LITERATURE

REVIEW










Review of Literature

"Strategy is the direction and scope of an organization over the long-term: which achieves advantage
for the organization through its configuration of resources within a challenging environment, to
meet the needs of markets and to fulfill stakeholder expectations".

Johnson and Scholes












i) A strategic vision is a roadmap of a company's future-providing specifics about
technology and customer focus, the geographic and product markets to be pursued, the
capabilities it plans to develop, and the kind of company that management is trying to
create.

ii) A company's mission statement is typically focused on its present business scope-
"who we are and what we do"; mission statements broadly describe an organization's
present capabilities, customer focus, activities, and business makeup.

Strategic
Analysis
Strategy
Implementation
Strategic Choice
iii) Strategic objectives relate to outcomes that strengthen an organization's overall
business position and competitive vitality; financial objectives relate to the financial
performance targets management has established for the organization to achieve.

Strategy making is fundamentally a market-driven and customer-driven entrepreneurial activity-the
essential qualities are a talent for capitalizing on emerging market opportunities and evolving
customer needs, a basis for innovation and creativity, an appetite for prudent risk taking, and a
strong sense of what needs to be done to grow and strengthen the business.
The match of external and internal developments dictate that a company's strategy change and
evolve over time-a condition that makes strategy making an ongoing process, not a one-time event.

A strategic plan consists of an organization's mission and future direction, near-term and long-
term performance targets, and strategy.
The faster a company's external and internal environment changes, the more frequently that its
short-run and long run strategic plans have to be revised and updated-annual changes may not be
adequate. In today's world strategy life cycles are growing shorter, not longer.
Strategy implementation concerns the managerial exercise of putting a freshly chosen strategy
into place. Strategy execution deals with the managerial exercise of supervising the ongoing pursuit
of strategy, making it work, improving the competence with which it is executed, and showing
measurable progress in achieving the targeted results.
Strategy execution is fundamentally an action-oriented, make-it-happen process-the key tasks are
developing competencies and capabilities, budgeting, policy making, motivating, culture-building,
and leadership.
A company's vision, objectives, strategy, and approach to implementation are never final; evaluating
performance, reviewing changes in the surrounding environment, and making adjustments are
normal and necessary parts of the strategic management process.
Strategic management is a tightly knit process; the boundaries between the five tasks are
conceptual, not fences that prevent some or all of them being done together.
Managers are not prepared to decide on a long-term direction or a strategy until they have a keen
understanding of the company's strategic situation-the exact nature of the industry and competitive
conditions it faces and how these conditions match up with its resources and capabilities.
An industry's economic features help frame the window of strategic approaches a company can
pursue.
A company's competitive strategy is increasingly effective the more it provides good defenses
against the five competitive forces, shifts competitive pressures in ways that favor the company, and
helps create sustainable competitive advantage.
Successful strategists seek to capitalize on what a company does best its expertise, resource
strengths, and strongest competitive capabilities.
Strategic cost analysis involves comparing how a company's unit costs stack up against the unit
costs of key competitors activity by activity, thereby pinpointing which internal activities are sources
of cost advantage or disadvantage.
A company's value chain identifies the primary activities that create value for customers and the
related support activities.
A company's cost competitiveness depends not only on the costs of internally performed
activities (its own value chain) but also on costs in the value chains of suppliers and forward channel
allies.
Benchmarking the costs of company activities against rivals provides hard evidence of a company's
cost competitiveness.
The challenge of competitive strategy-whether it be overall low-cost, broad differentiation, best-
cost, focused low-cost, or focused differentiation-is to create a competitive advantage for the firm.
Competitive advantage comes from positioning a firm in the marketplace so it has an edge in coping
with competitive forces and in attracting buyers.
To achieve a low-cost advantage, a company must become more skilled than rivals in controlling
structural and execution cost drivers and/or it must find innovative cost-saving ways to revamp its
value chain. Successful low-cost providers usually achieve their cost advantages by imaginatively and
persistently ferreting out cost savings throughout the value chain. They are good at finding ways to
drive costs out of their businesses.
Differentiation strategies seek to produce a competitive edge by incorporating attributes and
features into a company's product/service offering that rivals don't have. Anything a firm can do to
create buyer value represents a potential basis for differentiation. Successful differentiation is
usually keyed to lowering the buyer's cost of using the item, raising the performance the buyer gets,
or boosting a buyer's psychological satisfaction. To be sustainable, differentiation usually has to be
linked to unique internal expertise, core competencies, and resources that give company capabilities
its rivals can't easily match
Companies opt to expand outside their domestic market for any of four major reasons: to gain
access to new customers for their products or services, to achieve lower costs and become more
competitive on price, to leverage its core competencies, and to spread its business risk across a
wider market base. A company is an international or multinational competitor when it competes in
several foreign markets; it is a global competitor when it has or is pursuing a market presence in
virtually all of the world's major countries.
Building a strategy-supportive corporate culture is important to successful strategy execution
because it produces a work climate and organizational esprit de corps that thrive on meeting
performance targets and being part of a winning effort. An organization's culture emerges from why
and how it does things the way it does, the values and beliefs that senior managers espouse, the
ethical standards expected of organization members, the tone and philosophy underlying key
policies, and the traditions the organization maintains. Culture thus concerns the atmosphere and
feeling a company has and the style in which it gets things done.







Strategic Management Process














Input Stage:
Consists of the internal factor evaluation (IFE), external factor evaluation (EFE) and competitive
profile matrix (CPM) of the firm. Once the company is well aware of its strengths, weaknesses,
opportunities & threats, it has a fair idea of how to step in the external environment before its
competitors. Analyzing competitors and industries key success factors, gives a firm a spot light to
focus on certain areas to stand out and make its mark in the industry.
Matching Stage:
This stage is a phase in which a firms internal and external analysis makes full use of and
development of strategies takes place. TOWS Matrix, SPACE Matrix, BCG Matrix, IE Matrix and Grand
Strategy Matrix are matrixes that help in formulating more strategies.



Input Stage
Matching
Stage
Decision
Stage
Decision Stage:
This is the last stage at which we have to decide among the many strategies extracted from the
above two stages and then are listed together, duplicates are deleted and then each strategy is given
its weightage and its ratings, together then comes out the decision as to which strategy is best to
implement.

