Post on 07-Apr-2018
transcript
8/3/2019 Strategic Management Pel
1/39
Dedications
TO Our Honorable Teachers Parents and Friends who
showered their wisdom and knowledge enabling us to come to
grips with the worldly life and attain our Objectives.
8/3/2019 Strategic Management Pel
2/39
Introduction
PEL was founded in 1956 and has since been serving the Power utilities,
industries, individual customers, housing and commercial projects by providing
reliable, customized and cost effective solutions. Backed by the innovative genius
of Saigol Group, PEL is now technology forerunner and market leader in providing
new products and services to meet ever changing and technology intensive needs
of its customers. Our EPC contracting division delivers custom designed and built
HV and EHV grid stations, electrification of housing projects, industrial parks and
optimum solutions for power utilization to all kinds of industries and commercial
customers. We aim to maintain this competitive edge and at the same time keep
striving to improve it further by continuous R&D, creating new knowledge and
adapting to global developments in technology and product design. Ever increasing
local market share, growing export orders, numerous successful power projects andgreater than ever base of satisfied customers are evidence to these aspirations.
In October 1978, PEL was taken over by SAIGOL GROUP OF COMPANIES,
which is the largest and well-know industrial and commercial group in Pakistan.
The Saigol Group belongs to the Saigol family that is an old business family and
has contributed a lot towards Pakistans industrial and believes in continuousdevelopment and growth. The result is a global business activity monitored
through the various offices worldwide. Meeting Saigols traditions, since its
takeover by the group, PEL is also a Company on the go. The high growth rate
proves the complete success of the professional management and providessufficient confidence to trust in its future development schemes.
Works of PEL are spread at two facilities in Lahore, the historical city and cultural
hub of Pakistan. The two facilities cover an area of 1,033,200 Sq ft and 614,252 Sq
ft respectively. Both are equipped with latest technology, state of the art testing
facilities and environment friendly production process. At the heart of our
operations is our human resource. PEL invests heavily on professional
development, skill improvement and well being of its human resource. Our
employees are our most valuable asset and we keep them very dear.
8/3/2019 Strategic Management Pel
3/39
History and background
Pak Elektron was setup in 1956 as a Public Limited Company with the object of
initially producing transformers, switchgears, and electric motors. AEG experts
and PEL personnel carried out the designing and production of this equipment
jointly. After the conclusion of joint venture agreement with AEG Saigol Group
acquired the PEL COMPANY in October 1978.The company floated its shares to
the general public and was listed on Karachi Stock Exchange (KSE) and Lahore
Stock Exchange (LSE).
In 1980, Appliances Division was established and in 1981 it started the productionof Window Type Air Conditioners with the technical collaboration of General
Corporation of Japan. These air conditioners were well received in the market for
its quality. Subsequently in 1987 the production of Refrigerators and Deep
Freezers was started.
In 1993 the company has started the assembly of Compressors for Refrigerators
and Deep Freezers under technical collaboration with Messrs. NECCHICOMPRESSORI of Italy.It was in early 70s that PEL became known in overseas
markets due to its quality. The company started its export to countries like Saudi
Arabia, Abu Dhabi, Qatar etc. Later on PEL supplied electrical equipments to
various other countries in the Middle East, Far East and Africa with great success.
PEL (Pak Elektron Limited) is the flag holder of the Saigol Group of Companies.
Pak Elektron Limited (PEL) is the pioneer manufacturer of electrical goods inPakistan. It was established in 1956 in technical collaboration with M/s AEG of
Germany. In October 1978, the Saigol Group of Companies bought the company.
Since its inception, the company has always been contributing towards the
8/3/2019 Strategic Management Pel
4/39
advancement and development of the engineering sector in Pakistan by introducinga range of quality home appliances.
In the year 1980 the company expanded into consumer products with the
introduction of Window Type Air Conditioners and today also manufactures Split
Air Conditioners, Refrigerators, Microwave ovens, Deep Freezers and
Compressors etc. PEL products right from the beginning have been of a high
standard and the name PEL is synonymous with QUALITY all over Pakistan.
Since its inception, the company has been acting as an institution working for the
advancement and development of engineering know how in Pakistan. The
company has produced hundreds of engineers, skilled workers and technicians
through its apprenticeship schemes and training programs.
