Agriauto Industries Limited (AIL) Report

STRATEGIC MANAGEMENT              Agriauto Industries Limited (AIL)

Table of Contents

Introduction……………………………………………………………………………………3

Vision…………………………………………………………………………………………..4

Quality Policy………………………………………………………………………………….4

Revision of Vision……………………………………………………………………………..4

Company Values…………………………………………………………………………….4-5

Long Term Objectives…………………………………………………………………………5

Product List…………………………………………………………………………………….6

Company Strategies……………………………………………………………………………7

Major Customer ……………………………………………………………………………….8

Distribution Network……………………………………………………………………….....9

Business Growth……………………………………………………………………………....9

Market Segment………………………………………………………………………………10

Product Share…………………………………………………………………………………10

External Assessment………………………………………………………………………….11

EFE Matrix……………………………………………………………………………………12

Internal Assessment…………………………………………………………………………..13

IFE Matrix…………………………………………………………………………………….14

SWOT Matrix…………………………………………………………………………………15

BCG Matrix………………………………………………………………………………..16-17

SPACE Matrix………………………………………………………………………………..18

IE Matrix………………………………………………………………………………… ..20-21

Quantitative Strategic Planning Matrix …………………………………………………….22

Recommendation………………………………………………………………………………

Introduction

• Agriauto Industries Limited (AIL) is a public limited company, incorporated in 1981 and quoted on the stock exchange.
• The company is one of the leading automotive components manufacturers in the private sector in Pakistan.
• Agriauto industries Ltd. is an important part of House of Habib group.

• Technical collaborations with leading international companies have added to the company’s technical versatility;

• Agriauto is the sole manufacturer of “Gabriel” brand shock absorbers and struts in technical collaboration with Gabriel Ride Control products, (USA).
• Agriauto have also our technical collaboration with Kayaba Japan and through this collaboration; we are manufacturing shocks and struts for Toyota Corolla, Daihatsu Cuore, Baleno and other cars.
• The product range covers both original equipment manufacturers (OEM) and after- market.
• The company follows international standards i.e. B.S.S., S.A.E., ASTM, JIS, ISO 9001:2008 and ISO/TS 16949:2009 as the basis of quality control program.
• Agriauto’s production lines are backed by well-equipped quality lab and have persistently sought to consolidate technological and product excellence.
• Quality control is maintained at all stages of manufacturing.

Existing Company Vision

“Become a world class manufacturer and supplier of high entry barrier automotive components & providing competitive returns to all stakeholders.”

Quality Policy

“Excellence in manufacturing of automotive parts through continuous improvement in people, systems and technology to meet at all times the customer’s needs of quality, volume & timeliness.”

Recommended Vision:

“Become a world class manufacturer and supplier of sheet metal and machining components & providing competitive returns to all stake- holders”.

Revision of Vision:

Company has emphasized in old vision to develop high entry barrier automotive components while in actual company is manufacturing sheet metal parts for Dawlance which is manufacturer of home appliances, company is also manufacturing sheet metal parts as dual source for Indus motor, these parts are small in size and are not fulfilling requirement for statement of “high entry barrier”.

Company Values:

Respect:  

Interact respectfully with all people, living creatures and things; it increases their life & contribution.

Sense of Urgency:

Do it now; velocity creates winners; prioritize to be effective; focus on customer’s needs.

I am we:

Complementing and strengthening each other we can do anything: together we win: communicate effectively.

Leap:

Bench mark; think high and pursue it; Monitor your progress frequently.

Innovate:

Pursue knowledge; embrace changes; quest for simple, innovative solutions; conscious concern for improvement

Listen:

Listen with all senses open; be accessible, be receptive; hearing is learning and knowledge

Cost down: Drive cost down for competitiveness; add customer value not cost.

Shun Bureaucracy:

Make things happen; no buck passing; results are important not reasons.

Fairness:

Merit is the only criteria; create win-win situations.

Be Bold: Take timely decisions; delegate authority & empower; exhibit entrepreneurship; own mistakes, praise others.

1Q, S, 5S: Create ‘wah’ work environment, and ‘wow’ service & quality; safety is a pre-requisite to work

Long term Objectives

• Develop parts for 2 wheeler & 4 wheeler segment at OEM & replacement market.
• Upgrade plant facility
• Develop high value tractor parts.
• Gross profit of 15 – 20% in new products.

• Extensive training with Kayaba Japan to develop human resource

PRODUCTS

Shock & Strut Steering Box

Cam Shaft Sleeve

Gasket Instrument Panel

Company Strategies for 2010 -2015

• Explore new business in 2 wheeler segment; TAA with SHOWA Japan for Atlas Honda Ltd.
• Joint venture with SUMMIT Thailand for press parts.
• Modernizing of plant facility.
• Extensive training with Kayaba Japan to develop human resource.
• Initiation of succession planning for development of 2^nd Tier management & retain talented human resource.

MAJOR CUSTOMERS

Indus Motor Company
Pak Suzuki Motor Company
Atlas Honda
Hino Pak Motor Company
Yamaha Motors
Millat Tractors
Adam Motor Company
Nissan
Delta Motorcycle
Karakoram Motor Company
FIAT
Mazda
Dawlance

DISTRIBUTION NETWORK

BUSINESS GROWTH

MARKET SEGMENT

PRODUCT SHARE

External Assessment

Opportunities:

1. Country laws encourage import of vehicles, Agriauto can develop shocks & Strut for imported vehicles such as: Vitz, Platz.
2. Increase in new entries of motor cycle assembler and CNG Rickshaw encourage Agriauto to provide them Shocks assembly.
3. Localization of new Suzuki & Toyota cars Swift and Corolla provide opportunity to Agriauto for development of body parts.

Threats:

1. Increase in price of raw material cause decrease in profit.
2. Decrease in OEM’s production due to higher prices (4 wheeler and two wheeler) effect on sales of dependent industries.
3. Customers’ new policy of developing dual source of critical parts effect on sales.

EFE MATRIX
S/NO.	KEY EXTERNAL FACTORS			WEIGHT		RATING	WEIGHTED SCORE
	Opportunities
1	Country laws encourage import of vehicles, Agriauto can develop shocks & Strut for imported vehicles such as: Vitz, Platz.			0.2		3	0.6
2	Increase in new entries of motor cycle assembler and CNG Rickshaw encourage Agriauto to provide them Shocks assembly.			0.15		2	0.3
3	Localization of new Suzuki & Toyota cars Swift and Corolla provide opportunity to Agriauto for development of body parts.			0.25		4	1
	Threats
1	Increase in price of raw material cause decrease in profit.			0.2		4	0.8
2	Decrease in OEM’s production due to higher prices (4 wheeler) effect on sales of dependent industries.			0.13		3	0.39
3	Customers’ new policy of developing dual source of critical parts effect on sales			0.07		1	0.07
	Total			1			3.16

Total weighted score of 3.16 is above the average of 2.5, so Agriauto industries is doing well, taking advantage of external opportunities and avoiding the threats facing the firm. There is still room for improvement.

Internal Assessment

Strength:

1. Technical collaboration with Kayaba Japan and Gabriel America.
2. Group Company of “House of Habib”.
3. ISO 9000 and TS16949 certified.
4. Having Research & Development facility.
5. Enough capacity to meet customer requirements.
6. Company is equipped with latest technological machineries.
7. Single source in Pakistan for manufacturing of Shocks & Struts for all OEM’s.
8. Good financial position.

Weaknesses:

1. Demand of product depends on OEM’s not directly to the consumers.
2. Slow moving products are still producing which effect on flexibility and cost.
3. High employees turn over due to distance and location of factory which is at Hub Chowki Baluchistan.
4. Strong influence of labor union.