Implementation:
90% of all air crashes take place during the landing period. Giving the demonstration of reality, that
when a firm formulates, extracts, and finally decides which strategy to go ahead with, its not that
phase which is most difficult, but the difficult and most challenging phase is How to implement the
chosen strategy in the prevailing situation.
1
















1
Fred David 12
th
edition, Strategic Management
Textile Industry in Pakistan, Facts and figures
The textile industry is one of the most important sectors of Pakistan. It contributes significantly to
the countrys GDP, exports as well as employment. It is, in fact, the backbone of the Pakistani
economy.

Established capacity
The textile industry of Pakistan has a total established spinning capacity of 1550 million kgs of yarn,
weaving capacity of 4368 million square meters of fabric and finishing capacity of 4000 million
square meters. The industry has a production capacity of 670 million units of garments, 400 million
units of knitwear and 53 million kgs of towels.
The industry has a total of 1221 units engaged in ginning and 442 units engaged in spinning. There
are around 124 large units that undertake weaving and 425 small units. There are around 20600
power looms in operation in the industry. The industry also houses around 10 large finishing units
and 625 small units. Pakistani textile industry has about 50 large and 2500 small garment
manufacturing units.
Moreover, it also houses around 600 knitwear-producing units and 400 towel-producing units.

Contribution to exports
According to recent figures, the Pakistan textile industry contributes more than 60% to the countrys
total exports, which amounts to around 5.2 billion US dollars. The industry contributes around 46%
to the total output produced in the country. In Asia, Pakistan is the 8th largest exporter of textile
products.





Contribution to GDP and employment
The contribution of this industry to the total GDP is 8.5%. It provides employment to 38% of the
work force in the country, which amounts to a figure of 15 million. However, the proportion of
skilled labor is very less as compared to that of unskilled labor. The World Textile and Apparel
industry is undergoing a tremendous era of changes characterized first by the rapid relocation of the
majority of productions out of western countries and secondly the increasing level of competition
among new supplying countries with China and India, expected to rapidly gain control over global
textile and apparel trade.

Post quota scenario has dramatically changed the global trade pattern. With the opening of world
markets and increased global competition, there is a new focus required for textile companies to
increase their success rate. The winning formula now is much more based on internal competences
and performance than on protected political and trade policies.

Many developing countries including Pakistan are highly dependent on textile and apparel export,
which accounts for a significant share of their total industrial goods export and hence export
earnings, creating a high degree of dependency on this sector.

In this context national governments of leading textile countries are constantly intervening playing a
relevant role in determining the overall competitiveness of their commodity textile industry through
various kinds of incentives.
2


The Cabinet Committee on Textile has restricted yarn export to 50 million kg a month and
offered 2% rebate to yarn manufacturers for supplying their product to the local
downstream industry. The Committee had recommended that yarn export should not go
beyond 550 million kg against average export of 525 million kg over the last three years.


2
http://www.osec.ch/internet/osec/de/home/export/countries/pk/export/economic_report.-RelatedBoxSlot-
98778-ItemList-97522-File.File.pdf/bb_Pakistan-Marktstudie-Textilindustrie2007_en.pdf
According to The Federal Secretary Ministry of Commerce, Zafar Mehmood, the government
had capped yarn export at 50 million kg a month, but the move was not in line with the WTO
regime and it should be considered temporary. He said yarn prices increased because of
shortage of cotton in the world market and our yarn export went unnecessarily high, first
local demand should be met.

According to Jawed Bilwani, Chairman Pakistan Apparel Forum Chairman, Pakistan is the
fourth largest cotton producer but is not listed among top apparel exporters. Bangladesh,
which does not produce cotton, exports apparel worth $13 billion while Pakistans apparel
exports are only worth $6 billion.

The Federal Secretary Ministry of Commerce, Zafar Mehmood, said the government was
doing a lot of diplomacy to win access to US and EU markets, but due to the World Trade
Organization (WTO) regime they had to go through the system. The EU and USA have agreed
to talk on free trade agreement with Pakistan.
3







3
http://www.ptj.com.pk/Web-2010/01-10/Textile-Briefs-National.htm









ABOUT
GUL AHMED











COMPANY PROFILE

Gul Ahmed is a brand synonymous with quality, innovation & reliability not just in Pakistan but all
over the world. The mill is a composite unit, making everything from cotton yarn to finished product
Manufacturing takes place in decentralized production unit, strictly focusing on specialization all
under one recognized & reputed name.

Gul Ahmeds textile products represents a unique fusion of century old tradition of the east and the
latest textile technology of west, the purest of cotton fibers are spun, woven & processed into the
finest quality cotton & blended products, through a combination of cutting edge technology & highly
skilled craftsmanship. Products include bed linen, curtains, fabric and yarn. The companys spinning
line specializes in medium to fine count cotton yarns & is also capable of producing wide variety of
synthetic fibers.

Gul Ahmed has introduced new fashion trends and dictated the style of the day with its classic yet
contemporary designs. In house designers are constantly striving to keep up with the latest fashions
and come-up with innovative designs that became fashion statements of the day.
MISSION AND VISION

VISION STATEMENT
Setting Trends globally in the textile industry. Responsibly delivering products and services to its
partners

EVALUATION OF VISION STATEMENT
Gul Ahmeds vision statement is quite vague in terms of scope as it does not outline the quality
parameters that they should set up and also where they ultimately want to go in the long run, it
covers only the global trends which they inspires to set up on the contrary the consumers sets up
the trends and companies follow it.

PROPOSED VISION
To be a world class textile organization one that lead and serves as the benchmark for others

MISSION STATEMENT
To deliver value to its partners through innovative technology and teamwork. Fulfilling its social and
environmental responsibilities

EVALUATION OF MISSION










Customers
Products or Services X
Markets X
Technology
Concern for survival, growth and profitability X
Philosophy
Self concept X
Concern for public image
Concern for employees X
PROPOSED MISSION
Our mission is to give our customers locally and internationally a competitive advantage through
superior textile products and services at best prices. We will meet and exceed our customers'
expectations of service through timely delivery and supreme quality. To achieve tangible benefits by
promoting efficiencies, productivity and professionalism we aim to provide competitive prices and
genuine products to our clients. We aim to use state of the art technology and best workforce
available to ensure the concern for our service to our clients, employees and effective use of the
natural resource available.






















