1

FRED R DAIVD’S STRATEGYFORMULATING FRAMEWORK

DR.FRIGZ INTERNATIONAL

CREATED BY:

M. MOBASHAR ALI ASIF MEHMOOD

MUZAMMAL HUSSAIN

2

DR. FRIGZ INTERNATIONALSURGICAL INSTRUMENT MANUFACTURER

GOHDHPUR, KULOWAL ROAD, SIALKOT.

ContentsPART A (INDUSTRY ANALYSIS)

SURGICAL INDUSTRY ....................................................................................................................................... 1

GROWTH: .................................................................................................................................................... 1

OVERVIEW OF SIALKOT SURGICAL INDUSTRY .................................................................................................. 1

RAW MATERIAL USED IN MANUFACTURING .................................................................................................... 2

IMPORTS OF SURGICAL INSTRUMENTS ............................................................................................................ 3

EXPORT OF SURGICAL INSTRUMENTS .............................................................................................................. 4

PAKISTAN’S EXPORT IN 2004-05 ...................................................................................................................... 5

WORLD EXPORT OF SURGICAL INSTRUMENTS ................................................................................................. 6

COUNTRIES SHARES IN WORLD EXPORT .......................................................................................................... 7

ABRIDGED SUMMARY OF DUTY DRAWBACK (REBATE) RATES .......................................................................... 8

MAJOR CONSUMERS OF SURGICAL INSTRUMENTS .......................................................................................... 8

MAJOR MANUFACTURING UNITS .................................................................................................................... 9

PROCESS FLOW CHART OF SURGICAL INDUSTRY............................................................................................ 10

EXTERNAL ENVIRONMENT ANALYSIS ............................................................................................................. 11

PESTEL ....................................................................................................................................................... 11

POLITICAL, GOVERNMENTAL, & LEGAL FACTORS ....................................................................................... 11

SOCIAL, CULTURAL, & OTHER FACTORS ..................................................................................................... 11

TECHNOLOGICAL FACTORS ........................................................................................................................ 11

ECONOMIC FACTORS ................................................................................................................................. 11

Pest Impact Matrix ................................................................................................................................ 12

PORTER’S 5 FORCES ................................................................................................................................... 13

1. PORTER’S 5 MODEL ........................................................................................................................ 14

2. IMPACT ON PROFITABILITY ................................................................................................................ 15

3. STRATEGIES TO CONTROL PORTER’S 5 MODEL ADOPTED BY FRIGZ INTERNATIONAL .......................... 16

3

4. PORTER’S 5 FORCES ....................................................................................................................... 17

INTERNAL ENVIRONMENT ANALYSIS ............................................................................................................. 18

STRUCTURE ............................................................................................................................................... 18

PHYSICAL OUTLOOK............................................................................................................................... 18

DEPARTMENTS ...................................................................................................................................... 18

HIERARCHY OF THE FIRM ....................................................................................................................... 20

HUMAN ..................................................................................................................................................... 21

KNOWLEDGE ......................................................................................................................................... 21

SKILLS .................................................................................................................................................... 21

ABILITY .................................................................................................................................................. 21

PART B (FRED DAVID STRATEGY FORMULATING FRAMEWORK

INTRODUCTION ............................................................................................................................................. 22

RESEARCH MODEL AND METHODOLOGY ....................................................................................................... 22

STAGE 1:THE INPUT STAGE ............................................................................................................................ 23

EFE (EXTERAL FACTORS EVALUATION) ....................................................................................................... 23

INTERNAL FACTOR EVALUATION (IFE) ........................................................................................................ 24

STRATEGIC GROUP MAPPING .................................................................................................................... 25

CPM MATRIX ............................................................................................................................................. 26

VERTICAL ANALYSIS OF CPM .................................................................................................................. 26

HORIZONTAL ANALYSIS OF CPM ............................................................................................................ 27

STAGE 2: MATCHING STAGE .......................................................................................................................... 28

BCG MATRIX .............................................................................................................................................. 28

IE MATRIX: ................................................................................................................................................ 29

SWOT MATRIX ........................................................................................................................................... 30

TWOS MATRIX ........................................................................................................................................... 31

SPACE MATRIX .......................................................................................................................................... 32

GRAND MATRIX ......................................................................................................................................... 34

STAGE 3: DECISION MAKING ......................................................................................................................... 35

QSPM ........................................................................................................................................................ 35

REFERENCES .................................................................................................................................................. 36

4

PART A

(INDUSTRY ANALYSIS)

5

SURGICAL INDUSTRYSurgical industry of Pakistan holds a history of more than 100 years, when some British doctors got theirsurgical instruments repaired from the skilled workers of Sialkot and that was the foundation of SialkotSurgical Industry. Surgical instrument manufacturing industry originated in the early 1940s in and around theCity Sialkot. The sector manufactures a wide range of medical, surgical and veterinary instruments exportingmore than 95%, which includes 60% of disposable and 40% of reusable surgical instruments, of its productioni.e. 100 million instruments annually. Its exports made to over 140 countries.

The surgical instrument manufacturing started in Sialkot at the turn of the 19th century, when the AmericanMission Hospital in Sialkot for the first time got its scalpels and other instruments repaired from the localartisan community of blacksmith. These craftsmen successfully replicated these imported instruments, whichwere being used by the Hospitals. When Sialkot industry started exporting surgical instruments, for theimprovement of instruments British Government established the Metal Industries Development Centre(MIDC) in 1941.

After Independence Sialkot inherited total of 17 registered surgical instruments manufacturers. In 1958Surgical Instrument Manufacturers Association of Pakistan (SIMAP) was incorporated as representative bodyof the exporters and manufacturers of surgical industry, to safeguard the interest of the Industry. Later onmany benefits to promote surgical industry had been provided to the manufacturers of surgical instruments.

GROWTH:The exports, which were US$ 129.6 Million in 2006-07 came up to US$ 151.6 Million in 2007-2008 showing anincrease of 16.98% (by chamber of commerce Sialkot). Although exports to USA, Germany, UK, France, Italyand UAE has been increased. The U.S.A. is top buyer of the products, over the last year and it is expected togrow at 28% in year 2009-2010. During the period from 2000-01 to 2007-08 the surgical instrument growthrecorded by 9 per cent per annum. Currently Sialkot is producing 2,000 various surgical instruments forworldwide exports.

