3 star ceramics

Economy of Pakistan 1

History & Characteristics of Industry

Introduction

Ceramics are defined as products made from inorganic materials having non-metallic properties

usually processed at a high temperature at some time during their manufacture. The word

"ceramics" comes from the Greek word "Keramos" meaning "Pottery," "Potter's Clay," or "a

Potter" - primarily used to mean "burnt stuff." The technical definition of ceramics

encompasses a much greater variety of products than is normally realized. To most people, the

word ceramics means dinnerware, figurines, vases, and other objects of ceramic art. The

majority of ceramic products is not generally recognized, as such is much more recent in

development and in general is utilitarian rather than aesthetic. Examples are bathtubs,

washbowls, sinks, electrical insulating devices, water and sewerage pipes, bricks, hollow tile,

glazed building tile, floor and all tile, earthenware, porcelain enamel and glass. Variety of

products is directly proportional to variety in clays being used in their manufacturing.

Industry History

Up until the 1950s or so, the ceramics industry did not come into lime light because most then

its major products were then derived from the traditional clays, made into pottery, bricks, tiles

and their likes, along with cement and glass. And until 1980’s use of tiles was concentrated with

the elite of the society as they were considered a sign of prominence.

With the passage of time the pottery industry developed into today’s ceramic industry and with

it better manufacturing techniques were introduced. It all started in the late fifties when some

big ceramic units like Dada Bhoy China Karachi, Pakpore Ceramics Lalamusa (Gujrat) were

established to produce high temperature porcelain tableware of good quality using imported

machinery. Later in the late sixties refractory manufacturing units were established, namely

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General Ceramics and Marshall Ceramics at Gujranwala, and General Refractory at Karachi. And

then in the seventies, the production of sanitary wares started with the focus on production in

an organized manner and the erection of major units like International Ceramics, Karam

Ceramics, Frontier Ceramics, Swat Ceramics, and Trust Ceramics etc. These units were then

established and they started to produce their goods to their capacities. Meanwhile, in the mid

seventies, a few organized units for the production of ceramic wall and floor tiles were also

established on the, then European imported technology. The more prominent units among

them were Shabir tiles, Swat Ceramics, Karam Ceramics, Emco Industries etc. Later on more

units like National Tiles, Master Tiles, and Frontier Ceramics were established.

Industry Overview

Ceramic industry accounts for exports worth US $ 10.8 Billion in 2000 on the international

scenario where USA alone was the largest importer in with 19% of global imports going there

followed by Germany 11% share.

In recent past, the production figure has risen from 10.6 million sqm (in 2003-04) to the present

18.7 million which clearly indicates the potential of growth in the sector. This growth in

production is in line with the global trend as our analysis for the period 2001-2007 reveals 53%

increase in world tile production and 55% in consumption. However, this production growth is

mostly seen in non-traditional tile manufacturing countries such as China, India, Turkey etc.,

due to government assistance and support to the sector. At present, the country's total

demand stands at 36 million sqm per year, which was nowhere close to this figure five years

ago. The consistent growth in demand for tiles in Pakistan i.e., 32% in the year 2004-05, 21% in

2005-05, 3% in 2006-07 and 18% in 2007-08 clearly indicates the potential for growth of the

domestic tile manufacturers. The demand is likely to increase further due to

Developments in Gwadar.

Construction of a new railway track connecting Gwadar with the rest of the country.

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Prime Minister Housing Scheme under which the government is building low cost

houses for general public.

Development and rapid growth in the construction industry of Pakistan.

The industry has both, comparative and competitive advantages due to abundant availability of

indigenous raw material and cheap skilled and unskilled labor. If supported, the sector will

emerge as a major foreign exchange earner for the country and will also provide employment

to thousands of families in the most underdeveloped areas of Pakistan. It is pertinent to

mention here that the basic raw material i.e., 'clay', for manufacturing tiles is abundantly

available in the North-West Frontier Province of Pakistan, which is presently being focused by

international community for industrial and economic development. If the sector is supported, it

will certainly create more opportunities for the most underdeveloped areas of Pakistan. The

sector has immense potential of growth not only to cater for the domestic demand but also

earn major foreign exchange through exports. Within the limited resources that the sector has

and given the fact that it has to compete with exporters from China and India who are fully

supported by their respective governments through incentives, it has been able to export.

