Masood Textile Mills

Strategic Management Ms. Farah Zarak

Bilal Nadeem Humayun Tahir Rana Ali Asad Rizwan Khan S. M. Sohaib Atif Talha Bin Tariq Zain Ali Chughtai

Section B

Lahore School of Economics

Contents
History .......................................................................................................................................................... 4 Vision Statement ........................................................................................................................................... 6 Mission Statement......................................................................................................................................... 6 Review: Corporate Mission and Vision .................................................................................................... 6 Components of mission statement ........................................................................................................... 7 Proposed Vision Statement ........................................................................................................................... 9 Proposed Mission Statement ......................................................................................................................... 9 SWOT Analysis............................................................................................................................................. 10 Strengths ................................................................................................................................................. 10 Information System ............................................................................................................................. 10 Financial Management System ........................................................................................................... 11 Research and Development ................................................................................................................. 11 Supply Chain Management ................................................................................................................. 12 Total Quality Management ................................................................................................................. 12 Latest Machinery ................................................................................................................................ 12 Qualified and Trained Team ............................................................................................................... 12 WRAP Certification (Worldwide Apparel Response Company) ........................................................ 13 Direct- to- Store System...................................................................................................................... 13 Back Tracking System ........................................................................................................................ 13 Customer Profile ................................................................................................................................. 13 ISO 9002 Certification ........................................................................................................................ 13 Adequate Financial Resources ............................................................................................................ 14 Owned Power Generation Plant .......................................................................................................... 14 Owned warehouses in USA ................................................................................................................ 14 Weaknesses ............................................................................................................................................. 14 Limited to United States and few European Market ........................................................................... 14 Too Much dependency on Exports ..................................................................................................... 14 Over Staffing....................................................................................................................................... 14 Lack of productive environment (few departments) ........................................................................... 14 High cost of production....................................................................................................................... 15 Opportunities........................................................................................................................................... 15 New global penetration ....................................................................................................................... 15

Build a brand of its own label .......................................................................................................... 15 Local market reduced emphasis of exports ...................................................................................... 15 Cost reduction is possible by proper utilization of resources.............................................................. 15 Backward Integration Own cotton fields ......................................................................................... 15 Threats .................................................................................................................................................... 15 IFE .............................................................................................................................................................. 16 EFE ............................................................................................................................................................. 17 Competitive Profile Matrix (CPM) ............................................................................................................... 18 PEST Analysis ............................................................................................................................................ 19 Technological Environment .................................................................................................................... 19 Socio-Cultural Environment ................................................................................................................... 20 Economic Environment .......................................................................................................................... 20 Economy and War on Terror .............................................................................................................. 21 Pricing Trend and its Consequences ................................................................................................... 21 Energy Crises ...................................................................................................................................... 21 Political and Legal Environment............................................................................................................. 22 Inappropriate Governmental Policies...................................................................................................... 22 Facts & Figures Regarding Production ................................................................................................... 22 Research and Development..................................................................................................................... 22 PEST Conclusion ........................................................................................................................................ 23 Porters Approach ....................................................................................................................................... 23 Bargaining Power of Suppliers: .............................................................................................................. 23 Suppliers Concentration ...................................................................................................................... 23 Number of Buyers ............................................................................................................................... 23 Switching Cost .................................................................................................................................... 23 Substitute Raw Material ...................................................................................................................... 24 Threat of Forward Integration ............................................................................................................. 24 Threat of New Entrants ........................................................................................................................... 24 Economies of Scale ............................................................................................................................. 24 Absolute Cost Advantage.................................................................................................................... 24 Brand Identities ................................................................................................................................... 24 Access to Distribution ......................................................................................................................... 24 Switching Cost .................................................................................................................................... 25