OVERVIEW OF SIALKOT SURGICAL INDUSTRY

SURGICAL INDUSTRY OF PAKISTAN- SIALKOT

TOTAL NO. OF UNITS 2220

SEGMENTS UNITS

Large 20Medium 50

Small 150Vendor 2000

Total 2220

6

RAW MATERIAL USED IN MANUFACTURING

Raw Material

1 Flat Rolled Stainless Steel Sheets and Strips (AISI 410 & 420)

2 Hot Rolled Stainless Steel Bars

3 Electroplating Polishes

4 Compositions and Salts

5 Grinding Belts

6 Emery Powder

7 Emery Grains

8 Electropolishing Chemicals

9 Trichloroethylene

10 Felt Mops

11 Satin Finishinhg Wheels

12 Granules and Flakes from Gloss Powder

13 Grinding Wheels

To meet the quality and standard set by the buyer of surgical instruments, this industry has to purchasematerial from outside country in order to meet the standards set by the buyer. Raw material importing in thisindustry has been increased by the last few years.

7

IMPORTS OF SURGICAL INSTRUMENTS

YEARS Value (Million US $)

1998 32.5

1999 31.6

2000 32.9

2001 33.23

2002 36.37

8

EXPORT OF SURGICAL INSTRUMENTS

YEAR Value(US $ in million)

2000-01 124.137

2001-02 145.04

2002-03 149.96

2003-04 132.56

2004-05 182.87

2005-06 160.07

9

PAKISTAN S EXPORT IN 2004-05

COUNTRY SHARE (%)

USA 28.8%

Germany 13.7%

United King dom 9.1%

Ita ly 5.3%

UAE 4.7%

France 4.12%

Japan 2.2%

Rest of the World 32.1%

10

WORLD EXPORT OF SURGICAL INSTRUMENTS

YEAR VALUE (In US $ Billion)

1998 22.7

1999 24.6

2000 25.5

2001 28.23

2002 30.33

11

COUNTRIES SHARES IN WORLD EXPORT

COUNTRY %AGE

USA 24.71GERMANY 12.33NETHERLAND 7.13MEXICO 5.89IRELAND 5.29UK 5.23FRANCE 5.07JAPAN 4.57BELGIUM 4.07ITALY 3.45REST OF WORLD 22.26

12

ABRIDGED SUMMARY OF DUTY DRAWBACK (REBATE) RATES

S/N Product / Commodity

Duty Draw Back SRO's / Rates786

(I)/2005Dt. 6-8-05

839(I)/2006

Dt.17-8-06

612(I)/2007

Dt. 16-6-07

930(I)/2007

Dt. 11-9-07211 (I)/2009Dt.5-3-2009

SURGICAL PRODUCTS

68Annealed Surgical and Veterinary instruments of

Stainless Steel and non-surgical Scissors ofstainless steel

0.90% 1.08% 1.08% 0.75% 0.75%

69Annealed Surgical and Veterinary instruments ofCarbon Steel and non-surgical Scissors of Carbon

steel0.96% 1.08% 1.08% 0.75% 0.75%

70Nickle or Chrome plated Scissors, Annealed

Surgical or non-surgical items, all types made ofCast/Pig Iron.

1.24% 1.08% 1.08% 0.75% 0.75%

71Annealed Surgical and Veterinary instruments all

sorts made of Brass1.59% 1.08% 1.08% 0.75% 0.75%

72Annealed Surgical and Veterinary instruments of

stainless steel all sorts made from dutyfreeImported Forging

0.75% 1.08% 1.08% 0.75% 0.75%

The surgical industry of Sialkot Pakistan has urged the FBR to equalize the rate of duty drawback to 2.73%from 0.75% on surgical and manicure to flourish this industry in the larger national interest.

MAJOR CONSUMERS OF SURGICAL INSTRUMENTSMajor customers include in order of market size are shown below:

MAJOR CUSTOMER OF SURGICAL INSTRUMENTSForeign CustomersGovernmentmedical and health servicesdoctors and dentistshospitalsdrug companies

13

MAJOR MANUFACTURING UNITS

S.NO. Name of Units

Insta l led Capac ity

(Mill ion Nos.)

1. M /s T. S. K. Impex, Sialkot 20.0

2. M /s Dr. Frigz Surgical & Co. ( pvt) Limited 15.0

3. M /s Bashir Jamil & Brothers (Pvt ) Limited 10.0

4. M /s We Brother , Sialkot 8.0

5. M /s Hilbro Instruments ( Pvt ) Limited 6.0

6. M /s Technimen Gama (Pvt ) Limited 5.0

7. M /s Asim Surgical Revit Makers 5.0

8. M /s Tinopal Surgical (Pvt ) Limited 3.5

9. M /s A.D.Surgical ( Pvt ) Limited 2.0

10. M /s Garish Surgical ( Pvt ) Limited 2.0

11. M /s A-One Surgico 1.7

12. M /s Weldon Industries 1.5

13. M /s Medisporex ( Pvt ) Limited 1.2

14. M /s Ghulam Rasool Surgical 1.2

15. M /s Tata Services 1.1

14

PROCESS FLOW CHART OF SURGICAL INDUSTRY

DIE MAKING RAW MATERIALSHEARING

FORGING

INITIALASSEMBLING

FILLING

HEATTREATMENT

ANNEALINGMACHINING TRIMMING

ELECTRO-POLISHING

LABLEING &PACKAGING

TESTING &CLEANING

FINSHING & FINALASSEMBLY

15

EXTERNAL ENVIRONMENT ANALYSIS

PESTEL

POLITICAL, GOVERNMENTAL, & LEGAL FACTORS1. Exporters of Pakistan face problem to get visa from the foreign embassies due to security issues.2. Establishment of SIMA (Surgical Instruments Manufacturer Association) and launching of USAID (U.S.

Assistance to Pakistan).3. Government imposed ban on the export of semi-finished to protect the surgical industry.4. Exporters are also allowed to get raw material on duty-free basis in order to provide benefit to the

manufacture of surgical, but the rates of raw material were increasing apace which increased the cost ofproduction.

5. Government planning to establish “Raw Material Bank” in order to provide raw material to themanufacturers on fixed rates.