In October 1978, the company was taken over by the SAIGOL GROUP, which is
one of the leading industrial groups in PAKISTAN, having diversified business
activities in the fields of: Textile, Engineering, Banking & Finance, Fuel &
Energy, Trading, Automobiles.
8/3/2019 Strategic Management Pel
5/39
Vision Statement
To excel in providing engineering goods and services through continuousimprovement.
Mission Statements
To provide quality products & services to the complete satisfaction of ourcustomers and maximize returns for all stakeholders through optimal use of
resources
To focus on personal development of our employees to meet futurechallenges
To promote good governance, corporate values and a safe workingenvironment with a strong sense of social responsibility.
Analysis of mission statement
Core competency Technology Philosophy
These are the three things which are not mansion in the mission
statement of PEL.
8/3/2019 Strategic Management Pel
6/39
Slogan
Change your Life
Home Appliances Division:
Home Appliance Division includes the products like WRAC (Window Room Air
Conditioner), Split Air Conditioner, Refrigerator, Fridge, and Microwave Oven.
Power Division:
Power Division includes the products like Transformers, Switchgear and Energy
Meters.
The present range of power products includes Transformers up to 33KV 5MVA
capacity, Switchgears up to 33KV, Cage Induction Motors up to 40HP, Single
Phase Energy Motors, Small Generators, Shunt Capacitor, Banks and Recloser etc.
PEL-LG Strategic
8/3/2019 Strategic Management Pel
7/39
Partnership
Pak Elektron Limited, held a press conference (April 21, 2009) to announce the
strategic alliance between Pak Elektron Limited & LG Electronics. An agreement
in this regards was signed at the ceremony by Mr. Murad Saigol, Director
Operations, Pak Elektron Limited & Mr. E. D. Choi, General Manager, LG
electronics, Pakistan Liaison Office. Mr. Saigol announced this to be the biggest
partnership in the history of home appliances and air conditioners in Pakistan and
this strategic alliance will expand in the times to come. PEL has been appointed the
official distributor for LG Air Conditioners, Refrigerators, Microwave ovens,
washing machines and vacuum cleaners from June 2009. The addition of LG forPak Elektron will now mean Pak Elektron will have two leading brands, PEL and
LG, in both the categories of home appliances and Air conditioners.
8/3/2019 Strategic Management Pel
8/39
This synergy of brands will bring technologically better products to the customer at
competitive prices. PEL will be offering innovative products made from cutting
edge technology of LG. LG Electronics has 30 R&D centers globally and spends
hundreds of millions of dollars on R&D making it one of the leading brands in the
world. This will be possible as LG has a wealth of global expertise in terms of
designing the right product for the consumer. LG will also enhance the production
capabilities of Pak Elektron through technology transfer which will translate into
more smart and sophisticated designs, with competitive cost of production.
As the facility is upgraded it will be fully capable for export of LG products thus
improving the foreign exchange earnings for Pakistan. Pak Elektron will benefit
from economies of scale as a result maximizing return to all stakeholders
8/3/2019 Strategic Management Pel
9/39
PESTLE ANALYSIS
Political environment
Pakistan is facing the situation of great political instability and uncertainty since
last couple of year. according to the economist com survey Pakistan is at the 11th
number of top most vulnerable countries of the world. due to this problem business
activates in Pakistan are severely affected. The foreign direct investment also
decreased dramatically due to current insecurity.
The government decided to increase the minimum wage rate of workers from
4500Rs to 6000Rs which is increases the cost of production and inflation
There are few incentive to the manufacture of Pakistan by the government as
compare to up coming giants of china. the cost of manufacturing is high due to
electricity rate and overhead. So most of the time manufacture hesitate to do
manufacturing in Pakistan and prefer to import finished goods are only assemble
good in Pakistan
Economic environment
Due to global environment economic crises, Pakistan is also facing a lot of
problem. Although Pakistan economy is not directly hit by the crises yet the
economic situation in server in Pakistan
To resolve the power sector issue, removing subsidies and concurrent transfer of
international oil price changes also likely to risk a further slow down in economic
activities at least in the near future.
In Pakistan there is a strong black economy due to the circulation of black money
illegal business like smuggling
Economist are expected better condition for Pakistan economy due to the loan ofIMF.
The consumer in Pakistan is spending most of their income of food and basic needs
of life.