Customers
Products or Services
Markets
Technology
Concern for survival, growth and profitability
Philosophy
Self concept
Concern for public image
Concern for employees





































INDUSTRY
ANALYSIS












PORTERs FIVE FORCES
THREAT OF NEW ENTRANTS YES
(+)
~ NO
()
1 Do large firms have a cost or performance advantage in your segment of
the industry?


2 Are there any proprietary product differences in your industry?


3 Are there any established brand identities in your industry?


4 Do your customers incur any significant costs in switching suppliers?

5 Is a lot of capital needed to enter your industry?


6 Is serviceable used equipment expensive?

7 Does the newcomer to your industry face difficulty in accessing
distribution channels?


8 Does experience help you to continuously lower costs?


9 Does the newcomer have any problems in obtaining the necessary skilled
people, materials or supplies?



10 Does your product or service have any proprietary features that give you
lower costs?


11 Are there any licenses, insurance or qualifications that are difficulty to
obtain?


12 Can the newcomer expect strong retaliation on entering the market?





LOW HIGH
INTERPRETATION
The threat of new entrants is relatively lower in the textile sector of Pakistan, as there are many
potential textile manufacturers in the country. The industry is growing at a satisfying rate and new
technology and skilled labor is putting life into the industry. Companies are providing new, up to
date products to their customers that meet international standards and the competition is very high.
In a country like Pakistan, where there is a problem of economic and political instability, there are
certain issues in setting up a mill or plant in the country. Government is providing incentives though,
but a huge amount of capital is required to setup the business.

BARGAINING POWER OF BUYERS YES
(+)
~ NO
()
1 Are there a large number of buyers relative to the number of firms in the
business?


2 Do you have a large number of customers, each with relatively small
purchases?


3 Does the customer face any significant costs in switching suppliers?

4 Does the buyer need a lot of important information?

5 Is the buyer aware of the need for additional information?

6 Is there anything that prevents your customer from taking your function
in-house?


7 Your customers are not highly sensitive to price.

8 Your product is unique to some degree or has accepted branding.


9 Your customers businesses are profitable.


10 You provide incentives to the decision makers.



LOW HIGH

INTERPRETATION
Bargaining power of buyers is somewhat moderate for the industry. Manufacturers provide products
in bulk and on fixed price to their retail outlets, whole sellers etc. Prices of these products depend on
the cotton cultivation, government policies, and in a country like Pakistan, inflation and current
economic conditions are favoring this industry.







THREAT OF SUBSTITUTES YES
(+)
~ NO
()
1 Substitutes have performance limitations that do not completely offset
their lowest price. Or, their performance is not justified by their higher
price.


2 The customer will incur costs in switching to a substitute.


3 Your customer has no real substitute.


4 Your customer is not likely to substitute.




LOW HIGH
INTERPRETATION
The threat of substitute is moderate; there is no such potential substitute available for this type of
products. The textile industry of Pakistan is diversified and is providing varieties in their products.
BARGAINING POWER OF SUPPLIERS YES
(+)
~ NO
()
1 My inputs (materials, labor, supplies, services, etc.) are standard rather
than unique or differentiated


2 I can switch between suppliers quickly and cheaply.

3 My suppliers would find it difficult to enter my business or my
customers would find it difficult to perform my function in-house.


4 I can substitute inputs readily.

5 I have many potential suppliers.


6 My business is important to my suppliers.


7 My cost of purchases has no significant influence on my overall costs.




LOW HIGH

INTERPRETATION
The bargaining power of supplies is relatively low, as there are no unique input for the industry, and
Pakistan is an agricultural economy, so there are many potential suppliers available in the country.

RIVALRY AMONG EXISTING COMPETITORS YES
(+)
~ NO
()
1 The industry is growing rapidly.


2 The industry is not cyclical with intermittent overcapacity.

3 The fixed costs of the business are a relatively low portion of total costs.

4 There are significant product differences and brand identities between
the competitors.


5 The competitors are diversified rather than specialized.

6 It would not be hard to get out of this business because there are no
specialized skills and facilities or long-term contract commitments, etc.


7 My customers would incur significant costs in switching to a competitor.

8 My product is complex and requires a detailed understanding on the
part of my customer.


9 My competitors are all of approximately the same size as I am.





LOW HIGH

INTERPRETATION
Rivalry is very high in this industry which makes this industry a bit unfavorable. There are many
known competitors in the market. Textile manufacturers are providing products according to
international fashion industry and are competing on the basis of technology, designs, prices, quality
and availability.






OVERALL INDUSTRY ANALYSIS
OVERALL INDUSTRY RATING Favorable Moderate Un-
favorable
Implications
Threat of new entrants 9 1 2
Threat of new entrants is low
Favorable
Bargaining power of buyers 5 - 5
Bargaining power of buyers is
Low
Moderate
Threat of substitutes 2 2 -
Threat of substitutes is Low
Favorable
Bargaining power of
suppliers
3 2 2
Bargaining power of suppliers
is low
Favorable
Intensity of rivalry among
competitors
2 - 6
Intensity or rivalry is High
Unfavorable
Total 21 5 15 Favorable
















PEST ANALYSIS

OVER ALL MACRO ECONOMIC PEST FACTORS

POLITICAL FACTORS

Following are some of the political factors:
Tax policy
Rebate
Quota
Industrial policy of Government in term of garments manufacturer
Subsidies from Government
Labor policy
Political situation
Law and order

All of these factors positively and negatively impact the textile industry depending on the situation
prevailing. Currently in Pakistan political situation is changing on a routine basis and government is
negatively impacting the industry, Government has made efforts to strengthen the sector by
providing subsidies on R&D but suspicion remains on the trenchancy. Currently the textile turmoil
prevailing is of cotton crisis. Pakistan is rich in cotton but government in this fiscal year has exported
a major chunk of cotton to china and now the industry is importing it back on higher prices.
Moreover, during the cold war that took place between Russia and America, Pakistan supported
America. This is the reason Russia is not willing to be our buyer even for less prices.






