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VISION STATEMENT OF Nishat Textile Mills

To transform the company into modern & dynamic yarn,

cloth & processed cloth and finished product

manufacturing Company with highly professionals and

fully equipped to play a meaningful role on sustainable

basis in the economy of Pakistan.

To transform the company into modern & dynamic power

generating company with highly professionals and fully

equipped to play a meaningful role on sustainable basis in

the economy of Pakistan.

Proposed Vision of Nishat Textile Mills

To compete in the global market through value creation and

technology."

CIIT LAHORE CAMPUS 1

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MISSION STATEMENT OF NISHAT MILLS LTD.

To provide Quality products to customers & explore new

markets to promote/expand sales of the company through good

governance & foster a sound and dynamic team, so as to

achieve optimum prices of products of the company for

sustainable and equitable growth & prosperity of the company.

PROPOSED MISSION STATEMENT OF NISHAT MILLS LTD.

We aim to achieve Zero faults (7) in yarn clothes and apparel

manufacturing (2,6) by considering cost effective technology (4),

corporate social responsibility issues (8) and horizontal

management system to encourage entrepreneurial ideas (9) in

order to explore sales and market opportunities (5) keeping in

mind customer preferences (1) in global market (3).


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Explanation:

The essential components of Mission statement cater different points which are

as follows:

(7) Self conceptNishat Textile Mill is reaching zero faults by controlling individual elements inprocess and improves productivity and the benefit is that the Mill is giving betterproducts and services by an addition of 20000 new spindles. This distinctivefeature gets competitive edge over other companies.

(2) Product and servicesThe major products produced by Nishat Mill Ltd. are yarn clothes and Nishatlinen.

(4) TechnologyNishat Textile Mill has efficient information system which helps in makingdecisions to allocate financial resources in order to cut down the cost of majoroperations and enhance the computer based services.

(8) Concern for public imageThe firm is functioning like good corporate citizen and also having an efficientsystem for the disposal of waste. Nishat Textile Mill also established in-housetraining for unskilled labor so that they may be trained on stitching machines andquality of work in stitching floors.

(9) Concern for employeesNishat Textile Mill has decentralized system and it also involves employees indecision making and problem solving challenges. It helps to motivate, encourageand compensate employees according to the working conditions.

(5) Concern for survival and growthNishat textile mill done its operations in a way that it would be profitable and alsoshare its profits fairly with stakeholders, shareholders, employees etc

(1) Customers

Nishat textile mill develops customers loyalty and trust by fulfilling their needsand facilitating them with different services.

(3) MarketNishat Textile Mill is an export oriented company and not only competing globallybut also doing its operations in local market too.


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INTRODUCTION

When Pakistan came into being there were only 16 textile companies out of whichonly 12 were in operation. It grew to 70 in 1957 as industrial development took

place. Now days there are 596 textile mills out of which 442 are in operation. Theexport revenue of textile industry contributes a large share to the GDP ofPakistan. (Google.com: history of textile mills)

We are doing our project on Nishat textile mills. The brief snapshot of NML istomanufacture spins, combs, weaves, bleaches, dyes, prints, stitches, buys andsells textiles. It deals in yarn, linen, cloth and other goods and fabrics made fromraw cotton, synthetic fiber and cloth. The Group's plants are located atFaisalabad, Sheikhupura, Lahore and Feroze Watwan.

Textile exports from Pakistan

Textile constitutes a major exporting sector for Pakistan, which accounts for about60% of the countrys total foreign exchange earnings.

The major export items are yarn, gray cloth, finished clothes, towels & bed sheets& their major customers are USA, EU, Japan & Hong Kong & now UAE also.Many textile exports take place under quota arrangements with the EU & theUnited States. Gray cloth roughly accounts 16-18% of total cloth.

Exports from Pakistan

Nishat mills Gray cloth exports account for roughly 20% for Pakistan. The firmhas been exporting to USA for many years & has recently started export to EUcountries & Middle Eastern countries.

In Pakistan the cotton crop season runs approximately from August to March.Prices are generally high from August to September & fall later on as supplyincreases.


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COMPANY INFORMATION

Board of Directors

Mian Hassan Mansha

Mr. Fayaz Ahmad Longi (NIT)

Mr. Muhammad Bilal Sheikh (PICIC)

Mr. Aftab Ahmed Khan

Mr. Khalid Qadeer Qureshi

Mr. Muhammad Azam

Rana Muhammad Mushtaq

Mr. Muhammad Ali Zeb

CHIEF EXECUTIVE

Mrs. Naz Mansha

CORPORATE DEPARTMENT

Mr. Muhammad Azam

Company Secretary

Mr. Khalid Mahmood Chohan

Senior Manager corporate

AUDITORS

Riaz Ahmad and Company

Chartered Accountants

LEGAL ADVISOR:

Mr. M. Aurangzeb Khan, Advocate,

Chamber No. 6, District Court, Faisalabad.

Bankers to the Company:

ABN AMRO Bank

Allied Bank of Pakistan Limited

American Express Bank


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Askari Commercial Bank Limited

Credit Agricole Indosuez

Citibank N.A.

Deutsche Bank

Emirates Bank International P.J.S.C

Faysal Bank Limited

Habib Bank Limited

Habib Bank A.G. Zurich

Mashreq Bank P.S.C.

Mills:

Nishatabad, Faisalabad

(Spinning, Weaving, Processing,

Stitching units & Power Plant)

12 K.M. Faisalabad Road, Shiekhupura

(Weaving units & Power Plant)

21 K.M Ferozepur Road, Lahore.

(Stitching unit)

5 K.M. Nishat Avenue off 22 K.M Ferozepur Road,

Lahore (Dyeing & Finishing Unit and Power Plant)

20 K.M. Shiekhupura Faisalabad Road, Froze Watwan

(Spinning Unit)

Nishat Group of Companies

Nishat Mills Ltd., Faislabad

Nishat Dyeing and Finishing, Lahore.