Even otherwise, the domestic demand for tiles has seen enormous growth and this increase in

demand is mainly taken by cheap imports from China, which has increased Pakistan's import bill

to cause loss of substantive and precious foreign exchange.

Contribution to Economy |

Analysis


Ceramics manufacturing sector plays a significant role in the economy of Pakistan. The sector

employs over 36,000 people and contributes 0.1% to total GDP of the country.

Its contribution to the exports of the country is about $ 12.30 Million per annum.

Raw Materials Used

Raw materials for body include Quarts, Feldspar, China clays and Ball clay, Mianwali clay, K.D.

10 Stone. Raw materials for glaze include Quartz, Feldspar, Limestone, Zinc oxide, Barium oxide,

Zirconium and ceramic colors. Plastic of is used for modeling and molding of the ceramic

sanitary ware.

Products of Ceramic Industry

Following is a list of the major products produced by the Ceramics Industry

Ceramic Tiles

Tableware

Sanitary ware

Refractories

Electric Insulators

Hubs of Ceramic Industry

The regions where ceramics production is engaged are:

Gujranwala

Kamoke

Nowshera Virkan

Wazirabad

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Organization Selected

3 - Star Ceramics

3-Star Ceramics specializes and excels in introducing decorative ceramics products which are

highly appreciated in Pakistan as well as foreign countries. We always strike for the best quality,

designing and customer services, due to which our customers are quite satisfied by using our

products.

ISO 9001:2000 certification is also an indication towards the struggle of achieving better

internal production and quality management system, through which we could achieve that

stage of quality where we can serve our customers with full of affiliation and enthusiasm.”

Providing the best quality is the motto of 3-Star Ceramics.

Vision

As per increasing demand of our brand we are planning to make our production double within

next five years to meet the demand of our local as well as international markets.

As per rapidly changing the global issues to manufacturing, we’re visualizing on expanding our

brand by setting up some manufacturing units in other countries, where our customers may

find our famous brand with better quality and services at their doorstep, Yes! Becoming a

Pakistan based multinational company.

Mission Statement

According to the managers partners of 3 Star Ceramics:

Our fundamental purpose to come into being is:

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“To give such an improved quality, variety and services by which our customers may feel pride

to but our products, to give our employees such a working atmosphere, where they can

function with full of commitment and motivation and to fetch the international standards of

quality with reason able prices to our country to save valuable foreign exchange”

Goal

The ultimate goal of Three Star ceramics is to make products for customer satisfaction.

History

It was established in 1982 and started its operations on 23rd March 1982. 3-Star Ceramics is

one of the top brands industry of Ceramics products in Pakistan. P-trap was the initial product

of this industry but now it is producing a variety in ceramics products with different colors,

shapes and designs. The organization admits that it not only produces quality products but also

have best products designs and colors of ceramics products on an affordable price.

Structure

Organization is a partnership firm having three managing partners. Working structure is simple

which is commonly known Simple Organization Structure.

All the management activities have to be done and maintained keeping the type of business is

mind. As far as the organizational design of the organization is concerned it has simple

organization structure. This is why its working activities are fast and flexible. It is not very

difficult to maintain and perform the business activities and hence accountability is also clear.

These are all the strengths the simple structure posses. But as with everything there are some

weaknesses of this structure as well.

The organization design is Mechanistic and also Organic to some extent having mixed type of

design in some business matters of the organization. As formalization is just normal it is not

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Sabir Ali Butt (Managing Partner)Zeeshan Saleem (Managing Partner)Muhammad Ramzan (Managing Partner)Muhammad Shakeel (Business Manager)


very strictly followed. Some of the rules and regulations are rigid for the employees and

workers of the company others are not.

The following are the members of 3-Star Ceramics

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Problems from the Governments Side

Following are the problems faced from the Governments side.