6. Government issued funds approximately Rs. 250 million to establish the hospitals and provision of dentalunits, machines etc, i.e. big opportunity for the firms to deal locally.

7. Establishment of Technical Education and Vocational Training Authority (TEVTA) to train the workers insurgical industry.

SOCIAL, CULTURAL, & OTHER FACTORS1. Foreign buyers are quality conscious, so to meet standards of the buyers, manufacturers must have

quality stainless steel. For this purpose investors were called upon it.2. Firms in Sialkot are run by family ownership because of lack of trust on the others.3. People become health conscious and preferred to use disposable equipment.4. Manufacturers in surgical industry not selling their products under their brand name, they hadn’t

developed any brand but send to the other countries and then countries sell these products under theirown brand names at attractive prices.

TECHNOLOGICAL FACTORS1. Government is going to establish Institute of Surgical Technology (IST) costing Rs. 160.459 million, to

provide surgical nursery to the surgical manufacturers.2. IST going to provide 250 skilled and trained workers to the surgical firms in order to developed the

surgical industry.3. Lack of skilled labor is another problem faced by the firms existing in Surgical Industry Sialkot.4. Establishment of Dye’s manufacturer in Gujranwala is also seemed to opportunity to the Sialkot Surgical

Industry.

ECONOMIC FACTORS1. Introduction of VAT (Value Added Tax) next fiscal year by SCCI Chairman, VAT may be done for minimum

rate of 4% to 5%, but currently no tax imposed on the imports of material by Customs.2. The rising in the utilities cost such as electricity, telephone, gas etc. increased the cost of production.3. The rise in the services charges of the Banks is also a drawback to the growth of surgical industry.4. High rates on the export re-finance also added while determining the surgical industry Sialkot but it is

expected that the Government reduce rate to 3%.5. Fluctuation in foreign exchange rates also affects the earnings of the surgical instruments exporting firms.

16

Pest Impact Matrix

Visa Getting IssuesSecurity Issues

Shortage ofexports

Shorten of Export inForeign Countries

Establishment of“Raw Material

Bank”Fixed Rates Low cost of Material

Availability of rawmaterial

Establishment of(TEVTA)

Trained workers More skilled workersSkill employees provide

benefits to the firm

Rising utility cost Increase cost ofproduction

Lower Profit Margin

Rising bankcharges

Bank's chargesincreasing

Increase cost ofproduction

Lower Profit Margin

Fluctuation inExchange Rates

lower earnings limit profits Lower Growth Rate

Lack of trustDifficult to expand

business

Chances ofwinding up

business

Lack of opportunity ofskilled workers

No Brand NameNo image of the

company

No goodwill oftheir owncompany

Company is restricted byforeign customers

Establishment of(IST)

Provide SurgicalNursery

Helps the industry inthe business

Increased theproduction & lower cost

Skilled workersprovided by (IST)

Skilled and trainedworkers

Increased theproduction

Through skilled workersincrease efficiency &

effectiveness

Strategicresponse

ThreatsImpact ofChange

OpportunitiesNature ofChange

PoliticalChange

EconomicChange

Social Factors

TechnologicalChange

17

PORTER S 5 FORCESBARGAINING POWER OF SUPPLIERIn surgical industry the supplier of raw material are very limited. They are not able to supply the requiredmaterial according to the manufacturers. So manufacturers have to import the raw material from the othercountries that also increase the cost of manufacturing. So in this industry Supplier has strong power becauseof the following factors:

1. Suppliers are limited2. Demand is more than supply3. Switching costs are high because manufacturers have to contact foreign suppliers of material.

BARGAINING POWER OF THE BUYERHence in the above discussion we try to explain that the buyers (customers) of the surgical industry major areforeign customers. They have freedom to buy from any manufacturer. There are many other foreignmanufacturers in the market exists. They have strong bargaining power because of the following factors:

1. Switching costs are low2. A lot of foreign manufacturers3. Easy availability of the products4. Importing barriers they face by their country so they prefer their home made.5. Other low cost suppliers

RIVALRY AMONG COMPETITORSThere are a lot of competitors that exists in both inside country and outside country. They are very activeparticipating in the strong competition both inside the country and outside the country. In the foreigncountries surgical industries competitors are Siemens Medical Solutions, United States Surgical Corporation,Alcon Incorporation, Boston Scientific Corporation, etc. These factors are:

1. Price war in the competitors is very enthusiastic2. Technology improvement is so high, competitors has their own R&D departments, heavy investments

on the R&D by the Governments3. Sialkot surgical industry has no distribution channels, even most of them doesn’t sale under their

brand name, while rivals are strong in the market.4. Most Sialkot manufacturers are not actively innovating the surgical products, but competitors are

very strongly go for innovation by developing different products lines and segments.5. Competitors are also trying to put the Pakistan Surgical Industry out of race by means of imposing

trade barriers, lowering their prices, getting new technology, etc.6. Customer has low cost in switching to the other manufacturers which is indication of the strong

rivalry.THREAT OF NEW ENTRANTSSurgical Industry has potential to grow according to the SCCI, but it needs Government Support to grow. Nosingle individual or firm can establish a successful business, because it faces following factors in the markets:

1. Huge early investments2. May firm bear losses in the early years of the establishment3. Difficulty to get customers out from the existing other established firms.4. Government also imposing Value Added Tax (VAT) on surgical goods.5. Import rebates are going low6. It is also expected that the Government in the coming budget will not provide any relief to the

exporters.7. Firms that were already established have expertise and learn from its practices while remaining in the

surgical industry.

18

8. Requires technical expertise typically is needed to develop proprietary knowledge necessary todifferentiate products from others in the marketplace.

So, the above mentioned factors give an indication that the Surgical Industry has weaker threat of NewEntries to the Industry.THREAT OF SUBSTITUTESSurgical Industry has not adopted the rapid technological change. Sialkot Surgical is only making theinstruments used in the surgical, but it doesn’t make the equipment used in the Surgical Industry. Adaptationof the Fess Surgical equipment is a big threat to the surgical industry.

1. PORTER S 5 MODEL

Rivalryamong

competitors

Threat ofnew

entrants

Huge early investments

bear losses in the early years of theestablishment

Difficulty to get customers out from theexisting other established firms.