Government Policies ........................................................................................................................... 25 Other Stakeholders .................................................................................................................................. 25 Relative Power Unions........................................................................................................................ 25 Bargaining Power of Customers ............................................................................................................. 25 Buyer Concentration ........................................................................................................................... 25 Number of Suppliers ........................................................................................................................... 26 Switching Cost .................................................................................................................................... 26 Substitute Products.............................................................................................................................. 26 Threat of Backward Integrations......................................................................................................... 26 Threat of Substitute Products or Services ............................................................................................... 26 Functional Similarity .......................................................................................................................... 26 Ratios .......................................................................................................................................................... 26

History Masood textile mill is a public limited company listed in all stock exchanges of Pakistan and is leaders in responding to up-and-coming global trends of textile by creating and developing very basic to very highly fashioned attire by developing and manufacturing of knitted products. They transform the abstract ideas of their customers into reality through specialized insight and technical and mechanical expertise. MTM team is the strong believers of customer satisfaction as

they are believed are the reason of their success. MTM has got state of the art technology; products know how and most importantly the right mind set to achieve customer satisfaction. Masood operations are running throughout the world. Masood is expert in creating and manufacturing of T-shirts, Polo shirt, Jogging suit, Henley shirt, Raglan shirt and Tank top, Bikini, Shorts, Pants and Sleepwear. Driving force behind the achievement of Masood enormous escalation in past years is the experienced professional staff, a well groomed team of talented merchandiser, trustworthy suppliers and up to dated technology. Masood textile mill was incorporated on October 1986 as public limited company and started off after its listing on Karachi. It was listed on Lahore stock exchange in 1988 and now it is listed on all stock exchanges of Pakistan. Its head office is located in Faisalabad (Universal House, West Canal Road, Faisalabad) with 6 units in Faisalabad, one in Lahore and one in Karachi. Masood has also invested in Bangladesh and has one unit in Dhaka. Masood Textile also own Software Creation, a software development company. Chaudry Nazir bought three spinning units in 1986 in Faisalabad and started to produce a raw fabric. Knitting facility was installed in 1986. Chaudry Nazir bought three spinning units in 1986 Dying Plant in 1988 Apparel division operational in 1995 with 35 machines Shahid Nazir has different businesses as well Koshistan Transport 1973 Kakakhel Oil Mills 1994 Coca Cola Bottlers 1983 Industrial Cooperation Bank 1994 Manthar Bus Service 2004 Shahid Nazir at the age of 29 became the CEO of Masood after his MBA from UK and several courses from LUMS.

Vision Statement "Our vision is of continual improvement and sustained growth, and of a family of workers. Who are given the best compensation benefits and working conditions in the region. In this respect, MTM continues to emphasize the need to invest in and develop its most precious resource - its human capital. MTM continues to provide training courses and self-enhancement opportunities for all our workers". Mission Statement Be dynamic profitable and growth oriented by providing good return on investment to its shareholders and investors, quality products to its customers, a secured and friendly environment place of work to its employees and to project Pakistans image in the international market. Review: Corporate Mission and Vision MTMs corporate mission defines what the company is and what it intended to achieve through its functional departments. MTMs corporate mission is: Be dynamic profitable and growth oriented by providing good return on investment to its shareholders and investors, quality products to its customers, a secured and friendly environment place of work to its employees and to project Pakistans image in the international market. A vision statement is a clear, challenging picture of the future of the classis as you believe it can and must be. (Malphurs) An analysis of the current vision statement shows that it is lacking in its purpose of reflecting the future orientation and growth of the company. The vision statement of the company seems more like a core value or strategy rather than a depiction of the direction in which the company is moving and what it aims to achieve. The vision statement does not reflect what the business will look like in the next 3 to 5 to 10 years nor does it show a picture of the companys future meaning it is not future-casting. A vision statement is also supposed to be a bit audacious in the sense that it reflects a dream or an idea that might seem beyond what it possible as it is supposed to the epitome of where the company is headed. Based on this criterion, the vision statement is again lacking as there is no ambitious goal towards which it is moving. Another criterion for