Cheap Imports from China

Due to the lower import tariffs under the Free Trade Agreement with China, import of tiles from

China now represent more than 60% of the total imports. The industry is finding it extremely

difficult to compete with imports from China under the FTA. Custom duty on imported tiles

from China are (i) Glazed Tiles 35% (exemption from regulatory duty of 15%); (ii) Unglazed Tiles

22.5% (exemption from regulatory duty of 15%);

Due to dumped imports of tiles from China, the government of Pakistan imposed anti-dumping

duties for a period of five years. On one hand the government has endeavored to provide level

playing field to the domestic industry producing tiles through the imposition of anti-dumping

duties and on the other hand, the government, through the FTA, has provided incentives to the

Chinese tiles exporters/producers by giving them concessionary import duty rates.

Competition with China and India in the International Market

India and China has provided major incentives to its tile industry for export growth, which is a

major deterrent to Pakistan's industry competing internationally and the Government is doing

no such effort on our side.

Lack of incentives

No incentives from the government to improve competitiveness of the industry i.e., reduction

in cost to make and sell, subsidy etc.

Access to Markets

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Lack of assistance from the Governments side in accessing the major markets of the world.

Porcelain Tiles

The import of Porcelain Tiles under incorrect heads is also hampering the growth of the local

ceramic tiles industry.

CARE Program

Import of ceramic tiles through CARE is not subject to physical examination, which enables

importers to mis-declare their product.

Lack of Institutions

Un-availability of an institution for (i) conversion of unskilled labor to skilled labor and (ii) for

further development and innovation of designs, styles etc.

No Concessions

No concession in duties and taxes (including sales tax).

High Taxes

High duty and taxes on the Import of plant, machinery and equipment.

Lack of R&D

No provision of grants for research and development for this field.

Lack of Trade Fairs

No organization of ceramic fairs in Pakistan to attract foreign buyers and also introduce and

develop new technology.

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SWOT Analysis (Strengths, Weaknesses, Opportunities and Threats)

SWOT Analysis consists of the following two steps,

Conduct an External Analysis:

Analyzing the environment is a critical step in the identification of SWOT analysis. Managers in

every organization need to do external analyses.

Threats are unfavorable characteristics that may affect the efficiency of the business e.g. they

need to know, for instance, what the competition is doing, what pending legislation might

affect the organization, what the labor supply is like in locations where it operates.

Opportunities are favorable characteristics that may affect the efficiency of the business e.g.

the same environment can present opportunities to one organization and pose threats to

another in the same industry because of different resources and capabilities.

Conduct an Internal Analysis:

In this step we assess the organizational resources, capabilities, activities, and culture.

Weaknesses are activities the organization does not do well or resources it needs but does not

possess. Weaknesses (things done poorly or not at all) can place the firm at a competitive

disadvantage.

Strengths (core competencies) create value for the customer and strengthen the competitive

position of the firm. Organizational culture is important in internal analysis. It can promote or

hinder an organization’s strategic actions.

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SWOT Analysis of 3–Star Ceramics

It’s essential to use a tool such as SWOT analysis to weigh professional or personal decisions.

Not only does it provide an insight on the industrial trends but also enable one to exploit the

opportunities and rectify hindrances.

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Strengths of 3-Star Ceramics

The following can be considered as the strengths of 3-Star Ceramics.

Exports

3-Star Ceramics not only sells its products to the local market but it also has an install base

overseas which gives it an edge over the competition. The major markets for 3-Star Ceramics

are the Middle East Asian countries.

Strategic Management

Three Star Ceramics uses strategic management to confirm its long standing position in the

market not only making plans for the short term but also making plans for the distant future

ranging from plat expansion to brand setting.

Customer Orientation

A customer wants high quality products for lowest possible and 3-Star Ceramics is putting all its

efforts to create such a situation for which it has also succeeded.

Labor Characteristics

Labor is cheap compared to the rest of the countries which allows it to lower its cost to some

extent. Not only is the labor hired here cost effective it is also dedicated and hard working with

years of experience accumulated over the years.

Distribution Network

3-Star Ceramics has an extensive network of suppliers in the country reaching all the corners.

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Strong Supplier Relations

3-Star Ceramics has strong and long lasting relations with the suppliers of the industry that have

allowed it to excel.

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Weaknesses of 3-Star Ceramics

The weaknesses of the Three Star ceramics are:

Wastage

The labor even though is hard working but sometimes for achieving quality standards waste

raw materials.