ECONOMIC FACTORS
No doubt that it is the period of recession and about almost the entire industrial sector got affected
from it and in this case declining period of textile sector is a natural phenomenon. Economic
scenario in Pakistan and all over the word has several affect on the textile sector
Following are some of the economic factors:
MINIMUM WAGE LAWS
Minimum wage is constantly increasing and all organizations are expected to abide by the rules laid
out by the Government. Previously the minimum wage was Rs.4000 and now the Government of
Pakistan has increased this amount to Rs.6000. This law has been implemented from July 2008
onwards.
INTERNATIONAL POLICIES
Due to international recession, the Government policies of US and European countries are
constantly becoming rigid towards the third world countries like Pakistan, India, Bangladesh and this
rigidity of policies causes the change in rate and tariff and increases it to several times.
PRICING OF RAW MATERIAL

Due to increased global demand of cotton, the production of cotton and other fibers is decreasing
and this in turn is constantly increasing the price of Cotton. The rising price of cotton has increased
the prices of Yarn too much.

SOCIAL FACTORS
Due to increase in education and technological sector, the buying power of the customers is
increasing at a speedy rate.
They are becoming aware about the brands and latest fashions. Due to this, they are
demanding high fashion at a low price in international market and so the fashion trends are
changing at a very fast pace.
Besides this, the population of youngsters in foreign countries is increasing day by day and
they are demanding latest trends at large quantity and styles. To achieve greater quantity,
they have to opt for latest machinery and skilled staff to produce more and more to fulfill
the demands of the international buyers.
People are becoming health conscious also and its necessary to focus on the welfare of the
employees by providing them a neat clean and a healthy environment to work in. It is also
mandatory for the company to educate and inform people living near the industrial areas
about the environment. They should keep the environment non hazardous.


TECHNOLOGICAL FACTORS

Technology is also a key sector in terms of external environment for garments industry. The
technology is working as a substitute for man power with more efficiency. The industrialist has a
solid point that it can save cost in terms of

Error reduction
Less labor cost In order to compete internationally the organization must have to depend
on new and advanced technology

















PEST ON THREAT OF NEW ENTRANT
Though it is easy to enter in the textile business but to enter in the position of a vertical unit is very
difficult because of the huge amount of initial investment involved. At this point on time where the
world is in the phase of recession and there are very few buyers available, and already established
brands functioning, it is very difficult for a new entrant to earn their business. But on the shorter
scale as far as CMT (Cut Manufacture and Trims) unit are concerned it is far easier to compete
because of the low profit margins.
Also it is worth clarifying here the present economic turmoil in country makes it extra difficult for
new companies to work because of the duties and higher amount of utility burden involved. Also as
per IMF program Pakistan is bound to increase its tax structure and utility expenses which will
further aggravate the situation.
But the huge factor here is international competition. Countries like china, India, Bangladesh and
Srilanka are giving severe competition to Pakistani textile companies and are taking their business
away because of cheaper labor available there and also lesser utilities expenses as compared to
Pakistan which is a major threat to our textile industry.
Also the termination of the MFA (Multi fiber Agreement) and the entrance in the free quota regime
invites all companies all over the world to enter in the textile business.


LOW HIGH










PEST ON BARGAINING POWER OF BUYER
The global economic slowdown and the declining buying power makes buyer more conscious
towards prices and now they are competing for a single cent even. Recently we had a conversation
with a Merchandiser in a textile company he said that we lose the business to US retail Gaint Gap to
Bangladesh just because of few cents.
Buyers today particularly in textile business are demanding higher quality but they are not willing to
augment the price easily. We talked in various textile companies one merchandiser in Al-karam
textile says that the margins are reduced drastically as compared to what the margins they were
earning 10 years back.


LOW HIGH



PEST ON THREAT OF SUBSTITUTES
Threat of substitute in textile industry is pretty low in spite of the fact that there has been a lot of
research on alternative clothing like creped tissue paper sheets but they have not gain any
popularity and their implementation at mass scale is very difficult. There has been a shift in textile
industry as now more of plastic wire and tarpaulin is used instead of a weave but that segment as a
very low contribution in the overall textile sector.



LOW HIGH





PEST ON BARGAINIG POWER OF SUPPLIERS
Bargaining power of suppliers is not very high because of the fact that cotton is normally the raw
material thats used more and the cotton growers and ginners cannot bargain much because of the
international pricing mechanism of commodity exchange. But the bargaining power of suppliers of
accessories likes:
zippers
labels
tags
poly bags
Their bargaining power is much higher because of the few players like YKK etc.


LOW HIGH



PEST ON RIVALRY AMONG COMPETITORS
The rivalry among competitors is extremely high as the margin of having order in the textile industry
is as low as to few cents both domestically and internationally. Also the recession has further
intensified this rivalry as buyers are shutting down and the existing numbers of buyers are getting
lesser so all the textile companies are running to get their business.



LOW HIGH




OVERALL PEST

LOW HIGH




























































EXTERNAL
AUDIT











EFE MATRIX
Opportunities and threats are extracted out of the analysis of five forces of Porter and social,
technological, political and economic trends of the environment the company is operating in, so
based on our previous analysis of all these factors has led us to come up with EFE Matrix








EFE MATRIX

Critical Success Factors Weight Rating Weighted
Score
Opportunities
New style and Trends Demands 0.10 3 0.30
New market segments around the world 0.25 2 0.50
Abolition of Quota 0.05 2 0.10
Existing production Capacity 0.04 4 0.16
Lower cost competitiveness 0.06 2 0.12
Advanced Technology 0.05 3 0.15

THREAT
Strong Local competitors 0.08 3 0.24
Strong international Competitors 0.15 4 0.60
Economic Downturn 0.10 1 0.10
Change in Government Policies 0.04 1 0.04
Lack of conducive Environment of Business 0.04 2 0.08
Rise in utilities expenses 0.04 2 0.08
TOTAL 1.00 2.47
ANALYSIS

New style and Trends Demands
The growing customer demand of new styles and designs is an opportunity for Gul Ahmed as they
are equipped with modern technology of air jet looms and advance printing and dyeing machines so
they can cope with it quite well.

New market segments around the world
The problem that Gul Ahmed is facing is that of limited exposure in the markets. They are catering
only to US, Europe, Spain etc. But there are also other markets of Russia, China and others which
they are not covering which can give Gul Ahmed exceptional returns.

Abolition of Quota
The abolition of quota after 2005 gives the company advantage to increase their capacitites and
cater as much exports as they can.

Existing production Capacity
The existing production capacity of Gul Ahmed is well enough to meet the Demand of the buyers but
most of their units are working on below capacity.

Lower cost competitiveness
Gul Ahmed is completely vertical unit they are making their own yarn till packaging stuff so the
lower cost competitiveness gives them an incentive to better compete in the market .