Government also imposing Value Added Tax(VAT) on surgical goods.

Import rebates are going low

no any relief to the exporters.

Firms that were already established haveexpertise and learn from its practices

Requires technical expertise typically isneeded to develop proprietary knowledgenecessary to differentiate products fromothers in the marketplace.

Bargainingpower ofsupplier

Suppliers are limited

Demand is more thansupply

Switching costs are highbecause manufacturershave to contact foreignsuppliers of material.

Bargainingpower of

BuyerSwitching costs are low

A lot of foreignmanufacturers

Easy availability of theproducts

Importing barriers theyface by their country sothey prefer their homemade.

Other low cost suppliers

Price war in the competitors is very enthusiastic

Technology improvement is so high,competitors has their own R&D departments

no distribution channels, even most of themdoesn’t sale under their brand name,

not actively innovating the surgical products,but competitors are very strongly go forinnovation

low cost in switching to the othermanufacturers

Threat ofSubstitues

Technology innovation of new productswith hybrid technology "Hybrid includescoated stents and impregnented dressing

introduction of the equipments ratherinstruments e.g. FESS (FunctionalEndoscopic Sinus Surgery)

laser technology

19

2. IMPACT ON PROFITABILITY

THREAT/POWER

PROFITS

HIGH MODERATE LOW

Competitive Intensity

Bargaining Power ofSupplier

Bargaining Power ofBuyer

Threat of newentrants

Threat fromsubstitutes

20

3. STRATEGIES TO CONTROL PORTER S 5 MODEL ADOPTED BYFRIGZ INTERNATIONAL

Rivalryamong

competitors

Threat ofnew

entrants

REDUCING THREAT OF ENTRANTS

Creat Brand Imange and loyalty

Formed alliances with the linked products/services

Tie up with suppliers

Try to gain minimum efficient scale foroperations

Bargainingpower ofsupplier

REDUCING BARGAININGPOWER OF SUPPLIER

Make partnership with thesupplier

Tie up with the supplieryourself

Bargainingpower of

BuyerREDUCING BARGAINING POWER OF THEBUYER

Make Joint ventures to the foreign retailers &distributers

Make your own office in foreign countries

Increase your brand loyalty

Give more incentives to the buyers to makeyourself prefer on others by them

Cut out retailers, i.e. sell direct to customer

REDUCING RIVALRY AMONGCOMPETITORS

Differentiate your productfrom your competitors

Focus on diffierent productsegments

Try to sell in your own brandname

Threat ofSubstitues

REDUCING THREAT OFSUBSTITUTES

Enter in the equipmentmanufacturing market

Emphasis Change ordifferences in Products

21

4. PORTER S 5 FORCES

CompetitiveIntensity

Bargaining Powerof Supplier

BargainingPower of Buyer

Threat of newentrants

Threat fromsubstitutes

QUALITY

Competing on Quality Instrumentsexported to the countries

Suppliers charged high prices,resultantly, prices charged tocustomers increased.Give customer high quality, & letcustomer to decide. Example codedby Firgz representative.

Threat is low, although if there’sany than experience curve &learning curve cover this.

Give customer high quality, & letcustomer to decide. Example codedby Frigz representative.

Threat is low, although if there’sany than experience curve &learning curve cover this.

Threat is low, although if there’sany than experience curve &learning curve cover this.

Threat is low but making customerloyal by providing quality so thatcustomer not willing to switch.

22

INTERNAL ENVIRONMENT ANALYSISInternal environment is the combination of structure and human;

+

STRUCTURE

PHYSICAL OUTLOOKDr. Frigz International manufacturing unit is situated at Sialkot Godhpur Road. The outlook of the Frigz isattractive. People worked inside the Frigz feel comfort working there in provided clean environment, properrooms for discussions, place for the parking, security, etc.

DEPARTMENTSDr. Frigz International is currently operating 5 major departments named as Quality Assurance Department,Production Department, Quality Control Department, HR & Supply Chain Department, and Finance &Marketing Department.Quality Assurance DepartmentDr. Frigz’s team is highly aware of the positive correlation between project quality, and customer satisfaction.They endeavor to deliver flawless solutions through incorporating highly competitive Quality Assuranceprocesses and personnel in place. The Quality Assurance department at Frigz ensures that compliance withestablished requirements, standards, and procedures is consistently checked through performancemonitoring, product evaluation, audits, and testing.PRODUCTION DEPARTMENTAll our production departments are well-equipped with the latest, machinery imported from Germany andEngland, and well-staffed with the expert technicians trained from our strategic joint venture network. Itincludes the following departments:

• Raw Material DepartmentAt Dr. Frigz, we believe that quality can only be achieved through quality raw material. As such, the bestquality Raw-materials (S.S. Strips, Round Bars, S.S.Coils and S.S.Tubes) are imported directly from Japan &France and are subjected to composition and hardness testing through our in-house Laboratory in orderto ensure that only the best materials are passed on to production departments.

• Forging DepartmentThe Company has its own Forging Section where Forgings are made through Drop Hammer process byseasoned operators using Dyes made of the best-quality imported D-2 Steel. The Forgings are later putthrough various processes like ring trimming, and acid cleaning / pickling by those well-versed in theseprocesses before they are passed to milling department.

• Milling DepartmentOur Milling / Machining Section have about 35 Milling / Lathe/Drill/Grinding Machines which are mannedby the exceptionally well-trained experts for good milling of the ratchets, teeth, box-making, and for all

Physicaloutlook Departments

Hierarchy Knowledge SkillSkillAbility

23

other related processes for ensuring exact perfection before filing. For this purpose, top-quality importedcutters are used throughout the machines with intense scrutiny on quality production.

• Filing DepartmentThe process of filing is then carried out by foreign trained professionals in order to ensure high standardof exactitude and precision. Heat Treatment Dr. Frigz has an in-house Heat Treatment Departmentequipped with top-quality Vacuum Furnace imported from England, where qualified staff and engineerstrained by the English Suppliers are engaged in treating the instruments in order to add strength to thesteel and perfect the metallurgical composition for further processes.

