External Assessment

1. PORTER’S 5 FORCES MODEL

force strength of force industry attractiveness

1. Competitive Rivalry. H L

2. Entrants H L

3. Substitute L H

4. Bargaining power of supplier. H L

5. Bargaining power of buyers L H

Overall industry attractiveness = MEDIUM

❖ REASONS:
1. COMPETITIVE RIVALRY:

The industry is well organized and consists of healthy competition. FFC is strong in Pakistan with
approx. 40% market share. Therefore, rivalry is super high. The quality products are also similar,
so competition is based on branding and acquiring farmers. There is rich rivalry among FFC,
Engro, and Fatima. Hence strength of this force is High.

2. ENTRANTS:

The entry barriers for this industry are high and thus do not allow too much flow into the sector.
Setting up a plant requires huge amount of capital and expertise. The return on the investments is
collected and more profitable in long-term. That is the reason why we see only a handful of
players in the industry. Further, the market has become saturated. The inputs like gas are
depleting therefore, the government is not issuing the new gas certifications to the new firms.
The inputs are also too costly i.e. Phosphorus, Potassium etc. Hence strength of this force is High.

3. SUBSTITUTE:
 Fertilizer has no substitute as it is essential for the crop’s growth and health. If the fertilizers are
not used so the farmers suffer loss. Therefore, this industry has no threat of a substitute so far.
This means that the industry’s product has an advantage and a say of its own in the market. Even
Natural fertilizer are not perfect substitutes. Emphasis on high yields pushes farmers to buy
fertilizers. No threat of substitute of products until or unless, the product better than fertilizer can
be developed. Hence strength of this force is Low.

4. BARGAINING POWER OF SUPPLIER:

The main Raw material for the industry is methane, which is obtained from natural gas. It is
supplied by the local gas industry to the factories. Gas is used as both feed and fuel stock; thus,
one can image the significance of this raw material for this industry. Since gas is the main
ingredient therefore there is supplier power present. There is no other substitute present for gas.
If the gas company/industry is privatized, it will be more dominant over the fertilizer industry. The
gas is regulated by the government. Thus, firms can face the issue of shortage of gas (sometimes).
The gas suppliers are very few. Therefore, the dependence has created the edge to the suppliers.
firms cannot influence the market prices as these are regulated by government. Except gas, other
raw materials are imported thus, the dependence on these are high. Hence strength of this force
is High.

5. BARGAINING POWER OF BUYERS:

Farmers are the main buyers in this industry, as they are the ones in need of fertilizers for better
productivity of their crops. Thus, they end up paying the amount the fertilizers are priced without
any negotiations. The main problem facing the industry is that they can increase the price of the
end product to meet their costs of production to a certain extent as the farmers are not well-off
enough to afford the costly fertilizers. So, the industry has a certain price limit. Farmers can't
influence price. However, the perfect substitutes are there in brands Le. Sona Urea Engro Urea,
but farmers are reluctant to switch due to the satisfaction from one product. The farmers are
large in quantity and products are inevitable for production. Thus, the power lies to the company.
Hence strength of this force is low.

❖ RECOMMENDATIONS:

Entry to barriers might not be an easy force to target and harness, hence we can focus to strategize over
competitiveness rivalry and bargaining power of supplier.
The horizontal integration will enable the firm to take the ownership control over the firm and as a result
the strength of the force would become low.
For bargaining power of supplier, one can really do anything to produce their own natural gas as it is a
state-owned natural resource. However, through backward integration, firm may start producing other
raw materials. This will at least bring the strength of the weakness to medium.

2. PEST-C analysis:
Fauji Fertilizer Company Limited (FFC), one of Pakistan's leading fertilizer producers, conducting a PEST-C
analysis focused on opportunities and threats can offer valuable insights into the external factors that
may affect its operations and strategies. PEST-C stands for Political, Economic, Socio-cultural,
Technological, and Competitive factors.

PEST-C Analysis: (Opportunities)

✓ Political:
a. Government Subsidies and Support: Opportunities may arise from government initiatives aimed
at supporting the agricultural sector, including subsidies for fertilizer products, which can
increase demand for FFC’s products.
b. Trade Agreements: Positive trade agreements with other countries can open up new markets for
FFC, allowing it to expand its export footprint.
✓ Economic:
a. Agricultural Growth: With Pakistan's economy heavily reliant on agriculture, any economic
policies or investments aimed at boosting agricultural productivity can increase the demand for
fertilizers.
b. Currency Fluctuations: Favorable currency exchange rates could make FFC's exports more
competitive on the international market, potentially boosting revenues from abroad.
✓ Socio-cultural:
a. Increasing Agricultural Awareness: Growing awareness among farmers about the benefits of
using fertilizers for crop yield improvement can lead to higher demand for FFC’s products.
b. Population Growth: As the population grows, so does the demand for food, which in turn
increases the need for agricultural inputs, including fertilizers.
✓ Technological:
a. Innovations in Fertilizer Products: Developing new, more efficient, or environmentally friendly
fertilizer products can give FFC a competitive edge and open up new market segments.
b. Advancements in Production Technologies: Embracing new technologies for fertilizer production
can improve FFC’s operational efficiencies, reduce costs, and increase profitability.

