PEL Strategy Management Project

Pak Elektron Limited.

Strategic Management Group MembersUmer Shahzad 17Muhammad Usman 20Hafiz Farhan Saleem 28Umer Farooq 45Sajjad Zafar Pirzada 52Muhammad Umar Farooqi 145

Introduction By Muhammad Usman Roll # 20

TEXTILESKohinoor IndustriesAzam Textile MillsSaritow Spinning

311,678500569

SECTORS COMPANY TURNOVERMUSD

EMPLOYEES(Nos.)

ENGINEERING Pak Elektron Ltd.

232 7,036

FUEL & ENERGY Kohinoor PowerKohinoor Energy 86 98

TOTAL 349 10,018

PEL is a flag bearer of Saigol Group

PEL Introduction

• Pioneer manufacturer of electrical goods in Pakistan• One of the oldest and amongst the leading Home Appliances

Manufacturer and Distributor in Pakistan.• The company has an annual turn over of Rs 20.3 billion.• It was established in 1956 in technical collaboration with M/s AEG of • Germany.• In October 1978, the company was taken over by Saigol Group of• Companies.• Since its inception, the company has always been contributing

towards the advancement and development of the engineering sector in Pakistan.

Historical Overview

Company’s operations are divided into two divisions:

1) Power Division 2) Appliances Division

COMPANY OPERATIONS

PEL Product Line

DISTRIBUTION TRANSFORMER

POWER TRANSFORMER

DRY TYPE TRANSFORMER

SWITCHGEAR

PMT TRANSFORMER EPC CONTRACTING

CERTIFICATION

Source: www.pel.com.pk

Chairman

Director Operations

Managing Director

Power Division

Sales & Marketing

Manufacturing

EPC Contracting

Appliances Division

Sales & Marketing

Manufacturing

Finance

Finance / Accounts

Supply Management

HRD / IR&A

Internal Audit

PEL HEIRARCHI

Chairman BOD

Managers

Executive

Line Staff

Workers

Management Level sat PEL

VISION

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

MISSION STATEMENT

To provide quality products & services to the complete satisfaction of our customers and maximize returns for all stakeholders through optimal use of

resources.

To focus on personal development of our Human Resource to meet future challenges.

To promote good governance, corporate values and a safe working environment with a strong sense of social responsibility

MISSION VISION

Mission Components Included Not included Description

Customers ● Customers

Products and Services ● To provide quality products

Markets ●

Technology ● use of resources

Concern for Survival Growth and Profits ● maximize returns for all stakeholders

Philosophy ● Quality , customer care, good governance, corporate values

Self-Concept ● complete satisfaction of our customers

Concern for Public Image ● strong sense of social responsibility

Concern for Employees ● safe working environment with -

Mission Statement Analysis

Key Variables Case Facts Evaluation

Broad in Scopequality products & services, complete satisfaction of our

customersAcceptable

Length (Less than 250 words) - Acceptable

Inspiring - -

Identify the utility of the firm’s products - Mentioned

Reveal that the firm is socially responsible strong sense of social responsibility

Mentioned

Reveal that the firm is environmentally responsible safe working environment Mentioned

Include Nine Component 9 out of 9 Acceptable

Reconciliatory - Unspecified

Enduring - Unspecified

Mission Statement Evaluation

PEL Major Customers

Utility: WAPDA, PEPCO, KESC & AJK-ED.

TRANSCO: NTDC.

DISCOs: TESCO, PESCO, IESCO, LESCO, FESCO, GEPCO, MEPCO, SEPCO, HESCO & QESCO.

GENCOs.

IPPs & RPPs.

Private customers.

External Factors By Umar Farooq

• Economic Forces:– Devaluation of Currency– Interest Rate– Uncertain Economic Situation– Dumping Pricing.– Competition inside; China & Korea.– Competition outside; China, Korea, India & Turkey.– GST: 17%– Price Preference: 30% to the importing country.

External Forces

• Political, Legal & Govt. Forces:– Frequently Changes in tax laws– Unstable Political Environment– Energy Crisis– Local Rules: PPRA Rules.– International Rules: World Bank, ADB & JICA Rules.– “Lowest most responsive”.– No negotiations.– Bank Guarantee; 10% of Bid value.– Performance Guarantee; 10% of Purchase Order value.– Bound to Contractual agreements.

External Forces

• Technological Forces:– New Products.– Extended Services.– New Emerging Markets.– New Marketing methods.– Supply Chain Management.– Manufacturing Process & Techniques.

External Forces

• Social, Cultural, Demographic & Environmental Forces are not effective.

• Competitive Forces:– More than 50 competitors.– New Entrants.– Low pricing.