• Polishing & Grinding DepartmentThe Electro-polishing and Grinding Departments are manned by seasoned workmen using importedChemicals and best quality grinding wheels to ensure the best-quality finish. More than 15 halls housingapproximately 200 trained technicians are employed for this process as it is an important process forquality finishing of any instrument.

• TC DepartmentOur Tungsten Carbide (T.C.) Department is installed with the best-quality induction machinery beingmanned by the exceptionally well-trained experts of German Technology. The T.C. Tips and the solderingmaterial are imported from Germany to ensure matchless quality and precision. The department alsoutilizes laser welding machinery for superior results and unbreakable strength.

• Coating DepartmentOur coating department is capable of providing Gold plated instruments as well as powder coatedinstruments depending upon the requirements of the instruments or the customer. All coating relatedraw materials are imported from European countries so that no compromise on quality can be made.Furthermore, each coating is inspected for quality before any instrument is passed on to the nextdepartment.

• DDJ DepartmentA new addition to our departments is the Diamond Dusted Jaws (DDJ) department. Here, using the latesttechnology we diamond dust the jaws of those instruments which are used for holding purposes duringmedical procedures. This process adds strength to the gripping quality of instruments and increases thelife of usage.

• Passivation DepartmentUsing the top-quality imported Chemicals in our Passivation Department we boil test and passivate eachand every instrument for 24 hours before packing. If need arises, the instruments are re-passivated so asto eliminate any chances of rusting or corrosion during the life of the instrument. Our instruments arerust-free for life though we give guarantee for three years.

• Sandblasting DepartmentUsing imported machines and quality materials, we sand blast the surface of instruments to achieve theproper finishing requirements as demanded by our customers. The process is done by English trainedcraftsmen and is a source of pride for the company where quality instruments are concerned.

• EtchingCurrently etching on the instruments is being done in-house through a chemical-electrical process.Stamping facilities are also available if requested by customer. The company plans to apply laser-etchingtechnology for its reusable grade instruments in the near future.

QUALITY CONTROL DEPARTMENTStaffed by flight brains and equipped with the advanced test apparatus, Frigz quality control departmentensures the manufacture of reliable products by means of multistage close examination system verifyingfrom raw-material, in process to final packaging.

24

HR & SUPPLY CHAIN DEPARTMENTKey areas in which Dr. Frigz HR department deal in:

• Recruitment• Compensation• Training & Development• Appraisal

This department also deals in supply chain management.MARKETING & FINANCE DEPARTMENTThis department assesses the market demand and supply, customer demand, new product requirements inthe market, and also deals with financial measures, budgets, investments.

HIERARCHY OF THE FIRM

In the above hierarchy of the Frigz International, strategy is made on the top level only, but daily objectivesand targets are given to the individual workers in order to:

CEOMIAN MUHAMMAD RIAZ

DIRECTOR QUALITYASSURANCE

MIAN M. DAUDSAIR

DIRECTORPRODUCTION

MIAN TUFAILAHMED

DIRECTOR QUALITYCONTROL

MIAN FAIZ AHMED

DIRECTOR HR &SUPPLY CHAIN

USMAN DAUD SAIR

DIRECTOR MARKETING& FINANCEM. REHAN

GENERALMANAGER

GENERALMANAGER

GENERALMANAGER

GENERALMANAGER

GENERAL MANAGER

ASSISTANT ASSISTANT ASSISTANT ASSISTANT ASSISTANT

SUPERVISOR SUPERVISOR SUPERVISOR SUPERVISOR SUPERVISOR

WORKERS WORKERS WORKERS WORKERS WORKERS

25

1. Speed up production2. Improve Efficiency3. Gain operational effectiveness4. Refrain customers by switching to the competitors.

HUMANDr. Frigz International has employees currently working 900, they are provided by the medical paid by theCEO Mian Muhammad Riaz from his own pocket. They are provided by clean environment, security, post-agebenefits, EOBI, etc. They are provided by the competitive salaries, as concluded the turnover of theemployees is very low. Workers are rewarded on the basis of the contribution he/she make. Bonuses are alsogiven annually.Human has following aspects:

1. Knowledge2. Skills3. Ability

KNOWLEDGEIn the top management people working are knowledgeable, up to the supervisors of the company people areknowledgeable, and they can help the company to takeout company in case of any downfall faced by thecompany.

1. Supervisors of the Frigz implement different concepts they know to achieve operational effectiveness2. Workers of the Frigz are not knowledgeable and can’t handle new technology3. Management working have knowledge about the strategic concepts4. Internal information system has been established to convey information5. Workers also provided the information about importance of the shipment and where this shipment is

exported.

SKILLSPeople appointed in the top management have different skills according to the tasks. For the differentdepartments in the Frigz International, persons appointed that have experience in those departments. Like,for quality assurance a lawyer by education, experienced in surgical instruments for last two decades. Alongmanagers of the firm, supervisors are also very skilled. They assign daily tasks to the workers in order to meetthe shipment date. The daily quality control program is also implemented under the command of the skilledworkers. They are implementing Six Sigma approach, i.e. 3.4 products errors in manufacturing of 1 millionproducts.

ABILITYWorkers of the Frigz international are well experienced and are able to handle complex instrumentproduction easily because they are in the industry when they were child. Worker’s ability in FrigzInternational is of high potential but they are not polishing it.

26

PART B

(FRED DAVID STRATEGYFORMULATING FRAMEWORK)

27

FRED DAVID’S STRATEGY FORMULATING SCAFFOLD

INTRODUCTIONThis document is the application of Fred’s strategy scaffold to Dr. Frigz International. It has three parts. Firstpart called research model and methodology i.e. understanding of methodology and techniques to determinemost appropriate strategy for the company. The second part, called the background information of Dr. FrigzInternational, describing its domestic operations. Third part, called applying the strategy scaffold to Dr. FrigzInternational by using model and methodology of strategy formulation.

RESEARCH MODEL AND METHODOLOGYThis part deals with strategy formulation scaffold that helps in generating feasible alternatives and choose aspecific course of action. It depends on three stages mentioned in the following graph.

To reach at the decision stage the first two stages must be completed. This framework is of the FRED DAVID’SStrategic management.