8/3/2019 Strategic Management Pel
10/39
Social Environment
Now a days people are becoming more price conscious due to inflation and crises
of Pakistan. Their primary focus on food and daily use good and thus people have
lessened their interest in electronic good.
Now consumer prefers the split air conditioner over window air conditioner
because split ACs are considered as energy severs. That is why window ACs are
almost obsolete because of high consumption and split ACs are becoming more
popular because of low electricity.
In countries like Pakistan the usage of air conditioner is great because of extended
summer season of nearly 8 month. In Pakistan air conditioner are used for middleand upper class.
The company are becoming more socially responsible these days as they have
introduce CFC free refrigerant, anti bacterial and dust filter.
These people in Pakistan have started considering spilt air conditioner as a status
symbol and feel disgraced if split unit is installed in every room in their house.
That is why people purchase home appliances on installment from the dealers.
Technological environment
With the introduction of spilt air conditioner, it made the air conditioner more
affordable and easy to install and maintain.
The efficiency of air conditioner depends upon its outer unit. The bigger is the
outer unit the more efficient will its inner unit. so companies are more big unit to
get more efficient.
In split air conditioner the rotator compressor are used which are soundless and donot heat up in extreme situation.
Companies are introducing refrigerator with cool bank which remain working for 5
hours even after switch off.
8/3/2019 Strategic Management Pel
11/39
The multinational national companies are using information technology to
coordinate and communicate with in companies as well as extreme parties. The
electronic management system are used to reduce the cost of handling the
inventory order.
Legal
Legal factors include description law employment law, and earth and safety.
These factors can affect how a company operates, its costs, and the demand for its
products
Environmental analysis
Environmental factors include ecological and environmental aspects such as
weather, climate, , which may especially affect industries such as tourism,
farming, and insurance. Furthermore, growing awareness of the potential
impacts of climate change is affecting how companies operate and the products
they offer, both creating new markets and diminishing or destroying existingones.
Five force model
8/3/2019 Strategic Management Pel
12/39
Bargaining power of supplier
The bargaining power of supplier is low because of availability of a number of
chines brand in the market.
Bargaining power of buyer
The bargaining power of the buyer is high because,
1 They have choice of different in the market
2 they have choice of models and features
3 they have choice of product in different prices
Threats of substitute
Threats of substitutes high because
1the gas generators and ups are the substitute of Pels diesel and petrol generator
2 the major substitute of air conditioners are
Room air cooler
The room air coolers are available at are low price starting from 6000
Electric fans are also very cost effective and its major company GFC fans ,Younas
fans ,Royal fans .
8/3/2019 Strategic Management Pel
13/39
Threats of new Entrants
PEL has low level of threats of new entrants in the industry as the electronics
industry has different barrier to entry
1 requires huge capital to get entry in the industry.
2 High manufacturing costs.
3 high advertisement cost.
4 high cost of raw material.
Rivalry among competitor
There is intense competition with in the industry to capture the market in term of
share of market. The companies are introducing product with new and advance
technology to attract and capture the customers. They are using advertisement and
technology as a weapon to increase market share in related market.
8/3/2019 Strategic Management Pel
14/39
Value Chain Analysis
Inbound logistics
When the company purchase the raw material.it used ship and transportation
because it purchase raw material from china and germany.
Operation
PEL production operation done in the domestic level wheather in abroad thats
why its also opportunity for company.
8/3/2019 Strategic Management Pel
15/39
Outbound Logistics
When the company have prepare the products like ACs,air coolers etc and to take
them into market through the transportation.
Marketing
I. ProductCompany produces different types of products which sells in the market
II. PriceCompany used different pricing strategies to increase their sale
III. PlacePEL targets all the markets to sell their products in all over the countries.
IV. PromotionCompany promote their products through the seminars, sponsorship, couponrates and through the print media and electronic media.
Services
Company provide different types of services through having all over the countries
repairing workshops and through the replacement of products and also give their
customers guarantee and warrantee.
Procurement
Procurement department have the rght to purchase all the machinery or rew
materual for the production department.
Technology
Technology is more important in these days for every kind of production and in
all the departments.PEL also used advance technology for production for reduce
the cost and time.
8/3/2019 Strategic Management Pel
16/39
Human resource management
HR department suppose to hire well experienced and qualified staff and labor for
maximum productivity. PEL also have qualified human resources.