External Forces

PORTER’S MODEL

Substitute Products (Medium)

Rivalry amongst Competitors (High)

Bargaining Power of Suppliers (Medium)

Bargaining PowerOf Consumers (High)

Potential Entry of newCompetitors (Low)

PORTER’S MODEL

Rivalry amongst competitors: Modestly High

Potential New Entrants:1 to 2 new competitors every year.

Suppliers Bargaining Power:Medium; Depends upon economy, source, time, demand, supply, transportation mode and availability of raw material.

PORTER’S MODEL

Substitute Products: A lot of registered companies having the product of same specification or standard.

Buyers Bargaining Power:Tender advertised in daily news paper.Lowest most responsive bidder.Bound to contractual agreements.

SWOT ANALYSIS

OPPORTUNITIES

Expansion of Energy Sector

Increase in Population

Large Product Range

Globalization

Joint ventures, merger, acquisition or take over

SWOT ANALYSIS

THREATS

Strong Competition

Chinese Products

Grey Market

Devaluation of Currency

Obsoletion of Technology

Rapid Changes in Government Policies

New Entrants

EFE Matrix

Key External Factors Weight Rating Weighted Score

Opportunities Expansion of Energy Sector 0.10 3 0.30

Increase in Population 0.05 2 0.10

Large Product Range 0.10 3 0.30

Globalization 0.04 3 0.12

Joint ventures, merger, acquisition or take over 0.05 2 0.10

Threats

Strong Competition 0.16 4 0.64

Chinese Products 0.10 3 0.30

Grey Market 0.04 1 0.04

Devaluation of Currency 0.10 3 0.30

Obsoletion of Technology 0.06 2 0.12

Rapid Changes in Government Policies 0.10 2 0.20

New Entrants 0.10 3 0.30

Totals 1.00 2.82

Internal Factors By Farhan Saleem Roll # 28

• Management• Marketing• Finance and Accounting• Production Operation• R & D• MIS

Internal Factors

Management Function Performed at PEL

PlanningDefining goals, establishing strategies to achieve goals, developing plans to

integrate and coordinate activities.

OrganizingTeam formation of each dept with the help of team leaderArranging and structuring work to accomplish organizational goals

Leading Proper vision and direction of team leaderWorking with and through people to accomplish goals.

ControllingMonitoring, comparing, and correcting work

PEL SWOT ANALYSIS

STRENGTHS

ERP Based Company Strong Brand ImageStrong Dealer NetworkNumerous Super Brand Award State of the art plantOne of the largest manufacturerStrong R&D DepartmentStrong After Sales ServiceCompliance of International Standards

New Transformer Factory

PEL SWOT ANALYSIS

WEAKNESSES

Financial Problem

Large overheads High PricesSystem Variation

IFE Matrix

Key Internal Factors Weight Rating Weighted Score

Strengths

Strong Brand Image 0.15 4 0.60

Strong Dealer Network 0.15 4 0.60

Numerous Super Brand Award 0.05 2 0.10

State of the art plant 0.10 3 0.30

One of the largest manufacturer 0.05 3 0.15

Strong R&D Department 0.05 3 0.15

Strong After Sales Service 0.05 3 0.15

Compliance of International Standards 0.10 3 0.30

Weaknesses

Financial Problem 0.10 2 0.20

Large overheads 0.05 3 0.15

High Prices 0.10 2 0.20

System Variation 0.05 2 0.10

Totals 1.00 3.00

Market Analysis By Umar Shahzad Roll # 17

Major Competitors of Appliances Products

1-Dawlance

2-Haire

3-Orient

4-Waves

Major Competitors of Power Products

1-Transformer:

2-Energy Meters:

3-Switchgear:

4-Power Transformer:

5-EPC Project

substation, Rawalpindi DHA substation Isld Substations, in Nigeria

Market Analysis

PEL29%

Siemens

Elmetec10%

Trans-fopow

Others25%

Siemens

Elmetec

Transfopower

Others

BCG MATRIX

Distribution Transformers

Power Transformers Refrigerator

Question Mark Instrument Transformer Water Dispenser Floor Standing

Cash Cow

Energy Meters Switchgear Panel Split AC

Generators Washing Machine

Market Share

High Low

Export Marketing-PEL

PRODUCT LIFE CYCLE

PEL Company PEL Transformers

Introduction Growth Maturity Decline

Sales and Profits

TimeDevelopment Introduction Growth Maturity Decline

Sales and Profits

TimeDevelopment

Export Marketing-PEL

Financial AnalysisBy Sajjad Zafar Pirzada Roll # 52

FINANCIALS

• Gross Sales: Rs. 20.3 Billion.• Net Sales: Rs. 17.7

Billion.• Gross Profit: Rs. 3.60 Billion.• Net Profit: Rs. 0.12

Billion.89%

Gross Sales

Power DivisionAppli-ances Division

FINANCIALS

Summary of the Liquidity Ratio Comparisons

Ratio PEL Industry

Current 1.32 1.26

Acid-Test 0.82 0.88

> Strong current ratrionand weak acid test ration

indicates a potential problemin inventories account.