Nishat Fabrics, Bhikhi.

Nishat Spinning, Feroze Watwan.

Nishat Sewing, Lahore


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Present Status of NishatThe history of Nishat dates back to 1951, when Mian Mohammad Yahya foundedNishat Mills. After almost half a century of undaunted success, Nishat Group isamong the leading business houses of the country and ranks among the top 5

groups in terms of assets and sales revenue.

The group has its roots firmly planted into four-core businesses namely.1. Textiles2. Power generation3. Banking4. Cement

The textile business is further subdivided into 2 textile divisions;

Nishat Faisalabad

Nishat Chunian

Textile Capacity

Production process consists of spinning, weaving, processing, and finishing. Theprocessing includes dyeing, engraving. The textile capacity of the group is thelargest in the country. An addition of 20000 new spindles, 100 new air jets loomsand new dyeing plant has increased the existing capacity of 24000 spindles, 740looms and dyeing and finishing capacity of 5 million meters. The group is thelargest exporter of textile products from Pakistan for more than a decade.

History of NISHAT MILLS LIMITED

NISHAT MILLS LIMITED (NML) commenced business in 1951 as a partnershipconcern, which was converted into private limited company in 1959. In 1961, thecompany went public and was listed on the Karachi stock exchange, the onlystock exchange in the country at that time.

NML started out as a weaving unit with 500 semi-automatic looms; later 10000spindles were added, laying the foundation on nations biggest textiles compositeproject. Composite project at Nishat mills limited Faisalabad covering 98 acre ofland is providing all production process under one roof i.e. spinning, weaving,

processing, stitching and power generation.

The Founder

A man of vision, courage and integrity, Mian Mohammad Yahya was born in 1918in Chiniot. In 1947 when he was running a leather business in Calcutta, hewitnessed the momentous that swept the indo-Pak sub-continent and resulted inthe emergence of Pakistan. Like many of his contemporaries, he also migrated to


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the new country to help establish its industrial base. His is a story of successthrough sheer hard work and an undaunted spirit of enterprise. Beginning with acotton export house, he soon branched out into ginning, cotton and jute textiles,chemicals and insurance. He was elected Chairman of All Pakistan textile Mills

Association (APTMA), the prime textile body in the country. He died in 1969, at

the age of 51 having achieved so much success in so short period.

The Chairman

Today Mian Mohammad Mansha, the chairman of Nishat Group, like his father,continues the spirit of entrepreneurship and has led the group to become a multidimensional corporation, with wide ranging interests.

Nishat has grown from a cotton export house into the premier business group ofthe country with 5 listed companies, concentrating on 5 core business, Textiles,Cement, Banking, and Power Generation & Insurance companies. Today, Nishat

is considered to be a part with multinationals operating locally in terms of itsquality products and management skills.

Firmly believing in Growth through Professional Management the corporateculture of NML is based on decentralization, delegation of authority, encouragingthe acceptance of responsibility and inculcating quality consciousness.

It is the conviction of NML that every successful organization is a reflection on thecommitment, dedication, and team spirit of its employees, and Nishat is noexception. The employees of NML are all imbued with the spirit, a fact manifestedin our rapid growth and low turnover

Nishat continue to strive to be a better group today than what they wereyesterday, for their customers, for their shareholders, for their investors, for theenvironment, for the community and for their employees, for it is with them thatNishat has achieved so much success in last fifty years.


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EXTERNAL AUDIT

The purpose of the external audit is to develop a finite list of opportunities thatcould benefit the firm and should protect from the threats. It is the comparison ofa company with its competitors. To compete the highly competitive environment

Nishat performs EFE and the CPM to check its competitive edge and thecompatibility in the market.

Following are some key external forces:1) Economic Forces

Key Pakistani Economic Variables to Be Mentioned

Propensity of people to spend Value of the Rupees in world MarketInterest rates Imports/ export factors

Inflation rates Income differences by region and consumergroupsMoney Market rates Price fluctuationConsumption patterns Monetary policiesUnemployment Trends Fiscal policiesTax rates Trade policies

i) Propensity of people to spend

It tells us about the purchasing power of customers. Nishat is targeting the upperclass from Pakistan and the business 2 business dealing globally.

ii) Interest rates

The interest rates in the country are higher which discourages the small investors.It directly influences negatively the Nishat Textile Mills.

iii) Inflation rates

The inflation rate is high in Pakistan which ultimately affects the Nishat TextileMills.

iv) Consumption patterns

v) Unemployment Trends

High Unemployment in Pakistan and also become a gap while dealing to itssuppliers and others.

vi) Tax rates

The tax rates are high as compared to the other countries but there is a low wagerate in Pakistan which helps Nishat in making products at a better andcompetitive price.

vii) Value of the Rupees in world Market


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The value of PKR is very less in the global developed countries which affectNISHAT Mills while trading globally in the form of Currency conversion.

viii) Income differences by region and consumer groups

The society of Pakistan is divided into 3 major economic groups i-e, Upper class;middle class; lower class. Out of which Nishat textile mills is focusing on the

Upper class and some portion of the middle class.ix) Price fluctuation

There is a great fluctuation because of more than 200% increase in the priceswithin few years (2008-2010). It will affect the Nishat textile mills by damaging thecompetitive price margin the global world of competition .