Stage 1

•The Input Stage•EFE (EXTERNAL FACTOR EVALUATION)•CPM (COMPETITIVE PROFILE MATRIX)•IFE (INTERNAL FACTOR EVALUATION)

Stage 2

•The Matching Stage•SPACE (STRATEGIC POSITION AND ACTION EVALUATION)•TWOS (THREATS, WEAKNESS, OPPRTUNITIES, STRENGHTS)•BCG (BOSTON CONSULTING GROUP MATRIX)•IE (INTERNAL EXTERNAL MATRIX)•GS (GRAND STRATEGY MATRIX)

Stage 3•THE DECISION MAKING STAGE

•QSPM (QUANTITATIVE STRATEGIC PLANNING MATRIX)

28

STAGE 1:THE INPUT STAGE

EFE (EXTERAL FACTORS EVALUATION)The EFE total weighted score for the Frigz International is 2.85 in the following table. This signifies that it ismanaging threat above the 2.5 average. Since there were some serious threats, it could try to address theseissues in a more efficient and effective manner. To reduce the impact of the threats, Frigz must counteractthreats with opportunities in a manner that reduce the impact of the threats.

EXTERNAL FACTORS EVALUATION MATRIX

EXTERNAL STRATEGY MATRIX Weight Rating WeightScore

Comments

Opportunities

Establishment of Institutions forsurgical improvements

0.15 4 0.6 increase efficiency &effectiveness

Creating the new products by newtechnology

0.1 3 0.3 Meet customer demand

Selling under own brand name 0.1 3 0.3 make customer loyaland entrance to new

marketsEstablishment of raw material bank 0.05 3 0.15 Low cost availability

Supply of disposable instruments 0.1 2 0.2 Increase in Revenues ofthe Frigz

Threats

Increase the taxes on imports ofgovernment

0.1 3 0.3 Slow Growth

Rapid technological changeadaptation

0.15 2 0.3 Requires knowledgeableworkers

Competitive distributive channels 0.1 2 0.2 Availability ofSubstitutes

Strong brand preference andcustomer loyalty

0.1 3 0.3 Customers switch toothers

High rates of export re-financeapprox. 6%

0.05 4 0.2 Decrease in Exports &Revenue as well

TOTAL SCORES 1 2.85

29

INTERNAL FACTOR EVALUATION (IFE)Dr. Frigz International’s IFE total weighted score of 2.90 indicates that they are above the industry average aswhole in formulating strategies that capitalize on their strengths and minimize their weaknesses. As providedin the following table.

INTERNAL FACTORS EVALUATION MATRIX

INTERNAL STRATEGY MATRIX Weight Rating Weight Score Comments

STRENGTHSJob description 0.1 4 0.4

every departmenthas responsibility

Direct import of raw material 0.15 4 0.6Quality and cost

benefits

human KSA 0.1 3 0.3 knowledge,skill,ability

give workers daily targets 0.1 3 0.3superior result &

unbreakable strength

six sigma approach 0.1 2 0.2 quality maintain

Weakness

employee training 0.1 3 0.3Must train employees

to improve KSA

No marketing 0.1 2 0.2 planning

low spending on R&D 0.1 3 0.3technology may be

decline

lack of distribution channel 0.05 2 0.1 Access products

lack of trust on employee 0.1 2 0.2check of all employee

after holidayTOTAL SCORES 1 2.9

STRATEGIC GROUP MAPPING

30

The above is the graph of the group matrix of the Surgical Instruments manufacturers. On x-axis we take thevariable price and on y-axis we take the variable quality, both are in 3 scales i.e. low, moderate, & high. Ourcompany as being chosen is Dr. Frigz International, so the big competitors of the Dr. Frigz Internationalinclude TSK IMPEX, Bashir &Jamil Brothers and also the WE Brothers.

CPM MATRIXIn Competitive Profile Matrix (CPM) there are nine key success factors for the Dr. Frigz International asincluded in the following table. They are product quality, price competitiveness, management, managementexperience, branding, customer loyalty, Advertising, market share, and Customer Service. Dr. FrigzInternational has three big competitors in the aviation industry are TSK IMPEX, Bashir &Jamil Brothers, and

HILBROBrothers,

Bashir&Jamil Bros.WE Brothers

SMALLVENDORS,

SELLING TOCOMPANIES

High

Moderate

Low

Moderate HighLow

QU

ALI

TY

PRICE

Frigz, TSKImpex

31

HILBRO. Dr. Frigz is seen as high quality company providing excellent products. TSK IMPEX known as theIndustry Leader. Based on the data in the CPM, Bashir &Jamil and HILBRO are the most competitive onesfollowed by the TSK IMPEX and Dr. Frigz.

Dr. Frigz TSK IMPEX Bashir &JamilBro.

Hilbro

CRITICAL SUCCESSFACTORS

WEI

GH

T

RATI

NG

SCO

RE

RATI

NG

SCO

RE

RATI

NG

SCO

RE

RATI

NG

SCO

RE

Product Quality 0.20 4.00 0.80 4.00 0.80 3.00 0.60 3.00 0.60

Price Competitiveness 0.18 4.00 0.72 4.00 0.72 4.00 0.72 4.00 0.72

Branding 0.15 2.00 0.30 2.00 0.30 1.00 0.15 2.00 0.30

Management 0.10 3.00 0.30 3.00 0.30 3.00 0.30 2.00 0.20

Management Experience 0.10 2.00 0.20 3.00 0.30 2.00 0.20 2.00 0.20

Market Share 0.10 3.00 0.30 4.00 0.40 2.00 0.20 2.00 0.20

Customer Loyalty 0.08 3.00 0.24 2.00 0.16 2.00 0.16 2.00 0.16

Advertising 0.07 1.00 0.07 2.00 0.14 1.00 0.07 1.00 0.07

Customer Service 0.02 1.00 0.02 1.00 0.02 1.00 0.02 1.00 0.02

Total 1.00 2.95 3.14 2.42 2.47

VERTICAL ANALYSIS OF CPMDr. Frigz is almost good in critical success factors except advertising and customer services. Dr. Frigz is weakerin these two areas, overall Dr. Frigz is better performing from the average 2.5 by scoring 2.95, and from thecompetitors. In the management experience Dr. Frigz is only having top management with a decade or twodecade experience but where’s the functional level management is concerned, they are under-experienceand in-experienced. Dr. Frigz should also focus on the Branding of the products, although it has jointventures in other countries including USA, Germany etc. and it is providing to them under their own brandname, but the total income is not earned only from this geographical segmented area, so Dr. Frigz shouldfocus on the brand establishment of the provided products.

HORIZONTAL ANALYSIS OF CPMWhen Critical Success factors are compared to the other competitors of the Dr. Frigz International, we findout that:

32

• Dr. Frigz is providing high quality of the products as well as TSK IMPEX, but the other two areproviding somehow low quality than the top twos

• Dr. Frigz, while remaining in the competitive world, it is offering highly competitive prices to thecustomers

• Dr. Frigz is doing branding to their products and selling in their own name or tag, while other two arealso selling to the companies, after which they made their own tag on the product and sell theproducts under their own brand name.

• Frigz has a good combination of management currently employed, qualified and educated, and alsogiving importance to this issue.

• Frigz give importance to management experience, because it is experienced management who helpcompany to achieve operational effectiveness and goals, but currently it has employed wellexperienced management with experience of one or two decades in top management not infunctional level.

• TSK Impex is the industry leader and Dr. Frigz is the second one, all of the rest have low market sharethan these two.

• Dr. Frigz International has strong customer loyalty, customers who quitted Dr. Frigz, they faceproblems in meeting the demands of the products or may compromise on quality, but Frigz isproviding continuously high quality products to the customers.

STAGE 2: MATCHING STAGE

33

BCG MATRIX

For the BCG matrix we have chosen TSK IMPEX as market leader, and Dr. Frigz international has market shareof 15 % while the industry leader has a share of the 20 % so relevant market share will be 75 %. Dr. FrigzInternational is a single enterprise there is no SBU it has.

SBU SALES SALES %AGE G. PROFIT PROFIT %AGE ISGR RMSA 4.38m 100% 1.84m 100% -21.10% 75%

In the BCG matrix Dr. Frigz international lies on the Cows, “Cash Cows”,

IE MATRIX:SBU SALES SALES %AGE G. PROFIT PROFIT %AGE ISGR RMS IFE SCORE EFE SCORE

A 4.38 m 100.00% 1.84m 100 -21.10% 75% 2.9 2.85

IND

UST

RY S

ALE

SG

ROW

TH

RELEVANT MARKET SHARE

?

DC

25%

0%

-25%

25%

1.0 0.5 0.0

-21.1%

0.75

34

Dr. Frigz International is lying in the cell number V. This means that Dr. Frigz International should follow holdand maintain strategy.

1234

1

2

3

Grow & Build

Hold &Maintain

Harvest orDivest

2.9

2.85

EFE

SCO

RE

IFE SCORE

DR. FRIGZ LIE IN THE HOLD& MAINTAIN SEGMENT

35

SWOT MATRIX

Strengths1. Job Description2. Quality of raw material3. Human KSA4. Give workers daily target5. Six Sigma Approach

Weaknesses1. No Employee Training2. No marketing3. Lack of Distribution Channel4. Low spending on R&D5. Lack of Trust on Employee

Opportunities1. Establishment of Institutions

for surgical improvement2. Creating the New Product by

New Technology3. Selling under own Brand4. Establishment of Raw Material

Bank5. Supply of Disposable

Instruments

Threats1. Increase in the Taxes on

Imports by Government2. Rapid Technological Change

Adaptation3. Strong Brand Preferences and

Customer Loyalty4. High rate of Export Re-

finance approximate 6%

INTERNAL

EXTERNAL

36

TWOS MATRIXSTRENGTHS &

WEAKNESS(INTERNAL)

OPPORTUNITIES& THREATS(EXTERNAL)

Strengths1. Job Description2. Quality of raw material3. Human KSA4. Give workers daily target5. Six Sigma Approach

Weaknesses1. No Employee Training2. No marketing3. Lack of Distribution

Channel4. Low spending on R&D5. Lack of Trust on Employee

Opportunities1. Establishment of

Institutions for surgicalimprovement

2. Creating the New Productby New Technology

3. Selling under own Brand4. Establishment of Raw

Material Bank5. Supply of Disposable

Instruments

SO-strategies1. Surgical Institutions will provide

benefits to achieve good qualityof Raw Material, e.g. Provisionof quality checkingequipment.(S2,O1)

2. Using Human KSA new Productand Technology can beachieved.(S3,O2)

3. Selling under own Brand usingthe technique of Six SigmaApproach for betterment ofquality.(S5,O3)

4. With providing Job descriptionproduction of DisposableInstruments increased, becauseno confusion employee have insense of what to do.(S1,O5)

WO-Strategies1. With the help of establishment

of institutions for surgicalimprovement employee’s canbe trained.(W1,O1)

2. For Selling under own Brandname the market and customerloyalty can beincreased.(W2,O3)

3. By Creating New Product usingNew Technology there will bemore spending on R&D,innovations will be onway.(W4,O2)

4. Disposable Instruments can beproduced by trust onEmployees and making thedecision makingdecentralized.(W5,O5)

Threats1. Increase in the Taxes on

Imports by Government2. Rapid Technological

Change Adaptation3. Strong Brand Preferences

and Customer Loyalty4. High rate of Export Re-

finance approximate 6%

ST-Strategies1. Good Quality of Raw Material is

beneficial to earn high profitand it will avoid taxes levied byGovernment on imports.(S2,T1)

2. Change in Technology can beachieved by Human KSA byproviding them training underprofessionals.(S3,T2)

3. Through the technique of SixSigma Approach Strong BrandPreferences and customerLoyalty can be achieved byproviding them highquality.(S5,T3)

4. High rate of Export Re-financecan be avoid by moreproduction by giving workersmore daily target.(S4,T4)

WT-Strategic1. Marketing tools should be used

to achieve Strong BrandPreference and CustomerLoyalty.(W2,T3)

2. There should me morespending on R&D so that rapidchange in Technology can beadopt.(W4,T2)

TWOS Matrix for the Dr. Frigz International focuses on matching the company strengths to maximizingexternal opportunities while simultaneously minimizing external threats.