Company infrastructure
Company has a large infrastructure which is as follows
Organizational Structure
8/3/2019 Strategic Management Pel
17/39
The objectives and mission for which the company is established are
as following:
To carry on the business or businesses of manufacturing, selling, installing,
maintaining designing and dealing in all kinds of electrical equipment.
To carry on any business whether manufacturing or otherwise which maybe
found convenient to undertake in connection with or in addition to any of these
objectives mentioned above?
To do all such things that is incidental for the attainment of the above
objectives or any of them.
To produce high quality and standard products.
To produce equipment to be used in numerous projects of national importance.
To secure a high share / quota of WAPDAs demand for power products.
To produce skilled workers and technicians through its apprenticeship schemes
and training programs for engineers and technician
Non financial goal
To add a new product to its range in every third year for increasing the sales
volume
To set on image as the best quality of local home appliances
To set an image the best quality of local power division product
8/3/2019 Strategic Management Pel
18/39
Financial goal
To obtain a real (inflation and adjusted) growth in earning per share 10%per year
over time.
To increase the market share of split unit to at least 20%-25%by the end of 2009.
Competitor Analysis
DIRECT COMPETITORS
The direct competitors of PEL are Dawlance, Waves, LG, and Haier etc. The
Dawlance is market leader in the refrigerator and PEL is still on second number.
But in window room air conditioner (WRAC) the PEL is market leader
REFRIGERATORS.
Total market sale of refrigerator in 2009 was 756300 units. Last year sale was
656900 units. These figures show 30% market growth. But the average growth
was 13% to 17%. And the PEL sale growth is 70%, which is a great achievement.
Dawlance is a market leader in refrigerator with 46% share.
PEL has 32% market share. Waves has 11% market share. 11% shares are others.
WINDOW AC.
PEL is a market leader with a market share of about 60% in local manufacturing
industry. And overall has 35% market shares for this product.
LG has about 32% market share and stands on number two. And rest of the manufacturers have 23% marker share.
8/3/2019 Strategic Management Pel
19/39
Indirect Competitors:
The indirect competitors for PEL in this industry are Samsung, Orient,
Mitsubishi, Sabro, Nobel and others Chinese brands available in the market.
The PEL has no big threat from all these companies. But the Sabro pioneer for
introducing the split air conditioner in Pakistan. Now days the sabro has lost
its market share to other companies for the business of Split AC.
SWOT Analysis of PEL
The rapid changes in governments will become threats for the companies because
every government adopts its own policies for the industries. So it increases the
uncertainty for the investors who want to invest heavy amount in their new
projects. Thats become the major threat for the companies and decreases the
profitability. Due to fear of politically instability companies will also SWOT
Analysis is a strategic planning method used to evaluate the Weaknesses,
Opportunities, and Threats involved in a project or in a business venture. It
involves specifying the objective of the business venture or project and identifying
the internal and external factors that are favorable and unfavorable to achieving
that objective.
8/3/2019 Strategic Management Pel
20/39
Strengths
PEL has the following strengths and is in more competitive position in these areas
than its competitors. Following are the main strong points of PEL:
Strong brand image Strong dealer network Good product quality and service Number 2 in refrigerators in Pakistan Firm grip in home appliances Strong Management Distribution of Authority Free customer service
Strong Brand Image
PEL has created the strong brand image in the mind of the customers through
higher quality and low price. The customers of the PEL always prefer to buy the
PEL home appliances like WRAC split AC and refrigerators whenever they
wanted to buy.
Strong Dealer Network
It is also the plus point for the PEL that it has also developed the strong dealernetwork in the market. The dealers are always trying to sell the PEL appliance to
the customers because they know there are high margin in the PEL products.
8/3/2019 Strategic Management Pel
21/39
Strong Quality, Sale and Service
PEL is also in a strong position that it provides the superior quality to your
customers. It makes sense in the mind of the customers that PEL products are
better in quality than the other companies products. PEL also provides the after
sale service to their customers which delight the customers satisfaction.
Number 2 in Refrigerators In Pakistan
After the Dawlance refrigerators PEL has a second position in refrigerators market.
PEL always continuously strives to pursue the strategies adopted by the
competitors.