> Note that PEL has a relatively high level of inventories.

FINANCIAL ANALYSIS

Summary of the Liquidity Trend Comparisons

> The current ration for PEL has been declining & slowly rising

at the same time acid test ratio first declining and slowing rising.

> The current ration for Industry has been declining & slowly rising

at the same time acid test ratio first declining and slowing rising.

> This indicates inventories are a problem for PEL

FINANCIAL ANALYSIS

Summary of the Profitability Ratio Comparisons

Ratio PEL Industry

Gross Profit Margin 22.8% 16.9%

Net Profit Margin 1.8% 2.8%

Return on Investment 1.5% 3.5%

Return on Equity 6.8% 13.7%

> PEL profitability ratios have ALL been falling since 2007.

Each except Gross Profit Margin below the industry average

for the past three years.

> This indicates that COGS and administrative costs may

both be too high and a potential problem for PEL.

> Note, this result is consistent with the low interest

coverage ratio.

FINANCIAL ANALYSIS

Summary of the Financial Leverage Ratio Comparisons

Ratio PEL Industry

Debt to Equity 2.07 2.29

Debt to Assets 0.44 0.58

Total Capitalization 1.09 1.77

> PEL debt utilization and assets supports to debt relative

to industry is low.

> PEL long term debts also less than industry.

> That shows PEL debts utilization possition is very low

as compare to industry.

FINANCIAL ANALYSIS

Summary of the Financial Leverage Trend Comparisons

> PEL debt utilization tred stuck down as compare to

industry and than slowly rise.

> PEL assets support to debt financing is slowly down but

much down as compare to industry.

> PEL long term debt utilization trend also down.

FINANCIAL ANALYSIS

SUMMARY OF RATIO ANALYSIS

1. Inventories are too hihg.

2. A burden of financial charges.

3. May be paying off creditors too soon.4. Selling , general and administrative costs may be too high.

5. Less adminstrion performance.

6. Very poor profitability rates.

FINANCIAL ANALYSIS

Strategies/ObjectivesBy Muhammad Umar Farooqi Roll # 145

Financial GoalsTarget of reducing financial cost from 13%

Strategic GoalsIncrease profitability and sales turnoverIncreasing the product line

Defined Goals at PEL

Strategic PlansCapture 10% more market share within next 2 years.To become the leading manufacturer of electrical goods in

Pakistan.

Operational Plans Introduce a wide range of Products.To achieve the desired targets with cost cutting

techniques.Efficient utilization of resources to maximize output.

Plan at PEL

Criticisms of Planning Main flaw in today's planning lies with the energy crisis

prevailing in the country. Due to its dynamic nature the changes in plans are very

frequent.

Effective Planning in Dynamic Environments Different plans including sales and production plans need to

be changed very often and is an ongoing process. Need to cater to market trends while planning and therefore

being static or fixed is of no use.

Contemporary Issues in Planning at PEL

Objective

Strategic:

Increase our ExportIncrease in production plant capacityRetain local market share.Lower production cost, not effecting the quality.Change in internal design.Superior on time deliverySuperior customer services.

Objective

Financial:

Lower factory overheads.Minimize liquidated damages on late delivery.Maximize profits.

Recommendations

1. They should retire their expensive loans.2.They should carefully study their competitors.3.As mentioned earlier company’s liquidity position is dismal. So they need to pay off their short term loans.4.Their operating cost is very high so they should control their operating expenses.5.There should be a continuous monitoring of performance. When performance deviates from plans one does not have to wait for the next periodic review to correct it. The supervisor and subordinate should discuss the situation immediately so the corrective actions can be taken at once in order to avoid the major disasters.6.Whether performance appraisal discussions are held monthly, quarterly, annually appraise should be clear about what he/she is doing right and wrong ,and how he/she can overcome there deficiencies for the future appraisal.7. Performance appraisal should be conducted in a way that employee should not perceive it as a fatigue or threat for there job but it should take it as an opportunity to add or contribute more value in work of there organization

Distribution Transformer Plant

Question and Answer

• www.pel.com.pk• www.wikipedia.com• www.slideshare.com• https://www.google.com.pk

References

PEL Strategy Management Project

Marketing

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