IFE MATRIX
S/NO.	KEY EXTERNAL FACTORS			WEIGHT		RATING	WEIGHTED SCORE
	Strength
1	Technical collaboration with Kayaba Japan and Gabriel America.			0.07		4	0.28
2	Group Company of “House of Habib”.			0.06		3	0.18
3	ISO 9000 and TS16949 certified.			0.07		3	0.21
4	Having Research & Development facility.			0.06		4	0.24
5	Enough capacity to meet customer requirements.			0.11		3	0.33
6	Company is equipped with latest technological machineries.			0.08		4	0.32
7	Single source in Pakistan for manufacturing of Shocks & Struts for all OEM’s.			0.15		4	0.6
8	Good financial position.			0.09		3	0.27
	Weakness
1	Demand of product depends on OEM’s not directly to the consumers.			0.12		2	0.24
2	Slow moving products are still producing which effect on flexibility and cost.			0.04		2	0.08
4	High employees turn over due to distance and location of factory which is at Hub Chowki Baluchistan.			0.05		1	0.05
5	Strong influence of labor union.			0.1		1	0.1
	Total			1			2.9

Total weighted score of 2.9 is above the average of 2.5, so Agriauto industries is doing well but still need to improve the performance to meet the weighted score of 4.0

SWOT matrix suggets following strategies:
Market development
Market penetration
Product development
Forward integration
Retrenchment
BCG MATRIX
Division	Plants	Sales (Million)	Sales (%)		RMSP		IG Rate (%)
1	Shocks & Struts	3292.57	82.35		0.80		12%
2	Press Parts	47.45	1.19		0.20		5%
3	Tractor	233.47	5.84		0.70		-3%
4	2- Wheeler	331.07	8.28		0.70		15%
5	Others ( Door Hinges)	93.84	2.35		0.30		6%
	Total	3998.39	100.0
Industry Sales Growth Rate
	Stars	?
	3
	Cash Cows	Dogs
				Relative Market Share Position
BCG matrix suggested following strategies for each division:
* Backward, forward, horizontal integration, Market penetration, market development & Product development for Division "1 & 4"
* Market penetration, market development and product development for division "2 & 5"
* Product development, Retrenchment for division "3"

SPACE MATRIX
CONSERVATIVE			FP				AGGRESSIVE
Market Share				6			Backward, Forward, Horizontal Integration
Market Development								Market Penetration
Product Development				5				Market Development
Related Diversification								Product Development
							4					Diversification
							3
							2
							1
CP																		IP
-7	-6	-5	-4	-3	-2	-1	0	1		2	3	4		5	6		7
							-1
							-2
							-3
							-4
							-5
							-6				COMPETITIVE
DEFENSIVE					Backward, Forward, Horizontal Integration
Retrenchment				-7				Market Penetration
Diverstiture								Market Development
Liquidation				SP				Product Development
FP									IP				SP			CP
ROI	7	Growth Potential	6	Technological Changes	-4	Market Share	-1
Leverage	5	Profit Potential	5	Inflation rate	-3	Product Quality	-2
Liquidity	4	Financial Stability	5	Demand Variability	-3	Product Life Cycle	-4
Working Capital	5	Extent Levraged	4	Competing Products Price Range	-5	Customer Loyalty	-2
Cash Flow	6	Resource Utilization	5	Capacity Utilization		-4
Inventory TurnOver	5	Ease of entry into mkt	3	Competitive Pressure		-5	Technological Know-How	-3
EPS	5	Productivity, Capacity Utilization	5	Entry Barriers	-4
				Exit Barriers	-4	Control Over Suppliers & Distributors	-5
				Risk Involved in Business	-6
Total Value	37	Total Value	33	Total Value		-34	Total Value	-21
Average	5.3	Average	4.7	Average		-4.3	Average	-3
Calculation
	∑x	₌	IP + CP					∑y	₌		FP + SP
		₌	4.7 + (-3)						₌		5.3 + (-4.3)
		₌	1.7							₌	1
Conclusion
The industry is financially strong and has achieved major competitive advantages in a growing and stable industry

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