37

SPACE MATRIXConcerning the internal strategic position and external strategic position analysis in following table, Dr. FrigzInternational in surgical industry located in the Competitive Quadrant because the directional vector appearsin the lower-right of the SPACE matrix. Based on the SPACE matrix, Dr. Frigz International should use acompetitive strategy which was competitive advantages in high-competitive industry. Thus, Dr. FrigzInternational should give head to market penetration, product development, and finally joint ventures withforeigners.

INTERNAL STRATEGIC POSITION EXTERNAL STRATEGIC POSITIONFinancial Strengths (FS) Rating Environmental Stability (ES) Rating

Firm is in the position to process 2 to 3large orders of instruments, without

getting a single rupee from bank.

4 Stability of the political conditions ofthe country

-5

Firm has good repute in the financialmarket in order to get loan, if

required.

3 Establishment of different institutionsfor the development of the Surgical

Industry

-4

Firm is financially strong in comparisonto competitors.

3 Except Dr. Frigz there are 19 otherlarge manufacturers are in the industry,so it is anticipated that new entrants in

market will occur.

-5

Firm has increased its profit marginfrom 40% to 42%.

2 Competitive pressure from the nationalindustry or local manufacturers is high

-3

Firm has investment in subway foodand in total petroleum, so it can meet

any capital shortages.

2 Rising in the cost of utilities -2

Total 14 Total -19COMPETITIVE ADVANTAGE (CA) INDUSTRY STRENGTHS (IS)

The company holds 75% relevantmarket share and 15% absolute

market share. (domestic)

-2 In 2009 95% of the industry revenuesare generated from exports of

instruments.

5

From the last year company hasincreased its capacity of production

-3 From the last decade, surgical industryshows almost increasing trend.

3

With the introduction of newtechnology sales of the company has

been increased

-3 There are 20 large manufacturers, 50medium, 150 small and 2000 vendors,so they can meet the rapidly increasing

demand of the instruments.

3

Employee turnover status in Dr. FrigzInternational.

-4 Sialkot surgical industry has potential ofearning billions from the export,

currently is under utilized.

5

Dr. Frigz International is exporting toall the countries in the world.

-3 Labor is available at cheap prices. 5

Total -15 Total 21The average score of FS is: 14/5 = 2.8The average score of CA is: -15/5 = -3.0The average score of ES is: -19/5 = -3.8The average score of IS is: 21/5 = 4.2

38

The two score on the x-axis are added (IS+CA= 4.2-3.0= 1.2) and the resultant point is pointed on the x-axis.Similarly two scores on the y-axis are added (FS + ES = 2.8 – 3.8 = -0.1) and the resultant point is plotted on Y.The intersection of the new xy points is drawn and a directional vector is drawn.

AggressiveConservative

Defensive Competitive

IS

FS

CA

ES

1 2 3 4 5 6-6 -5 -4 -3 -2 -1

1

2

3

4

5

6

-6

-5

-4

-3

-2

-1

39

GRAND MATRIX

Dr. Frigz International is financially strong and is in situation to compete at high level of competition, but theindustry growth rate is low or Dr. Frigz in a slow growth industry. Dr. Frigz has ability to launch diversifiedprograms into more promising growth areas. Dr. Frigz International can go for concentric diversification,Horizontal diversification, Conglomerate Diversification, or can go for joint ventures.

RAPID MARKET GROWTH

WEAKCOMPETITIVE

POSITION

STRONGCOMPETITIVE

POSITION

SLOW MARKET GROWTH

QUADRANT IV

1.Concentric Diversification2.Horizontal Diversification3.Conglomerate Diversification4.Joint Ventures

40

STAGE 3: DECISION MAKING

QSPMQUANTITATIVE STRATEGIC PLANNING MATRIX (QSPM)

Strategic Alternatives

1 2

JointVentures

in USA

JointVentures inEuropean

Community

Key Success Factors Weight AS TAS AS TAS

OPPORTUNITIES

Establishment of Institutions for surgical improvements 0.15 3 0.45 3 0.45

Extension of Distribution channels 0.1 3 0.3 4 0.4

Selling under own brand 0.1 3 0.3 4 0.4

Establishment of raw material bank 0.05 3 0.15 4 0.2

Supply of disposable instruments 0.1 4 0.4 4 0.4

THREATS

Increase the taxes on imports of government 0.1 1 0.1 1 0.1

Rapid technological change adaptation 0.15 1 0.15 1 0.15

Competitive distributive channels 0.1 1 0.1 1 0.1

Strong brand preference and costumer loyalty 0.1 1 0.1 1 0.1

High rates of export re-finance approx. 6% 0.05 2 0.1 1 0.05

STRENGTHS 1.0

Job description 0.1 4 0.4 4 0.4

Quality of raw material 0.15 4 0.6 4 0.6

human KSA 0.1 4 0.4 4 0.4

give workers daily targets 0.1 4 0.4 4 0.4

six sigma approach 0.1 4 0.4 4 0.4

WEAKNESSES

employee training 0.1 3 0.3 4 0.4

No marketing 0.1 4 0.4 4 0.4

low spending on R&D 0.1 3 0.3 4 0.4

lack of distribution channel 0.05 1 0.05 1 0.05

lack of trust at employee 0.1 3 0.3 3 0.3

Total 1.0 5.70 5.85

So we recommend Dr. Frigz International to go for the Joint Ventures in the European Community, for thesake of earning profits and to become in the STAR block of the BCG and also in other matrix.

41

REFERENCES1. www.thefinancialdaily.com2. www.dawn.com3. www.books.google.com4. www.simap.com.pk5. www.tdap.gov.pk6. www.smeda.gov.pk7. www.financialnews.com8. www.sialkotweb.com9. www.dailytimes.com.pk/default.asp?page=2009\11\26\story_26-11-2009_pg5_110. www.thenews.com.pk/daily_detail.asp?id=16330711. www.opfblog.com/1100/sialkot-airport-to-raise-exports-to-2b-sbp-chief/12. http://cmer.lums.edu.pk/upload/Sialkot_enterprenurial_Spirit.pdf13. www.onepakistan.com/news/local/23926-Surgical-industry-urges-FBR-equalize-rate.html14. www.pgbf.com.pk15. http://www.tradeboss.com/default.cgi/action/viewcompanies/companyid/311166/16. http://www.defence.pk/forums/economy-development/1049-pakistan-economy-news-updates-

archive-91.html17. www.frigzinternational.com