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The educated differ from the uneducated as much as the living differs

from the dead.

(Aristotle)
Acknowledgement

Special thanks to the distinguished group members who served on this


collective task:

Nida khalil

13-BBA.H-FM-52

suman

13-BBA.H-FM-59

Umer daraz

13-BBA.H-FM-96

Usman tariq

13-BBA.H-FM-97

Waseem ijaz

13-BBA.H-FM-101

As our advisor, Sir. Rashid Saleem provided detailed guidance and


encouragement throughout the course of preparing for and conducting the
research. His belief that it was, indeed, possible to finish kept us going.
Thanks to all the group members for their support, patience,
encouragement, and useful suggestions.

Thanks to Mr. waseem ijaz for providing materials from his doctoral
research, from which many questions were drawn for the distractor survey.
Special thanks to our friends who cheered us on from the beginning. For the
suggestion that planted the seed, thanks to sir.rashid saleem, University of
Education, Lower Mall Campus, a great teacher. And special thanks to my
family for their good-natured forbearance with the process and for their
pride in this accomplishment. It was a team effort.
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EXECUTIVE SUMMARY ............................................................................................................. 1


INTRODUCTION ........................................................................................................................... 2
HISTORY ........................................................................................................................................ 4
OVERVIEW OF THE ORGANIZATION ...................................................................................... 6
VISION ............................................................................................................................................ 7
MISSION STATEMENT ................................................................................................................ 7
Objectives of Ittefaq Sons (Pvt.) Ltd ............................................................................................... 8
OBJETIVES................................................................................................................................. 8
Cooperate profile ........................................................................................................................... 10
KEY MANAGEMENT PROFILE ............................................................................................ 13
External analysis: ........................................................................................................................... 16
Environmental analysis .............................................................................................................. 16
Environmental factors: ............................................................................................................... 17
GPEST ANALYSIS:............................................................................................................................ 18
FACTOR AFFECT THE BUSINESS.................................................................................................. 18
Political factors............................................................................................................................... 18
Economic Factors ........................................................................................................................... 19
Social Factors ................................................................................................................................. 20
Technological Factors .................................................................................................................... 21
Five POTERs FORCES: .................................................................................................................... 22
Threat of New Entrants .............................................................................................................. 23
Power of Suppliers ..................................................................................................................... 24
Power of Buyers......................................................................................................................... 24
Availability of Substitutes.......................................................................................................... 25
Competitive Rivalry ................................................................................................................... 25
Issue priority matrix: ...................................................................................................................... 26
Factors: .......................................................................................................................................... 26
Budget (2017-18) ....................................................................................................................... 26
OPEC Policies............................................................................................................................ 26
Operational Risk ........................................................................................................................ 27
Foreign ....................................................................................................................................... 27
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Power Supply Risk..................................................................................................................... 27


Credit Risk ................................................................................................................................. 28
Labor laws: ................................................................................................................................ 28
Liquidity Risk ............................................................................................................................ 28
Interest Rates: ............................................................................................................................ 29
Political instability: .................................................................................................................... 29
Sector / Demand Risk ................................................................................................................ 29
Disposable Income: .................................................................................................................... 30
Social responsibility: .................................................................................................................. 30
Competitor Risk ......................................................................................................................... 31
Risk of Technological Obsolescence ......................................................................................... 31
Value of Dollars in World Market: ............................................................................................ 31
Stock Market Trend: .................................................................................................................. 31
Monitory .................................................................................................................................... 32
Fiscal Policy:.............................................................................................................................. 32
Lifestyle: .................................................................................................................................... 32
Unemployment Trend: ............................................................................................................... 33
Tax Rate: .................................................................................................................................... 33
Demand shift for goods :............................................................................................................ 34
Opportunities: ................................................................................................................................ 36
Threats: .......................................................................................................................................... 36
EFE matrix: ..................................................................................................................................... 37
Internal analysis: ............................................................................................................................ 38
SUPPLY CHAIN: ...................................................................................................................... 38
Supplier ...................................................................................................................................... 38
Manufacturing ........................................................................................................................... 38
Distributor .................................................................................................................................. 39
Wholesalers ............................................................................................................................... 39
Retailers ..................................................................................................................................... 39
Customers: ................................................................................................................................. 39
VALUE CHAIN ANALYSIS: ................................................................................................................ 40
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Product related cost (inbound & PD) ......................................................................................... 40


Market Related Cost (Outbound logistics, marketing sales, services): ...................................... 41
Support Activities: .......................................................................................................................... 41
IFE matrix: ................................................................................................................................. 42
IE MATRIX:...................................................................................................................................... 43
Organizational Structure of Ittefaq Sons (Pvt.) Ltd ....................................................................... 43
MANAGEMENT HIERARCHY .................................................................................................. 46
4 PS OF MARKETING:............................................................................................................... 47
PRODUCT ..................................................................................................................................... 47
STEEL BARS ............................................................................................................................ 47
INDUSTRIAL STEEL............................................................................................................... 48
ALLOY STEEL ......................................................................................................................... 49
STAINLESS STEEL ................................................................................................................. 49
MELTING ................................................................................................................................. 50
LADLE REFINING FURANCE ............................................................................................... 50
MELTAL REFINING CONVERTER ....................................................................................... 51
COUNTINUOUSE CAST ......................................................................................................... 51
ROLLING MILLS ..................................................................................................................... 52
PRICE ............................................................................................................................................ 52
Factors Influencing Pricing Strategy in Steel Industry .............................................................. 52
Production Costs ........................................................................................................................ 52
Market Demand: ........................................................................................................................ 53
Competition: .............................................................................................................................. 54
Pricing Strategy: ........................................................................................................................ 54
PLACEMENT ............................................................................................................................... 55
Distribution channels at Ittefaq Steel: ........................................................................................ 55
PROMOTION ................................................................................................................................ 55
Promotional activities undertaken by Ittefaq Steel: ....................................................................... 56
Branding Steel Based on Customer Focus ................................................................................. 56
Branding Steel............................................................................................................................ 56
Human Resource Managemant ...................................................................................................... 57
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LEGAL INFLUENCES ............................................................................................................. 57


Responsibilities: ............................................................................................................................. 59
Overall Responsibilities ............................................................................................................. 62
Compensation and Benefits ........................................................................................................... 62
Training and Development ............................................................................................................ 62
Employee Relations ....................................................................................................................... 63
Recruitment and Selection ............................................................................................................. 63
Human Resources and Skill/Technology Support: ........................................................................ 64
Financial Management ................................................................................................................... 65
Controllers ..................................................................................................................................... 65
Treasurers and finance officers ...................................................................................................... 65
Credit managers ............................................................................................................................. 66
Risk and insurance managers ......................................................................................................... 66
Financial Analysis.......................................................................................................................... 71
Internal Analysis ........................................................................................................................ 71
Liquidity Ratio ....................................................................................................................... 72
Leverage Ratios ..................................................................................................................... 72
Efficiency Ratio ..................................................................................................................... 73
Profitability Ratio................................................................................................................... 74
External Analysis (Year 2016)................................................................................................... 75
Liquidity Ratios ..................................................................................................................... 75
Interpretation .............................................................................................................................. 75
Leverage Ratios ..................................................................................................................... 76
Efficiency Ratios.................................................................................................................... 77
SWOT ANALYSIS ....................................................................................................................... 78
SITUATION ANALYSIS ............................................................................................................. 78
STRENGTHS OF ITTEFAQ SONS (PVT.) LTD......................................................................... 78
Management Team..................................................................................................................... 78
Information Technology ............................................................................................................ 78
Innovativeness of Ittefaq Sons (Pvt.) Ltd with respect to its competitors ................................. 79
Adaptability of the company in the fast change of the environment ......................................... 79
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Corporate governance ................................................................................................................ 79


Reducing .................................................................................................................................... 80
Weaknesses of Ittefaq Sons (Pvt.) Ltd ........................................................................................... 80
Debt............................................................................................................................................ 80
High attrition rate ....................................................................................................................... 80
Low cost recovery ...................................................................................................................... 80
Laggard in technological front ................................................................................................... 81
Bad raw material procurement philosophy ................................................................................ 81
Opportunities of Ittefaq Sons (Pvt.) Ltd......................................................................................... 81
Competitive position of the company ........................................................................................ 81
Opportunities in the field ........................................................................................................... 81
Acquisition opportunities ........................................................................................................... 82
Opportunities for demand of higher prices ................................................................................ 82
The movement of Ittefaq Steel in the value chain front ............................................................. 82
Benefit to Ittefaq Steel ............................................................................................................... 82
Threats faced by Ittefaq Sons (Pvt.) Ltd ........................................................................................ 83
Resources to cushion the from business environmental change ................................................ 83
Financial..................................................................................................................................... 83
Adoptability of the company to technological changes ............................................................. 83
Regulatory norms ....................................................................................................................... 83
CORPORATE STRATEGY: ......................................................................................................... 84
Service Excellence ..................................................................................................................... 84
Integrity ...................................................................................................................................... 84
Learning ..................................................................................................................................... 84
Collaboration ............................................................................................................................. 84
Innovation .................................................................................................................................. 85
Fun ............................................................................................................................................. 85
Responsibility ............................................................................................................................ 85
CONCLUSION.................................................................................................................................. 87
Recommendations ......................................................................................................................... 88
Annexure ........................................................................................................................................ 92
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EXECUTIVE SUMMARY
Ittefaq Sons (Pvt.) Ltd was established in 2004-05. Initially the company was established
with the objective to gain maximum profit and to compete with competitors. The normal
procedure of establishing a company under the Companies Law was set aside and the
Company was established through the promulgation of an Ordinance. The Company
commenced its working from 2005.

Now a days Ittefaq Sons (Pvt.) Ltd has become one of leading company of Pakistan. It
works under the Al- Shafi Group Of Companies. Following are the companies of Al-
Shafi group:

1. Ittefaq Sons (Pvt.) Ltd


2. Ittefaq Sugar Mills Ltd
3. Kashmir Sugar Mills Ltd
4. Kashmir Feeds Limited

The functions performed in Ittefaq Sons (Pvt.) Ltd are:

1. Product Development
2. Product Management
3. Manufacturing
4. Technical
5. Risk Assessment
6. Quality Control

Ittefaq Sons (Pvt.) Ltd has led the way in developing customized solutions to customers'
product requirements. Focused on being responsive to customers' needs, Ittefaq Sons
(Pvt.) Ltd is widely recognized for fostering the development of innovative steel
solutions through its own research and through strategic alliances with world-leading
technical partners. Ittefaq Sons (Pvt.) Ltd has led the industry with value-adding
technologies such as metallic coating. Solid paint technology is another innovation
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currently being commercialized. The company is continuing to explore opportunities to


break new ground in steel markets.

Ittefaq Sons (Pvt.) Ltd is looking to further develop this established business and take
advantage of the significant potential for growth in international market. To serve
customers' needs directly, over recent years Ittefaq Sons (Pvt.) Ltd has built
manufacturing facilities in a number of Asian countries and it is now operating efficiently
and growing rapidly in profitability.

INTRODUCTION

This report has been prepared for the research project that has been done in the Ittefaq
Sons (Pvt.) Ltd in order to study the practical aspect of the course and implementation of
the theory in the real field with the purpose of fulfilling the requirements of the course of
B.B.A (Hons).

The aim of this research project is to be familiar to the practical aspect and uses of
theoretical knowledge and clarifying the career goals, so I have successfully completed
the research project and compiled this report as the summary and the conclusion that have
drawn from the research project experience.

The time in Ittefaq Sons (Pvt.) Ltd very audacious and supportive to my career through
which I have gained valuable work experience that will help definitely makes a favorable
impression on me as a prospective future employer.

In todays competitive business scenario and era of flatter organization, structures


enabling high quality performance/contribution from each individual have become
essential because skill level of employees is critical to the performance of any
organization.

The leaders role in motivating, guiding and facilitating employees in raising their
performance and realizing their potential has assumed greater significance. Further,
managers are called upon to develop the softer skill, attitudes and behaviors so as to
ensure that each individual integrates well with the team and the overall organization
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culture. Also, employees today expect their manager to play an active and effective role
in their career planning and professional development.

Thus for knowing the needs of the training and development of the employees, managers
are able to evaluate and analyze the progress of skill index of a group of employees of
same profile. In order to improve the skill level of employees, 4 quadrant model of skill
assessment is adopted by managers. This help in identifying the gaps and the training the
Critical skills are those minimum skills required to successfully accomplish the assigned
work/job. If skill of worker or employees lies below the critical skill, then the
productivity of workers is hampered and the organizational output will be affected. On-
critical skills are those skills, which help in enhancing the efficiency and effectiveness of
an organization. It helps in achieving the benchmark of productivity of an organizational
output.
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HISTORY
initiated early into the techniques of trade company traveled wide, gained a scientific
outlook and first set up steel business in Pakistan , introducing new machinery that vastly
improved the production of steel in the country by having sufficiency in scientific
knowledge, power.