2) Social, cultural, demographic and environmental forces

Social, cultural, demographic and environmental forces

Per Capita IncomeAttitudes toward customerservice

Availability of retailing, manufacturing,and services businesses Social Responsibility

Attitude towards work RecyclingBuying Habits Waste ManagementEthical Concerns Air Pollution Water Pollution

3) Political, Governmental and legal forces

Political, Governmental and legal forces

Government regulations Level of Govt. SubsidiesChanges in Tax Laws Legislation on equal EmploymentSpecial Tariffs Import/export regulations

4) Competitive forces

i. Competitive Intelligence Programs

ii. Cooperation Among Competitors

iii. Market Commonality and Resource Similarity.


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EFE MATRIX

EFE MATRIX OF NISHAT TEXTILE MILLS

Key External Factors Weight Rating Weighted Score

OPPORTUNITIES

1 Opportunity to increase Target market 0.08 2 0.16

2 Quality and Guaranteed Fabrics 0.08 3 0.24

3 Opportunity to expand product line 0.05 3 0.15

4 International Fair Trade Certificate (IFTC) 0.15 4 0.6

5Increase demand of Pakistani Cotton Made products inOverseas Market 0.1 4 0.4

THREATS

6 Electric Power Plants 0.2 4 0.8

7 Political Instability 0.1 2 0.2

8 Low Market Share in Overseas Market 0.08 3 0.24

9 Least Advertising 0.05 1 0.05

10 Limited Retailing Outlets 0.11 1 0.11

TOTAL 1 2.95

Nomenclature:

It is used to evaluate the external opportunities and threats

Opportunities come before threats.

Opportunities often receive higher weights than threats.

The sum of all the weights assigned must lie between 0-1

Rating should be done w.r.t. their industry (1-4) i-e; excellent to worst.

Multiply each factors weight by its rating to determine a weighted Score

The weighted score should not be more than 4.0


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COMPETITIVE PROFILE MATRIX

COMPETITIVE PROFILE MATRIX

WEIGHTSNISHAT TEXTILES

MILLSCHENAB

MILLSGUL AHMED

FABRICS

Critical Success Factors Weight Rating Score Rating Score Rating Score1 Advertising 0.15 1 0.15 3 0.45 3 0.45

2 Product Quality 0.2 4 0.8 3 0.6 3 0.6

3 Price Competitiveness 0.2 3 0.6 2 0.4 3 0.6

4 Financial Position 0.15 4 0.6 2 0.3 3 0.45

5 Global Expansion 0.15 4 0.6 1 0.15 1 0.15

6 Market Share 0.15 3 0.45 2 0.3 4 0.6

TOTAL 1 3.05 2.2 3

Nomenclature:

In this competitive profile matrix a firm identifies its major competitors andits particular Strengths and weaknesses.

Multiply the weights with rates of companies and write score in the nextcolumn.

Assign weights with respect to the importance. As advertising is not muchimportant for Nishat Textile mills because of their B2B business dealing.

Take 2-3 competitors against the company like we choose gul ahmedfabrics and Chenab textile mills.


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INTERNAL AUDIT

INTERNAL FACTOR EVALUATION MATRIX

Introduction

IFE matrix is a summary step in conducting an internal strategic managementaudit is to construct an Internal Factor Evaluation (IFE) Matrix. This strategyformulation tool summarizes and evaluates the major strengths and weaknessesin the functional areas of a business, and it also provides a basis for identifyingand evaluating relationships among those areas.

The IFE Matrix together with the EFE matrix is a strategy-formulation tool thatcan be used to evaluate how an organization or a company is performing inregards to identified internal strengths and weaknesses of an organization or acompany. The IFE matrix method conceptually relates to the Balanced Scorecardmethod in some aspects.

The IFE matrix consists of following attributes mentioned below.

Internal Factors

Internal factors are extracted after deep internal analysis of the company.Obviously every company has some weak point and strong point thats thereasons internal factors are divided into two categories namely strengths andweakness.

StrengthsStrengths are the strong areas or attribute of the company, which are used toovercome weakness and capitalize to take advantage of the externalopportunities available in the industry.

WeaknessWeakness are painful for the company means these are the weak factors whichneeds to be improve in future otherwise if they exposed to the competitors theycan take the advantage of it.

Rating

Internal weakness are further divided in two categories namely minor weaknessand major weakness same goes of the strengths (minor strength and majorstrength)There are some important points related to rating in IFE matrix.

Rating is applied to each factor.

Major weakness is represented by 1.0


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Minor weakness is represented by 2.0

Minor strength represented by 3.0

Major Strength represented by 4.0

Weight

The weight range from 0.0 means not important and 1.0 means important, sum ofall assigned weight to factors must be equal to 1.0 otherwise the calculationwould not be consider correct.

Weighted Score

Weighted score value is the result achieved after multiplying each factor ratingwith the weight.

Total Weighted Score

The sum of all weighted score is equal to the total weighted score, final value oftotal weighted score should be between range 1.0 (low) to 4.0(high). The averageweighted score for IFE matrix is 2.5 any company total weighted score fall below2.5 consider as weak. The company total weighted score higher then 2.5 areconsidering as strong in position.

Steps to develop IFE Matrix

List key internal factors as identified in the internal audit process. Use a

total of from ten to twenty internal factors, including both strengths and

weaknesses. List strengths first and then weaknesses. Be as specific as

possible, using percentages, ratios, and comparative numbers.

Assign a weight that ranges from 0.0 (not important) to 1.0 (all important)

to each factor. The weight assigned to a given factor indicates the relative

importance of the factor to being successful in the firms industry.

Regardless of whether a key factor is an internal strength or weakness,

factors considered to have the greatest effect on organizational

performance should be assigned the highest weights. The sum of all

weights must equal 1.