evaluating a vision statement is to check whether it is motivating or not in terms of being clear about the strategic direction, company focus, business activities the company wishes to pursue and capabilities that the company aims to develop. The vision does clarify that it wishes to enhance and build on its human resource capital to allow continuous improvement and sustained growth in the future. It does not however give a clear cut focus as to the destination for which this is required. The goal identified is too vague and subjective to be a single motivating factor. The vision statement is also not purpose-driven as it gives no sense of a larger sense of purpose or contribution to a greater purpose. The statement is also not inspiring as it does not create any excitement or emotions relative to the vision. No mental image is created nor is any inspiration leveraged from the words used to describe the vision. Therefore, our analysis shows that the vision statement is too vague and lacks strategic direction and ambition to sustain and guide the corporate strategies in the future. It also ignores the core competencies and capabilities of the company and fails to connect emotionally.

Components of mission statement

CUSTOMERS

What are the firm's major products or services?

Products or services

What are the firm's major products or services?

Markets

Where does the firm compete?

Technology

What is the firm's basic technology?

Concern for survival, growth, and profitability

What is the firm's commitment towards economic objectives?

Philosophy

What are the basic beliefs, core values, aspirations and philosophical priorities of the

firm? Self-concept What are the firm's major strengths and competitive advantages?

Concern for public image Concern for employees

What is the firm's public image? What is the firm's attitude/orientation towards employees?

The following components of the mission statement are present in that of Masood Textiles Mills. These are:

1- Growth: In the very initial part of the mission statement, it is stated that Masood
Textiles Mills aims to Be dynamic profitable and growth oriented. We can clearly see that growth is an imperative part of this mission statement. As a result it is quiet eminent that this component is present in this mission statement.

2- Customer: This mission statement also mentions its concern for customer. It says
that its objective is to provide quality products to its customers. We can see how the company values its customers by providing them with quality products.

3- Philosophy: Philosophy refers to the aspirations and philosophical priorities. This

mission statement mentions to project Pakistans image in the international market. This concern leads to greater meaning of this mission statement and its aspirations. Its a symbol of great philosophical idea on global scale. It means to achieve excellence and great reputation with quality produce.

4- Employees: In the middle part of the mission statement, the company mentions its
concern for employees and their working conditions by stating to provide a

secured and friendly environment place of work to its employees. Consequently, it is proven that concern for employees is mentioned in this mission statement.

5- Markets: There is a partial indication to this component of the mission statement.

Although the mission states that its markets are abroad, it does not clearly specify which country or countries the business is exporting to. As a result, the mission statement does not fully recognize or explain this component. However, since it mentions that it operates abroad, we assume it to be part of the mission statement. Proposed Vision Statement At Masood Textile, our vision is to be the best knitting company in Asia--in the eyes of our customers, shareholders, communities and people. We expect and demand the best we have to offer by always keeping Masood's values top of mind. Proposed Mission Statement Our mission is to become market leader in home textile sector and provide good return on investment to our shareholders by achieving growth. We aim to exceed our customers expectations by producing quality products, employing state-of-art/latest technology and best human skills while providing safe working environment for our employees, incorporate best practices, use integrated methodology to manufacturing technology and contribute to the economic growth of Pakistan.

Key Risks

The major problem in textile industry as it prevails in every other Pakistan industry is the implementation of the policies and programs announced by the Government. Bargaining power of the industry with the government is high because of

PACRA, Sector Study, Textile Sector-FY11

the mounting share of 52% in total exports of the country that has resulted in favorable domestic policies which have the tendency of being abstained from implementation. Textile industry was successful in getting preferential access to the European market but the legalization of it was challenged by the competing countries. Again, government was unable to resolve the issue in favor of the local industry. Increase in cotton prices has damaged small and medium players in the industry, making it very hard for survival. Mergers and acquisition in the textile industry of Pakistan are not so common. Industry structure is fragmented resulting in the limited economies of scale. The limitation due to the fragmentation of the industry limits the exit strategy for the investor in hard times of the business. Low-value added product dominates the industry, thus reduced margins and low differentiation in the product category. Power supply is exerting enormous pressure on the cost of production, as textile industries tries to meet their energy requirements by internal generation of energy at quite high prices. Gas shortages has added fire in this regard.