Ittefaq Steel founded on 2004-2005 with the objective to gain maximum profit and to
become leading company for Contracting & Trading activities. Today Ittefaq Sons (Pvt.)
Ltd has become the largest privately owned steel organization in the Middle East and is
expanding its manufacturing power beyond the Middle East engulfing parts of South Asia
Europe.

Since its inception the Ittefaq steel management was steering into the global market for
gradual diversification with the gifted cognizant vision and palpable strategy. The success
of Ittefaq Steel is a result of an amalgamate effort of an established troika of thinkers,
professionals, and doers. Of course, the eventual outcome is mesmerizing when Ittefaq
Steel is sighted recently among top companies.
The mill is also engaged in distribution of building materials and trading of various
industrial materials throughout the Pakistan. Further business opportunities are being
explored in cooperation with local and foreign companies.

Ittefaq Sons (Pvt.) Ltd an ISO 9001:2008 and ISO 14001:2004 certified organization for
its production facilities, the flagship company of the group, is an established
manufacturer of stainless steel billets, blooms, rolled flats of various thickness/ width and
has manufacturing facilities in Lahore, Faisalabad, Gujranwala.
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The group is a responsible corporate citizen with ethical practices and conforms to the
environment friendly waste disposal methodologies. Working environment in the group
brings motivation among the workers. It attracts and retains true professionals committed
to their work and achievements. Dedicated to achieve service and technical excellence,
the group envisages a vision that constitutes its core strength and basis for a growing base
of satisfied customers.

Keeping in mind the market potential with the growing demand and rare availability of
manufacturing facilities for quality steel products such as, Steel Billets, Hot Rolled De-
Formed Bars etc the ISM envisages setting up a state of the art steel mill for
manufacturing of quality steel products to provide to the requirements of various
segments of the industry.

The companys future projects will provide to the requirements of quality products used
by various segments of the industry such as construction and engineering sector in
Pakistan. The proposed steel mill offers the company a distinctive edge in the field for
reasons such as, it shall be the well-known steel mill in the private sector, and most
importantly ISM shall produce grades rarely produced by Pakistan Steel and other local
manufacturers thus creating a niche market for the company.

As a result in 2007 firm set up their own re-rolling mills in the name of Ittefaq Steel Re
Rolling Mills at NWFP which is running proudly in his initial start and capturing many
known projects of the market. And by the Grace of ALLAH we will also establish our
CC Plant soon in future for achievement of the desire developed in 2009.
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OVERVIEW OF THE ORGANIZATION


Ittefaq Sons (Pvt.) Ltd was incorporated in Pakistan on 2004-2005 as a private limited
company under the Companies Ordinance, 1984. The registered office of the company is
situated at Gulberg III,
Lahore, Pakistan The principal activity of the company is to carry on business as a
manufacturer of steel.
Being initiate at the market place company provides customers with value through our
products and services, committing us to providing the quality, variety and convenience at
economical price. Company objectives is customers to trust in pricing philosophy and to
always be able to find the lowest prices with the best possible service. Success of
company requires us to trust in employees, respect their individual contributions and
make a commitment to their continued development. This environment will allow the
company to attract the best people and provide opportunities through which they can
achieve personal and professional satisfaction. Commitment of company is to support the
communities in which employees and customers live and work. Time and resources are
used to preserve our role as a partner, neighbor and friend.

Management responsibility to its company is clear - continuous profit growth while


ensuring future success. Ittefaq Sons (Pvt.) Ltd will prosper through a balance of
innovation and good business decisions that enhances our operations and creates superior
value for our customers.

By pursuing these goals, Ittefaq Sons (Pvt.) Ltd will continue to build on foundation as
a world-class chain in Pakistan. Ittefaq Sons (Pvt.) Ltd continue to build strong
relationships with the diverse people and organizations with whom we work. We shall
pursue our mission with a passion for what we do and a focus on priorities that will truly
make a difference in our future.
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VISION
To contribute the society by creating better value, innovative technology, high quality
steel products and superior services.

We will achieve our vision through:

By People
By fostering teamwork, nurturing talent, enhancing leadership capability and acting with
pace, pride and passion.

By Offer
By becoming the supplier of choice, delivering premium products and services and
creating value for our customers.

By Innovative Approach
By developing leading edge solutions in technology, processes and products.

By Conduct
By providing a safe workplace, respecting the environment, caring for our communities
and demonstrating high ethical standards.

MISSION STATEMENT
Ittefaq Steel aims to proceed on its path to be the leading provider of quality steel
products, through employees empowerment with safe and environmentally sound
practices.
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Objectives of Ittefaq Sons (Pvt.) Ltd


Ittefaq Sons (Pvt.) Ltd is under the department of the Ministry of Commerce and
was established in 1963 with the main objective of promoting and supporting
sustained growth in exports of goods and services both in terms of volume and
value.

OBJETIVES
Assist the govt. in formulating and administering export policy
Formulate export targets and monitor exports
Recommend production for export and establishment of products
Receive and disseminate market intelligence
Sponsor incoming and outgoing trade delegations
Participating international trade fairs
Settlement of trade disputes
Markets studies, seminars and workshops
Registration of steel mills abroad
Training of officers and businessmen
Export of services and products
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PRESENT STATUS OF ORGANIZATION

At present the Ittefaq Sons (Pvt.) Ltd is the largest organization in the Public sector to
facilitate and boost products. It is working closely with other departments and with the
respective industries chambers and their associations.
It has build up relationships with the foreign importers. It has made easy access to the
international markets for the exporter. It is providing the timely and informative date to
enter into the new market and statistical analysis to make him suitable to enter the market
at the right time.
It has many mills in the country with a central head office at Lahore. And regional offices
at Gujranwala, Karachi and Faisalabad. Now it is trying to establish more mills and
working with the associations to make their best.
Our major exports are being made to the European Union, America and U.K. after the
September 11, 2001, our exports has been decreased to a minimum level. There was a
slowdown because these countries have refused to accept our products. So Ittefaq Sons
(Pvt.) Ltd has realized this fact and it trying to move to the new markets of the Africa and
the Middle East.

Moreover it is giving emphasis on the developmental categories products. It is helping


the exporter in these categories in joining the trade delegations and the trade exhibitions
and a very nominal fee is charged for this. Moreover it has a large network of its foreign
offices and promotion is made through these offices. Our trade offices are working in
more than 40 countries. In short the ISM is making their best to increase product. There
are some problems facing the organization. Because here is no export culture. First we
have to try to create export culture and then to make our business internationalize in the
foreign markets and the make the country prosperous and rich in the foreign exchange.
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Cooperate profile

MR.USMAN JAVED, PRESIDENT/CEO

Mr. Usman is the son of Mian Muhammad Javed Shafi; one of the most eminent
industrialists of the country with a superior vision and dynamic brand of leadership. Mr.
Usman has held the directorships at Kashmir Poultry Breeders (Pvt.) Limited, Ittefaq
Sugar Mills Ltd. and Kashmir Feeds Ltd.

Mr. Usman is instrumental in making strategic decisions for the Company and has led the
Company to become one of the leading companies in steel sector. He is an MBA from the
University of Utah, USA.

MR. MIAN MUHAMMAD PERVAIZ SHAFI, DIRECTOR

Mr. Pervaiz has a rich and diversified experience of 40 years in iron and steel industry
and is renowned as one of the most experienced industrialists of the steel industry. He has
also served as the Director of Ittefaq Sugar and Kashmir Sugar Mills Ltd. Under his
leadership the Company expects to achieve new heights and can further excel in the steel
industry. Mr. Pervaiz is also serving as a member of audit committee of the Company.

MR.JAVED SADIQ,DIRECTOR

Mr. Javed is serving as an independent director and has brought significant diversity to
the board of Ittefaq Iron Industries. Previously, he has served on the boards of National
Investment Trust, Regional Development Finance Corporation, Lahore University of
Management Sciences and State Cement Corporation and currently holds directorships in
The United Insurance Co. of Pakistan and Greenstar Social Marketing. Having a
remarkable history of more than four decades, Mr. Javed has served various prestigious
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organizations including National Development Finance Corporation as Director, EVP


Karachi, SVP Zonal Head Lahore, Overseas Employment Corporation as Manager
Marketing Planning and Development, MICAS Association Pakistan as Deputy General
Manager, Decca Ltd. London as System and O&M Analyst and BBC London in audience
Research Development. He has also worked with First national Bank Modaraba as the
CEO and Industrial Development Bank of Pakistan as a Chairman.

Mr. Javed has also rendered consultancy services to NDFC for the affairs related to
Karachi Electric, Wapda and National Book Foundation. Also, he has provided his
consultancy for the billion, transmission and distribution departments of KE.
xd

Mr. Javed is also a member of audit committee of the Company. He holds the degree of
B.A (Hons.) from University of Liverpool, England and is also an M.A in International
Relations & Economy from University of Manchester, England.

MR. KHALID MUSTAFA, DIRECTOR

Mr. Khalid Mustafa is a graduate from M.A.O College, Lahore. He has a vast and
illustrious experience of transport and steel business having served in the sectors in
various capacities. He possesses keen interest in Pakistan Politics and sports. He was
elected ascouncilor in local body election thrice and has also served as chairman bait-ul-
mall Lahore.
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MRS. KHALIDA PERVAIZ, DIRECTOR

Mrs. Khalida Pervaizis daughter of Mian Khalid Siraj who was ex-partner of Ittefaq
Foundries. She has also served as director in Ittefaq Sugar Mills Ltd a. At present she is
on the board as well as a member of Human Resource Committee and has taken
numerous initiatives for the development of HR function of the Company. She is also
supervising a charitable institution and actively participates in social work.

MRS. AYESHA FAHID, DIRECTOR

Mrs. Ayesha Fahid is a graduate from Kinnaird College for Women University. Her
presence onthe board and as a member of HR Committee has broughtnumerous initiatives
to set high standards and benchmarks for the performance of the Company. She also aims
to work for the improvement ofproduct portfolio of the Company and expanding its
customer base.

MRS. SUMBLEEN USMAN, DIRECTOR

Mrs. Usman is a graduate from Government College of Home Economics, Lahore.. Apart
from serving the board she is supervising the procurement of raw materials and is also
serving as a member of HR Committee.
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KEY MANAGEMENT PROFILE

MR.USMAN JAVED,PRESIDENT/CEO

Mr. Usman is the son of Mian Muhammad Javed Shafi; one of the most eminent
industrialists of the country with a superior vision and dynamic brand of leadership. Mr.
Usman has held the directorships at Kashmir Poultry Breeders (Pvt.) Limited, Ittefaq
Sugar Mills Ltd. and Kashmir Feeds Ltd.

Mr. Usman is instrumental in making strategic decisions for the Company and has led the
Company to become one of the leading companies in steel sector. He is an MBA from the
United States of America.

MR. AMIR MUNIR BHATTI, CHIEF FINANCIAL OFFICER

Mr. Amir being a Fellow member of (ICMAP) is a seasoned professional and possess
diversified experience in Accounting, Financial Management, and Taxation for over 20
years. During his distinguished career he has served on top management positions like
Senior Manager Finance, Chief Accountant in Siddique Brother (Pvt.) Ltd, Laiba Look
International respectively. He has been associated with steel industry since 2000. His
previous appointment was in Shalimar Steel Re-rolling Mills (Pvt.) Ltd in the capacity of
DGM (Finance &Taxation) where he supervised the successful ERP implementations in
Steel unit and developed effective budgetary and cost control mechanisms. Currently he
is Chief Financial Officer in Ittefaq Iron Industries Limited since 2014.
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MR.MUHAMMAD SHAHZAD BAZMI,COMPANYSECRETARY/LEGAL


ADVISOR

Mr. Muhammad Shahzad Bazmi has been serving the Company for more than 10 years in
the capacity of Company Secretary. He is well versed with corporate, taxation, and legal
matters of the Company. He is a Commerce graduate and also holds a law degree from
the University of Punjab, Lahore. Mr. Bazmi is also an associate member of Pakistan
Institute of Public Finance Accounts.

As a member of senior leadership team, he assists Chairman, Directors, and Group


General Manager with their corporate, legal and taxation affairs. He is also a member of
the Lahore High Court.