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Assign 1 to 4 rating to each factor to indicate whether that factor

represents a major weakness (rating = 1), a minor weakness (rating = 2), a

minor strength (rating = 3), or a major strength (rating = 4). Note that

strengths must receive a 4 or 3 rating and weaknesses must receive a 1 or

2 rating. Ratings are thus company based, whereas the weights in Step 2

are industry based.

Multiply each factors weight by its rating to determine a weighted score for

each variable.

Sum the weighted scores for each variable to determine the total weighted

score for the organization.


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Internal Factor Evaluation Matrix for Nishat Mills

Discussing the NISHAT MILLS IFE MATRIX the sum of weighted score showsthat company has strong internal position. Now elaborating each strength andweakness will tell that why and how it has been rated and what the company isdoing that makes it strong internally. The factors are explained below:

STRENGTHS

Lowest employee turnoveris one of the most attractive strength and itsrating is 4 which mean company is having a great policy for this strength.Nishat mills employee turnover is almost equal to zero this is due to theirgood incentives and compensations for their employees. The environmentof the company is very good and this helps the employees groomingNishat gives free medical and provide transport to their employees.

Highly experienced professionalsare hired. The rate given to thisstrength is 3 which mean company is doing quite well for this strength.Well experienced people are hired at top levels. They are notcompromising in this because their top management has hold of thecompany.

Decentralized organizational structure is also one more strength whichshows efficiency of the company. This is rate 3 and it is due to the friendly


Internal Factor Evaluation Matrix

KEY FACTORS Weight Rating weighted score

STRENGTHS

lowest employee turnover 0.15 4 0.6

Highly experienced professionals 0.08 3 0.24

Decentralized organizational structure 0.1 3 0.3

Efficient information system 0.05 3 0.15

Good financial position/strong group 0.08 4 0.32

Location of plants 0.06 4 0.24

Highest capacity of production 0.2 4 0.8

WEAKNESS

Less advertising focus 0.1 2 0.2

Maintenance of Imported machinery 0.1 1 0.1High production cost 0.08 1 0.08

1 3.03

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and empowering environment of Nishat. Employees are given preferenceand they are motivated in decision making. Top management takes inaccount middle and lower level employees also and hence this company isconsidered in top companies of the country.

Efficient information system of Nishat mills has made us rate as 3. Forany company now a day its information technology should be very efficientbecause this is an IT era. Nishat has very good information system tohandle its customer as it deals most in B2B so they have good concern tothis field.

Good financial position/strong group is rate as 4. As everyone knowsthat Nishat Mills is of Mansha group which is also in other businesses likeMCB bank and in insurance business. So this group has good financialposition in the market and has good credit rating which can help them inany new investment and this strength is most important for any company

as there is competition in the market.

Location of plants is also rate as 4 which mean that this strength ishandled by Nishat mills efficiently. Nishat plant location s close to eachother e.g. one is in Ferozpur road and dyeing section in chunian etc. sothis helps them reduce their transportation cost and managing their plantseasily.

Highest capacity of production is rate as 4 because Nishat has 13600spindles in their production which raises its capacity and this is andimportant and excellent strength rather than its competitors. Nishat this

policy has made us to rate it the most.

WEAKNESSES

Less advertising focusis rate as 2. Nishat is an export oriented companyso they less focus on advertisement. We have rated it as 2 because beforeNishat don't have any policy for their advertisement but now they havefocused on its advertisement department which can be seen by print mediaadvertisement of Nishat linen.

Maintenance of Imported machinery is rated as 1. As Nishat Mills usesimported machinery in their production so their maintenance is costly. Forinstance if any spare part is needed so they have to import it and this canbe costly for them as our country's have instable environment. Nishat millsdon't have any good policy to handle this weakness so we haveconsidered it 1.

High production cost for Nishat Mills is another weakness which shouldbe handled but Nishat doesn't have much policy for it so we have rated as


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1. They make quality yarn product so their cost is also high. The importedmachinery, spindles etc made it costly.

Marketing strategies of NML

Today textile industry is facing big challenges. Inflation and decline in purchasingpower resulted in decline in demand, which increased the competition to a greaterextent. In spite of the above facts Nishat mills ltd, had been successful inmaintaining its market position and growth.

NML has adopted different marketing strategies over the years to sustain itsbetter position in the economy of Pakistan. These strategies are described below.

Diversification strategy

Market development strategy

Contacting old customers

New & innovative product development

Improved quality products

Diversification Strategy

Market yarn is diversified to increase the customer base. Under this,diversification program, business with Malaysia, Korea, Taiwan and UK havebeen initiated. Product range is also increased to cater for the different needs of

increased number of buyers production volume is also increased by concentratingon coarse counts with a result of increase in volume from 90-95 containers permonth to around 115 containers a month.

Market Development

In order to reduce their dependence on a few markets especially FAR EAST, newmarkets were developed for grey cloth. This diversification not only reduced theirdependence on Hong Kong but also gave better profit margins at times whenHong Kong market was very depressed. Under this market diversification, theystarted business with South Africa, Australia, Taiwan, Srilanka, Italy etc.


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Contacting Old Customers

The business with some of the old buyers in Europe was also revived during thisperiod after intense efforts. This revival gave both good volumes and better profit

margins.

New and Innovative Product Development

They have developed fancy and special items like Cavalry Twills, Bedford Cordsand dobby items, which are being sold at premium prices. They keep onmodernizing their equipment in order to maintain the high quality of their products.