Firm Grip in Home Appliance
So PEL is one of the companies, which is having a strong grip in the home
appliance i.e. WRAC, Refrigerators, micro wave Oven etc that is a strong point for
the company.
Strong Management
It is another plus point that PEL has a strong management. Its employees are more
competent and fully skill and knowledge. They always co-operate the top
management in achieving the goals that are assigned to them.
8/3/2019 Strategic Management Pel
22/39
Distribution of Authority
Top management of PEL delegates the power to the subordinates for achieving the
marketing objectives in a specified time period. So every manager has an authority
that use in achieving the Goals.
Free Customer Service
PEL provides free customer service for one year to its customers. So the customers
always buy the PEL products due to its free service and it becomes loyal customer
for the PEL. PEL always provides help to their customers for repairing the WRAC,
Refrigerators and other items. PEL always make efforts to satisfy the customers.
Public Limited Company
Although PEL is owned by the SAIGOL GROUP but its shares can be purchased
and sold in stock exchange market. So every one who is interested in purchasing
the shares of PEL he can purchase. It is also called public limited company.
Weaknesses
Like other companies PEL has some weaknesses in operating the business. If PEL
overcome on these weaknesses then it can become a market leader in the home
appliance. PEL loose some competitive edge in the following points:
Financial Problems Lack of advertisement System variations
8/3/2019 Strategic Management Pel
23/39
Lack of Product range Less Utilization of capacity
Financial Problems
Sometimes PEL faces the financial problems because its stocks are so much piled
up in the stores that create the problem of cash flow because when the stocks are
not sold and the production is in process for 24 hours a day than the company faces
such problems.
Lack of Advertisement
It is a second major weakness of PEL that it never makes advertising on TV. That
creates hurdle in selling the products and customers cannot know the changes,
which are made in products by the company time to time.
System Variations
It is also the main weakness of PEL that there are rapidly a change in polices of
selling the products. Thats creates problems for the selling team how to sell the
products to the dealers because the top management requires the urgent amount of
money.
8/3/2019 Strategic Management Pel
24/39
Lack of Product Range
PEL has introduced more products of consumer items but there are more needs to
develop new consumer items like PEL washing Machines, Vacuum cleaner and
other items.
Less Utilization of Capacity
Due to lack of finance a company cannot utilize all its resources on its full
capacity. It increases the cost of products per unit that decreases the profit margin
of each consumer item
Opportunities
For the PEL there are more opportunities for expansion the business. If PEL realize
that opportunities then it will be more fruitful and profitable for the company. Even
if company does not take advantage of these opportunities then it will loose its
competitive position and high profit. Its `competitors will give PEL tough time to
pursuing the opportunities that are adopted by them. Following are the
opportunities for the PEL.
Exploration of market in Pakistan Increase in product range Export opportunity
8/3/2019 Strategic Management Pel
25/39
Exploration of Market in Pakistan
PEL has the opportunity to explore the market in all over the Pakistan. Even
though PEL introduce its products in all cities of Pakistan but there are so many
places that have the capacity to absorb the PELs products. These places are tribal
areas in NWFP and northern areas of Punjab and NWFP, central area of SIND. If
company introduces their products in these areas then it can get a large amount of
profit and increase its market shares.
Increase in Product Range
It is the main opportunity for the PEL that it can increase its product range that will
be a more profitable for the company. There are more needs to develop new
consumer items like PEL washing Machines, Vacuum cleaner and other items. Due
to lack of product Range, Company cannot earn more profit because consumers
have high demand of these products. If PEL does not take this opportunity then it
will loose high margin of profit and market share. It will reduce the fixed cost and
increase the efficiency of the employees.
Export Opportunity
PEL Company has also the opportunity to export their products in other
international countries like UAE, SAUDI ARABIA, and other Arabic and African
countries. It will not only reduce the dependence on one market but also increase
the market shares and profits. It will also help the company to spread the fixed cost
on all of its production that will reduce the total cost and company will enjoy the
high profit.
8/3/2019 Strategic Management Pel
26/39
Threats
PEL Company in such a competitive era has many threats as well. These threats
are for the present situations and future. Company should make its policies and
strategies according to these threats. So following are the main threats for the PEL:
PEL facing tough competition. Mostly companies Give High Credit in market and get current market High Credit market is big fever for the company Slow growth rate in Pakistan Instability of government Tax department
PEL Facing Tough Competition
There is very strong competition for the home appliance in the market. So every
company tries to come in the number 1 position for achieving the maximum shares
in the market. Every company adopts different strategies for selling of the
products.