MR. ADNAN YOUNUS, GENERAL MANAGER AUDIT

Adnan Younus is a qualified member of Institute of Internal Auditors USA (IIA) and
Institute of Chartered Accountants of Pakistan (ICAP). He has more than 10 years of
practical experience in the field of internal audit planning, programming, internal control
system, design and developments, risk assessment and measures to mitigate risks. He is
in association with this company for the past 4 years and playing an important role in
developing a well established and robust internal audit function.

MR. HAROON ARIF, MANAGER MARKETING

Mr. Haroon has been associated with the Company since 2010 and is a high profile
marketing professional has played significant role in developing effective sales and
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marketing plans for the Company. Mr. Haroon possesses seven years of local and
international experience of developing B2B sales, client relationships, sales plans and
strategies development, brand management and business development.

He has also worked with Gft NOP UK as a marketing researcher. He is an MBA


(Marketing) from University of Wales, Institute Cardiff-UWIC, United Kingdom.

HUMAN RESOURCE AND REMUNERATION COMMITTEE

The Board of Directors has setup an effective Human Resources function managed by
suitable and qualified personnel who are conversant with the policies & procedures of the
Company and are involved in Human Resources function on a full time basis.

The human resource and remuneration committee comprises of the following members:

Ms. Khalida Pervaiz - Chairman


Ms.SambleenUsman - Member
Ms.Ayesha Fahid Member
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External analysis:

Environmental analysis
In basic oxygen steelmaking, scrap represents up to 30 percent of the raw materials
charged into the furnace. It represents between 90 and 100 percent of the charge in EAF
(electric arc furnace) production, which is also the principal route for stainless steel
production.
Steel is 100 percent recyclable: moreover, it can be used over and over again with no
downgrading to a lower quality product. Steels magnetic properties make it simple to
extract from other materials for recycling. Approximately 350 million tonnes of steel
scrap is recycled each year. Stainless steel is a very valuable commodity and is therefore
almost entirely recycled.

There is no one factor to explain the many environmental improvements achieved by the
steel industry in recent years. One trend has become clear however: the steel industry has
shifted its focus from end-of-pipe collection of emissions to considering improvements at
every single stage of the steelmaking process. Steelmakers have therefore achieved even
further emissions reductions by investing in overall cleaner production, better
maintenance and improved practices. New technologies, operating practices, employee
education and management attention have all been important.

Many of the improvements have resulted from very heavy investment programs. It is
estimated that at least 10 percent of all steel industry capital expenditures have been
17

specifically on environment improvement or more than US$ 20 billion in the last ten
years alone. This is almost certainly an underestimate, since it does not include
investment in new steelmaking processes such as continuous casting, thin slab casting
or coal injection which enable much cleaner technology to be introduced.

Environmental factors:

Weather
Climate change
Laws regulating environment pollution
Air and water pollution
Recycling
Waste management
Attitudes toward green or ecological products
Endangered species
Attitudes toward and support for renewable energy
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GPEST ANALYSIS:

FACTOR AFFECT THE BUSINESS

Political factors
Are how and what degree a Government interference in his economy specifically political
factors includes areas such as

Tax Polices
Labor Law
Environmental Law
Trade Restrictions
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Tariffs
Political stability
Political Factors may also include goods and services which the Government wants to
provide or be provided but others there are some question in our mind during the analysis
which is

The political areas have a huge influence upon the regulation of businesses, and the
spending power of consumers and other businesses. We must consider issues such as:

How stable is the political environment?


Will government policy influence laws that regulate or tax our business?
What is the government's position on marketing ethics?
What is the government's policy on the economy?
Does the government have a view on culture and religion?
If these factors are goes in favor of Ittefaq Sons (Pvt.) Ltd then we will decide that the
political environment is favorable for opening the new stores and I thought that it is a big
opportunity for Ittefaq Sons (Pvt.) Ltd to do business and for earn profit.

Economic Factors
Ittefaq Sons (Pvt.) Ltd analyze the economy of Pakistan and know how the economic
factors are influence on company the factors may be include of

Economic growth,
Interest rates,
Exchange rates
Inflation rate
Employment level per capita
Long-term prospects for the economy Gross Domestic Product (GDP) per capita, and
so on.
20

These factors have major impacts on how businesses operate and make decisions. For
example, interest rates affect a firm's cost of capital and therefore to what extent a
business grows and expands.

Social Factors
In the Social Factors the Ittefaq Sons (Pvt.) Ltd will analyze the social factors include the

Cultural aspects
Health Consciousness
Population Growth Rate
Age Distribution
Career Attitudes
Emphasis on Safety
A trend in social factors affects the demand for a companys products and how that
company operates. For example, an aging population may imply a smaller and less-
willing workforce (Thus increasing the cost of staff). Furthermore, companies may
change various management strategies to adapt to these social trends (Such as recruiting
older workers) and some question arises in our mind because the culture is different from
city to city these may be

The social and cultural influences on Ittefaq Sons (Pvt.) Ltd (Some Extent) vary from city
to city. It is very important that such factors are considered. Factors include:

Does language impact upon the diffusion of products onto markets?


What are attitudes to local and imported products and services?
How much time do consumers have for leisure?
What are the roles of men and women within society?
How long are the population living? Are the older generations wealthy?
Does the population have a strong/weak opinion on political issues?
If these are in favor of Ittefaq Sons (Pvt.) Ltd then will be the best environment for
investing in other cities to expand business.
21

Technological Factors

Basic infrastructure level


Rate of technological change
Spending on research & development
Technology incentives
Legislation regarding technology
Technology level in your industry
Communication infrastructure
Access to newest technology
Internet infrastructure and penetration

Technology in the manufacturing industry has provided a new dimension. The


introduction of point of sale equipment and huge storage capacity for billing and payment
database has facilitated the management of large set-ups with ease. Operations can be
recorded in a structured and systematic manner, providing detailed analysis of the sales
and volume of transactions. Electronic transactions have increased the volume of sales in
the country. Flexibility in the mode of payment and cashless transactions has helped in
driving sales. Communication assists in maintaining a competitive advantage in retaining
and attracting customers. The introduction of new technology may be intricate for
manufacturers, but the convenience and cost effectiveness create the need for new
advancements. Big businesses need to monitor inventories and expenses of
establishments. With automated machines and high-end computers making the task
simpler, the focus of retailers can stay on retaining customers with new strategies. Such
technological advancements are only now coming into Pakistan and the need for it has
been acknowledged. The point of sale (POS) applications will provide for quicker
consumer check-out and multiple payment options like credit cards. Solutions ranging
22

from simple Point of Sale (POS) systems to complex retail ERPs have been implemented
mainly by large, mid-sized and manufacturer-retailers in Pakistan
We know that, Technology is vital for competitive advantage, and is a major driver of
retail business. Consider the following points:
Does technology allow for products and services to be sold more cheaply and to a
better standard of quality?
Do the technologies offer consumers and businesses more innovative products and
services such as Internet banking, new generation mobile telephones, etc?
How the technologies effect the system of Point of sale (pos)?
Does technology offer to Ittefaq Sons (Pvt.) Ltd a new way to communicate with
consumers e.g. banner, cables, and internet?

Ittefaq Sons (Pvt.) Ltd analyzes the technological factors if they meet their requirements
then the company will decide it positively.

Five POTERs FORCES:


The model originated from Michael E. Porter's 1980 book "Competitive Strategy:
Techniques for Analyzing Industries and Competitors." Since then, it has become a
frequently used tool for analyzing a company's industry structure and its corporate
strategy.

In his book, Porter identified five competitive forces that shape every single industry and
market. These forces help us to analyze everything from the intensity of competition to
the profitability and attractiveness of an industry. Flowing figure shows the relationship
between the different competitive forces.
23

Threat of New Entrants


Its means that the new companies have a lot of potential in the industry to enter as a new
supplier of the specific product, it is easy for new companies to enter the industry. In the
manufacturing business there are number of companies are working and still there is a
potential in this industry to absorb the new entrants because the needs of the peoples are
changing rapidly, and they are demanding the new product, so for the fulfillment the
demand of the customer the people comes in the industry as a manufacturer. But there are
some reasons through which peoples feel hesitation and these reasons limits the threat of
the new entrants are known as Barriers to Entry .Some examples include:

Existing loyalty of Steel Mills, Mughal Steel, Ittefaq Steel, Model Steel
Incentives for using a particular buyer (such as frequent shopper programs)
High fixed costs
Scarcity of resources
High costs of switching companies
24

Government restrictions or legislation

Power of Suppliers
Its means how much pressure suppliers can place on a business? If one supplier has a
large enough impact to affect a company's margins and volumes, then it holds substantial
power. Ittefaq Steel is a manufacturer business having different departmental at different
location, so the suppliers of the Ittefaq Steel are Open Markets Supplier, There are
somehow have a permanent suppliers. Sometime the open market supplier take a benefit
from the needs of the Ittefaq Steel, and they charge the same rate on which they are
providing to others, so it creates the completions between the Ittefaq Steel and others.
Here are a few reasons that suppliers might have power:

There are very few suppliers of a particular product


There are no substitutes
Switching to another (competitive) product is very costly
The product is extremely important to buyers - can't do without it

Power of Buyers
Its means how much pressure customers can place on Ittefaq Steel.? If one customer has
a large enough impact to affect a company's margins and volumes, then the
customer hold substantial power. The buyers of the Ittefaq Steel are the general public of
the different location, as we discussed the Ittefaq Steel have a focus to do its business
mainly in the rural areas and the peoples of the rural areas are not educated. so some time
it will be difficult for the Ittefaq Steel employees to retain the peoples of the rural areas
because they not listen any one , they do according to their mind, Here are a few reasons
that customers might have power:

Small number of buyers


Purchases large volumes
25

Switching to another (competitive) product is simple


The product is not extremely important to buyers; they can do without the
Product for a period of time
Customers are price sensitive

Availability of Substitutes
What is the likelihood that someone will switch to a competitive product or service? If
the cost of switching is low, then this poses a serious threat.

Competitive Rivalry
This describes the intensity of competition between existing firms in an industry. Highly
competitive industries generally earn low returns because the cost of competition is high.
A highly competitive market might result from:

Many players of about the same size; there is no dominant firm


Little differentiation between competitors products and services
A mature industry with very little growth; companies can only grow by stealing
customers away from competitors
26

Issue priority matrix:

To design issue priority matrix its important to understand and identify factors or issues
that affect Ittefaq Sons (Pvt.) Ltd in any way. GPEST or PESTL factors are those external
factors that affect any organization either positively or negatively which becomes
opportunity or threat for an organization respectively.
Following are such factors that can affect Ittefaq Sons (Pvt.) Ltd in various ways:

Factors:

Budget (2017-18)
Government announce budget (2017-18) in which the iron and steel industry product
price is high due to this act the iron industry capture revenue.

Chances of Occurrence = high


Impact on Company = high

OPEC Policies
Oil prices fell to $52/b in March. That's $3 a barrel lower than in February. That's double
the thirteen-year low of $26.55/b on January 20, 2016. Six months before that, oil had
been $60/b (June 2015). Oil production fell to 8.9 million b/d in 2016. It's expected to
rise to 9.2 million b/d in 2017 and 9.9 million b/d in 2018. It is predicted that oil price
will average $54/barrel in 2017 and $57/b in 2018.
Chances of Occurrence = high
Impact on Company = high
27

Operational Risk
Risk of damage to Property, Plant, Machinery and Equipment due to any unforeseen
event could halt production and the ability of the Company to service its clients. If the
shutdown of the plant is for a long period of time, finished goods inventory may not be
sufficient to meet customer demand.

Chances of Occurrence = high


Impact on Company = high

Foreign Exchange Risk


Foreign exchange risk is the risk that the Company may suffer losses as a result of
adverse exchange rate movements i.e. PKR depreciation and devaluation will inflate the
price of imports and devalue export prices thus affecting the profitability of the
Company. All the Companys raw materials are imported and therefore exchange rate
risk is an important consideration for the Company. Also, since local selling prices are
affected by international steel prices, variation in the exchange rate also affects the
Companys selling price. Variations in the exchange rate can be either positive or
negative for the Company.
Chances of Occurrence = high
Impact on Company = high

Power Supply Risk


The Company may not be able to operate at optimal capacity due to unavailability of
electricity as electricity is a key component in the conversion process from scrap to billets
to re-bars. A stable and reliable source of electricity would help sustain sales and
profitability. Without it, the Company could import billets instead of scrap, however, this
can increase the overall cost of production, and thus reduce profitability.
Chances of Occurrence = high
Impact on Company = high
28

Credit Risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a
financial instrument fails to meet its contractual obligations, and arises mainly from trade
debts, advances and deposits, interest accrued, other receivables and margin on letter
guarantee. The Company currently does provide credit to various construction
contractors, and default by any of these parties would have a negative impact on the
financial standing of the Company.
Chances of Occurrence = high
Impact on Company = high

Labor laws:
Labor laws also effect the industry and government keep on revising the laws related to
labor force e.g. laws related to child labor and forced labor. Government recently in
budget (2017-18) increases the minimum salaries of an employee to Rs. 10,000. These
laws directly affect the industry.