Improved Quality Products

With the increase of competition, Nishat Mills have become more quality

conscious. In order to achieve their quality standards, they are maintaining betterquality by getting yarn from pre-approved sources, tighter fabrics inspection infolding and providing service to their customers. They also import cotton from

Australia which is known best for its Quality. NML has its cotton fields too whichproduce premium quality cotton.


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FINANCIAL ANALYSIS of NML

LIQUIDITY RATIOS

Current Ratio = Current Assets

Current liability

2008 2009

Current Ratio 0.73:1 0.86:1

Interpretation

This ratio tells us about short- term solvency of the organization or it is the direct

evaluation of a companys liquidity. Current ratio shows the availability of the

ready current assets to meet the short- term liabilities of the organization. The

current ratio shows stable increase due to excessive cash available to company.

But overall company is not I very good position as it is having only 0.86 asset

against a single liability.

Quick Ratio = Current Assets-Inventory

Current liability

2008 2009

Quick Ratio 0.34:1 0.38:1

Interpretation

This ratio tells the extent to which a firm can meet its short term obligations

without relying upon the sale of its inventories. The trend of 0.34 to 0.38 shows

that currently company is in better position to meet its short term obligations.


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LEVERAGE RATIOS

Debt-to-total Asset Ratio = Total DebtTotal Assets

2008 2009

Debt-to-total Asset Ratio 26% 25%

Interpretation

This ratio tells the percentage of total funds that are provided y creditors. The

trend showing that this percentage is reduced from 26 to 25% in previous year i.e.

the amount of assets increased over the debt.

Debt-to-Equity Ratio = Total Debt

Stakeholders Equity

2008 2009

Debt-to-Equity Ratio 39% 40%

Interpretation

This ratio tells the percentage of total funds that are provided y creditors versus

owners. The trend showing that this percentage is increased from 39 to 40% in

previous year.


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Log term Debt-to-Equity Ratio = Log term DebtStakeholders Equity

2008 2009

Log term Debt-to-Equity Ratio 5% 12%

Interpretation

This ratio tells the balance between debt ad equity I a firms log term capital

structure. As debt is cheaper than equity, so, the ratio is showing good

performance of the company.

ACTIVITY RATIOS

Inventory Turnover Ratio = SalesInventory of Finished Goods

2008 2009

Current Ratio 4.7 5.8

Interpretation

This ratio shows whether a firm holds excessive stocks of inventories and

whether a firm slowly selling its inventories compared to the industry average.

Trend of increasing from 4.7 to 5.8 shows that company is currently increased its

inventory level.


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Fixed assets Turnover Ratio = Markup Interest

Fixed assets

2008 2009

Fixed Assets Turnover Ratio 0.62 1.03

Interpretation

Fixed asset turnover indicates the efficiency with which the company uses its

assets to generate sales. Generally, the higher a companys fixed asset turnover,

the more efficiently its assets have been used. This ratio is showing an increase

from 0.62 in 2008 to 1.03 in 2009 which is good for company .

Total assets turnover = salesTotal Assets

2008 2009

Total Assets Turnover Ratio 0.49 0.76

Interpretation

Total asset turnover indicates the efficiency with which the company uses itsassets to generate sales. Generally, the higher a companys total asset turn over,

the more efficiently its assets have been used. The ratio for company is very

good.


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Account Receivable Turnover ratio = Annual Credit Sales

Account Receivable

2008 2009

Account ReceivableTurnover Ratio 51.9 73.9

Interpretation

The ratio tells the average length of time it takes a firm to collect credit sales, the

trend of increased length is not good for the company.

Average Collection Period = Account Receivable

Total Credit Sales

365

2008 2009

Average Collection Period 5 days 70 days

Interpretation

The ratio tells the average length of time it takes a firm to collect on credit sales.

The tend of increased length of 5 days to 70 days is not good for the company.


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PROFITALITY RATIOS

Gross Profit Margin = Sales-Cost of Goods Sold

Sales

2008 2009

Gross Profit Margin 14.35 18.23

Interpretation

The ratio tells the total margin available to cover operating expanses and yield a

profit. The increasing trend from the last year is good sign for the company.

Net Profit Margin = Net Profit

Sales

2008 2009

Net Profit Margin 31.23% 6.54%

Interpretation

This ratio tells the after-tax profits from the sales of goods. The declining trend

from 31.23% to only 6.54% is giving ad effect to the companys name.


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Return on Total Assets = Net Profit after Tax X100

Total Assets

2008 2009

Return on Total Assets 15.19% 4.95%

Interpretation

Turn on total assets measures the firms overall effectiveness in generating profit

with its available assets. The higher the companys return on total assets, thebetter it is. The return on total assets is showing a decrease from 15.15% in 2008

to 4.95% in 2009 which is not a good sign for the company.

Return on equity = Net income X100Shareholder equity

2008 2009

Return on Equity 23.1% 8.1%

Interpretation

The return on equity indicates the equity utilization of the company to produce

profits. The ratio tells the shares holders about their expected profit on their equity

in a business. The ratio indicates sharply decreasing trend of net profit from

23.1% in 2008 to 8.1% in 2009. This sharply decrease in the return on equity is

not a favorable point for the organization and its shareholders. It shows that

company has suffered a loss.


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Earning per share Ratio = Net income

No. of shares outstanding

2008 2009

Earning Per Share 36.86 6.81

Interpretation

The company earnings per share are generally of interest to present or

prospective stockholders and to management. The earning per share represents

the number of Rupees earned on behalf of each outstanding share. The earning

per share decreased from 36.86 in 2008 to 6.81 in 2009, which is not favorable

for the company.