Mostly Companies Give High Credit in Market and Get Current
Market
As there is stiff competition in the home appliance market, it will cause the price
war. So every company reduces the prices of its products to increase the sales.
8/3/2019 Strategic Management Pel
27/39
Slow Growth Rate in Pakistan
There is also slow growth rate of home appliance in Pakistan that will increase the
stocks of the company. It becomes the burden for the company that how to sell
these stocks. Its main reason is that purchasing power of the buyer is very low and
it has no income to buy the expensive the home appliance. It is also becoming a
main threat for all the companies.
Instability of Government (political conditions)
Due to the unstable government people low invest in the industry.
Tax Department
Tax department is another major threat for the companies that will restrain the
business expansion. There is more complicated tax procedure for the companies,
which are interested to increase the investment in their businesses.
Corporate governance
corporate governance is the set of processes, customs, policies, laws, and
institutions affecting the way a corporation (or company) is directed, administered
or controlled. Corporate governance also includes the relationships among themany stakeholders involved and the goals for which the corporation is governed.
The principal stakeholders are the shareholders, the board of directors, employees,customers, creditors, suppliers, and the community at large.
Corporate governance is a multi-faceted subject.[1]
An important theme of
corporate governance is to ensure the accountability of certain individuals in an
http://en.wikipedia.org/wiki/Business_processhttp://en.wikipedia.org/wiki/Custom_%28law%29http://en.wikipedia.org/wiki/Policieshttp://en.wikipedia.org/wiki/Lawshttp://en.wikipedia.org/wiki/Institutionshttp://en.wikipedia.org/wiki/Corporationhttp://en.wikipedia.org/wiki/Companyhttp://en.wikipedia.org/wiki/Governancehttp://en.wikipedia.org/wiki/Stakeholder_%28corporate%29http://en.wikipedia.org/wiki/Shareholderhttp://en.wikipedia.org/wiki/Board_of_directorshttp://en.wikipedia.org/wiki/Employeeshttp://en.wikipedia.org/wiki/Creditorhttp://en.wikipedia.org/wiki/Corporate_governance#cite_note-0http://en.wikipedia.org/wiki/Corporate_governance#cite_note-0http://en.wikipedia.org/wiki/Corporate_governance#cite_note-0http://en.wikipedia.org/wiki/Accountabilityhttp://en.wikipedia.org/wiki/Accountabilityhttp://en.wikipedia.org/wiki/Corporate_governance#cite_note-0http://en.wikipedia.org/wiki/Creditorhttp://en.wikipedia.org/wiki/Employeeshttp://en.wikipedia.org/wiki/Board_of_directorshttp://en.wikipedia.org/wiki/Shareholderhttp://en.wikipedia.org/wiki/Stakeholder_%28corporate%29http://en.wikipedia.org/wiki/Governancehttp://en.wikipedia.org/wiki/Companyhttp://en.wikipedia.org/wiki/Corporationhttp://en.wikipedia.org/wiki/Institutionshttp://en.wikipedia.org/wiki/Lawshttp://en.wikipedia.org/wiki/Policieshttp://en.wikipedia.org/wiki/Custom_%28law%29http://en.wikipedia.org/wiki/Business_process8/3/2019 Strategic Management Pel
28/39
organization through mechanisms that try to reduce or eliminate the principal-
agent problem. A related but separate thread of discussions focuses on the impact
of a corporate governance system in economic efficiency, with a strong emphasis
on shareholders' welfare. There are yet other aspects to the corporate governance
subject, such as the stakeholder view and the corporate governance models aroundthe world (see section 9 below).
There has been renewed interest in the corporate governance practices of modern
corporations since 2001, particularly due to the high-profile collapses of a number
of large U.S. firms such as Enron Corporation and MCI Inc. (formerly
WorldCom). In 2002, the U.S. federal government passed the Sarbanes-Oxley Act,intending to restore public confide
We talk a good talk when it comes to corporate governance. We research and draw
conclusions on the principles of governance, but how do we, as internal auditors,relate to those principles? And what is our role in governance especially in
regard to the unprecedented financial crisis that not only has crippled the U.S.
economy, but has the potential of devastating the global economy?