Advanced Technology
Gul Ahmed possesses state of the art technology in almost all of the departments which include:
Spinning
Weaving
Wet Processing
The analysis of the critical factors of the EFE matrix and their weighted score reveals that the new
market segments around the world is the most important aspect of the matrix as it has the highest
weight associated but the rating is very low which means Gul Ahmed is not successfully catering it.
On the threats strong international competitors is the biggest threat to Gul Ahmed at this point in
time since the textile business is quota free and any country can export to any other depending on
efficiency.
The total weighted average score of 2.47 conveys that Gul Ahmed is working on below the average
score of 2.5 which means that Gul Ahmed is not doing well enough in taking the advantage of
opportunities and avoiding the threats facing the firm.
We can see that Gul Ahmed has sufficient existing capacity but they are not efficiently utilizing it,
which means though Gul Ahmed has available resources but they just need to channelize it. The
Growth in Bangladesh, china and others countries textile share is a warning signal to Pakistan since
Pakistan share is on decline.









STRATEGIES

1. MARKET PENETRATION
Pakistan have a huge opportunity to cater the china and Russian textile market as Pakistan woven
products are acknowledge all over the world for its best quality and yet we are not exporting to
these two giant buying nations. At this point in time Gul Ahmed is exporting yarn to China but they
are not exporting bed linen and home textiles to these two countries.

2. EFFICIECNCY IN CAPACITY UTILIZATION
Most of the Gul Ahmeds units are running on below efficiency where as we see the capacity
utilization off Bangladesh and china are much higher.

3. ADJUSTMENTS IN PRICING
To compete in the international market Gul Ahmed need to lower down its prices for that they need
to remove the bottlenecks and need to improve the efficiency level of the units production














COMPETITIVE PROFILE MATRIX

GUL AHMED NISHAT MILLS KOHINOOR TEXTILES
Critical Success
Factors
Weight Rating Wt. Score Rating Wt. Score Rating Wt. Score
Market Share 0.22 3 0.66 4 0.88 2 0.44
Price
Competitiveness
0.14 3 0.42 3 0.42 2 0.28
Management 0.06 2 0.12 2 0.12 2 0.12
Financial Position 0.08 4 0.32 3 0.24 2 0.16
Advertising 0.08 2 0.16 2 0.16 1 0.08
Technology 0.08 4 0.32 4 0.32 2 0.16
Customer Loyalty 0.04 3 0.12 3 0.12 2 0.08
Product Quality &
hygiene
0.10 3 0.30 3 0.30 2 0.20
Employee
Productivity
0.08

2 0.16 3 0.24 2 0.16
Branding 0.12 1 0.12 1 0.12 1 0.12
TOTAL 2.7 2.92 1.80

ANALYSIS
The analysis of the competitive profile matrix reveals that Gul Ahmed is second to Nishat AND IS
DOING BETTER THAN Kohinoor textiles. The overall market share of nishat is much higher than Gul
Ahmed also the productivity of the nishat workforce is much better where as Gul Ahmed is
performing much better as compared to Nishat in terms of financial position. It appears from CPM
that Gul Ahmed need to tap more markets to gain extra market share.










































INTERNAL
ANALYSIS











VALUE CHAIN ANALYSIS



Spinning
Cotton value chain starts from Ginning that adds value to it by separating cotton from seed and
impurities. However, spinning can be called as the first process in the chain that adds value to cotton
by converting it into a new product i.e. conversion of ginned cotton into cotton yarn. Spinning is the
foundation process and all the subsequent value additions i.e. Weaving, Knitting, Processing etc.

Weaving
Weaving is the process of making cloth, rugs, blankets, and other products by crossing two sets of
threads over and under each other. Weavers use threads spun from natural fibers like cotton, silk,
and wool and synthetic fibers such as nylon and Orlon. But thin, narrow strips of almost any flexible
material can be woven.

Wet Processing
Wet processing is the process of dyeing finishing of fabric. Wet processing is the most important
step of a textile value chain since after this the product is really worth selling it adds highest amount
of value after woven into textiles products.

Finishing
Finishing is the process of checking, accessories addition and packaging of textile products. This is
the process after which the textile products are finally ready to get shipped.

Transport
This is the final step in the textile value chain the products can be transported by air or by ship,
generally ship is the means usually adopted as it is less costly but for urgent delivery air
transportation is used.

















STRATEGIC COST MANAGEMENT

COTTON YARN
Gul Ahmed is cutting cost in their yarn production. Gul Ahmed has two spinning units. The
machinery used in these units is made in the U.K., Japan, Germany & the U.S.A.
The ring spinning operation comprises of a total of 130,296 spindles. A wide range of yarns are
produced in these units: 100% cotton from 50 NM for knitting and weaving, up to 135 NM for light
weight dress fabrics. Poly Cotton, Poly viscose and 100% viscose yarns are also produced from 7 Ne
to 100 counts.

WEAVING (USE OF AIR JET LOOMS)
These air jet looms are the most advanced looms. The units have 223 air jet looms. The air jet looms
come from Tsudakoma in Japan. The latest installations of air jet looms operate in a new custom
built weaving facility supported by the most modern yarn preparation equipment and are
comparable with the finest available yarn preparation equipment anywhere in the world.
These units produce fine quality lawns, sheetings, twills, drills, dobbies, satins, and other fancy
fabrics with a width of up to 330 cms.

WET PROCESSING
The wet processing unit is equipped with a wide range of state of the art machines which gives Gul
Ahmed a flexible processing possibility and an edge over its competitors.
Gul Ahmed has 4 sophisticated rotary printing machines Capable of printing up to 21 colours on
fabrics as wide as 320 cm.

Processing and Finishing Machinery are very advanced and that is where Gul Ahmed is cutting costs
some machinery include:
Computerized Colour Kitchen
Calender
CAD/CAM System
Colour Scanner
Dyeing Range
Embroidery Machine (20 head 9 colour)
Film Plotter etc.
