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SWOT MATRIX

Here is the SWOT Matrix of NISHAT Mills Ltd. The input of this matrix has beenextracted from IFE, CPM, & EFE matrices. It comprises of four strategies whichare

i. strengths/opportunity strategies (SO strategies)ii. weakness/opportunity strategy (WO strategies)iii. strengths/threats strategy (ST strategies)iv. weakness/threats strategy (WT strategies)

This matrix is presented as follows:

STRENGTHS WEAKNESS

lowest employee turnover Less advertising focus

Highly experienced professionals Imported machinery

Decentralized organizational structure High production cost

Efficient information system

Good financial position/strong groupLocation of plants

Highest capacity of production

OPPORTUNITIES SO strategies WO strategies

Opportunity to increase Target marketDesigner wear garments forgents(S5,O1,O3)

Concentrate on electronic advertisingdomestically(W1,O1)

Quality and Guaranteed Fabrics Open retail outlets in gulf (S5,O1)

Opportunity to expand product line

International Fair Trade CertificateIncrease demand of Pakistani Cottoninternationally

THREATS ST strategies WT strategies

Political InstabilityOpen retail outlets in suburbsareas(S5,T4) Advertising internationally (w1,T2)

Low Market Share in Overseas Market More domestic production(S7,T3)Increase machine handling training foemployees(W2,T1)

Focus more on export oriented

Limited Retailing Outlets

Shortage of electricity supply

Strengths & opportunity strategies:

Our first strategy proposed by us to the company by taking into account strength# 5 & opportunity # 1 & 3 is designer wear garments for gents. We have madethis strategy because the company is making ladies outfits right now. They arenot in gents garments profession. Company can invest for expanding its productline because it has strong financial back ground.


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Our second strategy by taking into account strength # 5 & opportunity # 1 is openretain outlets in gulf countries. The company can increase its target market byincreasing its number of retail stores in gulf countries because a lot of Pakistanislive in those countries so it would be beneficent for the company to increase itstarget market.

Opportunities & Weaknesses strategies (WO strategies)

The strategy by taking into account opportunity # 1 & weakness # 1 isconcentrate on electronic advertising domestically. We have proposed thisstrategy because Nishat has a threat of strong advertising by its competitors Gul

Ahmad & Chenab textiles but Nishat is not in electronic media. By concentratingon electronic advertising the can compete by increasing their target market. Themain reason for electronic advertising is customers have televisions & internets intheir homes, they can easily know about its products.

Strengths & threats strategies (ST strategies):

The first strategy we made by considering strength # 5 & threat # 4 is open retailoutlets in suburb areas. Nishat has limited retailing outlets where everycustomer cannot go. It has an opportunity of strong group i.e Mansha group &good financial history. This company can invest in opening retailing outlets insuburbs areas & can earn more profits by reaching more customers.

The second strategy by considering strength # 7 & threat # 3 is more domesticproduction. As Nishat is an export oriented organization its 90% products areexported. But there are other international brands also in other countries which

are competitors of Nishat that is why the company should increase its domesticproduction. Nishat can easily do this because it has 173000 looms; the highesttextile capacity of any textile mill in Pakistan.

Weaknesses & threats strategies (WT strategies):

The first strategy we propose to NISHAT by taking into account weakness # 1 &threat # 2 is advertising internationally. Nishat as an export orientedorganization should increase its advertising in foreign markets. By increasing itsadvertising focus can get high market share in overseas markets.

The second strategy by considering weakness # 2 & threat # 1 is increasemachine handling training for employees. If proper training is given toemployees about handling of imported machinery then there will be no impact ofpolitical instability on the company because all spare parts will be imported.


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THE QUANTITATIVE STRATEGIC PLANNING MATRIX(QSPM)

The quantitative strategic planning matrix is a technique which is designed todetermine the relative attractiveness of feasible alternative actions. Thistechnique objectively indicates which alternative strategies are best based onpreviously identified external and internal critical success factors. It requires goodintuitive judgment.

Left column of a QSPM consists on key external and internal factors and the toprow consists of a feasible alternative strategies. And the left column of it consistsof information obtained directly from EFE Matrix and IFE Matrix. In a columnadjacent to the critical success factors, the respective weights received by eachfactor in the EFE Matrix and IFE Matrix are recorded.

The top row of QSPM consists of alternative strategies derived from SWOTMatrix. The QSPM determines the relative attractiveness of various strategiesbased on the extent to which key external and internal critical success factors arecapitalized upon or improved. The relative attractiveness of each strategy- withina set of alternatives is computed by determining cumulative impact of eachinternal and external critical success factor.

Here is given the basic format of the QSPM.

We have developed QSPM Matrix for Nishat Mills by using the six steps asfollows:

Step 1

In the 1st step we made a list of Nishat mills key internal strengths/weaknessesand external opportunities/threats in the left column of the QSPM. The keyinternal success factors include lowest employee turnover, Highly experiencedprofessionals, Decentralized organizational structure, Efficient informationsystem, Good financial position/strong group, Location of plants, Highest capacityof production, Less advertising focus, Maintenance of Imported machinery, Highproduction cost and key external success factors include Opportunity to increaseTarget market, Quality and Guaranteed Fabrics, Opportunity to expand productline, International Fair Trade Certificate (IFTC), Increase demand of PakistaniCotton internationally, Political Instability, Low Market Share in Overseas Market,Focus more on export oriented, Shortage of electricity supply.