✓ Competitive:
a. Market Expansion Opportunities: Identifying underserved or emerging markets where
competition is low could provide new growth avenues for FFC.
b. Strategic Partnerships: Collaborating with agricultural tech companies, research institutions, or
other entities in the agricultural supply chain could offer new opportunities for innovation and
market penetration.

In summary, FFC has numerous opportunities to leverage within the PEST-C framework. Capitalizing on
these opportunities involves strategic planning and adaptation to the evolving political, economic, socio-
cultural, technological, and competitive landscape. Focusing on innovation, market expansion, and
operational efficiency can help FFC maintain and enhance its position as a leader in the fertilizer industry.

PEST-C Analysis: (Threat)

✓ Political:
a. Import and export tariff are generally increase the cost of raw material for making chemical
fertilizer is also increase.
b. Custom duty for importing raw material.
✓ Economical:
a. The manufacturing costs pertaining to the fertilizer industry were impacted by inflationary
factors, combined with escalations in the prices of feed and fuel gas.
b. Shortages of natural gas in the country can limit the opportunities for the company in future.
✓ Social:
a. Although the adverse effects of this industry is very high because of the improper handling of
the waste. Due to this, many diseases like asthma, kidney diseases, hepatitis etc. are caused.
✓ Technological:
a. In order to meet the expectation of fertilizers in the country, a strong technological base is
required in the planning and development of specific engineering and expertise in project
management and execution.
✓ Competitive:
a. New competitors in the industry like Fatima Fertilizer and Engro fertilizer’s Company can reduce
the market share of FFCL
 3. EFE matrix
External Factors Weight Rating Weighted Score

Opportunities

Government Subsidies and Support 0.10 4 0.40

Trade Agreements 0.08 3 0.24

Agricultural Growth 0.10 4 0.40

Currency Fluctuations 0.07 3 0.21

Increasing Agricultural Awareness 0.08 3 0.24

Population Growth 0.09 4 0.36

Innovations in Fertilizer Products 0.10 4 0.40

Advancements in Production Technologies 0.08 4 0.32

Market Expansion Opportunities 0.08 3 0.24

Strategic Partnerships 0.10 4 0.40

Threats

Import and Export Tariffs 0.10 2 0.20

Manufacturing Costs 0.09 2 0.18

Health and Environmental Concerns 0.09 2 0.18

Technological Requirements 0.08 3 0.24

Increased Competition 0.07 2 0.14

Total 1.00 3.85

Recommendations:

1. Leverage Government Support and Subsidies: Actively engage with government initiatives and
utilize subsidies to maximize production efficiency and market penetration.

2. Exploit Trade Agreements: Explore and capitalize on new markets opened up by positive trade
agreements to expand export opportunities.
3. Focus on Technological Innovation: Allocate resources towards R&D to develop innovative and
environmentally friendly fertilizer products, enhancing competitiveness and market share.

4. Strengthen Strategic Partnerships: Collaborate with agricultural tech companies and research
institutions to drive innovation and gain access to new technologies.

5. Address Threats through Efficiency: Mitigate the impact of import/export tariffs and
manufacturing costs by optimizing operations and seeking cost-effective solutions.

6. Environmental Responsibility: Address health and environmental concerns through sustainable

practices and waste management strategies, ensuring compliance with regulations.
 4. CPM vs 3 major competitors:
Engro FFC Fatima Fertilizer

AS W S WS S WS S WS

Cost effective 8 0.1 3 0.3 3 0.3 3 0.3

products

Customer 8 0.1 4 0.3 3 0.3 3 0.3

loyalty

Brand image 9 0.11 4 0.44 3 0.33 3 0.33

Innovation and 8 0.1 4 0.4 4 0.4 3 0.3

growth
requirements

7 0.09 3 0.27 3 0.27 2 0.18

Compliant to
the regulations

Supply chain 7 0.09 3 0.27 3 0.27 3 0.18

management

Sustainable 8 0.1 3 0.3 3 0.3 2 0.2

products

Product 8 0.1 4 0.3 3 0.3 3 0.3

diversification

R&D 9 0.11 4 0.44 3 0.33 2 0.22

Effective 8 0.1 4 0.36 2 0.18 2 0.18

distribution
network

80 1.00 3.38 2.98 2.49

WS of Engro is 3.38 which is above average.

