Market share
2.Creative designers
3.Fully vertically integrated
from fiber to fashion
4.Latest technology engaged
5.99.99% design quality
assurance
6. Strong brand image
7. An extensive chain of retail
outlets all over Pakistan
8. Financial Strength
SO STRATEGIES
Launch its brand in other
countries (S6, S3, S6, O3)
Follow the global trends in
fashion and make presence in
international trade expos and
shopping festivals (S2,O5)
Collaborate with some
designer to make impact in
fashion weeks (S6,O4)
ST STRATEGIES
market to increase export
T2)
FDI in other countries to take
low cost advantage (S8,
T4,T1)
WEAKNESSES
1.Demand for Lawn is so high
that sometime it exceed their
production capacity
2.Online shop is not fully
functional (does not contain
all products of Gul Ahmed)
3.Most of designs are out of
stock
4.Sometime designs are there
in the magazine but are
launched late.
5.Perfumes and footwear are
not profitable
WO STRATEGIES
Make use of internet to cover
lost sales (W1, O1,O2)
Improve supply chain by
integrating department and
processes (W3, W4, O1)
WT STRATEGIES
Drop perfumes and foot wears
unless Gul Ahmed develop as
a prestige brand (W5,T5)
Re launch perfumes with some
high profile celebrity as brand
endorsement (W5, T5)
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Financial Performance at a Glance
Profit and Loss 2010 2009 2008 2007
Rs.
Sales Million 19,689 13,906 11,726 9,848

Rs.
Gross Profit Million 3,173 2,359 1,775 1,475
Rs.
Operating profit Million 1,653 1,209 936 745
Rs.
Profit before tax Million 708 170 202 262
Rs.
Profit / (loss) after tax Million 478 80 103 164
Rs.
Dividends Million 79 - 55 -

Balance Sheet 2010 2009 2008 2007

Rs.
Property Plan and Equipment Million 6,140 6,106 5,828 4,703
Rs.
Intangible Million 16 29 28 30
Rs.
Long term investment, loans, advances and deosits Million 93 90 78 74
Rs.
Net Current Assets Million (224) (390) (687) (278)
Rs.
Total Assets employed Million 6,025 5,835 5,247 4,529
Represented by:
Rs.
Share capital Million 635 635 552 552
Rs.
Reserves Million 2,961 2,483 2,210 2,107
Rs.
Shareholders' equity Million 3,596 3,118 2,762 2,659

Rs.
Long term loans Million 2,223 2,567 2,354 1,772
Rs.
Deffered liabilities Million 207 149 130 98
Rs.
Total capital employed Million 6,025 6,025 5,247 4,529

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Cash Flow Statement 2010 2009 2008 2007
Rs.
Operating activities Million 454 442 (399) 774
Rs.
Investing activities Million (711) (931) (1,649) (713)
Rs.
Financing Activities Million (170) 398 680 6
Rs.
Cash and cash equivalents at the end of the year Million (5,560) (5,233) (514) (3,832)

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Financial Ratios
Financial Ratios 2010 2009 2008

Profitability ratios

Gross profit ratio % 16.12 16.96 15.14

EBITDA margin to sales % 11.92 13.37 12.49

Net profit to sales % 2.43 0.58 0.88

Liquidity ratios

Current ratio 0.97 0.95 0.90

Quick / acid test ratio 0.34 0.39 0.24

Finance gearing

Debt: equity ratio 0.81 0.98 1.07

Rate of return

Return on equity % 14.22 2.73 3.79

Return on capital employed % 27.87 21.82 19.14

Interest cover ratio 1.75 1.16 1.28

Capital efficiency

Inventory turnover Days 98.00 107.00 95.00

Debtor turnover Days 45.00 66.00 72.00

Creditor turnover Days 73.00 76.00 61.00

Fixed assets turnover ratio 3.21 2.72 2.00

Total assets turnover ratio 1.40 1.07 1.05

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Financial Ratios 2010 2009 2008

Investor information

Earnings per share Rupees 7.52 1.45 1.86

Price earnings ratio 2.46 26.79 21.51

Cash dividend per share Rupees 1.25 - 1.00

Bonus shares issues % - - -

Dividend payout ratio % 16.60 - 53.68

Dividend cover ratio 6.06 - 1.87

Break - up value per share Rupees 56.45 49.12 50.04

Market value per share

at the end of the year Rupees 18.53 38.84 40.00

high during the year Rupees 38.84 49.00 51.40

low during the year Rupees 17.40 28.60 37.25

Rs.
EBITDA Million 2,347 1,860 1,465

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SPACE MATRIX
SPACE MATRIX

INTERNAL STRATEGI POSITION EXTERNAL STRATEGIC POSITION

SINANCIAL STRANGTH (FS) ENVIRONMENTAL STABILITY (ES)
Return on Investment 6 Technological change -4
Leverage 3 Rate of Inflation -5
Liquidity 3 Demand Variability -4
Working capital 4 Price Range of Competing Products -5
Cash flow 3 Barriers to entry in market -3
Inventory Turnover 5 Competitive Pressure -3
Earnings per Share 6 Ease of exit from marker -1
Price Earnings Ratio 5 Risk involved in business -4
-
4.375 3.625 0.75