Chances of Occurrence = High


Impact on Company = Medium

Liquidity Risk
The Company uses various financing facilities in order to meet its operational liquidity
requirements. This exposes the Company to the risk of not being able to meet its financial
obligations in a timely manner via internal liquidity generation. Failure to pay financial
dues on time would weaken the Companys future ability to raise further financing and
thus increasing the overall cost of funds and potentially lowering the ability to service
clients.
Chances of Occurrence = high
Impact on Company = medium
29

Interest Rates:
Pakistan interest rate is decreasing by the years, according to Trading Economics global
macro models and analysis expectations, it is estimated that the Interest Rate in Pakistan
to stand
at 5.50 in 12 months time. Currently by 2016 Interest Rate is at 5.75 percent and in the
long-term, the Pakistani Interest Rate is projected to trend around 4.00 percent in 2020.
Lower interest rate is good for all businesses but gradual decrease may not have great
effect on Ittefaq Sons (Pvt.) Ltd but will be beneficial in long run. The company managed
its supplies by making purchasing contracts with its raw material vendors. It also
managed its foreign exchange risk by using different derivatives and forward covers.
Chances of Occurrence = high
Impact on Company = low

Political instability:
The governments stability plays a great role for any industry. In Pakistan, government
faces a lot of difficulties from terrorism, clash with Supreme Court and other political
issues like corruption and Swiss bank accounts. These all activities effect badly on the
industries and no one is ready to invest in the country. Recently the electricity shortage
problem, caused due to misconduct and carelessness of government also created lot of
problems to the operations of the industry.

Chances of Occurrence = Medium


Impact on Company = high

Sector / Demand Risk


Decrease in demand for Companys products may have an adverse impact on its
operational effectiveness and profitability. Steel is a commodity and the industry is
cyclical in nature. If there is an economic slowdown, demand for all steel products is
likely to decline.
30

Chances of Occurrence = medium


Impact on Company = high

Disposable Income:

GDP Per Capita is increasing by the rate 4.01, 4.71 to 5.2 percent annually for 2015,
2016
and 2017 respectively, yet unstable disposable income for average Pakistanis, according
to a report by the US Department of Agricultures Economic Research Service in which
84 countries were surveyed, Pakistanis spend more of their income on food than any
other country. An average Pakistani spends 47.7 per cent of their house hold budget on
food consumed at home. Its getting harder for average Pakistani to fulfill other
necessities with half of his remaining income.
Chances of Occurrence = medium
Impact on Company = medium

Social responsibility:
The Company believes that Corporate Social Responsibility is the continuing
commitment to behave ethically and contribute to economic development of the
workforce and their families as well as of the local community and society at large.

Chances of Occurrence = medium


Impact on Company = medium
31

Competitor Risk
Since steel is a commodity, and there are various players in the market, including Chinese
imports, competition could reduce selling prices and thus margins for the Company. This
risk increases especially when there is excess production in the industry and low demand.
Chances of Occurrence = medium
Impact on Company = medium

Risk of Technological Obsolescence


The Company would need to continue to invest in its fixed assets in order to stay efficient
and up to date with technology, which would allow the Company to remain competitive.
A failure to do so can result in lower quality and efficiency relative to other players,
thereby adversely affecting the brand and the market share of the Company.
Chances of Occurrence = medium
Impact on Company = medium

Value of Dollars in World Market:

The Pakistan Rupee is expected to trade at 106.00 by the end of this quarter, according to
Trading Economics global macro models and analysts expectations. Looking forward, it
is estimated to trade at 109.00 in 12 months time. Increasing value of Dollar against Pak
Rupees,cause more cost and less return in companys trade.
Chances of Occurrence = Medium
Impact on Company = high

Stock Market Trend:


KSE 100 decreased 346 points or 0.69% to 49482 on Thursday April 27 from 48744 in
the previous trading session. The Pakistan Stock Market (KSE100) is expected to trade at
47700.00 points by the end of this quarter, according to Trading Economics global macro
32

models and analysts expectations. Looking forward, it is estimate to trade at 46200.00 in


12 months time.
Chances of Occurrence = low
Impact on Company = Low

Monitory Policy:
The State Bank of Pakistan (SBP) announced to keep interest rate unchanged at 5.75%
for the next two months, foreseeing challenges to the economy on an external front. The
deficit doubled to $3.6 billion in the current fiscal years first-half ended December 31,
2016 from $1.7 billion in the same period last year.
Chances of Occurrence = low
Impact on Company = high

Fiscal Policy:
Pakistans fiscal deficit touched 2.4 per cent of gross domestic product (GDP) in the first
half of this fiscal year. The half-year deficit this year is a tad lower than 2.6pc of GDP in
2012-13,repeatedly condemned by Finance Minister Ishaq Dar. However, the full-year
deficit was finally pitched at 8pc of GDP that year after accounting for Rs480 billion
power sector circular debt. In absolute terms, the fiscal deficit in the first half of current
year crossed Rs799bn, which is 55pchigher than Rs515bn a year ago.
Chances of Occurrence = low
Impact on Company = high

Lifestyle:
The lifestyle of people keeps on changing so it is very important to stay update with those
changes, it is very important to take the advantage and to attain and retain the customers.
Consumer adopts the trends of changing environment and because of modernity as well
as globalization. People are aware about each and every thing happening around them.

Chances of Occurrence = Medium


Impact on Company = Low
33

Unemployment Trend:
Unemployment rate is gradually decreasing but increasing population cause minimal
effect.Unemployment Rate in Pakistan is expected to be 6.10 percent by the end of this
quarter 2017, according to Trading Economics global macro models and analysts
expectations. Looking forward, it is estimated that Unemployment Rate in Pakistan to
stand at 6.00 in 12 months time.In the long-term, the Pakistan Unemployment Rate is
projected to trend around 5.70 percent in 2020.
Chances of Occurrence = Low
Impact on Company = Low

Tax Rate:
The Corporate Tax Rate in Pakistan stands at 32 percent. Corporate Tax Rate in Pakistan
averaged 34.58 percent from 1997 until 2016, reaching an all-time high of 43.00 percent
in 2000 and a record low of 30.00 percent in 1998. Tax Rate is still high. Corporate Tax
Rate, Income Tax Rate and Sales Tax Rate are at 30.00, 20.00 and 17.00 respectively and
are expected to be unchanged by 2020.
Chances of Occurrence = Low
Impact on Company = Medium
34

Demand shift for goods :


As a majority of the countrys population is in lower-lower to lower-middle class, this is
the reason that people are more price conscious and secondly the also look for the
convenience of products due to this reason there is a demand shift observed in the squash
industry. The demand of Squashes is now limited only for few months in major areas of
country.

Chances of Occurrence = low


Impact on Company = Low

Chance of occurrence High medium low


and impact on
company

High A B C

Medium D E F

Low G H I
35

A B C D E G

political disposable monetary


Budget labor law interest rate
instability income policy
OPEC sector/demand social
liquidity risk fiscal policy
Policies risk responsibility
operational
competitor risk
risk
risk of
foreign
technology
exchange risk
obsolesce

credit risk
36

Opportunities:
Supporting budget (2017-18)
Labor law increase salary
In future interest rate decrease
Disposable income
Social responsibility
Monitory policy
Fiscal Policy
Lifestyle
Unemployment Trend
Tax rate

Threats:
Change in OPEC prices
Operational risk
Power supply risk
Credit risk
Liquidity risk
Decrease demand
Competitor risk
Risk of Technological Obsolescence
Value of Dollars in World Market
Demand shift for good
37

EFE matrix:
External Factor Evaluation Matrix (EFE)
Weigh Ratin Weighted
Opportunities t g Score
1 Supporting budget (2017-18) 0.12 4 0.48
.
2 Labor law increase salary 0.15 4 0.60
.
3 In future interest rate decrease 0.08 3 0.23
.
4 Disposable income 0.05 3 0.15
.
5 Monitory policy 0.05 2 0.10
.
6 Fiscal Policy 0.05 2 0.10
.
Weigh Ratin Weighted
Threats t g Score
1
Change in OPEC prices 0.05 4 0.20
.
2
Operational risk 0.05 2 0.10
.
3
Liquidity risk 0.10 2 0.20
.
4
Risk of Technological Obsolescence 0.10 3 0.30
.
5
Competitor risk 0.10 3 0.30
.
6
Value of Dollars in World Market 0.10 2 0.20
.
TOTALS 1.00 2.96
38

Internal analysis:
SUPPLY CHAIN:
Supply chain process consist of the following components:

Suppliers
Manufacturing
Distributor
Whole seller
Retailer
Customers

Supplier
A party that supplies goods or services. A supplier may be distinguished from a
contractor or subcontractor, who commonly adds specialized input to deliverables.
Also called vendor.

Name of Supplier Imports (MT)


Stemcor Singapore 25,000
Adani UAE 50,000
BFRS UK 40,000
Stena Metal Sweden 100,000
MRC Kuwait 19,250
EMR UK 8,000
Buoysail UAE 5,000

Manufacturing
After getting the supplies or required material next step of supply chain is manufacturing.
In this step the raw material is transferred into the finished goods.
Value chain part of the internal environment also falls inside the manufacturing step of
supply chain. Which discussed in detail in the coming portion of the report.
39

Distributor
After manufacturing the next step is distribution of the product. Different distributor pick
up the goods in bulk quantity and then supply it to wholesalers.

Wholesalers
Wholesalers get the goods from distributor and then supply them in different
geographical region different wholesalers has picked up their geographical region and
they only work in that particular region.

Retailers
In that particular region where the wholesalers supply the goods there are some retailers
who buy these good and then sell it to the end users.

Customers:

Sr. No. Customers / Contractors Quantity Supplied (MT)


1 Atcon Construction 17,100
Professional
2 Frontier Works Organization 15,000
3 Descon Engineering 30,000
4 Zahir Khan and Brothers 12,000
5 General Head Quarters 17,000
6 ZKB Reliable JV 12,000
7 Habib Construction 18,000
8 Packages Construction Limited 1,000
9 Xinjiang Beixin Road and Bridge 3,000
Construction Company
Total 125,100
40

VALUE CHAIN ANALYSIS:

Product related cost (inbound & PD)

30-sep-2016 30-june-2016

Cost of sales 875,625,484 3,561,943062


41

Market Related Cost (Outbound logistics, marketing sales, services):

30-sep-2016 30-june-2016

Selling and distribution 2,907,285 13,278,919


cost

Support Activities:

30-sep-2016 30-june-2016

Administrative and 13,438,372 34,934,359


general expenses

30-sep-2016

Primary Activities Support Activities Total cost Sales-net Profit

878,532,769 13,438,372 891,971,141 958,661,045 66,695,904


*primary activities= Market related cost + Product related cost

30-june-2016

Primary Activities Support Activities Total cost Sales-net Profit

3,575,221,981 34,934,359 3,610,156,340 3,917,451,919 307,295,579


*primary activities= Market related cost + Product related cost
42

IFE matrix:

Internal Factor Evaluation Matrix (IFE)


Weigh Ratin Weighted
Strengths t g Score
1
Management Team 0.15 1 0.15
.
2
Information Technology 0.05 3 0.15
.
3 Innovativeness of Ittefaq Sons (Pvt.) Ltd with
0.05 1 0.05
. respect to its competitors
4 Adaptability of the company in the fast change of
0.15 4 0.60
. the environment
5
0.10 3 0.30
. Reducing Energy Costs
Weigh Ratin Weighted
Weaknesses t g Score
1
Debt burden 0.10 2 0.20
.
2
High attrition rate 0.05 3 0.15
.
3
Low cost recovery 0.05 2 0.10
.
4
Laggard in technological front 0.10 2 0.20
.
5
Bad raw material procurement philosophy 0.20 1 0.20
.
TOTALS 1.00 2.10
43

IE MATRIX:

Organizational Structure of Ittefaq Sons (Pvt.) Ltd


A well-developed and properly coordinate structure is an important requirement for the
success of any organization. It provides the basic framework within which functions and
procedures are performed. Any organization needs a structure, which provides a
framework for successful operations. The operation of an organization involves a number
of activities, which are related to decision making, and communication of these decisions.
These activities must be well coordinated so that the goals of the organization are
achieved successfully.
The Organization Structure shows the internal operations and reporting lines of
the Ittefaq Sons (Pvt.) Ltd. The company has clearly defined organizational structure,
which supports clear lines of communications and reporting relationships. There exists a
properly defined financial and administrative power of various committees and key
management personnel, which supports delegations of authority and accountability.