SWOT Analysis
Strengths Information System IT systems at MTM are one of the major factors in the success of the organization. It has not only reduced the work load but has also increased the efficiency in production, processing and quality control. All the IT systems operated in MTM are built by the Software Creation, a sister concern of MTM and are oracle certified. Main information management systems at MTM are following: Human Resource Management System o Job Bank o Human Resource o Time Management o Payroll o Training and development o Admin

o Vehicle o Cash Flow Manufacturing Management System Inventory Management System o Spinning o Knitting o Processing o Cutting Back Tracking System

Financial Management System Cash flow Management System o Chart of Accounts o Print Vouchers o Periodic Loan Detail o Employee Loan Detail o Periodic Advance Detail o Cash Flow Summary o Accounts Flow o Party Wise Cashflows o Bilty Wise Report o Sales Contract Reports o Cash Flow Analysis o Imprest Ledger

Research and Development Research and development at MTM is not just a department as a formality. It actually does an extensive research for the development of innovative fabrics and garments. To keep the uniqueness of the fabric alive and stop it from being intimated by the competitive firms, these garments are shown only to the current and potential customers. Few innovative products from MTM are:

Anti Mosquito Fabric Heat Adjustment Fabric Water Resistant Fabric Water Absorber Blinking Clothes Fluorescent Fabric

Supply Chain Management As MTM is complete vertically integrated textile composite, its supply chain management is effective and efficient. Merchandising department is the one which keep follow up of every aspect of the order from the placement of the order till the shipment of the order. Every single unit of the MTM is connected via ERP system and every stage of the order can be tracked and monitored. Yarn procurement is done on seasonal basis and it is pre sourced before the start of the season and made sure that there should be no deficit when it comes to the utilization of yarn to produce fabric. Total Quality Management Quality control is the essence of MTM success. Back Track system has enabled employees at MTM to be more responsible while working and be assuring of the intended quality is produced. It is because of the quality management, that Masood has received many international and local awards. Latest Machinery Masood has latest industrial machinery which has enabled it to produce products of the perfect quality and on right time with maximum efficiency. Qualified and Trained Team For the production of the goods, MTM has a staff which is experienced, skillful, and knowledgeable about the job. At the time of hiring, HR department makes sure that they hire a right man for a right job. Employees work with a team spirit and acknowledge each others work.

WRAP Certification (Worldwide Apparel Response Company) Masood Textile mill has a hand on WRAP certification which shows that the legal, benevolent and ethical manufacturing of goods at MTM. It depicts that all the practices at MTM are in the boundary of moral principles and procedures. Direct- to- Store System MTM is the first company in Pakistan to develop and implement direct-to-store system has permitted a good and long term relationship with the customer. This means, that now it is the responsibility of MTM to not only produce the product, but also make sure its placement in the stores of the customer. This system facilitated by the 24/7 information transfer from the sale of a unit from the store and the relevant department can act accordingly. The sale of even a single unit from the customers store can be received in the head office of MTM and can be acted accordingly. This means the visibility of the future trend has become available to MTM. Future purchase order feasibility can be made with a great accuracy and purchase orders than can be revised after discussion with the client. Back Tracking System (Bar Code System for tracking various components of its product right from spinning to the packed product) This system is the heart of quality control. If a defect is detected by quality department employee, the defect can be traced back to the employee who is responsible for the defect. Bar code is attached to the product at every single stage of the production and can be scanned whenever needed. Customer Profile Efficient marketing team owns a heavy credit because of its ability in turning potential customer into a permanent customer. Heavy customers portfolio is the reason of trust in the minds of the customers and prospected customers are pitched through such foundations as well. ISO 9002 Certification Masood Textile mills holds ISO 9002 certification and meet quality standards given by customers.