Before we can analyze these questions, we must first step back and define what
corporate governance. The Insitute of Internal Auditors (IIA) defines governance
as the combination of processes and structures implemented by the board in orderto inform, direct, manage, and monitor the activities of the organization toward the
achievement of its objectives. Corporate governance then implies relationships
among an organizations management, the board, the stakeholders, and other
bodies that have indirect involvement with the company. It also provides a
generalized structure from which the organizations objectives emerge. The
publication, Internal Auditing: Assurance & Consulting, identifies the key
components of governance oversight as the board of directors, stakeholders, risk
management (senior management and risk owners) and assurance (internal and
external auditors). Regulatory agencies also serve as an indirect/influencing
stakeholder. Effective corporate governance program depends upon a clear
understanding of the respective roles of each of these components and their
relationships with others in the corporate structure.
http://en.wikipedia.org/wiki/Principal-agent_problemhttp://en.wikipedia.org/wiki/Principal-agent_problemhttp://en.wikipedia.org/wiki/Economic_efficiencyhttp://en.wikipedia.org/wiki/Stakeholder_viewhttp://en.wikipedia.org/wiki/Enron_Corporationhttp://en.wikipedia.org/wiki/MCI_Inc.http://en.wikipedia.org/wiki/U.S._federal_governmenthttp://en.wikipedia.org/wiki/Sarbanes-Oxley_Acthttp://en.wikipedia.org/wiki/Sarbanes-Oxley_Acthttp://en.wikipedia.org/wiki/U.S._federal_governmenthttp://en.wikipedia.org/wiki/MCI_Inc.http://en.wikipedia.org/wiki/Enron_Corporationhttp://en.wikipedia.org/wiki/Stakeholder_viewhttp://en.wikipedia.org/wiki/Economic_efficiencyhttp://en.wikipedia.org/wiki/Principal-agent_problemhttp://en.wikipedia.org/wiki/Principal-agent_problem8/3/2019 Strategic Management Pel
29/39
Opportunities weights rates Weightedaverage score
Exploration of market 0.25 3 0.75
Increase product range 0.15 2 0.3
Export opportunity 0.17 2 0.36
Threats
Tough competition 0.12 4 0.48
Slow growth rate 0.13 2 0.26Instable government 0.08 2 0.16
High tax rate 0.10 3 0.3
Total 1 2.61
8/3/2019 Strategic Management Pel
30/39
SPACE MATRIX
CRITICAL
SUCCESS
FACTOR
Weights Rates Weighted
average
score
Rate Weighted
average
score
Rate Weighted
average
score
Strong brand
name
0.25 4 1 3 0.75 3 0.75
Strong dealers
network
0.2 2 0.4 2 0.4 4 0.8
Product quality 0.12 3 0.36 3 0.36 2 0.24
Customer
services
0.14 4 0.56 3 0.42 3 0.42
Strong
management
0.09 2 0.18 3 0.27 2 0.18
Strong home
appliances
0.2 4 0.8 2 0.4 3 0.6
total 1 3.3 2.6 2.99
description PEL HAIER DAWLANCE
8/3/2019 Strategic Management Pel
31/39
Internal factor evaluation
strength weight rate Average weight
score
image Strongbrand 0.15 4 0.6
Strong dealer
network
0.12 3 0.36
Good product
quality
0.14 4 0.56
Firm grip home
appliances
0.10 4 0.4
Strong
management
0.11 3 0.33
Distribution ofauthority
0.07 3 0.21
Free customer
services
0.09 3 0.27
weakness
Financial problem 0.03 1 0.03
Lock of
advertisement
0.09 1 0.09
System variation0.07 2 0.14
Lock of product
range
0.02 1 0.02
Less utilization of
capacity
0.01 1 0.01
Total 1 3.02
8/3/2019 Strategic Management Pel
32/39
BCG MATRIX (BOSTAN CONSULTING MATRIX)
BCG stands for Boston consulting group. It is a portfolio planning method
that evaluates the companys strategic business unit .Using this model an
organization classifies each of its separate business units (SBU) according to two
factors:
Market share relative to competition and growth rate of the industry in
which SBU operates
When these factors are divided into high and low categories, a 2 x 2 grid is
created as displayed in following figure:
8/3/2019 Strategic Management Pel
33/39
STAR:
Star is a business unit that has large market share in fast growing industry. Such
unit requires more investment to generate more cash. If due to more investment it
will become successful and become cash cow and it will reach at maturity stage.