The internal operations of the company are organized into 5 main departments
and divisions headed by senior management of the company and are report directly to the
44

Board of Directors. The organizational structure of Ittefaq Sons (Pvt.) Ltd is centralized
because all the decisions of the company are taken by the top Management.

The entire structure of the organization of Ittefaq Steel can be broadly divided into
3levels, each level having separate roles and responsibilities. These 3 levels are upper
management, senior management and the middle management. Each of these lower levels
is responsible to perform Its functions and thereby report to the next higher level in the
organization on a periodic basis. Overall, we can say that the company has a flat
structure, beginning from the top management to the lowest level of management. The
Upper Management of the company has designation like the Managing Director of the
entire company and the Group Executive officer. The Senior Management has the various
Vice Presidents of the different departments which come directly under the Managing
Director. Under the Vice Presidents we have the Chiefs of the various functions who
coordinate the activities of its function along with the other departments. There can be
more than one chief in a department depending upon the number of line of the products.
This is seen in the Long Products Departments. The Chiefs are also accompanied by the
Heads in some of the departments. Under these Chiefs and Heads, company has the
various Sectional Heads who are the Unit Leaders, the Managers or the Officers. This
structure is prevalent in the entire organization on a national scale. In the Finance and
Accounts Department of Ittefaq Steel Mill Head office, Lahore, the functions are handled
by the Head of Marketing and Finance. Then, there are the various Manager Accounts
who handle the different aspects of the department. Under these Managers are the officers
who carry out the actual accounting work of the department.

Span of Control & Unity of Command

Span of control refers to the number of subordinates a supervisor has. There are two types
of span of controls which exits in the many organization.
45

Wide span of control:

Wide span of control means a single manager or supervisor oversees a large number of
subordinates. This gives rise to a flat organizational structure.

Narrow span of control:

Narrow span of control means a single manager or supervisor oversees few subordinates.
This gives rise to a tall organizational structures Ittefaq Sons (Pvt.) Ltd have narrow
span to control due to the following reasons

Workers are located in different geographic locations like Gujranwala, Faisalabad,


and Karachi.
Because Ittefaq Sons (Pvt.) Ltd requires great deal of interaction between supervisor
and workers
New problems arise frequently
Unity of Command

The unity of command principle states that an employee should have one and only one
supervisor to whom he or she directly reports. No employee should report to two or more
supervisor since each supervisor has their own priorities. So the same principal is
adopting by the Ittefaq Sons (Pvt.) Ltd. Because the smoothness of the work.
46

MANAGEMENT HIERARCHY
47

Marketing funcation

4 PS OF MARKETING:

PRODUCT
ITTEFAQ SONS is the leading steel rolling mill in the Pakistan with the capability to
manufacture international quality products with various standards such as DIN, ASTM
etc. The company has created a name for itself i and is known as a pioneer in steel
products. The state-of-the-art rolling mill can produce structure steel with close tolerance
and the required mechanical properties, and cater to stringent requirements for critical
applications. A highly responsive and flexible production capability producing tailor-
made solutions has resulted in ITTEFAQ SONS becoming a preferred supplier to key
customers of structural steel in the region. ITTEFAQ SONS is also able to minimize the
lead time required to provide consistent with international quality structural steel Angles,
Flat Bars, Beams, Channels, Round and Square Bars in a wide range of sizes.

STEEL BARS
Our Deformed and TOR steel bars of Grade 40 and Grade 60 are produced in all
American and British standards sizes , from 10MM to 50MM.Rebar produced by Ittefaq
Steel is 100% melted and manufactured in the our mill, and is free of mercury
contamination in the process. Ittefaq Steel Mill (ISM) produces to tight tolerances, high
produced to tight tolerances, high surface finish and superior quality. Surface finish and
superior quality.
48

INDUSTRIAL STEEL
IITEFAQ SONS has quickly emerged as one of the most productive mills in Pakistan
producing high quality industrial steel conformance with ASTM,BSS and ASHTO
industrial sections includes Angles, Flats, Channels, Squares, Rounds and Special
Shapes. Throughout our Melt Shop - from scrap to billets - we maintain strict control
over the content of our steel. ITTEFAQ SONS quality system is based on the key
principles of ISO and focused on producing products consistently right to meet customer
requirements.
49

ALLOY STEEL
ITTEFAQ SONS is a professionally managed organization that has raised itself to a
higher pedestal with its quality products and has been recognized as a leading
manufacturer of big and small alloy steel billets in conformance with international
standards like ASTM, BSS, AISI, JIS,SAE and DI.

STAINLESS STEEL
ITTEFAQ SONS produces superior quality stainless steel in Pakistan in a different Series
like 200,300 and 400 series maintaining extremely close dimensional tolerance and
accurate mechanical properties. Built to international specifications cater the need of
kitchen, and surgical industry and defense sector.
50

Technical facilities/Processes

MELTING
The Melt Shop is the heart of the steelmaking operation at ITTEFAQ. Here, raw metallic
scrap is transformed into a semi-finished product (called a billet) of correct size and
chemistry in two medium frequency capacity of 15 ton per heat.

LADLE REFINING FURANCE


Ladle Refining Furnace having capacity of 20 ton per heat is used for refining of liquid
steel to produce high quality structural / alloy steel. LRF reduces the dissolved gas
content and helps in the better recovery of Ferro-alloys.
51

MELTAL REFINING CONVERTER


MRK is an improved Air-Oxygen-Decarburization (AOD) converter a capacity of 22 ton
per heat for making Stainless Steel and low carbon Alloy Steels.

COUNTINUOUSE CAST
The two stand 6/11 radiuses continuous caster is equipped for secondary cooling and
other special features for the production of 100 x 100mm, 130 x 130 mm or 150 x 15
square billets of steel.
52

ROLLING MILLS
The Fully automatic Rolling mills of 20" straight rolling with auto controlled reheating
furnace has capacity to roll steel bar from 10mm-90mm,flatbars from 40-400mm width
and 6-50mm thickness. Ittefaq produce different industrial sections according to
international standards.

PRICE
Pricing is one of the most crucial elements behind a successful product. It is more
pragmatic and fact oriented in industrial marketing as compared to pricing for consumer
products. Pricing in industrial marketing is closely related to the firms product,
distribution and communication strategies.

Factors Influencing Pricing Strategy in Steel Industry


The most important factors which affect pricing strategies in steel industry are:

1. Production Costs
2. Market demand (derived in nature)
3. Competition
4. Government regulations

Production Costs
Ittefaq Steel is the lowest cost manufacturer of steel and keeping production costs low
have played a major role in achieving that. The following measures have helped Ittefaq
Steel in maintaining cost leadership:
53

1. Capacity expansion: With the expansion of its Narangmandi plant by 2007 its
manufacturing capacity will jump to 21 mtpa. Acquisition of Corus has made
Ittefaq Steel one of the largest manufacturers of steel.

2. Technology: Ittefaq Steel has developed several technologies that help in keeping
production costs low. Some of them are:
- Process innovation and use of blue dust in sinter plants increased productivity
by 60%.
- Stamp charging technology was indigenously developed to convert low
quality coal to high quality coking coal. This reduced the import of coking
coal.

All these factors and more have led to Ittefaq Steel being the lowest cost, but still the best
quality steel manufacturer.

Market Demand:
Demand for steel is derived in nature since it is majorly used as an input. The following
facts and figures suggest that there exist healthy demand in market for Tata Steel to serve.

- World consumption of steel is expected to be 1.23 billion tones in 2010


registering a growth of 10% over 2009. The exports during 2010 are expected
to be higher by around 4% as compared to 2009.
- In Pakistan, apparent consumption is expected to increase by more than 10%
in FY 11 buoyed by expected strong performances from consuming segments
like automotive, construction, infrastructure and capital goods.

With economic and steel market conditions becoming more favorable and the steel
producers needing to recover the rise in input costs, it is anticipated that there will be a
strong rise in the steel prices in 2010-11. However, significant raw material price
increases, interest rate tightening and inflation may provide some downsides to an
otherwise positive outlook for the industry.
54

Competition:
Existing and potential competition inevitably affects pricing strategy by setting an upper
limit. The amount of latitude a firm has in its pricing decision largely depends on the
degree to which it can differentiate its products in the minds of buyers.

Pricing strategy is also influenced by the anticipated reactions of competitors to pricing


decisions. Price reductions on products that are undifferentiated are generally met
immediately by all suppliers, resulting in little shift in market share.

The major competitors of Ittefaq Steel in Pakistan are Pakistan Steel Mill, Model Steel.
Ittefaq Steel's rare advantage is that it has captive iron ore mines with capacities far in
excess of its current needs. Therefore, it makes imminent sense to expand its primary
steel-making facilities in Pakistan and look for finishing capabilities elsewhere. Greater
the volumes, lower the production costs and hence lower the prices at which its products
are offered.

This shows that the ability to maintain lower prices of its products have given Ittefaq
Steel the edge over its competitors.

Pricing Strategy:
A pricing strategy must be conceived in relation to overall business objectives and
marketing strategy. The success of any business depends upon a blend of long run profit,
growth and survival objectives. Price, because of its influence on unit sales volume and
profit margins, affects long run profit objectives. And maintaining profitability through
sound pricing practices is necessary to ensure the firms survival over time.

The pricing strategy adopted by Ittefaq Steel is the Market Penetration Strategy. This
strategy is based on the assumption that demands for the product is highly elastic. By
setting relatively low price Ittefaq Steel has managed to obtain large market share. The
advantage of this kind of pricing is that it discourages competition since there is less
opportunity to reap unusual benefits on investment. Since Ittefaq Steel is in control of
large iron ore deposits it has increased its capacity manifold and so enjoys economies of
55

scale. It has thus maintained prices of its products lower than of its competitors and has
increased the scale and efficiency of operations, since it has lower production costs.

PLACEMENT
Place represents the location where a product can be purchased. But in industrial
marketing place is often referred to as the distribution channel.

Distribution channels at Ittefaq Steel:

Ittefaq Steel Limited delivers steel products to Pakistani customers through:


Direct supply channels

Consignment agents

External processing agents

PROMOTION

In B2B marketing advertising, promotions and publicity plays an important role in the
communication strategies. Hence, to contribute to the overall effectiveness of the
promotional strategies utmost care must be taken by the companies.
B2B promotion is used to create awareness of the company, to increase the sales of the
product and to increase the overall effectiveness of the selling efforts. The promotional
program begins with carefully developed advertising objectives that must be formulated
from corporate and marketing objectives in such a manner as to set the direction for
creating, co-coordinating, and evaluating entire promotional program.
56

Promotional activities undertaken by Ittefaq Steel:

Branding Steel Based on Customer Focus

As one of Pakistans most successful companies, Ittefaq Steel represents a great example
of a strongly branded B2B company. In 2005, Ittefaq Steel was founded after that it has
become one of the leading company in Pakistan that is doing business in international
market.

Branding Steel

The profitability of the steel industry in Pakistan is generally linked to business cycles,
reaping profits when economy is going well and eroding them when it is in depression.
After Musharafs era, the Ittefaq Steel industry was experiencing a glut in the market
which strongly affected the profit margin of all related companies. To reduce its
dependence on the external environment and business cycles, Ittefaq Steel adopted a
strategy which stressed the following two points:

Branding its products


Moving to high value added products.

The company soon realized that a strong customer focus is essential if any branding
approach was to be successful. It soon began to introduce Internal Campaigns in order
to bring the customer-centric message to its employees. In the late 1990s, the company
launched several Internal Marketing Programs to emphasize customer focus and
service. The programs had taglines such as:

Customer first her haal mein (Customer comes first in any case),
Customer first her haal mein, her saal (customer comes first in every case, every
year),
57

Customer ki kasam hain taiyaar hum (We pledge to the customer that we are ready
for him).

Human Resource Managemant

LEGAL INFLUENCES

The field of HRM is greatly influenced and shaped by state and federal employment
legislation, most of which is designed to protect workers from abuse by their employers.
Indeed, one of the most important responsibilities of HRM professionals lies in
compliance with regulations aimed at HRM departments. The laws and court rulings can
be categorized by their affect on the four primary HRM functional areas: acquisition,
development, compensation, and maintenance.