Raw Materials

Non availability of processed raw materials wastes company resources and time.

Research & Development

There are low levels of R&D in 3-Star Ceramics

Production Techniques

Use of traditional techniques & technology disables 3-Star Ceramics to cut costs

No Proper Accounts Maintenance

There is no proper maintenance of accounts

Lack of Marketing Skills

The sales men lack marketing skills and there is no effort being put on it.

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Opportunities for 3-Star Ceramics

The opportunities of the Three Star ceramics are:

Expansion of Business

Due to goodwill associated with 3 Star Ceramics, it can expand its business and can also come in

trading business.

Product Line

3 Star Ceramics can introduce new products to attract more customers.

Financial Needs

Due to Good will loans can be easily applied for and business can be expanded.

Domestic Demand

Due to the rising domestic demand 3 Star Ceramics can expand its production capacity.

Foreign Demand

Similarly, due to the rising foreign demand 3 Star Ceramics can expand its production capacity.

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Threats for 3-Star Ceramics

3 Star Ceramics faces many threats. There are so many companies in the market which are

making ceramics.3 Star Ceramics faces the following threats:

Decrease in Prices

The prices offered by competitors from abroad are ever decreasing which creates a big problem

for 3-Star Ceramics.

Utilities Cost

In Pakistan the cost of utilities (gas & electricity) is extremely high which puts it at a

disadvantage.

Demand of Customer

The demand from the customers may shift at any moment due to competition.

Purchasing Power of Customers

With degrading purchasing power of national market buyers the circumstance seem

unfavorable.

Rate of Taxes and Duties

The rate of taxes and duties in Pakistan is extremely high as compared to neighboring countries.

Low Priced Import from China

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The government has allowed for import of such items from China at extremely low prices that

disables us to compete with the others.

Changing Consumer Preferences

Consumers are shifting to either low quality products that are cheap or those which are

symbols of status and are extremely expensive such as international brands.

Smuggling from China and Iran

Like if it wasn’t enough for people to buy from China they are smuggling from these countries

as well at even lower prices.

High Cost of Capital

The loan offered by banks is of high interest rate.

Mine Sector

The mine sector from where the raw materials are available is not developed.

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Suggestions

Imports from China

Create a level playing field for the local manufacturers.

Provide Institutions

The government should ensure the availability of an institution for (i) conversion of unskilled

labor to skilled labor and (ii) for further development and innovation of designs, styles etc.

Incentives from the Government

Allocation of land near clay rich areas in Pakistan for the development of cluster based

industrial sector, with tax holiday for exports. Provision of government land for development of

new industrial units. 99 years lease of 'clay rich government land' for clay mining.

Interest Free Loans

The Government should provide interest free loans t the industry.

Concession on Duties

There should be concession in duties and taxes (including sales tax).

Exemption on Sales Tax

The Government should offer exemption of sales tax in electricity and gas, which is presently

being offered to some sectors.

Exemption on Import of Plant

Import of plant, machinery and equipment be exempt from duty and taxes.

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Developing infrastructure

Allocation of land and infrastructure for establishment of showrooms/display centers for the

ceramic tiles manufacturers in Gujranwala, Lahore, Karachi or Gwadar in the manner that the

Chinese Government has allocated in Foshan (ceramic city). " This will attract major foreign

customers due to availability of all the verities produced by Pakistani manufacturers at one

stop.

R&D

There should be a provision of grants for research and development.

Ceramic Fairs

Ceramic Fairs be organized in Pakistan to attract foreign buyers and also introduce and develop

new technology.

Buy Pakistani

There should be encouragement from the Government in line with the 'Buy American' scheme

of the US, where the government is advised to procure tiles from the local manufacturers for all

its developmental projects including development of Gwadar, railway track connecting Gwadar

with the rest of the country, Prime Minister Housing Scheme etc.

Smuggling Stopped

Smuggling from Iran & China should be stopped.

Utilities Cost

Cost of utilities should be decreased.

Consistency of Policies

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The Government should adopt consistent policies.

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Appendix

Bibliography

www.smeda.org.pk

www.google.com.pk

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http://www.google.com.pk/

http://www.smeda.org.pk/

3 star ceramics

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