Strategic Analysis

Pak Electron Limited (PEL)

Presented By: Rashid Raheel Bilal Ahmed Sheikh Sadia Jafri Mazher Ali Humaira Fareed
Data collected from 3 years of PEL Financial Reports All rights reserved

Industry Introduction
The industry traces its origins to the invention of the twoelement electron tube (1904) by John Ambrose Fleming, and the three-element tube (1906) by Lee De Forest. These inventions led to the development of commercial radio in the 1920s, which boosted radio sales to $300 million by the end of the decade In 1947, the electronics industry made another important advance when John Bardeen, Walter Brattain, and William Shockley invented the transistor. In the 1960s it vastly increased the amount of information that could be stored on a single silicon chip. Inaugurated a revolution in the computer industry that led to the introduction of the personal computer.

Pak Electron Ltd. Introduction

In 1948, the Saigols migrated from Calcutta and initiated their business in Lyallpur (later named to as Faisalabad), the textile city of Pakistan, under the banner of Kohinoor Industries Limited. PELs Appliances Division is the flag carrier of the Saigol Group. This Division of PEL consists of home appliances manufacturing. In 1987, the Saritow Spinning Mills and AzamTextile Mills were established under the banner of Saigol Group of Companies.

GOLDEN HANDSHAKE
PEL Group overtook the distribution of LG in Pakistan in this FY.

Change your Life

BODs

1. Naseem Saigol (C.E.O) 2. Azam Saigol (Chairman) 3. Muraad Saigol 4. M. Yousuf Saigol 5. Haroon Ahmed Khan (M.D) 6. Muhammad Raffi Khan 7. Neelofer Hameed 8. Tajammul H. Bukhari 9. Wajahat A. Baqai 10.Rizwan Hameed

VISION STATEMENT

To excel in providing engineering goods and services through continuous improvement .

MISSION STATEMENT
To provide quality products and services to the complete satisfaction of our customers and maximize returns for all stake holders through optimal use of resources To focus on personal development of our Human Resource to meet future challenges To promote good governance , corporate values and a safe working environment with a strong sense of social

INTERNAL ANALYSIS
Internal Factor Evaluation Matrix
Strength Strong brand image Dealer Network Product Quality Rank in Pakistan pioneer of home appliances Management Distribution of authority Free customer service Weakness : Financial Problem Lack of advertisement System of variation Lack of product Range Less Utilization of capacity Total Weighted Score Weight 0.10 0.10 0.10 0.08 0.06 0.08 0.05 0.06 0.08 0.06 0.05 0.05 0.13 1.00 Rating 3 3 3 4 3 3 4 3 1 2 2 2 1 Weighted Score 0.3 0.3 0.3 0.32 0.18 0.24 0.2 0.18 0 0 0 0.08 0.12 0.1 0.1 0.13 0 0 0 2.55

EXTERNAL ANALYSIS
External Factor Evaluation Matrix

Opportunities
Exploration Increase in product range Export opportunity

Weight Rating Weighted Score 0.20 4 0.8

0.15 0.20 0.20 0.05 0.10 0.10 1.00 3 2 4 2 2 4 0.45 0.4 0.8 0.1 0.2 0.4 3.15

Threats
PEL facing tough competition Credit in market Slow growth rate in market Big fever of high credit

Total Weighted Score

SWOT ANALYSIS

SWOT ANALYSIS

Strengths PEL has the following strengths and is in more competitive position in these areas than its competitors. Following are the main strong points of PEL: Strong brand image Strong dealer network Good product quality and service Number 2 in refrigerators in Pakistan Firm grip in home appliances Strong Management Distribution of Authority Free customer service

SWOT ANALYSIS (CONT.)

Weaknesses Like other companies PEL has some weaknesses in operating the business. If PEL overcome on these weaknesses then it can become a market leader in the home appliance. PEL lose some competitive edge in the following points: Financial Problems Lack of advertisement System variations Lack of Product range Less Utilization of capacity

SWOT ANALYSIS (CONT.)

Opportunities For the PEL there are more opportunities for expansion the business. If PEL realize that opportunities then it will be more fruitful and profitable for the company. Even if company does not take advantage of these opportunities then it will lose its competitive position and high profit. Its competitors will give PEL tough time to pursuing the opportunities that are adopted by them. Following are the opportunities for the PEL.

Exploration of market in Pakistan Increase in product range Export opportunity

SWOT ANALYSIS (CONT.)