COPETITIVE ADVANTAGE (CA) INDUSTRY STRENGTH (IS)

Market Share -1 Growth Potential 6
Product Quality -5 Profit Potential 4
Product life Cycle -3 Financial stability 4
Customer loyalty -4 Technological know how 5
Competition's capacity utilization -4 Resource utilization 5
Technological know how -5 Ease of entry in market 3
Control over suppliers and distributors -1 Productivity capacity utilization 5
-
3.286 4.571 1.286

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BCG MATRIX

STARS QUESTION MARK

PRET LINE MEN’S STITCHED WEAR

ACCESSORIES

CASH COWS
DOGS
LAWN
MEN’S UNSTITCHED FOOT WEAR
HOME TEXTILE PERFUMES

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BALANCE SCORECARD
OBJECTIVES MEASUREMENT TARGETS STRATEGIC
INITIATIVES
CUSTOMERS
Target Market: Market share 70 % market share Market development
LSM : 8 & above
SEC: A+ & A Customer loyalty
Customer retention 100% customer programs
B2B customers retention ratio
Customer satisfaction On time delivery for
Attract new customers level 95% customer online buyers
satisfaction level
Retain customers Product availability

Design Accuracy Product quality

Quality leadership

INTERNAL
PROCESS
Superior R&D New product new seasonal Following global
development cycle collections twice a trends in fashion and
Finest Designers year setting benchmark in
Design quality local markets
Engraving for Color 99.9% design
Differentiation Color matching and matching Investment in new
quality technology to
Laboratory Color 99.9% color maintain edge on
Testing Nominal wastages matching design and color
quality
Color Development Product delivery 1% wastages
Reduction in scrap
Printing Quality Technology Fulfill 100% online sale
orders
Superior Production Asset utilization Continuous
Facility improvement in plant
CO2 emission Cover up lost sales efficiency in order to
Supply chain by increasing sales reduce wastages,
Community building growth by 20% carbon emission and
Environmental and empowerment of increase energy
Friendly women and 1000 women in work efficiency.
disadvantaged force at various
Socially Responsible positions Training program for
disadvantaged and
special people

Separate unit for

women
Child care facility for
women

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LEARNING &
GROWTH
Cultivate culture of New designs, ideas and lead position in Continuous
learning, creativity, concepts terms of new designs investment for
target orientation and learning and
adopting positive development of
values employees to maintain
Low employee reduce employee an edge
Attract and develop turnover turnover by 5% year
high caliber human on year basis Confidentiality policy
resource to ensure business
secrets are not leaked

FINANCIALS
Profitability Sales growth by 20% sales growth
segment targets

Increase in gross Customer and product Cost reduction by 5%

margin line profitability

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BLUE OCEAN STRATEGY

Blue Ocean Strategy on which Gul Ahmed is working are

 A dedicated Gul Ahmed Fashion magazine to promote their new collection

twice a year
 First one to launch online shop in Pakistan www.gulahmedshop.com ,
currently no other player in the industry has online shop

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CONCLUSION
Gul Ahmed has launched its online shop www.gulahmedshop.com for online shopping
but the problem is not all of their products are currently available one internet.
Mostly it happens on the first day of launch of their new collection, which is done twice a
year (one in winter and other in summer), the customers (mostly ladies) rush into ideas
and Gul Ahmed shop and start purchasing whole lot of a design and as a result that
design get short in the market. And customers who come become frustrated when they
can’t find a print.
Gul Ahmed is facing serious supply chain issue in this area, they can’t meet the demand.
One thing that can be done in this is the use of online shop to make sure availability of all
their hot designs for a sustainable period of time. This will be a one good strategy to
retain their customers.
Gul Ahmed can also use nontraditional communication channels like facebook and
twitter to interact with their customers and to get feedback. This online medium is one
very effective way of analyzing consumer choices. Google analytics and facebook page
analyzer can provide very useful information about user preferences. For instance it can
tell you which are the most favorite design liked by the audience, based on that
information Gul Ahmed can start producing more of that particular design and meet that
customer demand.

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