The most important piece of HRM legislation, which affects all of the functional areas, is
Title VII of the Civil Rights Act of 1964 and subsequent amendments, including the Civil
Rights Act of 1991. These acts made illegal the discrimination against employees or
potential recruits for reasons of race, color, religion, sex, and national origin. It forces
employers to achieve, and often document, fairness related to hiring, training, pay,
benefits, and virtually all other activities and responsibilities related to HRM. The 1964
act established the Equal Employment Opportunity Commission (EEOC) to enforce the
act, and provides for civil penalties in the event of discrimination. Possible penalties
include forcing an organization to implement an affirmative action program to actively
recruit and promote minorities that are underrepresented in a company's workforce or
management. The net result of the all encompassing civil rights acts is that HRM
departments must carefully design and document numerous procedures to ensure
compliance, or face potentially significant penalties.

In addition to the civil rights acts, a law affecting acquisition, or resource planning and
selection, is the Equal Pay Act of 1963. This act forbids wage or salary discrimination
based on sex, and mandates equal pay for equal work with few exceptions. Subsequent
58

court rulings augmented the act by promoting the concept of comparable worth, or equal
pay for unequal jobs of equal value or worth. The important Age Discrimination in
Employment Act of 1967, which was strengthened by amendments in the early 1990s,
essentially protects workers 40 years of age and older from discrimination. The Fair
Credit Reporting Act also affects acquisition activities, as employers who turn down
applicants for credit reasons must provide the sources of the information that shaped their
decision. Similarly, the Buckley Amendment of 1974 requires certain institutions to make
records available to individuals and to receive permission before releasing those records
to third parties.

The major laws affecting HRM development, or appraisal, training, and development, are
the civil rights act, the equal pay act, and the age discrimination in employment act. All
of those laws also affected the third HRM activity, rewards, or salary administration and
incentive systems. In addition, however, HRM reward programs must comply with a
plethora of detailed legislation. The Davis-Bacon Act of 1931, for instance, requires the
payment of minimum wages to nonfederal employees. The Walsh Healy Public Contracts
Act of 1936 ensures that employees working as contractors for the federal government
will be compensated fairly. Importantly, the Fair Labor Standards Act of 1938 mandates
employer compliance with restrictions related to minimum wages, overtime provisions,
child labor, and workplace safety. Other major laws affecting rewards include: the Tax
Reform Acts of 1969, 1976, and 1986; the Economic Recovery Tax Act of 1981; the
Revenue Act of 1978; and the Tax Equity and Fiscal Responsibility Act of 1982.

Similar to other department managers, a human resource manager has two basic
functions:

1. Overseeing department functions


2. Managing employees.

For this reason, a human resources manager must be well-versed in each of the human
resources disciplines compensation and benefits, training and development, employee
relations, and recruitment and selection. Core competencies HR managers have are solid
59

communication skills and decision-making capabilities based on analytical skills and


critical thought processes.

HR Manager is one of the most important key to open a lock hanging on the door of
success in an organization. If an HR Manager is efficient enough to handle and to take
out best from his team members any organization and can achieve more from his target
goals. HR manager plays an very important role in hierarchy, and also in between the
higher management and low level employees. Stated below are major responsibilities of
HR Manager:-

Responsibilities:

1. To maintain and develop HR policies, ensuring compliance and to contribute the


development of corporate HR policies.

2. To develop the HR team, to ensure the provision of a professional HR service to the


organization. Manage a team of staff. Responsible for mentoring, guiding and developing
them as a second line to the current position.

3. To ensure timely recruitment of required level / quality of Management staff, other


business lines staff, including non-billable staff with appropriate global approvals, in
order to meet business needs, focusing on Employee Retention and key Employee
Identification initiatives.

4. Provide active support in the selection of Recruitment agencies which meet the

corporate standard. Ensure Corporate Branding in recruitment webs and advertisements.

5. Develop, refine and fine-tune effective methods or tools for selection / or provide
60

external consultants to ensure the right people with the desired level of competence are
brought into the organization or are promoted.

6. Prepare information and input for the salary budgets. Ensure compliance to the

approved salary budget; give focus on pay for performance and salary benchmarks where

available. Ensure adherence to corporate guideline on salary adjustments and promotions.


Coordinate increments and promotions of all staff.

7. To develop the HR business plan.

8. Ensure appropriate communication at all staff levels.

9. To maintain and develop leading edge HR systems and processes to address the

effective management of people in relation to the following in order to maintain


competitive advantage for:

Performance Management.
Staff Induction.
Reward and Recognition.
Staff Retention.
Management Development / Career Development.
Succession Planning.
Competency Building / Mapping.
Compensation / Benefit programs.

10. To facilitate / support the development of the Team members

11. To facilitate development of staff with special focus on Line Management

12. To recommend and ensure implementation of Strategic directions for people


61

development within the organization.

13. Ensure a motivational climate in the organization, including adequate

opportunities for career growth and development.

14. Administer all employee benefit programs with conjunction with the Finance and

Administration department.

15. Provide counsel and assistance to employees at all levels in accordance with the

company's policies and procedures as well as relevant legislation.

16. Oversee the central HR Administration -

Employee offer letters


Salary letters and employment contracts.
Approve updated organizational charts on a monthly basis and maintain
Complete/accurate personnel records.

17. Co-ordinate the design, implementation and administration of human resource

Policies and activities to ensure the availability and effective utilization of human
resources for meeting

The company's objectives.

18. Responsible for Corporate HR function.

19. Responsible for overall centralized HR admin function

20. Counseling and Guidance cell - provide support to Managers in case of

disciplinary issues.
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Overall Responsibilities

Human resource managers have strategic and functional responsibilities for all of the HR
disciplines. A human resource manager has the expertise of an HR generalist combined
with general business and management skills. In large organizations, a human resource
manager reports to the human resource director or a C-level human resource executive. In
smaller companies, some HR managers perform all of the department's functions or work
with an HR assistant or generalist that handles administrative matters. Regardless of the
size of department or the company, a human resource manager should have the skills to
perform every HR function, if necessary.

Compensation and Benefits

Human resource managers provide guidance and direction to compensation and benefits
specialists. Within this discipline, human resources managers develop strategic
compensation plans, align performance management systems with compensation
structure and monitor negotiations for group health care benefits. Examples of human
resource manager responsibilities include monitoring Family and Medical Leave Act
compliance and adherence to confidentiality provisions for employee medical files.
Human resource managers for small companies might also conduct open enrollment for
employees' annual elections pertaining to health care coverage.

Training and Development

Employee training and development includes new hire orientation, leadership training
and professional development seminars and workshops. Human resource managers
oversee needs assessments to determine when training is necessary and the type of
training necessary to improve performance and productivity. Human resource managers
responsible for conducting needs assessment have a hands-on role in evaluating overall
employee performance to decide if the workforce would benefit from additional training
and orientation. They examine employee performance records to identify areas where
63

employees could improve through job skills training or employee development, such as
seminars or workshops on leadership techniques.They also play an integral role in
implementing employee development strategy and succession planning based on training
and professional development. Human resource managers responsible for succession
planning use their knowledge of employee development, training and future business
needs to devise career tracks for employees who demonstrate the aptitude and desire for
upward mobility.

Employee Relations

Although the employee relations specialist is responsible for investigating and resolving
workplace issues, the human resource manager has ultimate responsibility for preserving
the employer-employee relationship through designing an effective employee relations
strategy. An effective employee relations strategy contains specific steps for ensuring the
overall well-being of employees. It also ensures that employees have a safe working
environment, free from discrimination and harassment. Human resource managers for
small businesses conduct workplace investigations and resolve employee complaints.
Human resource managers may also be the primary contact for legal counsel in risk
mitigation activities and litigation pertaining to employee relations matters. An example
of risk mitigation handled by a human resource manager includes examining current
workplace policies and providing training to employees and managers on those policies
to minimize the frequency of employee complaints due to misinterpretation or
misunderstanding of company policies.

Recruitment and Selection

Human resource managers develop strategic solutions to meet workforce demands and
labor force trends. An employment manager actually oversees the recruitment and
selection processes; however, an HR manager is primarily responsible for decisions
related to corporate branding as it relates to recruiting and retaining talented employees.
For example, a human resource manager in a health care firm might use her knowledge
64

about nursing shortages to develop a strategy for employee retention, or for maintaining
the current staffing levels. The strategy might include developing an incentive program
for nurses or providing nurses with cross-training so they can become certified in
different specialties to become more valuable to the organization. Corporate branding as
it relates to recruitment and retention means promoting the company as an employer of
choice. Human resource managers responsible for this usually look at the recruitment and
selection process, as well as compensation and benefits to find ways to appeal to highly
qualified applicants.

Human Resources and Skill/Technology Support:

In alignment with the strategic product, geographic needs and international trading
regulations, the skills, training /technical facilities be enhanced amongst all
stakeholders especially the exporters, Pakistan's Missions and the Export Promotion
Bureau, financial institutions and SMEDA.

The Human Resource Department deals with management of people within the
organization and department are also performing the admin work with in the Ittefaq Steel.

It consisted of two peoples one is H.R manager and second one is his assistant.

Human resources or Personnels main responsibility is the recruitment, selection, training


and development of staff. This will involve developing staff to maximize their potential
in a manner that furthers the organizations objectives.
65

Financial Management

Almost every firm, government agency, and organization has one or more financial
managers who oversee the preparation of financial reports, direct investment activities,
and implement cash management strategies. As computers are increasingly used to record
and organize data, many financial managers are spending more time developing strategies
and implementing the long-term goals of their organization.

The duties of financial managers vary with their specific titles, which include controller,
treasurer or finance officer, credit manager, cash manager, and risk and insurance
manager.

Controllers

These prepare financial reports and analyses of future earnings or expenses that
summarize the organizations financial position. Controllers are also in charge of
preparing special reports required by regulatory authoritiesespecially important
because of the SarbanesOxley Act, designed in part to protect investors from fraud.
Controllers also are in charge of preparing special reports required by regulatory
authorities. Often, controllers oversee the accounting, audit, and budget departments.

Treasurers and finance officers

They direct and oversee budgets, monitor the investment of funds, manage associated
risks, supervise cash management activities, execute capital raising strategies, and deal
with acquisitions. Treasurers and finance officers direct the organization's financial goals,
objectives, and budgets. They oversee the investment of funds and manage associated
66

risks, supervise cash management activities, execute capital-raising strategies to support a


firm's expansion, and deal with mergers and acquisitions.

Credit managers

They supervise the firms issuance of credit, fix credit-rating criteria, determine credit
limits, and monitor the collection of past-due accounts. Credit managers oversee the
firm's issuance of credit. They establish credit-rating criteria, determine credit ceilings,
and monitor the collections of past-due accounts. Managers specializing in international
finance develop financial and accounting systems for the banking transactions of
multinational organizations.

Cash managers

They supervise and manage the flow of cash receipts and disbursements to meet business
and investment needs. Cash managers monitor and control the flow of cash receipts and
disbursements to meet the business and investment needs of the firm. For example, cash
flow projections are needed to determine whether loans must be obtained to meet cash
requirements or whether surplus cash should be invested in interest-bearing instruments

Risk and insurance managers

Administer programs to minimize risks and losses that could arise from financial
transactions and business operations. Risk and insurance managers oversee programs to
minimize risks and losses that might arise from financial transactions and business
operations undertaken by the institution. They also manage the organization's insurance
budget.

Financial institutions, such as commercial banks, savings and loan associations, credit
unions, and mortgage and finance companies, employ additional financial managers who
oversee various functions, such as lending, trusts, mortgages, and investments, or
67

programs, including sales, operations, or electronic financial services. These managers


may be required to solicit business, authorize loans, and direct the investment of funds,
always adhering to Federal and State laws and regulations. (Chief financial officers and
other executives are included with top executives elsewhere in the Handbook.)

Branch managers of financial institutions administer and manage all of the functions of a
branch office, which may include hiring personnel, approving loans and lines of credit,
establishing a rapport with the community to attract business, and assisting customers
with account problems.
In addition to the general duties described above, all financial managers perform tasks
unique to their organization or industry. For example, government financial managers
must be experts on the government appropriations and budgeting processes, whereas
healthcare financial managers must be knowledgeable about issues surrounding
healthcare financing. Moreover, financial managers must be aware of special tax laws
and regulations that affect their industry.

Financial managers play an increasingly important role in mergers and consolidations,


and in global expansion and related financing. These areas require extensive, specialized
knowledge on the part of the financial manager to reduce risks and maximize profit.
Financial managers increasingly are hired on a temporary basis to advise senior managers
on these and other matters. In fact, some small firms contract out all accounting and
financial functions to companies that provide these services.