For star product the strategy is called harvest
Refrigerator of PEL is the product having high market share and high annual growthrate.
Cash Cow:
It is the business unit sometimes known as problem child. It has a large market
share and low annual growth. Each cash cow requires little investment and it
generates more cash that can be used for investment purpose in other business
units. For cash cow the strategy is called HOLD, you must preserve market
Split air conditioners is the product of PEL having high market share and low annualgrowth rate.
Question Mark:
It is the business unit that has a low market share and high annual growth. These
business unit requires resources to grow market share but if they succeeded that
will become STAR. For question mark the strategy is called BUILD, you try to
make up the market share.
Washing machine and microwave oven are the products of PEL having low marketshare but high annual growth
8/3/2019 Strategic Management Pel
34/39
Question MarkStar
.
Dog:
Dog is the business unit that has small market share as well as low annual market
growth rate. A company normally would be unwise to invest substantial funds in
SBUs in this category. Marketing strategies for dogs are intended to maximize any
potential profits by minimizing expenditures or to promote a differential advantage
to build market shareAnd the company can diverts or liquidate the dog product
Deep freezer is the product of PEL having low market share plus low annual growthshare.
Cash CowDog
Deep freezer of PEL haslow market share in low
market growth rate. So it
regarded as a dog. Socompany should drop this
product.
8/3/2019 Strategic Management Pel
35/39
Space matrix
Financial stability
Return on investment +4
High working capital +5
Profitability +4/3
. 4.25
Industry stability
Growth rate +5
Increase in demand +5/2
. 5
Competitor advantage
Quality product -4
Market share 30% -3/2
. -3.5
Environment stability
Unemployment -2
Advance technology -5/2
. -3.5
IS+CA
5+(-3.5)=1.5
FS+CS
4.25+(-3.5)=0.75
8/3/2019 Strategic Management Pel
36/39
Internal external matrix
Y-AXIS
4
EFE 3
2
1 4 3 2 1 X-AXIS
IFE
IFE=3.6
EFE=3.2
The strategyfor PEL to growth and build
If lie in 1,2,4,QUARDANTThen the company will use GROWTH AND BUILD Strategy
If lie in 3,5,7,QUARDANTThen the company will use HOLD AND MAINTAINED Strategy
If lie in 6,8,9,QUARDANTThen the company will use HARVEST AND DIVEST Strategy
1 2 3
4 5 6
7 8 9
8/3/2019 Strategic Management Pel
37/39
QUANTITATIVE STRATEGIC POSITION MATRIX
Marketing Development Marketing penetration
1=Not attractive
2= Some attractive
3= Attractive
4=Very attractive
strengths weights Attractivescore
Total
attractive
score
Attractive
score
Total
attractive
score
Product quality 0.15 4 0.6 2 0.3
Strong brand
name
0.13 3 0.39 2 0.26
Strong brand
image
0.19 2 0.38 3 0.57
weaknessesFinancial problem 0.06 2 0.12 3 0.18
Lack ofadvertisement
0.04 1 0.04 1 0.04
Less utilize ofcapacity
0.05 2 0.10 2 0.1
opportunitiesExplore market 0.18 3 0.54 3 0.54
Increase productrange
0.15 4 0.6 3 0.45
threatsTough
competition
0.02 2 0.04 1 0.02
Slow growth 0.03 2 0.06 2 0.06
1 2.87 2.52
8/3/2019 Strategic Management Pel
38/39
Strategy evaluation(frame work)
Stage 1
Stage 2
Stage 3
PEL in the internal and external analysis is strong.There is no change in previous and revised EFE and IFE
There is no change in the performance of the organization
Strategy of the PEL is successful, sale is increasing so there is no change in strategy.
If there is significance difference when we go for Take corrective action, if there is
no change then we have to measure organization performance
If there is no change there we will continue the same strategy
Revised IFE Revised EFE
Significance difference
Measure organization performance
Significance difference
Continue
Take
corrective
action
8/3/2019 Strategic Management Pel
39/39
References: