Steel Mill

PAKISTAN STEEL MILLS-SWOT analysis

SWOT Analysis

SWOT analysis is a simple framework for generating strategic alternatives from a situation analysis. It is applicable to either the corporate level or the business unit level and frequently appears in marketing plans. SWOT (sometimes referred to as TOWS) stands for Strengths, Weaknesses, Opportunities, and Threats.

Strengths:-

Any activities the organization does well or any unique recources that it has.

Weakness:-

Any activities the organization does not do well or resources it needs but does not pocess.

Opportunities:-

Positive trends in external eniormental factors.

Threats:-

Negative trends in external environmental factors.

The SWOT framework was described in the late 1960's by Edmund P. Learned, C. Roland Christiansen, Kenneth Andrews, and William D. Guth in Business Policy. The General Electric Growth Council used this form of analysis in the 1980's. Because it concentrates on the issues that potentially have the most impact, the SWOT analysis is useful when a very limited amount of time is available to address a complex strategic situation.

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The following diagram shows how a SWOT analysis fits into a strategic situation analysis.

Situation Analysis / \

Internal Analysis External Analysis/ \ / \

Strengths Weaknesses Opportunities Threats|

SWOT Profile

The internal and external situation analysis can produce a large amount of information, much of which may not be highly relevant. The SWOT analysis can serve as an interpretative filter to reduce the information to a manageable quantity of key issues. The SWOT analysis classifies the internal aspects of the company as strengths or weaknesses and the external situational factors as opportunities or threats. Strengths can serve as a foundation for building a competitive advantage, and weaknesses may hinder it. By understanding these four aspects of its situation, a firm can better leverage its strengths, correct its weaknesses, capitalize on golden opportunities, and deter potentially devastating threats.

Internal Analysis:

The internal analysis is a comprehensive evaluation of the internal environment's potential strengths and weaknesses. Factors should be evaluated across the organization in areas such as:

Company culture Company image Organizational structure Key staff Access to natural resources Position on the experience curve Operational efficiency

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Operational capacity Brand awareness Market share Financial resources Exclusive contracts Patents and trade secrets

The SWOT analysis summarizes the internal factors of the firm as a list of strengths and weaknesses.

External Analysis:

An opportunity is the chance to introduce a new product or service that can generate superior returns. Opportunities can arise when changes occur in the external environment. Many of these changes can be perceived as threats to the market position of existing products and may necessitate a change in product specifications or the development of new products in order for the firm to remain competitive. Changes in the external environment may be related to:

Customers Competitors Market trends Suppliers Partners Social changes New technology Economic environment Political and regulatory environment

Introduction

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Pakistan Steel was incorporated as a private limited company in July, 1968, wholly owned by the Federal Government. The Mills were established with the techno economic assistance by the former USSR, which came into operations in stages during 1981-85.

The foundation stone of this vital and gigantic project was laid on 30th December, 1973 by the Prime Minister of Pakistan Zulfikar Ali Bhutto. The project was completed at a capital cost of Rs.24, 700 million. The completion of the steel mill was formally launched by the then-President of Pakistan on 15th January, 1985. Its construction was carried out by a consortium of Pakistani construction companies under the overall supervision of Soviet experts. The real founders of Pakistan Steel Mills are Prof. Niaz Muhammad (Pride of Performance), Wahab siddiqui and Russian scientist Mikhail Koltokof.

Pakistan Steel is located at a distance of 40 km Southeast of Karachi at Bin Qasim near Port Muhammad Bin Qasim. Pakistan Steel is spread out over an area of 18,660 acres. It marked Pakistan's entry into the elite club of iron and steel producing nations

The government of General Musharraf privatized Pakistan Steel Mills. for a sum of Pakistani Rupees 21.75 Billion to a three-party consortium. The action drew wide spread condemnation from all sections of Pakistani society at large and Steel Mill workers in particular. The value of Pakistan Steel Mills was estimated to be Rupees 300 Billion (13 times the price) The Chief Justice of Pakistan took a suo moto action against the privatization citing irregularities in the process. The verdict was delivered on August 8, 2008.The $362 million transaction with the Russian-Saudi-Pakistan investors was declared as null and void.

STRENGTH:

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1. LARGE FINANCIAL RESOURCES:

The project was completed at a capital cost of Rs.24, 700 million. It has enough financial resources to increase its plant and supplies of products. It is patronized by the government of Pakistan which provide it financial aid when needed

2. LARGE SIZE.

It is Pakistan‘s largest industrial unit. It provides jobs to thousands of workers. It is producing enormous steel products for customers both local and international. So it earns more revenue than any other organization.

3. GREAT COPMETETIVE SKILLS:

It has been working consistently in steel production sector so it has achieved great competitive skills. It has ability to face strong competition.

4. ECONOMIES OF LARGE SCALES

It has been enjoying the benefits of large scales. Due to large production its cost of production is kept at minimum.

5. EXPERT EMPLOYEES

Continuity of operations has enabled its employees to achieve great operational skills. Its employees are very skilled than other related industries.

6. A LEADER IN STEEL PRODUCTS

It inaugurated the production of steel products in Pakistan. it enjoys the confidence of people in its supplicated products.

7. GOVERNMENT SUPPORT

It enjoys the patronage of government of Pakistan. It also enjoyed financial assistance from government of Pakistan.

8. EFFICIENT FUNCTIONING

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It is functioning efficiently under quality administration. It is following internationally recommended principles in its controlling.

9. PERFECT LOCATION

It was found to be an ecologically preferable location, alongside a tidal creek and having a wind direction away from the city of Karachi. It is located on a very critical location. It is located near sea port and also linked to major highways. So it has no difficulty in transportation.

10. RELATIONS

It enjoys strong relations with government officials. It also enjoys good relations with its customers both local and foreign.

11. COMPETETIVE ADVANTAGE

Its business model has enabled it to achieve competitive advantage. Its products are very innovative and relatively cheap.

12. INNOVATIVE

It’s a pioneer in steel production in Pakistan so it has been very innovative since its commencement.

13. BY PRODUCTS

It has the Coke Oven and Byproduct Plant coming on stream and the Galvanizing Unit .So it is adding to its profits.

14. MONOPLY

It enjoyed monopoly in steel products for years and earned lots of profits. There is no match to its expertise in steel production.

15. EXPANSION

It is an integrated mill with an annual capacity of 1.1 million tons of raw steel production with a built in potential for expansion up to 3 million tons. 330,000 tones of machinery, steel structures and electrical equipment

WEAKNESS

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1. BACKWARD TECHNOLOGY

PSM using the machinery provided to it by USSR.that technology is out dated. It did not install latest machinery to that extent as by its competitors. So it may fall behind in its production capacity.

2. DETERIORATING FINANCIAL POSITION

Due to heavy losses and bad financial policies it is losing its financial position. It’s facing problems in meeting its day to day expenses.

3. MISSING KEY SKILLS

Many of its employees are missing key skills necessary to run it efficiently. So it may harm its productivity.

4. POOR TRACK RECORD

The track record of PSM is very poor. Its has been changing its policies consistently which has damaged its goodwill. Nepotism also affected its working badly.

5. OPERATING PROBLEMS

Due to large size its management finding it hard to control its all functions. Large size is badly affecting its operational controls. Its management is faced with the problem of efficient human recourse management.

6. HIGH LABOR COST

There is a large labor force employed in PSM which has increased its cost of production. Its bearing the cost of many idle workers.

7. DIFFICULTIES IN EXPANSION IN SHORT RUN

Due to heavy operating cost and less financial resources it is very difficult for it to expand its plant. So it may not be able to increase its supply of steel products when there demand rises in short run

8. PRAVATIZATION

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Privatization always shows weakness in a company’s working. The government of Pakistan decided many times to privatize it to three-party consortium at nearly scrape value.

9. NEPOTISM

Hence it was established and controlled by Pakistan government so nepotism has always been there. The employment of favorite persons on key designation has badly affected its efficiency.

10. LOSSES

Due to inefficient administration PSM has been bearing losses for many years. So people were not ready to invest in it. It lost its bargaining power.

11. SUB STANDARD WORKING CONDITIONS

Due to backward technology the working conditions are not according to international standards. It might harm workers health.

12. ORGANIZATIONAL FLAWS

The business plan of PSM is not very impressive so it’s not able to provide steel products at competitive prices to its customers. The controversial privatization has also revealed the weakness of its administration. It is dependent on government support.

OPPORTUNITIES

1. DIVERSITY IN PRODUCTS

Since it has been working for a very long time so it has achieved high skills to produce a large variety of products. So it has ability to satisfy many wants of its customers and increase its profits.

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2. WEAK COMPETITORS

Its competitors are new to the market so they are not threatening its profits that much. It is producing more types of goods than its competitors so it is ale to earn more profits.

3. HIGH BARGAINING POWER

Due to large scale of production it purchases raw materials in bulk quantities so it has high bargaining power and enjoys discount from its suppliers. It also produces sophiscated products so it charges comparatively high prices from its customers.

4. CUSTOMER TRUST

As it is a pioneer to the market its customers trust on its products. People prefer to buy its products. So it is generating more revenue than its competitors.

5. MARKET DOMINAMCE

There have been no competitors in market for a very long time so it has achieved dominance in the market. The customers prefer its products.

6. INTRNATIONAL SCOPE

It is also supplying its products to foreign customers. So it enjoys higher profits than its competitors. is equipped with all the necessary facilities, conforming to International standards.

7. SUB UNITS

It also has capacity to build its sub units. So it can produce a variety of goods than others in the business.

8. INCREASING DEMAND FOR PRODUCTS

The demand for steel products is always on the rise. So it has the opportunities to generate revenues.

9. RELATED GOODS

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It has the ability to produce related goods demanded by its customers. It has a great scope to increase its sales.

10. NATURAL DISASTERS

There has been an increased demand for its products due to natural disasters. Its products have the ability to guard against natural disaster like earthquake. The people are building their homes with the support of steel products so demand for its products is increasing and so are its profits.

11. SUB INDUSTRIES

There are many industries that use its products as raw materials to produce their goods. So demand for its products is ever rising

12. FAST MARKET GROWTH

Due to heavy labor force and large capital it has the ability to increase supply of its products when demand for its products increases.

13. ORGANIZATIONAL GOALS

It is fully committed to become no.1 organization in steel products in south East Asia. So it tempting its employees to work hard

THREATS

1. NEW COPMETITORS

With the entrance of new competitors the sales of PSM has decreased. So it’s facing tough competition in this field. The emergence of new steel product producers is threatening its profits.

2. WRONG GOVERNMENT POLICIES

The previous government took many wrong steps like selling of PSM at lower rates. These kinds of policies are threat to its existence. It was being privatized in indecent haste, ignoring profitability aspect and assets of the mills by the financial adviser before its evaluation.

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3. ECONOMIC CRISES

The current economic crises have a bad impact on PSM’s profitability. There has been a considerable decrease in demand for its products due to decrease in people’s income.

4. ADVERSE DEMOGREPHIC CONDITIONS

The demand for steel products is ever changing. The people are switching to substitutions. So it may harm company’s profits.

5. GROWING COMPETITION

The number of competitors in steel products is increasing. It has an adverse affect on PSM’s revenues.

6. LABOR UNIONS

Labor unions always a threat to a company so is the case with PSM. Labor unions may go to strike when their demands are not fulfilled. Strikes may affect badly its working

7. RISE IN OIL PRICES

The rise in oil prices increased its cost of production. It was forced to sell its products at higher prices which decreased demand for its products.

8. MISMANAGEMENT

Due to nepotism the management of PSM is very inefficient. Key positions are held by people who are not eligible for their current posts. So it is a major threat to its profitability.

9. INABILITY TO PAY LOANS

The PSM took advances from many sources including banks and government but at one stage it was unable to pay its debts and it was near insolvency but government helped it to get out of this situation but it is still threatened by its creditors.

10. WITHDRAWAL OF GOVERNMENT SUPPORT

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The government wanted many times to withdraw its support due to non profitability of PSM. If it continues to work at no or lower profits the government may think it wise to sell PSM to foreign investors.

11. INADEQUATE HUMAN RESOURCE MANAGEMENT

Since PSM is working on a large scale it needs highly educated people to control its labor efficiently. But due to non availability of these people it is not working at a level where it should so it is a great threat to its profits.

12. COTROVERCIAL PRIVATIZATION

This action drew wide spread condemnation from all sections of Pakistani society at large and Steel Mill workers in particular. They threatened to go on strike if government did not take its decision back.

13. GLOBALIZATION

It is a major threat to its profits. With the introduction of multinational companies in Pakistan its revenues may decrease.

14. FREE MARKET ECONOMY

Free market economy may cause it to lower its product prices. Its profits may decrease.

15. POLITICAL INSATABILITY

Pakistan has been suffering from political instability for many years. Still it not as stable as it should. So it really has a negative effect on its profitability.

BENCHMARKING

Pakistan steel mill is conducting all processes being pursued by any national or international organization. It is Developing Human resource and motivating employees through empowerment and hard consequences. Like any other organization it is working under environment friendly conditions. It is minimizing process wastages, rejections and recycling, wastes, good governance. It is fulfilling social obligations and Improving Corporate Image. It is following established management principlesGlooming stars


CONCLUSION There is no doubt about the profitability of Pakistan steel mills. It’s working nicely under government patronage. It is providing quality products to its customers. Nepotism may harm its efficient working. It is working for social welfare. It has started many supportive programs for its employees. It is also trying to become self dependent by producing goods use as raw material in its production. There is a great customer care. It has arranged recreational activities for its workers. It is working in health, education, environment and housing departments for its workers. There are perfect selling and buying arrangements. It is producing many byproducts to increase its profits. It has invested highly in insuring the availability of state of the art facilities for our workforce and their families. It is giving Greater response to customer's present & future needs. It is innovative in its products and services.

SUGGESTIONS

It should ensure quality management. Its labor should be provided with perfect working conditions. The quality of the products should be raised to international standards. It should also increase marketing for its products. It should also start new subunits to earn maximum profits. It should develop a comprehensive business plan to guard against competition. It should also work to get itself protected from the bad effects of globalization. It should build good relations with its suppliers. It should cut idle labor force. It should recruit employees on merit. It should follow internationally recognized principles in human resource management. Its commitment to quality should not be limited to plant activities alone rather it should be extended the implementation of quality management systems across the whole organization. The management at Pakistan Steel should be fully committed to providing a high level of social accountability to its entire workforce. It should guard against free market economy. The customers and suppliers should be provided with superior services and ideas.

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Steel Mill

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