Sick industries: The reasons and remedies for it (A case study in Bangladesh)

transcript

Welcome to Our

Presentation

Our Topic

“Sick industries: The reasons and remedies for it’’

(A case study in Bangladesh)

Submitted to:Sakufa Chowdhury Assistant Professor, Department of Business Administration, SUST, Guest Teacher, Leading University

Ehsan Ahmed Chy.1201010230

Syed Ali Hasan1201010248

Mahmudul Karim1201010205

Masum Hussain1201010202

Abdul Motin1201010219

Abu Ahmed Shahib1201010247

Submitted By,

Torch Bearers

• Sick Industrial Companies Act, 1985

• A unit is defined as sick industrial company where:• a company is registered for not less than seven years• It incurred cash losses for the current and preceding

financial year.• Its net worth was eroded.• Even 50% or more of the net worth of the past 5

financial years is eroded because of accumulated losses

What is Industrial Sickness

• Colonial exploitation• Agriculture based economy• Lack of capital• Misuse of natural resources• Depend on foreign aid• Natural disaster• Lack of skilled entrepreneur• Corrupted administration

Causes of Sickness(General Point of View)

1. Management Related: (relating to all general management activities, personnel activities, marketing activities etc.)

• a) Improper strategic management policy

• b) Lack of proper training

• c) Improper manpower planning

• d) Lack of market planning

• e) Absence of well developed organizational culture

Causes of Sickness (Contd...) (In Details)

2) Financial: (relating to money)

• Poor financial management policies• Improper managing of accounts,• Lack of timely decisions form government• High interest rate on loans• Improper financial analysis (in some

cases) for investment

Causes of Sickness (Contd...)

3) Technological: (relating to production)

• Defective project planning• Use of defective forecasting data• Improper capacity planning• Inadequate quality control • Absence of use of scientific methods • Improper process planning

Causes of Sickness (Contd...)

4) Environmental: (relating to economy & technology)

• Change of local and global economic conditions• Lack of coordination between various ministries• Strikes, Hartals and other working day losses • Occurrence of Natural calamities • Attitude of mass media• Change of Technology

Causes of Sickness

1) Reduced working capital, fall in sales / profit 2) High managerial and labor turnover, labor unrest, 3) Rise in complaints from staffs and customers, 4) Unfavorable market development, 5) Rise in finished product inventory, 6) Decline in productivity, 7) Difficulty in paying salaries, bills,

Symptoms of becoming Sick

• 1. All functional areas are normal and efficient.• 2. Generating good cash profit.• 3. Positive value of net working.• 4. Positive value of net worth.• 5. Satisfactory debt equity ratio.

Stages of Sickness (contd...)

Stage I (Normal/Healthy)

• 1. Decline in profit during last year.

• 2. Losses estimated in the current year.

Stage II (Tending Towards Sickness)

• 1. Cash losses incurred in last year are expected in current year also.

• 2. Deterioration anticipated in current year although current ratio was more than 1 during last year.

• 3. Deterioration anticipated in debt equity ratio during current year.

Stage III (Incipient Sickness)

Stages of sickness

• 1. Erosion of net worth by 50% and more.• 2. Units being closed for a total period of 6

months and more during the past year.• 3. Default in payment of loan installment.

Stages of Sickness

Stage IV (Final Stage)

• Political stability• Technical education• Proper use of natural resources• Realistic planning• Use of technology• Govt. investment• Local adviser• Capital formation

Preventive Measures

At Planning Stage At The Operation Stages of Normal Units For Units Tending to Be Sick For Units of Incipient Sick For Sick Units

Corrective Measures

• Term Lending Institutions

• Commercial Banks

• Entrepreneur

• Government

Roles of Concerning Agencies

– Appraisal of Management

– Banning Industries Not Having Scope

– Machinery & Equipment

– Satisfactory Implementation

Role 1Term Lending Institution

• Careful Proper Appraisal

• Timely disbursement

• Feedback from Commercial Banks

• Warning Signals

• Market Intelligence

• Stemming Sickness

Role 2Commercial Bank

• Management Board

• Partners in Enterprise Solvency of Individual

Security of Collateral

Profitability & Viability of Project

Entrepreneurial Capabilities

Partnership

Responsibilities

Awareness Sickness Warning

Role 3The Entrepreneur

• Sudden changes in industrial policy

• Resistance to change

• Power to change

Role 4The Government

Sylhet

12,596

98,07,000

0.64 0.10

Area Population Estate Area Total Industrial UnitActive Unit Sick/Closed

Division Wise Sick Units in Industrial Estates

Sylhet Hobigonj Maulvi Bazar Sunamgonj Total

Area 3,490.40 2,636.58 2,799.39 3,669.58 12,595.95

Population 3,404,000 2,059,000 1,902,000 2,443,000 9,807,000

Density 975.25 780.94 679.43 665.74 778.58

Estate Area 25.76 15.00 14.59 25.52 81

Industrial Plot 255 70 101 116 542

Industrial Unit 150 59 64 21 294

On Production 130 35 29 7 201

UnderConstruction 6 17 10 7 40

Sick or Closed 13 2 7 0 22

Districts Wise Sick Unit in Industrial Estates of Sylhet Division

Rising economy of Bangladesh According to IMO report Total demand Revenue of government International trade

Ship Building Industry (Contd...)

0.03% in 2005 0.57% in 2008 0.80% in 2010 0.90% in 2013

Ship Building Industry (Contd...)

There are 150 small & big shipyards in Bangladesh

International competition (plus point)

Position of Bangladesh in international market

Problems

• Interest rate• Bank guarantee money• Time• Security• Environment• Port facilities• Insurance

Solutions & Possibilities

• Fixed area• Industry policy• Cost & quality• Assurance of minister• Near future

Ship Building Industry