The role of the financial manager, particularly in business, is changing in response to


technological advances that have significantly reduced the amount of time it takes to
produce financial reports. Financial managers now perform more data analysis and use it
to offer senior managers ideas on how to maximize profits. They often work on teams,
acting as business advisors to top management. Financial managers need to keep abreast
of the latest computer technology in order to increase the efficiency of their firm's
financial operations.
68

FINANCIAL STATEMENT ANALYSIS

LIMITATIONS OF FINANCIAL STATEMENTS

Financial statements are based on historical cost convention. They do not portray the real
or market value of the items on the face financial statements.

The credibility of financial statements is confined to the audit carried out, and most audit
evidence is persuasive rather than conclusive.

PURPOSE OF FINANCIAL STATEMENT ANALYSIS

Analysis is generally directed towards delving into three broad aspects of a business,
which are the driving forces behind the stakeholders decisions. These are:

Solvency of the business.


Stability of the business and
Profitability of the business.

The solvency of a business means its ability to meet its liabilities as it mature. The
solvency of the business is analyzed by the means of financial statements presently and
also in any future adverse business condition

Financial statements do not disclose any significant future events or contingencies.


69

Financial statements do not compare the actual figures with any standards set.

Qualitative information about the business is not found in financial statements.

And finally the company management often is under heavy pressure to report rising
earnings, accounting policies may be tailored towards this objective.

Objectives of Financial Analysis:

The particular objectives sought to the served by financial analysis determine the type of
ratios as well as the extent and depth of ratio analysis to be carried out to draw
conclusions. Financial analysis is carried out by;

Business Concern:

For assessment of profitability of the business.


For assessment of stability and financial strength of the business entity.
Management:

Assessment of efficiency of resources utilization.


Assessment of potentials of profitability.
Evaluation of different management controls.
Investors:

Assessment of earnings and divided prospects.


Growth in economic value of investments vis--vis risks undertaken.
Bankers/Creditors Concern:

Assessment of the ability of the business to service its debt obligations.


Debt coverage.
Proper utilization of assets financed.
Government Concern:

Evaluation of the economic contributions of the business entity.


70

Determination of the entitys financial strength to carry social and development


programs.

Horizontal Analysis

Financial statements present comparative information for the current year as well as the
previous year. Horizontal analysis is a simple approach to financial statement analysis
that involves calculating amount and percentage changes from the previous year to
current year in order to draw inference

RATIO ANALYSIS

Ratio analysis is powerful tool of financial analysis. A ratio is defined as the quotient of
two mathematical expression and as the relationship between two or more things. In
financial ratio analysis, a ratio is used as benchmark for evaluating the financial position
and performance of a firm.

Ratio analysis enables the analyst to compare items on a single financial statement or to
examine the relationships between items on two financial statements. After calculating
ratios for each year's financial data, the analyst can then examine trends for the company
71

across years. Since ratios adjust for size, using this analytical tool facilitates
intercompany as well as intercompany comparisons. Ratios are often classified using the
following terms: profitability ratios (also known as operating ratios), liquidity ratios, and
solvency ratios. Profitability ratios are gauges of the company's operating success for a
given period of time. Liquidity ratios are measures of the short-term ability of the
company to pay its debts when they come due and to meet unexpected needs for cash.
Solvency ratios indicate the ability of the company to meet its long-term obligations on a
continuing basis and thus to survive over a long period of time. Financial ratios allow for
comparison:

Between companies

Between industries

Between different time periods for one company

Between a single company and its industry average

Financial Analysis
Financial analysis includes both, internal and external analysis of business through ratios.

Internal Analysis
Ratios for internal analysis are:

Liquidity ratio
Leverage ratio
Coverage ratio
Efficiency ratio
Profitability ratio
72

Liquidity Ratio
Ratios 2015 2016 2017(H)

Current ratio 1.21 1.46 1.00

Interpretation
o A current ratio of 2:1 is generally considered as safe. Company is not in a
condition to pay its short term bills, as it has much more liabilities than its assets.
Companys liquidity has also been showing a increasing and decreasing trend , in
2016 no doubt it wasnt enough but at least it was better than that of 2017 and
2015.

Liquidity Ratios
2

1.5

0.5

0
2015 2016 2017

Current ratio Acid-test ratio

Leverage Ratios
Ratios 2015 2016 2017
Debt to
Equity(including
1.21 0.88 0.74
surplus on
revaluation)
Debt to total
0.43 0.39 0.36
Assets
Debt to
equity(excluding 1.45 1.02 0.86
surplus on rv)
73

Interpretation
o Companys leverage ratios are too high showing that company has been provided
its financing more by creditors than its shareholders and most of its assets are
financed with debts. These ratios are showing their decreasing trend, which is
favorable for company.

Leverage Ratios
3.5

2.5

1.5

0.5

0
2015 2016 2017(H)

debt to equity(excluding surplus on revaltion)


Debt to total Assets ratio
Debt to Equity ratio(including surplus on revaluation)
o

Efficiency Ratio
Ratios 2015 2016 2017

Receivable turnover 10.23 7.49 8.50


Inventory turnover 2.46 2.76 3.04
Payable turnover 5.04 6.24 8.73

Capital turnover 0.64 0.66 0.35

Interpretation
o Companys receivable turnover have been very liquid or efficient, especially in
2015 as that was the year of some profit to the company. Company is also
showing its efficient behavior in its inventory liquidity and ratio is showing an
74

increasing trend. Payable turnover was quick in 2017 than that of 2016 and 2015,
because of availability of resources in that year.

Efficiency Ratios
12
10
8
6
4
2
0
2015 2016 2017(H)

Receivable turnover Inventory turnover Payable turnover Column1

Profitability Ratio
Ratios(%) 2015 2016 2017(H)

Gross profit
9.2 9.1 8.9
margin
Net profit margin 1.7 2.3 3.7
Return on Assets 1.4 2.0 3.8
Return on Equity 4.0 5.1 7.8

Interpretation
o Profitability ratios shows the operational efficiency of a firm, net profit margin of
the company has been decreasing trend , after that although it has increased, but
not up to a certain satisfactory limit. Return on investment and equity are
something which clear the vague picture of a companys operations.
75

Profitability Ratios
10
9
8
7
6
5
4
3
2
1
0
2015 2016 2017(H)

Gross Profit Margin Net Profit Margin Return on Assets Return on Equity

External Analysis (Year 2016)


Ratios for external analysis are:

Liquidity ratio
Leverage ratio
Coverage ratio
Efficiency ratio
Profitability ratio

Liquidity Ratios
Ratios ITTEFAQ MUGHAL

Current ratio 1.46 1.34

Interpretation
o ITTEFAQ is showing a better condition in its liquidity of assets. It is in stable
condition and it has almost near to its assets than that of MUGHAL.
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Liquidity Ratios
1.465
1.46
1.455
1.45
1.445
1.44
1.435
1.43
1.425
1.42
1.415
Current ratio

ittefaq mughal Column1

Leverage Ratios
Ratios ITTEFAQ MUGHAL

Debt to Equity 1.21 0.25


Debt to total Assets 0.43 0.41

Interpretation
o ITTEFAQ leverage ratios are showing that it has more finances provided by its
shareholders than its creditors while the Mughal , due to its loss in this year is not
in a good condition and most of its finances are provided by its creditors.
77

Leverage Ratios
2.5

1.5

0.5

0
Debt to Equity ratio Debt to total Assets ratio

ittefaq mughal Column1

Efficiency Ratios
Ratios ITTEFAQ MUGHAL
Receivable turnover 10.23 13.30
Inventory turnover 2.46 3.75
Payable turnover 5.04 3.44

Interpretation
o Both of companies have almost same ratio of receivable turnover, receivable
turnover have been very liquid or efficient. Both the companies are also showing
its efficient behavior in its inventory liquidity. Payable turnover of ITTEFAQ is
too high when compared with MUGHAL which is quite less favorable in process
of raising funds of the company.
78

Efficiency Ratios
14

12

10

0
Receivable turnover Inventory turnover Payable turnover

ittefaq mughal Column1

SWOT ANALYSIS

SITUATION ANALYSIS

STRENGTHS OF ITTEFAQ SONS (PVT.) LTD

Management Team
Ittefaq Steel has a highly credible management team who has displayed their skills in
expanding the company through inorganic route. The company has successfully acquired
Nat Steel of Afghanistan, Millennium Steel of Thailand and more importantly Corus. The
companys virtuosos of finance have been able to find innovative ways to tackle the
companys bludgeoning debt and keep the bottom line in the green zone despite lowering
demand and huge debts accumulated.

Information Technology
The entire mining operation of the Company is safeguarded against accident occurrence.
Proactive measures are undertaken to ensure the employee's health and productivity
79

through ergonomically designed work stations and by protecting them from occupational
hazards. Ittefaq Sons (Pvt.) Ltd collieries use 'Surpac', a state of the art mine planning
software that estimates the volume of coal in every seam. This software is coupled with
qualitative detailing that focuses on output consistency. To maximize productivity and
utilization, a voice and data equipped Global Positioning System is used, which helps to
supervise mining activity for machine movement and engine status.

Innovativeness of Ittefaq Sons (Pvt.) Ltd with respect to its competitors


Ittefaq Sons (Pvt.) Ltd has the lowest operating cost for steel manufacture in Pakistan.
Further it has displayed effective means in adopting an eco-friendly and sustainable
approach towards the manufacture of steel thus proactive measures are undertaken to
ensure the employee's health and productivity through ergonomically designed work
stations and by protecting them from occupational hazards.

Adaptability of the company in the fast change of the environment


Ittefaq Sons (Pvt.) Ltd has displayed immense agility in the recent past during the global
financial tsunami. Its virtuosos of various fields have adopted various methods like
lowering of production and even shutting down of steel plant sowing to the lack of
demand, managing the balance sheet efficiently etc. The company has 70% of its
procurement of raw materials for its operations in Asia through long term contracts and
so its margins can be shielded from the nuances of the volatility of the financial markets.

Corporate governance
Ittefaq Sons (Pvt.) Ltd has had impeccable record for corporate governance. It has set the
benchmark in global corporate governance principles of transparency, accountability and
equity for others to follow.
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Reducing Energy Costs


The company embarked on several steps to become self-sufficient in its fuel needs.
Earlier, it used large quantities of liquid fuel from one of the petroleum refineries.
Significant process changes enabled the company to totally stop the use of liquid fuels.
Ittefaq Sons (Pvt.) Ltd is the pioneer of steel business in Pakistan and thus enjoys brand
equity. Ittefaq Sons (Pvt.) Ltd has a multiple companies under the same banner(Al.Shafi
Group of Companies), which gives it an advantage of value-chain efficiency, whereby the
company can utilize products made in its sister companies to process raw materials and
increase efficiency.

Weaknesses of Ittefaq Sons (Pvt.) Ltd


Debt burden

Ittefaq Sons (Pvt.) Ltd have huge debt in its books. It had a debt equity ratio 0f 7.46 in
2011 which means that the assets of the company was largely financed through debt.
With the inflation on a rise the central banks of most all the countries are intending to
tighten in the liquidity in the money markets. As a result of which the interest rates are on
a rise. Ittefaq Sons (Pvt.) Ltd largely depends on domestic and a few international
markets for generating business. This over-dependence can prove to be fatal in times of
economic crisis.

High attrition rate


Ittefaq Sons (Pvt.) Ltd has traditionally faced the brunt of high attrition rate. In its
Karachi plant many engineers constantly change their jobs to SAIL in Bokhara and vice-
versa. Thus the formation of a core team of capable individuals across all departments is
very difficult as the size of the team is ever changing.

Low cost recovery


There are specific products like the aerospace steel and cast products which has received
feeble response in the past. The company has failed to recover costs in this business front.
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Laggard in technological front


Companies like Pakistan Steel Mill, Model Steel has efficiently introduced the XRF (X-
Ray Fluorescence) in its plants at in Pakistan.12 months back which the Ittefaq Sons
(Pvt.) Ltd has failed to do.

Bad raw material procurement philosophy


Ittefaq Sons (Pvt.) Ltd has high exposure to spot prices and a higher operational gearing
in International Market. Hence it has the risk of volatility associated with pricing, one of
the key elements in determining profitability of a commodity company.

Opportunities of Ittefaq Sons (Pvt.) Ltd

Competitive position of the company


Ittefaq Sons (Pvt.) Ltd is one of the largest producers of steel in Pakistan and in the
world.