Adequate Financial Resources At the pinnacle of success, Masood textile has a strong backbone due to adequate financial resources and at time of threat, Masood pull its financial resources and get through such times. Owned Power Generation Plant Masood has its own power generation plants and has invested heavily on bio-technology to produce energy for its plants and equipment. Owned warehouses in USA To meet the demand of its customers in US, Masood owns warehouses in main cities where its main customers are residing. Masood even provide this service to other Pakistani and international firms to use their facility against threats. CAD Product Innovation Ability Moody Certification Several Quality Awards

Weaknesses Limited to United States and few European Market o There is a lot of potential in South America (Brazil, Argentina) and Canada in North America. Other than these countries, African countries Too Much dependency on Exports o Dependency on export is very high and any change or hit on export license and export policies by Government can demolish MTM business in American and European Market. Over Staffing o Some of the departments are over staffed Lack of productive environment (few departments) o Few departments like HR office at spinning unit doesnt have good physical environment which would work in the reduction of employees efficiency.

High cost of production o High cost of production because of the fact that MTM is overstaffed and results in increase cost of production o High transportation cost from Faisalabad to Karachi, resulting in reduced profit margins

Opportunities New global penetration o South American markets such as Brazil, Argentina and Canada in North America o African Countries o Middle Eastern Store chains Build a brand of its own label o To be on the safe side, Masood need to develop a local brands on the model of Cross Road, Stone Age, Outfitters and Levis. Gain more earning in coming years and increase shareholder income. Local market reduced emphasis of exports o Local label will also reduce the emphasis on exports and will put a cushion when export policies change. Cost reduction is possible by proper utilization of resources o Terminate employees who are a burden and are the reason of overstaffing Backward Integration Own cotton fields o Invest and buy agriculture land, do backward integration and reduce reliance on external sources of cotton Threats Political Instability Economics Crises Rupees Devaluation Energy Crises

Labor Unionization Increasing Competitive pressure from Bangladesh and China Natural Calamities, disruption in Supply of raw material Fluctuation in cotton prices International Cotton Prices Increase in oil prices, thus increasing in Production cost (Energy) Cost of Production Negative Country Perception Tariff and Duties

IFE Internal Factors Weight Rating Weighted Comments Score Strengths IT System 0.15 5 0.75 Information system at MTM is of the vital

importance in the success of the company. Every IT system has increase d the efficiency of MTM. Supply Chain TQM 0.1 3 0.3 0.1 4 0.4 Every single operation at MTM adds value to the product and increase efficiency Good quality product is the reason of success in international market. DTS/BTS 0.05 2 0.1 This web based software keeps MTM up to date on customers information Power Generation Weaknesses Limited to US and G9 Overstaffing 0.075 Leveraged on Exports Transport cost High cost of financing 3.325 0.075 5 0.375 High long term debt, high financial cost 0.05 3 0.15 Shrinkage of margin due to high transportation cost 0.15 4 2 0.3 0.3 0.15 3 0.45 High concentration in these markets, need to diversify through other markets as well. High cost is incurred due to over employment No emphasis on local market 0.1 2 0.2 Ability to generate power.

EFE External Factors Weight Rating Weighted Score Opportunities New & Potential International Markets 0.1 4 0.4 South America, Canada, Australia, middle east are potential international markets for knitted apparel. Comments

Local Market Potential Diversify into new industry Backward integration

0.15

0.75

Brands like cross road, outfitters and stone age are earning high profits in local market.

0.075

0.15

There is the need to diversify in other industries, can form a conglomerate (high financial resources)

0.1

0.3

Owing cotton farms will result in cost reduction, since reducing the cost from other sources is not possible at the moment

Leather Products

0.075

0.075

MTM can capitalize on its existing infrastructure in order to diversify into leather business. Threats

Political Instability

0.1

0.5

Political instability and unrest in the country results in the unattractiveness for the investor. A policies guideline has yet to be seen in practice.

Energy Crises 0.075

0.15

Producing energy by furnace oil is very expensive, results in high cost of production. MTM produces energy through bio technology.

Labor Unionization

0.075

0.15

Labor union is the potential threat in such companies which results in order delays, however MTM doesnt have any labor union at the moment.

Natural Calamities Increase in Oil Prices

0.15

0.6

Industry is dependent on cotton, natural disasters have been unfortunately quite consistent in past years

0.1

0.1

Increase in oil prices in international market results an increase in all raw material hence increase in the cost of production

Competitive Profile Matrix (CPM)

MTM Textile

Sitara Textile

Perfect Textile

Critical Success factor

Weight

Rating

Score

Rating

Score

Rating

Score

Advertising Product Quality Price Competitiveness Management Financial Position Customer Loyalty Global Expansion Market Share Total

0.15 0.20 0.10 0.10 0.15 0.10 0.05 0.15

2 4 3 2 2 3 1 3

0.30 0.80 0.30 0.20 0.30 0.30 0.15 0.45 2.80

2 3 3 2 3 3 1 3

0.30 0.60 0.30 0.30 0.30 0.20 0.10 0.30 2.4

2 3 3 3 2 2 2 2

0.30 0.16 0.30 0.20 0.45 0.30 0.05 0.45 2.21

PEST Analysis Technological Environment Technological advancements are taking place every day throughout the world. Higher and higher efficiency is being achieved by organizations and companies through the optimal use of technologies. Textile industry in Pakistan has a bit of mix environment when it comes to technology. Giant players in an industry got up to date technology and they import machinery from developed countries. The growth of information technology sector has acted as a medium in the direction and in the future the pace of technology will be even greater. Dependence on technology in every industry can provide high productivity and higher effective and efficiency. Strategic Decision Making factors regarding technology: Future form of the product will be changed. Different kind of fabric can be made possible

by the use of future technology

Yarn processing technology improvement Raw material availability could be accessed Future visibility of the demand can be possible through the use of financial models,

information processing and information data bases. New product innovation and invention is possible

Socio-Cultural Environment Unlike technological changes which are abrupt the socio-cultural options occurs at a slow pace. Socio-cultural changes may have the following implications for Nishat Mills: a) b) c) d) Changes in lifestyle Age distribution Expectations from business and social values Ethical Standards.

Economic Environment The GDP of Pakistan has a growth rate of 2.4% in 2011 which is very low as compared to the competitive countries. Exports fell to $17.190 billion in July-March, from $17.727 billion in the same period the previous year, according to the bureau. Imports totaled $33.285 billion, up from

$29.016 billion previously. The trade deficit was $1.496 billion in March and $1.428 billion in February. (Trade Analysis, 2012). The current discount rate is 12.5% as announced the state bank of Pakistan. Also the per capita income is around $1000 which is very low. The company has pretty adverse effect of these worse economic situations, it is resulting in rise in cost of production and the performance is also hampered. Economy and War on Terror War on terrorism is taking its toll from many countries and is also the reason of high defense budgets, neglecting many important industries. Economic recession has prolonged effect on the industries on worldwide basis. Poverty level is increasing in Pakistan with every passing day, very low foreign investment and high unemployment has resulted in lower purchasing power of the consumer. Economic downfall is being witnessed at very high rate and an individual life has been affected violently. Textile industry of the Pakistan constitutes 53% of the total exports in Pakistan is in direct hit due to these economic factors. Many garment businesses in Pakistan has be closed today due to these economic factors. Pricing Trend and its Consequences Frequent changes in the prices directly affect the garment manufacturing, as orders are received are on different rates, and by time these orders are in processing stages, prices changes thus damaging the business earning. This is the common in Pakistan, that after announcing the budget, government keep in raising the prices of the raw materials used in the processing to produce the final good. Business men cannot produce an authentic budget of their own because of these fluctuations in the business. With such frequent prices fluctuations, garment industry has to change its prices at which consumers are not willing to pay. Countries like Bangladesh, India and China are giving a severe competition to the Pakistan in textile industry because of their economic stability and lower cost of production. Energy Crises The biggest problem Pakistan textile industry facing these days is the power failure. Long hours electric load shedding has greatly affect the total production of the industry. Per unit increase in the prices of electricity every month, shortage of gas, shortage of petroleum products are some of most obvious causes of downfall of the textile industry.

Political and Legal Environment As far as the political and legal environment is concerned, in Pakistan the legal environment is a bit weak. There are no as such environment protections laws, tax laws, special incentives and stability of government. The legal framework is quite weak in Pakistan. Stability of government is also quite a big issue; as every time the government changes the policies of government changes and with new policies the trade policies changes which also hampers the performance. Inappropriate Governmental Policies Political environment in Pakistan throughout the years has raised many problems for all industries. Lack of conducive industrial policies, no FDI, export processing units are insufficient in relation to the number of exporter in Pakistan, trade fares in the country are near to non where companies have the chance to exhibit their product. Government do invest its expertise in developing polices regarding industries but these policies doesnt see the light of implementation. If government do take care of the factors mentioned earlier, export- led industrialization can be possible. There should be advantage to the local producers to develop the products which are exportable through duty free import of raw materials. Rule and regulations existence on papers are useless unless implemented. Lack of good governances, corruption every single government department and complex bureaucracy are the areas where a lot is need to be done for better business future in the country. Development of infrastructure to support the business in the country is also vital for business community in the country. Facts & Figures Regarding Production There is no statics available as for garment industry of Pakistan. Reasons are: Most garment businesses are working on small scale. There is no step taken by government to keep record of their growth Many garments and apparel factories close each year because low instability except for

few bigger players in the market. Research and Development The education system in Pakistan doesnt pay any emphasis on research and development on new products. This lack of orientation towards research leads to the deficiency of improvements

of industry. Textile industry in some countries pay a heavy emphasis on the development of innovative products but Pakistan lags behind in this arena too. PEST Conclusion With such mega environment factors, maintenance of product quality is very hard to keep from deteriorate. Consumer now days are bombarded with the information and more aware of the product quality requirements doesnt waste their money on poor quality products. To remain competitive in the market and reduce cost, companies dont pay much on promotion, marketing of the product and its publicity. Unemployment is rising due to such reasons as businesses are firing people to cut costs thus increasing the poverty level in the economy. The textile industry potential of Pakistan is not a news in any sector, be it the human capital, raw material and its abilities to produce superior quality product but the platform to develop and progress is not compatible. Porters Approach Bargaining Power of Suppliers: Suppliers Concentration Pakistan is an agriculture based economy and development and growth of textile industry solely depends upon the Pakistans agriculture sector. The concentration of suppliers is quite high because of this premise and huge raw material market. Number of Buyers Textile industry can be divided into three categories large companies, medium manufacturing and small business and that is why there is quite a number of buyers of the raw material in the market. Every year there is surplus of cotton produced by the farmers which enable government to export raw and processed cotton. Government put a cap and floor prices on cotton but government does not consistently follow these prices thus fluctuations in the prices. Switching Cost The switching cost of suppliers is very low considered the given fact that there are not fixed suppliers. It is solely based on the rate given the quality specifications are met. After this there is not discrimination of special or a normal supplier; they just buy it from the market.

The switching cost of the supplier is very low due to the fact there are large number of supplier in the market. If the required quality is met, there is no reason for a buyer to switch to a new supplier. Masood Textile buys cotton from the supplier who can provide the raw cotton of a specified quality. Masood textile purchase cotton in advance of the season. Substitute Raw Material There is no substitute raw material available for the cotton. Threat of Forward Integration The threat of forward integration is low because huge capital investment is required. The cost of production is rising in Pakistan because of the energy crisis and increase in other factors of production. Threat of New Entrants Economies of Scale Pakistans textile industry is losing on its competitive advantage because of the increase in cost of production. In the past, companies were able to achieve economies of scale because there was no power shortage; no shortages of raw materials but now the conditions are getting worse for the textile sector. Rising raw material costs, rising production costs reduce economies of scale. Absolute Cost Advantage Pakistan used to have absolute cost advantage in regard to the labor but now India and Bangladesh has beaten Pakistan in terms of cost. Per second rate in Bangladesh is 4 cents where as in Pakistan its 7 cents. Brand Identities Masood Textile has favorable brand equity in International and local market as it is the largest textile composite in Asia. Access to Distribution Masood textile mill has developed its own distribution network, known as DTS. Direct to store works with the partnership with the clients. It has its own warehouses in US where it stocks its products to neglect any delay in the order. It has its own fleet of trucks and containers to provide logistical services to the consignments.

Switching Cost There are many competitors in local market as well as in international markets like China, India and Bangladesh. These countries are low cost producers of textile products and give a fighting competition to Pakistan. So, the switching cost of the customer is low in this industry. Government Policies There is this tendency of every government whether its a democratically elected or its a dictatorship, government policies do not remain consistent once they are announced. This lack of consistency in the policy implementation results in unattractiveness of doing business efficiently. Capital investment requirement for business is not in align with the savings people have. So borrowing money from commercial banks is the option available to the business oriented people. High cost of financing i-e 14-15% is high when compared with the rest of the world. The business earning around 20% would remain in the market when it is leveraged by debt from the bank. Handsome portion of business earnings goes to the banks and then the tax further reduces the net income. Corporate structure in Pakistan is unsupportive to the business because of this huge tax and no incentive to the business. Other Stakeholders Relative Power Unions There is no labor union in Masood textile mill that can hamper its performance. But when it comes to protest against the government, unions arise and result in the strikes and respites which hurt the business. Whenever MTM observes that there are potent of unionization in the making, they find the one who is igniting the spark and transfer him to another unit, few weeks in new unit and again transfer to another unit and eventually out of the company. Bargaining Power of Customers Buyer Concentration There is no deficiency of customer in domestic and international market. There are chain stores in the world that expands from one pole to another covering almost every single continent. Concentration of buyers is high making it very tough to survive for the manufacturer unless it remains consistent on quality, timing and quantity. To remain competitive in the global market, Masood Textiles has to cover every single aspect from purchase order to the placement of the product in the market, better than the competitor.

Number of Suppliers The competition is not only from domestic market but from countries like India, Bangladesh, Thailand and Vietnam and the market going towards the maturity stage. Switching Cost Reduced cost of production in the countries like China, Bangladesh and Vietnam gave a tough competition to Pakistan textile sector. Switching cost of the customer is very low. Its only than the quality of the product on the basis of which you have to remain competitive to keep the switching cost high. Substitute Products Masood Textile mills do not manufacture formal wear garments, lawn, house decorative fabric etc. However, many other textile firms covers many areas such as formal/casual wear, ladies suiting, home decorative fabrics and raw fabric for further processing. Threat of Backward Integrations The threat of backward integration is very low majorly because of the economics and energy conditions in Pakistan. Threat of Substitute Products or Services Functional Similarity Local brands in Pakistan are in functional similarity with the apparel production in MTM. Crossroads, Stoneage are the substitute products and will give competition if these companies start doing export business.

Ratios
2011 Gross Profit Margin Net Profit Margin Return on Total Assets Return on stockholder Equity 16 0.04 0.05 0.19 2010 18 0.05 0.06 0.23 2009 19 0.04 0.05 0.21

Current Ratio Quick Ratio

1.12 1.05

1.22 1.15

1.25 1.17

Inventory turnover Total Assets turnover

10.46 1.24

14.88 1.20

19.47 1.14