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Quantitative Strategic Planning MatrixSTRATEGIC ALTERNATIVES

Open retail outlets

in gulfOpen retail outlets in

suburbs areas

KEY FACTORS Weight AS TAS AS TAS

STRENGTHS lowest employee turnover 0.15 - - - -

Highly experienced professionals 0.08 2 0.16 2 0.16

Decentralized organizational structure 0.1 1 0.1 2 0.2

Efficient information system 0.05 - - - -

Good financial position/strong group 0.08 3 0.24 2 0.16

Location of plants 0.06 1 0.06 3 0.18

Highest capacity of production 0.2 4 0.8 3 0.6

WEAKNESS

Less advertising focus 0.1 1 0.1 2 0.2

Maintenance of Imported machinery 0.1 - - - -

High production cost 0.08

1

OPPORTUNITIES

Opportunity to increase Target market 0.08 4 0.32 3 0.24

Quality and Guaranteed Fabrics 0.08 3 0.24 2 0.16

Opportunity to expand product line 0.05 2 0.1 3 0.15

International Fair Trade Certificate (IFTC) 0.15 3 0.45 1 0.15Increase demand of Pakistani Cottoninternationally 0.1 3 0.3 1 0.1

THREATS

Political Instability 0.17 1 0.17 2 0.34

Low Market Share in Overseas Market 0.1 3 0.3 1 0.1

Focus more on export oriented 0.12 3 0.36 1 0.12

Shortage of electricity supply 0.15 1 0.15 2 0.3

TOTAL 1 3.85 3.16

Step 2

In the second step we assign weights to each external and internal factor. Theseweights are identical to those in the EFE Matrix and IFE Matrix. The weights arepresented in a straight column just to right to the external and internal criticalsuccess factors.

The weights are given to the internal and external factors as

Opportunity to increase Target market (0.08)

Quality and Guaranteed Fabrics (0.08)

Opportunity to expand product line (0.05)

International Fair Trade Certificate (IFTC) (0.15)


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Increase demand of Pakistani Cotton internationally (0.1)

Political Instability (0.17)

Low Market Share in Overseas Market (0.1)

Focus more on export oriented (0.12)

Shortage of electricity supply (0.15)

And key internal success factors include

Lowest employee turnover (0.15)

Highly experienced professionals (0.08)

Decentralized organizational structure (0.1)

Efficient information system (0.05)

Good financial position/strong group (0.08)

Location of plants (0.06)

Highest capacity of production (0.2)

Less advertising focus (0.1)

Maintenance of Imported machinery (0.1)

High production cost. (0.08)

Step 3

In the third step we examined the SWOT Matrix and identified alternativestrategies that the Nishat mills should consider implementing. Then we recordedthese strategies in the top row of the QSPM, these are open retail outlets in gulfOR open retail outlets in suburbs areas.

Step 4

In the 4th step we determined the Attractiveness Scores (AS). AS defined asnumerical values that indicate the relative attractiveness of each strategy in agiven set of alternatives. We determined the attractiveness score by examining

each key internal and external factor, one at a time, and asking the questionDoes this factor affect the choice of strategies being made?

The range for Attractiveness Score is 1=not attractive, 2= somewhat attractive,3=reasonably attractive, 4=highly attractive. But if the answer to the previousquestion is no, this will indicate that the respective key factor has no affect uponthe specific choice being made. So, we used dash to indicate that the key factordoes not affect the choice being made.


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The factors which do not have any affect upon the choice being made includesthe lowest employee turnover, efficient information system, maintenance ofimported machinery, and high production cost.

The factors which are not attractive for the choice being made and received AS 1for the first alternative that is open retail outlets in gulf are decentralizedorganizational structure, less advertising focus, political instability, and shortageof electricity supply. The factors which are not attractive for the choice beingmade and received AS 1 for the second alternative that is decentralizedorganizational structure, International Fair Trade Certificate (IFTC), increasedemand of Pakistani cotton internationally, low market share in overseas marketand focus more on export oriented. As these factors do not show muchattractiveness for the first alternative, so they all received AS equal to 1.

The factors which are somewhat attractive for the first choice are highlyexperienced professionals and opportunity to expand product line, and for thesecond choice being made are decentralized organizational structure, goodfinancial position/strong group, quality and guaranteed fabrics, political instabilityand shortage of electricity supply. As these factors have some attraction to thechoices being made like they have highly experienced professionals will behelpful in marinating the new outlet.

They have the opportunity to expand the product line so can easily capture thenew market. Similarly they have decentralized organizational structure so it will beeasy to communicate throughout the organization for opening a new retail outletnationally, they have good financial position so if they launch their product at lowintroductory prices will also be effective and later on profitable for them, and asthere is shortage of electricity but they have their own power supply plants so itwill be easy for them to increase their production and cater more customers. Asall these factors are somewhat attractive so, all these receive AS equal to 2.

The factors which are reasonably attractive for the first choice are good financialposition/strong group, quality and guaranteed fabrics, International Fair TradeCertificate (IFTC), increase demand of Pakistani cotton internationally, low marketshare in overseas market and focus more on export oriented and for the secondchoice are location of plants, highest capacity of production, opportunity toincrease target market, and opportunity to expand product line.

They have good financial position so if they launch their product at lowintroductory prices will also be effective and later on profitable for them; they arecatering upper middle and upper class that are all quality conscious than priceconscious, so opening new retail outlets will be very profitable for them. They areexport oriented and there is high demand of Pakistan cotton made productsinternationally, so opening retail outlet in gulf countries will be more beneficial forthem. As all these factors are reasonably attractive for the choices being made soreceive AS equal to 3.


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The factors which are highly attractive for the first alternative are high capacity ofproduction, and opportunity to increase target market. They have high productioncapacity so they can open new outlets in gulf countries and sell their productsthere and can capture more market as they are export oriented and financial

strong group so by selling their products at low introductory prices they cancapture mare market area and can get higher profits later on. As these twofactors are highly attractive for the first choice being made that is open retailoutlet in gulf countries.

Step 5

In the fifth step we compute the Total Attractiveness Scores (TAS). (TAS) aredefined as the product of multiplying the weights by the Attractiveness Scores ineach row. The Total Attractiveness Scores indicate the relative attractiveness ofeach alternative strategy considering only the impact of the adjacent internal orexternal critical success factors. The higher the total Attractiveness Score themore attractive the strategic alternative (considering only the adjacent criticalsuccess factors).

Step 6

In the final step compute the Sum Total Attractiveness Score. For this we addedTotal Attractiveness Scores in each strategy column of the QSPM. The Sum Total

Attractiveness Scores (SATS) reveal which is most attractive in each set of thealternatives. Higher scores indicate more attractive strategies, considering all therelevant internal and external factors that could affect the strategic decisions.

The magnitude of the difference between the Sum Total Attractiveness Scores ina given set of strategic alternatives indicates the relative desirability of onestrategy over another. As the Total Attractiveness Score is more for the firstalternative (open retail outlets in gulf) that is 3.85 than the second alternative(open retail outlets in suburbs areas) that is 3.4 so, the first alternative choicebeing made is the best choice for Nishat mills. So, best choice is to go for openretail outlets in gulf.


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CONCLUSIONS

Nishat Textile is considered to be the leading organization in the field oftextile. The name Nishat has become has become a symbol of quality and

standard. The quality of cloth is dependent of textile yarn to finished cloth.Which is totally imported form various countries. Major machine aremercerizing machines, sober machine and J-Zimmer that con print clothwith 12 colors.

All the sub department of processing like bleaching, dyeing, printing, andfinishing are working under laboratory instructions so laboratory is playingrole of executive in quality control. All the schedules of bleaching, dyeingprinting and finishing are prepared by the laboratory.

The customer satisfaction is a basic criterion of Nishat Textile. They are

producing good quality products and 80% products are exported. Greatcare is taken for export Products regarding. Marketers of Nishat Textileknow the competition in the international market. They put their level bestefforts to satisfy the customer keeping in view the costs of products andquality.

Nishat has also a big share in local market. Local marketers areperforming their jobs efficiently to enhance the sales and to satisfy thecustomers however in local market quality is lower then export market. SoNishat has greater capability to preclude what they claim for.

If we turn to human resource department we see that there are certaingaps in human resources management of Nishat Textile. This departmentis not established and not considered to be very much important. Lowattention is paid to this department by upper level management. There islack of human resources planning, lack of recruiting activities lack of jobanalysis, compensation and reward system is not very much attractive andemployees are not well motivated in Nishat textile. One good thing of thisdepartment is that the department let the employees follow the rules andregulations set by the organization strictly. Attendance is strictly checked 7leaves as well. So there are good and bad both present in the humanresources management of Nishat Textile.

We developed QSPM Matrix for Nishat Mills by following different stepslike firstly we made a list of key internal and external factors than assignweights to those factors, identified alternative strategies, computed Total

Attractiveness Scores and in the final we computed Sum TotalAttractiveness Scores and reached at the strategic decision that the bestchoice is to go for open retail outlets in gulf.


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Nishat textile has the ability to produce what their customers want throughexcellent machinery and skilled workers in processing department andqualified marketing staff. But there are problems regarding humanresource management and financial management. Despite havingproblems Nishat has good and increasing sales figures that will lead the

organization to prosperity again.


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RECOMMENDATIONS /SUGGESTIONS

Organizations with more or less profitability or unprofitably have problems andthere are always chances of improvements. This is also the condition for Nishattextile. As problems and difficulties have been identified, now here are some

suggestions that may help the organization to improve.

In processing department there is a need of skilled workers. There arecertain departments of processing in which employees have been workingsince long but there efficiency is not improved and unsatisfactory resultscome out sometimes. The skilled labor will not only improve the efficiencybut also will improve effectiveness. There should be chances given toskilled workers to enter the organization.

There should be female artists and designers in design department asfemales have naturally more esthetical qualities than males. They will

really improve the quality of designs and will introduce more innovativedesigns.

Expanding product lines that will give more variety to people of countrycould extend local marketing and ultimately sales would be increased.There should be more staff in local marketing department to enhance thesales figure and to capture wide area of local market.

There is need to increases the staff in this department only three or fourpersons are working with all the affairs regarding let the employees abideby the rules 7 regulation, recruiting, selecting and other activities. This

area should carefully be handle to attract skilled employees and ultimatelyto enhance efficiency and effectiveness.

Job analysis should be done to know what are the jobs needed in theorganization. I know some persons who are doing the job of two or threepersons.

Compensation and reward system should be brought at higher level inorder to let the employees be motivated and happy. There should be morefringe benefits for the employees taking into consideration there devotionskill and experience. This higher level would make the employees more

efficiency & effective.

There should be little compensation for trainees as well, as they can fulfilltheir day to day traveling and food expenses. By doing this trainees willshow more interest, more devotion, more potentials and will work with theirfull mental and physical efforts.


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The first aid and other medical facilities should be provided to theemployees with in the mill area. There is continuous working in the mill andevery time there are chances of any accident or unpleasant incident. So inorder to handle this type of situation the first aid dispensary should bethere with in the mill area.

As Nishat Mills is export oriented company, have high production capacity,International Fair Trade Certificate (IFTC), and good financial position,even if they offer their products at lower introductory prices will be effectivefor them and will be more profitable later on. So they should go for openretail outlets in gulf.


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REFERENCES

1. Web:

www.nishatmills.com

www.wikipedia.com

www.investopedia.com

2. Annual Report, 2009, Nishat Textile Mills Ltd.

3. Marketing Department

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