CORE COMPETENCIES

A competitively important activity that a company performs better than other competitively
important activities is termed as core competence. Following are some of the core competencies of
Gul Ahmed:
HOME TEXTILES QUALITY AND DESIGNS
Gul Ahmed is known for its supreme quality in bed line and new designs that it offers in home
textiles ranging from:
Curtains
Bed sheets
Bath products
Drapery
Cushions etc


DIFFERENT COUNT YARN 78x54
Gul Ahmed have 3 spinning units, located in Karachi which consist of over 190 ring frame, with daily
production capacity of more than 180,000 lbs of yarn, with flexibility to produce from count Ne 10/s
to Ne 160/s. Gul Ahmed is using discharge printing which is not used commonly.

TECHNOLOGY
Gul Ahmed re competencies are teams of highly trained professionals and state of the art
machinery, imported from Japan, Germany, England, Switzerland, Italy, France, Belgium and China.





FINANCIAL RATIO ANALYSIS


GUL
AHMED

NISHAT

KOHINOOR





2009 2008 2007 2009 2008 2009 2008
Profiability Ratios


Gross profit ratio 16.81 15.14 14.98 18.2 14.4 12.6 13.07
EBITDA margin to
sales 13.37 12.49 11.9 6.5 31.2 6.31 -4.4
Net profit to sales 0.58 0.88 1.67 5.3 29.97 3.33 -5.19

Liquidity Ratios


Current ratio 0.95 0.9 0.95 0.86 1.19 0.74 0.84
Quick ratio 0.39 0.42 0.47 0.38 0.8 0.66 0.49
Debt to equity ratio 0.98 1.07 0.85 0.63 0.51 1.13 0.84


Rate of Return


ROE 2.73 3.79 6.62 6.6 22.1 -2.74
-
14.06
Return on capital 21.82 19.14 16.45 4 14.5 -2.6 -7.3
Time Interest
coverage ratio 1.16 1.28 1.54 2.03 8.05

-

Capital Efficiency

Inventory turnover 107 95 104 70 85 36
Debtor turnover 66 72 74 - - - -
Creditor turnover 76 61 56 - - - -
Fixed asset turnover
ratio 2.27 2 2.08 2.13 1.7 0.96
Total asset turnover 1.07 1.05 0.98 0.76 0.51 0.81

Investors
Information


Earnings per share 1.45 1.86 3.11 5.2 24.2 -0.36 -6.34
Price to earning ratio 26.79 21.51 14.68 13.4 2.3 -3.43



Gross Profit Margin
Gul Ahmeds gross profit margin as compare to the industry is quite good (16.81%) but its slightly
lower than its competitor Nishat Textiles which is only 18.20%. On the other hand Kohinoors gross
profit margin stood up to 12.6% only.

EBITDA margin to sales
Gul Ahmeds EBITDA margin to sales is far better than its competitors, it stood up to 13.37% whereas
its competitors reached only up to 6.5% and 6.31% of Nishat and Kohinoor respectively.

Net Profit to Sales
Gul Ahmed showed an astonishing net profit to sales of 58% which is much higher than its
competitors i.e Nishat 5.3% and Kohinoor 3.33%.

Current Ratio
Gul Ahmeds current ratio is somewhat in line with the industrys, where as its competitors current
ratio is slightly lower than Gul Ahmed, which is 86% for Nishat and 74% for Kohinoor textiles.

Quick ratio
As quick ratio for Gul Ahmed is 39% where as its current ratio is 95%, it is very obvious that a large
amount of their current assets is tied up with their inventories. Similarly the same is with one of its
competitors i.e. Nishat whose quick ratio also shows 38% where as its current ratio was 86% in 2009.

Return on equity
Gul Ahmeds return on equity declined from 2008 to 2009 whereas the same pattern was shown by
both of its competitors as well. But Nishat mills shows a larger chunk of drop i.e. 22.1% in 2008 to
just 6.6% in 2009, on the other hand Kohinoor was not doing well in managing its equity so it
occurred a loss in both the years.

Inventory Turnover
Gul Ahmeds inventory turnover rose from 95 in 2008 to 107 in 2009, but an opposite pattern was
observed at Nishat mills where their inventory turnover dropped down from 85 in 2008 to 70 in
2009.

Fixed Asset Turnover
The fixed asset turnover of Gul Ahmed showed an increase from 2 in 2008 to 2.27 in 2009, a similar
behavior was shown by Nishat as their ratio also increased from 1.7 in 2008 to 2.1 in 2009.

Total Asset Turnover
No major change have been observed in Gul Ahmeds total asset turnover because it only rose to
1.07 in 2009 from 1.05 in 2008, but on the other hand Nishat had a lower total asset turn over in
2009 as compared to Gul Ahmed but it increased by a greater proportion i.e. 0.51 in 2008 to 0.76 in
2009.















INVESTORs INFORMATION

EPS
From an investors point of view Gul Ahmed as well as Nishat , both have shown decline in their EPS,
where Gul Ahmed declined from 1.86 to 1.45 in 2009 whereas Nishats shareholders were on a
greater losing side as an EPS of 24 in 2008 dropped down to 5.2 in 2009. This might not be a
favorable investment for investors.

Price Earnings Ratio
The P/E ratio of both the companies i.e. Gul Ahmed and Nishat showed increase. Gul Ahmeds P/E
ratio increased from 21.51 in 2008 to 26.79 in 2009 where as Nishats P/E ratio rose from 2.3 in 2008
to 13.4 in 2009, Kohinoors P/E ratio was in slump and showed a value of -3.43.


















GENERIC STRATEGY




EXPLANATION
Gul Ahmed is pursuing broad differentiation strategy since Gul ahmed products include bed linens,
curtains, garments. These products are of high quality and Gul Ahmed is selling them to
geographically distributed buyers as well as in domestic market. This indicates that Gul Ahmed is
pursuing a broad strategy. Also Gul Ahmeds products since are of high quality and have intricate
designs and prints, their prices are generally higher which shows that they are not going for lower
cost product lines.