WS of FFC is 2.98 which is below average, following measures should be taken to make the FFC work and
perform better
 ● It can improvise on the production of sustainable products ● It should include
more products in the list and diversify.
● It should invest more in research and development areas to compete in the
market and thrive.
If above measures are taken then the weightage of FFC would be 3.1 which is above average.
 5. Details of 3 major competitors

✓ FATIMA FERTILISERS
Fatima Fertilizer Company Limited was incorporated on December 24, 2003, as a joint venture
between two major business groups in Pakistan namely, Fatima Group and Arif Habib Group.
The fertilizer complex is a fully integrated production facility, capable of producing three
intermediate products, i.e., Ammonia, Nitric Acid and LCO2 whereas three final products which
are Urea, Calcium Ammonium Nitrate (CAN) and Nitro Phosphate (NP) at Sadiqabad, Rahim Yar
Khan. The complex has a 56MW captive power plant in addition to off-sites and utilities. The
complex has been allocated 110 MMCFD of gas from the dedicated Mari Gas fields. Fatima
Fertilizer has a significant presence in the Pakistani fertilizer market. Its products are distributed
across the country through a well-established network of dealers and distributors. The company
also exports its fertilizers to international markets, contributing to foreign exchange earnings for
Pakistan. Fatima Fertilizer is committed to corporate social responsibility initiatives aimed at
benefiting the communities in which it operates. These initiatives may include educational
programs, healthcare projects, environmental conservation efforts, and support for local
development initiatives.
Fatima Fertilizer has established itself as a leader in the fertilizer industry in Pakistan through its
focus on quality, innovation, and customer satisfaction. The company's dedication to excellence in
production, environmental sustainability, and corporate governance has earned it recognition and
trust among stakeholders.
Overall, Fatima Fertilizer Company Limited plays a crucial role in supporting agriculture in
Pakistan by providing farmers with high-quality fertilizers essential for improving crop yields and
ensuring food security in the country.
✓ ENGRO FERTILISERS
Engro Fertilizers Limited is a Pakistani fertilizer manufacturing company and is a subsidiary of
conglomerate Engro Corporation. The company has a local market share of 30 per cent. Engro
Fertilizers was founded in 2010 as a wholly owned subsidiary of Engro Corporation. The
company's main manufacturing plant is located in Daharki, Sindh. It also has a fertilizer terminal
in Port Qasim, Karachi. Engro Fertilizers produces a variety of fertilizers, including urea, DAP,
and SOP. The company also markets a range of agricultural products and services, such as crop
advisory services, soil testing, and crop insurance. Engro Fertilizers is a leading player in the
Pakistani fertilizer market. The company has a strong brand reputation and a wide distribution
network. Engro Fertilizers is committed to providing high-quality fertilizers and services to its
customers.
Here are some of the key brands of Engro Fertilizers:
 • Engro Zarkhez: A urea fertilizer that is known for its high quality and consistent
performance.

• Engro DAP: A compound fertilizer that is used to improve crop yield and quality.

• Engro SOP: A potassium fertilizer that is used to improve crop resistance to drought and
pests.

• Engro Envy: A micronutrient fertilizer that is used to improve crop health and productivity.

• Engro Biozyme: A bio fertilizer that is used to improve soil health and nutrient availability.

Engro Fertilizers is committed to sustainable agriculture. The company has a number of initiatives
in place to reduce its environmental impact, such as using efficient irrigation practices and
minimizing the use of water and energy.
Engro Fertilizers is also committed to social responsibility. The company supports a number of
community development programs, such as education and healthcare initiatives.
In 2022, Engro Fertilizers was awarded the "Best Fertilizer Company in Pakistan" by the Pakistan
Fertilizer Association. The company was recognized for its leadership in the fertilizer industry and
its commitment to sustainability and social responsibility.
If you are looking for high-quality fertilizers and agricultural products, Engro Fertilizers is a good
option. The company has a strong brand reputation and a wide distribution network. Engro
Fertilizers is committed to providing its customers with the best possible products and services.
✓ LCPL
Lotte Chemical Pakistan Ltd is a world-class supplier of purified terephthalic acid, an essential
raw material used in the polyester industry. Lotte, the South Korean conglomerate, acquired the
majority shareholdings in Pakistan PTA Limited (PPTA) in September 2009. Subsequently, the
name of the Company was changed to Lotte Chemical Pakistan Ltd. Lotte Chemical Pakistan Ltd
is the single largest foreign direct investment to date (US$ 490 million) in Pakistan’s petrochemical
industry. The plant at Port Qasim, Karachi was built using ICI’s state-of-the-art technology when
it was commissioned in 1998. It produces Purified Terephthalic Acid (PTA), an essential raw
material for Pakistan’s textile and PET packaging industries and forms the backbone of the
polyester chain, including Polyester Staple Fibre, Filament Yarn and PET (bottle grade) resin. In
addition to its own manufacturing facilities, the Company has helped create a large infrastructure
network at the Port Qasim vicinity, which includes a chemical jetty, raw water pipeline and
manufacture of industrial gases through third party contracts. It has therefore been a trendsetter in
industrial investment in Pakistan. The PTA plant was constructed in 1996/97 and started production
in June 1998. Within a short time, PPTA’s dedicated and highly motivated team of professional
engineers proved that it could run this complex plant to world standards of safety, environmental
care, product quality and process efficiency.