Threats PEL Company in such a competitive era has many threats as well. These threats are for the present situations and future. Company should make its policies and strategies according to these threats. So following are the main threats for the PEL:

PEL facing tough competition. Mostly companies Give High Credit in market and get current market High Credit market is big fever for the company Slow growth rate in Pakistan Instability of government Tax department

PORTERS FIVE MODEL

PORTERS FIVE MODEL

Potential Entrants: No easy entrance in the industry (Huge investment required) No geographical barriers for this Industry PEL has a very strong Human Resources ( No Incumbent Resistance) Easy infra structure availability to Target Markets Substitutes Minor Price margin among all rivalry firms Huge distribution networks available Trends of such products are rising on daily bases due to rapid change in technology Normal tax bases for the companies but economical condition effects the sales of such company

PORTERS FIVE MODEL

Suppliers Brand reputation gives a competitive edge Imports and Exports of material is very low Quality is not compromised against low prices Customer loyalty is the key factor for the industry Buyers Availability of many ranges in a similar product makes the buyer go Rational in selection of the products Buyer size and power is rising slowly due to more demand of Electrical Products Because it is near to the basic needs of an individual Cost is not elastic to the demand or supply of the Products Services importance plays a vital role in competitive edge

COMPETITIVE PROFILE MATRIX

CPM ( The Competitive Profile Matrix )
PEL Waves Dawlance

Critical success factor

Advertising Product Quality Price Competition Management Financial Position Customer loyalty Global expansion Market shares Total weighted score

Weigh Ratin Weighted t g Score

0.17 0.10 0.13 0.12 0.10 0.05 0.20 0.13 1 . 00

1 3 3 4 1 2 3 2

0.17 0.3 0.39 0.48 0.1 0.1 0.6 0.26 2.4

Ratin Weighted g Score

4 3 2 3 2 3 1 4

0.68 0.3 0.26 0.36 0.2 0.15 0.2 0.52 2 . 67

Ratin Weighted g Score

4 4 2 3 2 4 1 2

0.68 0.4 0.26 0.36 0.2 0.2 0.2 0.26 2 . 56

INDUSTRY LIFECYCLE

SPACE MATRIX

BCG MATRIX
high Relative Market Share Position medium 0.5 low 0.0
China 4%

Industry Sales Growth Rate (%)

high 1.0 .20

Pakistan 91%

medium

0.0
GULF 5%

-.20 low

BCG MATRIX
Pakistans division of sales and profit falls in stars because PEL is using forward integration and they are penetrating the market with a huge product range and product development. The Gulf area division in currently falling in Dogs because they want high quality with a combination of Low price. The success of PEL in Gulf area is having very less chances and the BCG also says that they should now liquidate in Gulf Region. The China division is under the Question Marks because PEL is currently penetrating the market of China.

IE MATRIX (INTERNAL-EXTERNAL)

IE MATRIX (INTERNAL-EXTERNAL)
Pakistans division of sales and profit falls in the category of II because PEL is using forward integration and they are penetrating the market with a huge product range and product development. The Gulf area division in currently falling II III IV V because in actual they want high quality with a combination of Low price. The success of PEL in Gulf area is having very less chances but the IE matrix says that they should take a chance for penetrating in the market or they can liquidate from the area, Somehow it is in a confusion area. The China division is under II because PEL is currently penetrating the market of China.

FINANCIALS OF PEL

RATIO ANALYSIS
Debt Ratio

64.4%

The company fully employed capital includes 64.4% contribution of the debt/external financing.

(58.8% is the debt ratio after growth projection, reduced by 5.6%) Retention Ratio = 80.8% Dividend payout ratio = 19.2%

The company retains 80.80% profit to unappropriated Profit. The company pays 19.2% of the profits in dividend.

RATIO ANALYSIS
Current Ratio = 1.33:1
The Company have 1.33 Rs to pay its liabilities of 1 Rs, Whereas the accounting standard says that it should be 2:1

(1.52:1 is the Current Ratio after growth projection, increased by 0.19) Net working Capital = 2,159,872,000

The company has 2,159,872,000 Rs as Working Capital

(Increased by 1,443,563,000 After growth projection)

Receivable Turnover

= 3.94 times

The company actually recovers the payments from its customers 3.94 times yearly
(Increased by 0.23 times after 20% growth of sales by last year)

RATIO ANALYSIS
Equity Multiplier =4.76 times The company assets bear 4.76 times the value of equity (This time company reduced this by 0.41 times) Cash flow Coverage Ratio = 1.51:1
This indicates the ability to make 1$ interest and principal payments from cash flows of 1.51$ (Increased by 0.01 After growth projection)

Financial Cost Ratio =1.28:1 Interest is covering 1 RS to 1.28 RS of earnings

(Increased by 0.02 i.e. 1.30:1 after 20% growth of sales by last year)

RECOMMENDATIONS
Adopt a true decentralized organization setup which gives all employees to take part in decision making. The company should have a strong marketing information system to make proper forecasts. The company should announce two holidays (Saturday and Sunday) in a week. Make sure proper functioning of HR department. More allocate budget to its marketing department.

RECOMMENDATIONS
More focus on full strategy in its promotion mix. Shorten its cash conversion cycle. Should also focus on direct selling of its products to its customers. Should constantly add technology in its products and system. Should speed up its delivery process by establishing and expanding its stores in areas of high demand.

CONCLUSION
PEL has great strength and opportunities. Should take risk and go to the market. Management philosophy is the hurdle in the progress in the company. Take the advantage of todays media power to capture market. Future of PELs is very bright as it is grabbing its opportunities and has the potential to compete with challenges