NISHAT
GUL AHMED
KOHINOOR
SUGGESTIVE STRATEGY
They should stick to the same strategy, as it is where their competitive strength lies. Gul Ahmed
should go for more diverse market and deliver their value added curtains, bed sheets and other
home textiles to augment their market share.
























































INTERNAL
AUDIT











INTERNAL FACTOR EVALUATION

IFE MATRIX



Critical Success Factors Weight Rating Weighted Score
Strengths
Cotton yarn Quality 0.08 4 0.32
Economy of Scale 0.07 3 0.21
ISO and other compliance certification 0.03 4 0.12
State of the art Equipment 0.08 3 0.24
Brand Name 0.08 4 0.32
Availability of Cheap Workforce 0.06 2 0.12
Diverse Product Range 0.05 3 0.15
Strong Suppliers 0.04 2 0.08
Strong Buyers (Walmart etc) 0.08 2 0.16
Weaknesses
international Branding 0.13 1 0.13
Management hierarchy (Seth culture) 0.04 1 0.04
Lack of workforce training 0.06 2 0.12
Poor Marketing 0.08 1 0.08
Capacity Utilization 0.06 2 0.12
Supply chain 0.04 2 0.08
TOTAL 1.00 2.29
Cotton Quality
Gul Ahmed is producing yarn of various counts in a very high quality because of its advanced
spinning unit count rages from 10-160

Economy of Scale
Since Gul Ahmed is among the largest vertical unit of the country therefore Gul Ahmed hold the
advantage of economies of scale where they can cut easily for easily

ISO and other compliance certification
Gul Ahmed holds various compliance certification which include ISO 9000 also in todays era these
certification are very helpful since most of the big buyers urge these textiles companies to get these
certification.

State of the art Equipment
Gul Ahmed possesses advanced technology in almost its entire value chain. Some of the technology
includes:
Laser Engraver
Mercerizing
Rotary Printing including 21 colour and upto 280 cm width
Singeing & Desizing
Stentor
Sanforizing
Washing and Drying Range
Wax Engraver


Brand Name
Gul Ahmeds name is its biggest asset as the name Gul Ahmed itself signifies the importance of
quality reliability and service.

Availability of Cheap Workforce
In Pakistan there is easy availability of workforce as most of the people that work in the textile units
are not educated but recently government has raised the wage level up to RS6000. This is causing
hindrance for these textile units to compete against Bangladesh where labor is cheaper.

Diverse Product Range
Gul Ahmed holds the wide range of products which includes:
Curtains
bed sheets
cushion covers
garments
kurtas etc

Strong Suppliers
Gul Ahmed is working with well reputed suppliers of accessories as well as other textile products like
YKK.

Strong Buyers (Walmart etc)
Gul Ahmed holds the portfolio of big and quality buyers which include JC penny Walmart etc


Supply chain
In order to cut cost Gul Ahmed needs to work extensively over its supply chain as most of the orders
that gets delayed is due to the loop holes in their supply chain.

Capacity Utilization
Gul Ahmed has not been running on its existing capacity. This is the reason why they are not
successfully catering every order and there cost is getting higher.

Poor Marketing
It is just in recent times that Gul Ahmed has started working on marketing domestically.
Internationally they are not marketing that much they are not exploring new small buyers but on the
contrary they are just running for big orders.

Lack of workforce training
Gul Ahmed has now started giving importance to its HR division but still the training of labor force is
not up to the mark of what competitors like china and Bangladesh are following.

Management hierarchy (Seth culture)
The traditional Seth culture which is the forte of our textile industry also prevails in the Gul Ahmed
and most of the marketing is done by the owner himself rather than delegating it to the marketing
and merchandising staff.

International Branding
Gul Ahmed is not at all marketing its products internationally. There are no Gul Ahmeds brands in
any of the market they are exporting in spite of the good quality image Pakistan posses in home
textile products.







STRATEGIES

INTERNATIONAL BRANDING

IFE reveals that Gul Ahmed should start branding its products in the international market because
these will help them gain extra revenue. China has already started branding its textile products
which is not the case for any of the Pakistani Textile company.

SMALL BUYERS
IFE matrix reveals that Gul Ahmed is quite strong in its brand and yarn quality; therefore it should
move towards catering small buyers also as most of the small buyers give very advance work but the
margins are very high. Since Gul Ahmed has a very strong brand image they can dictate their terms
quite well here.







TOWS MATRIX
Strengths Weaknesses

1. Cotton yarn Quality
2. Economy of Scale
3. ISO and other compliance
certification
4. State of the art Equipment
5. Brand Name
6. Availability of Cheap
Workforce
7. Diverse Product Range
8. Strong Suppliers
9. Strong Buyers (Walmart
etc)




1. Supply chain

2. Capacity Utilization

3. Poor Marketing

4. Lack of workforce training

5. Management hierarchy (Seth
culture)

6. international Branding

Opportunities S-O Strategies W-O Strategies
1. New style and
Trends Demands
2. New market
segments around
the world
1. S5,O2 3
Gul ahmed can explore to
new markets like china and
Russia

1. 1. W1.O4 6
Gul Ahmed can use its supply chain more
efficiently to utilize the existing capacity and
lower down its cost
3. Abolition of Quota
4. Existing production
Capacity
5. Lower cost
competitiveness
6. Advanced
Technology




2. S6,O2 3 4
Gul Ahmed can use its cheap
labor force to effectively
utilize its existing capacity to
serve new markets

2. W6 3.O2
Gul ahmed can go towards
international branding and
marketing to cater new market
segments around the world like
china and russia
Threats S-T Strategies W-T Strategies









1. Strong Local
competitors
2. Strong international
Competitors
3. Economic Downturn
4. Change in
Government
Policies
5. Lack of conducive
Environment of
Business
6. Rise in utilities
expenses

1. S2, O3
Gul ahmed can use its
economies of scale to cut
down its cost to comepete in
this economic downturn
better than its competitors
2. S7 3 2, O1 2
Gul Ahmed can use its
compliance certification
diverse product range and
economies of scale to
compete with both domestic
and international
competitors.
1. W3 6.T1 2
Gul Ahmed can better do marketing and
branding of its products to compete local
and ionternational players.

ANALYSIS
The highlighted strategies are the best and also the most applicable to enhance the overall position of
Gul Ahmed as they effectively handle the important strengths, weakness, opportunities and threats.
Backed by their consistency in good quality yarn, strong Brand Image and opportunities (such as growing
market, peoples need for trends and styles ) and with weakness (such as poor international branding
and poor capacity utilization) and threats (such as International and domestic competitors, and
economic downturn) the highlighted strategies are the best and most applicable to enhance the overall
position of Gul Ahmed as they effectively handle the important strengths, weakness, opportunities and
threats.



















SPACE MATRIX

Internal Strategic Position External Strategic Position
Financial Strength (FS) Environmental Stability (ES)
Return on equity 2 Technological changes -2
Liquidity 2 Demand variability -3
Inventory turnover 2 Price range of competing
products
-2
Earnings per share 1 Barriers to entry into market -4
Price earnings ratio 4 Competitive pressure -4
Ease of exit -5
Financial Strengths (FS) 2.2 Environmental Stability (ES) -3.33

Competitive Advantage (CA) Industry Strength (IS)
Market Share -2 Growth Potential 5
Product Quality -2 Profit Potential 4
Customer loyalty -2 Financial Stability 3
Control over suppliers and
distributers
-3 Technological know-how 5
Ease of entry into market 3
Productivity, capacity utilization 2
Competitive Advantage (CA) -2.25 Industry Strength (IS) 3.67


Financial Strength: 2.2
Environmental Stability: -3.33

Competitive Pressure: -2.25
Industry Strength: 3.67

Y-axis: 2.2-3.33 = -1.13
X-axis: 3.67-2.25 = 1.42


Numerical values that are assigned ranges from +1
(worst) to +6 (Best) to each of the variables that
make FS and IS and -1 ( Best) to -6 (Worst) for
each of the variables making ES and CA.
FS and ES make up the X-axis whereas CA and
IS makes up the Y-axis.

ANALYSIS
As can be seen from the graph above Gul Ahmed lies in the Competitive quadrant of the space matrix.
The graph illustrates traits of a firm which has a major competitive advantage in a high growth industry.
The strategies that Gul Ahmed can undertake are as follows:
Backward, forward, horizontal integration
Market penetration
Market development
Product development

Gul Ahmed may choose to pursue the aforementioned strategies in the following ways:
Backward, forward and horizontal integration
Gul Ahmed can choose to acquire a competitor to make a strong foothold in the market.


+6
+1
+5
+4
+3
+2
-6
-5
-4
-3
-2
-1
-6 -5 -4 -3 -2 -1 +1 +2 +3 +4 +5 +6
ES
FS
Conservative Aggressive
Defensive Competitive

IS
CA
Market Penetration
The company can invest more on Advertising for raising brand awareness or sending reminders
to customers of their offerings and also other sales promotion techniques such as summer sales
encouraging more purchase of their products.


Market development
China and Russia are two potential markets for Gul Ahmed so it should avail this opportunity.

Product Development
Gul Ahmed already are into diversification but in order to gain market share they can further
seek to introduce new product categories such as they can also start making sofa covers or
carpets.
















GRAND STRATEGY MATRIX

GRAND STRATEGY MATRIX:

RAPID MARKET GROWTH




WEAK STRONG COMPETITIVE
COMPETITIVE
POSITION POSITION



SLOW MARKET GROWTH


ANALYSIS:

After the internal, external audit of the industry structure and Gul Ahmeds value chain and internal
processes, it is quite evident that Gul Ahmed lies in the first quadrant of the grand strategy matrix as the
industry is growing rapidly. The company enjoys a strong competitive position in the market place too.






QUADRANT II



QUADRANT I
GUL AHMED



QUADRANT III



QUADRANT IV
SUGGESTED STRATEGIES:
For a company like Gul Ahmed strategies like market development or penetration and forward,
backward or horizontal integration are best suited. The company can explore new markets like china
and Russia and market their products there, because these markets offer considerable growth prospects
both now and in the future. The firm has ample resources to further integrate backward, forward or
horizontally or it can pursue market penetration to concentrate on its current markets to overcome
underutilization of its capacity and resources.



















QUANTITATIVE STRATEGIC PLANNING MATRIX
Strategic Alternatives
CRITICAL SUCCESS FACTORS Weight
Expansion To
China Market
Introducing Of
Private Brand In
International
Market
STRENGTHS AS TAS AS TAS
Cotton yarn Quality 0.08 2 0.16 2 0.16
Economy of Scale 0.07 3 0.21 3 0.21
ISO and other compliance
certification 0.03 - - - -
State of the art Equipment 0.08 3 0.24 3 0.24
Brand Name 0.08 3 0.24 4 0.32
Availability of Cheap Workforce 0.06 - - - -
Diverse Product Range 0.05 4 0.20 4 0.20
Strong Suppliers 0.04 - - - -
Strong Buyers (Walmart etc) 0.08 3 0.24 - -
WEAKNESS
International Branding 0.12 - - 4 0.48
Capacity Utilization 0.06 4 0.24 4 0.24
Poor Marketing 0.06 2 0.12 4 0.24
Lack of workforce training 0.08 - - - -
Management hierarchy (Seth
culture) 0.06 - - - -
Supply chain 0.05 - - - -
SUBTOTAL 1.00
CRITICAL SUCCESS FACTORS Weight
Expansion To
Introducing Of
Private Brand In

























China Market International
Market
OPPORTUNITIES AS TAS AS TAS
New style and Trends Demands 0.10 2 0.20 2 0.20
New market segments around the
world 0.25 4 1.00 3 0.75
Abolition of Quota 0.05 2 0.10 2 0.10
Existing production Capacity 0.04 3 0.12 3 0.12
Lower cost competitiveness 0.06 2 0.12 - -
Advanced Technology 0.05 2 0.10 2 0.10

THREATS
Strong Local competitors 0.08 3 0.24 1 0.08
Strong international Competitors 0.15 3 0.45 2 0.30
Economic Downturn 0.10 - - - -
Change in Government Policies 0.04 - - - -
Lack of conducive Environment of
Business 0.04 - - - -
Rise in utilities expenses 0.04 - - - -

SUBTOTAL 1.00 3.98 3.74
STRATEGY 1 EXPANSION INTO CHINA MARKET (ADIOPTED)
Pakistans exports to China lack diversity and both the countries are competitors in the textile sector.
Diversification of exports from Pakistan in the non-traditional items will lead to minimizing the trade
imbalance. Another important factor of our trade deficit with China is growing exports of Chinese
products to Pakistan. Since these are more economical, businessmen are inclined to buy more from
China. Pakistan therefore, should be looking at China as an export market also since Pakistan has a huge
export potential of home textiles in china.



STRATEGY 2 INTERNATIONAL BRANDING
Gul Ahmed is only exporting to the retail buyers rather we think that they should start their own brand
as Pakistan home textiles are world famous for its quality. And all Gul Ahmeds products which are going
to Europe and other countries are going under the label made in Pakistan which means that people care
about Pakistani products and so we think Gul Ahmed should open their own retail outlets in countries
of Europe.