Opportunities in the field


Pakistan has geared up for rapid expansion in the field of infrastructure. The
Government of Pakistan(GOP) has earmarked Rs.1, 70,000 cror for infrastructural
spending for the fiscal year 2010- 2011 and the trend is set to escalate up to the fiscal
year 2025 .Further many private players either independently or by undergoing public
private partnerships (PPP) has also come into the fray. The consumption of steel has been
steadily increasing with the rapid investment in the infrastructure and real estate projects.
The annual steel production of Pakistan has touched 200MT and according to
governments steel policy is expected to touch around 250 MT by 2013-2014. The
demand for Pakistani made steel is escalating overseas out of the 200 MT of steel
currently produced in Pakistan around 50% of it is exported. In the first six months of the
fiscal year 2009-2010 the Pakistani steel export almost doubled to 9.3MT from 4.4MT in
the same period the previous fiscal year. The countrys iron ore exports during April-
October 2010 period grew 20 percent over the year ago period to 53 million tons.
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Acquisition opportunities
In the aftermath of the financial tsunami various mineral assets are available globally at a
price which is just a shade of their prime valuations. The government of various countries
has been putting up coal blocks under the hammer. Ittefaq Steel has been very active in
the asset acquisition space and has bagged various coal blocks in Asia, Africa etc. which
is essential for its security of raw materials.

Opportunities for demand of higher prices


The demand for steel is on arise both domestically and internationally as a result of the
enhanced focus upon infrastructural development. Secondly with other steel projects of
international giants POSCO, Pakistan steel mill (PSM) stalled due to land acquisition
problems the prices of steel are slated to rise. In the month of April 2010 the steel prices
were increased by Rs.2000/ton and this is just the brink of the U-Shaped economic
recovery and the prices are slated to rise further in the near future.

The movement of Ittefaq Steel in the value chain front


Pakistan is the one of the countries in the world where steel can be made cheaper and
there is consumption. Then there are other countries like India, Iran, Brazil, Australia and
Bangladesh where steel can be made cheap because of the availability of iron ore and
coal. Ittefaq Steel has been to Iran, Ukraine, Bangladesh - all in the last year and is
looking at China for finishing capabilities India is like Pakistan, where the factors of
production are competitive. The sustainable level of demand in India is 2.0 million tons
(MT), but one can make much more steel because of the availability of ore. Secondly, the
labor is cheap in Pakistan and so is the cost of energy. Hence, Ittefaq Steels strategy is
based on breaking up this value chain and putting each part where it's the most cost-
effective.

Benefit to Ittefaq Steel


Reduced down time of the trough runners leading to higher rate of production. Reduced
specific consumption of refractory in terms of kg/tons. Reduced overall cost of ownership
due to higher campaign life of refractorys and also due to higher rate of production, as
the productivity of the blast furnace largely depends on the quality of refractories used at
the cast house. Different Sourcing Levers Applied for Procurement of High Value and
Critical Commodities.
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Threats faced by Ittefaq Sons (Pvt.) Ltd

Resources to cushion the from business environmental change


Tata Steel is a company floated by Tata Sons whose assets are valued at around 108
billion USD and thus the company has enough reserves to cushion itself from market
fluctuations.

Financial Crises

Ittefaq Steel is having a huge debt in its books and hence a huge interest burden. With the
volatility of the financial markets and the tightening of the liquidity by the central banks
this rate is slated to go up and hence would further increase the interest burden of the
company.

Adoptability of the company to technological changes


Ittefaq Steel has shown immense integration abilities in the past. With the acquisition of
it has been able to imbibe the high end technological knowledge to its production
facilities and hence has been able to produce high quality steel at least prices and
significantly bettered its operating margins.

Regulatory norms
The government of Pakistan has chalked a strict norm for the clearance of a plant through
environmental impact assessment (EIA). To get clearance from the concerned authority
demands more than eight months thus leads to delay and project cost escalation.
Although the governments steel policy has been pro industry in order to increase the
steel capacity at a rapid pace.
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CORPORATE STRATEGY:

Service Excellence
We deliver remarkable service and regularly exceed our customers expectations. We
meet our vision and mission through producing internal and external work of the highest
quality possible. We seek and accept challenges and critiques to improve the quality of
our works content and presentation. We treat all customers with dignity and meet them
where they are to provide the right services in a way they will be able to understand and
implement. We support each other as a team to help provide superior, constituent-
centered service.

Integrity
We conduct our business fairly, with honesty and transparency. Everything we do must
stand the test of public scrutiny. We interact with each other and the communities we
serve in a way that is respectful, fully transparent and ethical. We approach all situations
with honesty, respect and transparency. We give each other the benefit of the doubt and
operate as if we have that same trust from our colleagues. We respect the confidential
nature of our client work and actively protect client, donor and constituent information.
We accept responsibility for our mistakes and make appropriate amends. We uphold the
highest level of ethical standards and seek to remedy any breach of those standards
appropriately.

Learning
We pursue and promote continuous learning and professional development in
competition and in the nonprofit sector. We pursue knowledge and skills to improve our
craft and ability to serve the community. We proactively seek learning moments with our
coworkers, clients and fellow nonprofit professionals. We are dedicated to sharing our
skills and knowledge, and working to develop a stronger nonprofit community.

Collaboration
We prioritize teamwork, inclusivity and shared goals with each other and our nonprofit
colleagues. We seek others ideas and opinions to enhance the quality of our work. We
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create and participate in brainstorming, project development and problem-solving


activities as a staff, with partners and constituents, and in the community. We maintain
the highest level of quality throughout each stage of collaborative efforts. We make
ourselves available and accessible to others, both within the organization and outside. We
must be caring, show respect, compassion and humanity for our colleagues and customers
around the world, and always work for the benefit of the communities we serve. We are
actively available to support each others work to further our mission.

Innovation
We develop, implement and share new ideas, creative solutions and leading nonprofit
practices. We question why we do things and seek to improve current methods. We
practice new ideas and report results for the benefit of others. We will find ways to
improve systems, tools and ways of working together. We will not become complacent in
our work. We will always seek new ideas and possibilities to further our mission. We are
open to taking risksand failing. We constantly strive to achieve the highest possible
standards in our day-to-day work and in the quality of the goods and services we provide.

Fun
We embrace individuality, encourage creativity and create opportunities for nonprofit
work to be exciting and meaningful. We allow the time and space to make work a place
we enjoy. We engage coworkers and other nonprofit professionals in activities that
strengthen positive relationships. We maintain a healthy perspective on work and life
and balancing them. We inject fun, spontaneity and humor into our daily work.

Responsibility
We are responsible and responsive to the countries, communities and environments in
which we work, always ensuring that what comes from the people goes back to the
people many times over.
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BUSINESS STRATEGY
A companys core philosophy has the power to influence, inspire, and challenge
employees on a daily basis. Ittefaq Steel, being the progressive company they are,
employs an emergent strategy, one that originates in the interaction of an organization
with its environment. Our CEO Zahid Shafi believes strongly in Pakistan Steels
philosophy not only because of the great success it has garnered Pakistan Steel and their
products, but also because of the continuous call to creativity and innovation it facilitates.
In fact, Les often quotes the Nike core purpose experiencing the emotion of winning
and
crushing your competition when educating businesses on the importance of a business
core purpose to develop the foundation of a brand promise and value proposition.
Experience coupled with technology that is constantly developed further - this is the
secret to Ittefaq Steels success. Our main activity is the production of Ittefaq Steel bar
and bullets. Ittefaq Steel nurtures its relationships with its customers. Ittefaq Steel is one
of only a few companies that have successfully managed to supply and manufacture steel
with a constantly high level of quality. The basis for this is a business philosophy which
attaches the extreme importance to quality, which is greatly valued by the many loyal
customers. The quality of the steel is one aspect, but the finest quality is nothing if the
content is not right.
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CONCLUSION AND RECOMMENDATIONS

CONCLUSION
At the end of research project, it is concluded that there is lots of demand of Ittefaq Steel
in the market. Ittefaq Steel should take necessary steps to fulfill this demand. The yearly
requirement of GC Sheet product for about 70 Dealers and Non-Dealers surveyed is
currently is 250 MT which is likely to increase by around 30% to 50%by 2016. So Ittefaq
Steel should prepare itself to meet the upcoming demand. Ittefaq Steel is using new
machinery. Ittefaq Steel production cost is higher. Ittefaq Steel is using paper work
system. From a survey it was found that with respect to the quality, price, few more
services like distribution etc. Ittefaq Steel is having upper hand that of the competition
brand like Pakistan Steel Mill, Mughal Steel, Model Steel and in International market
Tata Steel, Mittal Steel etc. but still Ittefaq Steel is lagging in few aspects than of the
competition brand. By taking steps Ittefaq Steel can retain their existing customers as
well as gain more customer demand.
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Recommendations

Due to high debt to equity ratio financial charges are increasing and
consuming major portion of the profit. Management should have to reduce
this debt to equity ratio to reduce financial charges to increase the net
profit.

Companys average collection period is increasing that is the situation not


favorable for the company and reducing the current ratio eventually. To
manage this management should take steps to offer incentives to debtors
for early payment of debts. It will help them to increase our current ratio
and reduces the high receivables turnover ratio in days to complete the
operating cycle.

As we observe that company is borrowing short-term finance to meet its


accrued liabilities, which is not a positive sign for a good management.
Because of increase it will adversely affect our current ratio. Because if
liabilities increased the current ratio will decrease. So management should
try to collects its debts by offering incentives and using this cash for paying
its debts. It will help to reduce the liabilities and hence decrease in the
financial charges and hence increase in the net profit.
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Due to high debt to equity Ratio Company will also find it difficult if they
apply for loans. Because no financial manager will like to invest in this
organization due to high debt to equity ratio.

Company is lacking behind in the current ratio. So company should try to


decrease its liabilities to increase in the current ratio. Because in the current
ratio current liabilities are in the denominator so if the liabilities are less
then there will be increase in the current ratio. Which is beneficial; for the
company?

Operating and cash cycle of Ittefaq Sons is good so company should


maintain this positive trend to increase the profit and business activity. If
cash circulates rapidly throughout the year it will be beneficial for the
organization.

Major of the operating profit is observed by operating and financial


expenses and reducing the net profit margin. Management should have to
decrease the financial and other charges in order to increase in the net
profit.

Company is maintaining a high and healthy return on equity and showing a


upward trend which is a good and positive sign for the management.
Management should maintain this improvement and increasing trend in
the return on equity. Higher the return on equity or increase in return on
equity shows the positive policies of the management.

The total asset turnover ratio of the Ittefaq Sons is increasing year by year
which is a positive sign for the management. Management should maintain
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this increasing trend because total asset turnover ratio shows that how
efficiently assets are utilized.
The inventory turnover ratio of the Ittefaq Sons is going in a positive
direction that is declining in days. Because the lesser the inventory turnover
ratio the higher will be the sales and hence earning profit on sales. So
management should maintain this positive trend in order move its current
asset efficiently and effectively.

Ittefaq Sons (Pvt.) Ltd should avail the opportunities of increasing demand
and new patterns of products making and should install new units.
Ittefaq Sons (Pvt.) Ltd should take care of this global oriented environment.

After critical skill mapping of the employees of operation section of the


Ittefaq Sons (Pvt.) Ltd department, the following are our recommendations
to this department:

The critical skill mapping study reveals the various skills of workers in
which they are expert or they are lacking. Special training program should
be arranged for those employees who are lacking in their respective
modules.

Special attention must be given in this process of training.

There should be no provision for sending the operators outside the


company for training program because Ittefaq steel is a big organization
and can provide such training with in the premises of working by
appointing some expert.
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All training modules should be evaluated at proper time and this activity
should be carried out regularly.

Training should be as per work requirement and should be given at the


right time.

Ittefaq Sons (Pvt.) Ltd should follow rules and regulations to price control.

Ittefaq Sons (Pvt.) Ltd should reduce the duty off raw material and increase
on importer.
Ittefaq Sons (Pvt.) Ltd should improve marketing system to increase sales.

Ittefaq Sons (Pvt.) Ltd should facilitate daily wages as they facilitate
permanent employees.
Ittefaq Sons (Pvt.) Ltd should control the overstaffing.
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Annexure

www.google.com

www.wikipedia.com

www.ittefaqsteel.com

www.referenceforbusiness.com/encyclopedia/Gov-Inc/Human-Resource-
Management-HRM.html#ixzz24Z8DECxq

http://hco.web.irs.gov/apps/leads/nmo.html.

www.economic surveyofpakistan.com

http://erc.web.irs.gov/docs/2002/awss/ps/EPFGuideForManagers.htm.