WHERE DO WE SEE PAK SUZUKI INTHE FUTURE Presented By: Mohammed Emad Naveed Bajwa Mohsin Raza Umair Yousuf
GLOBAL CURRENT AFFAIRS The world’s economy is said to be still recovering from the shock it received in 2007-2008. According to the International Monetary Fund (IMF) the percentage growth in world GDP is improving since it reached to -0.5% in 2008- 2009. USA no longer runs the whole economy of the world instead developing and emerging nations have taken its place. Developing countries matured by 7.3 percent in 2010 and then acted steadily at 6.5 percent in 2011. High unemployment, macro level economic challenges and high inflation throughout the world have been hampering the smooth progress towards the road to sustainability.
ACCORDING TO IMF12 10.3 10.410 9.6 9.5 9.2 8.2 7.8 8 6.8 6.5 6.1 6.2 6 5 4.6 3.9 Euro (%) 4 3.5 2.8 2.8 2.9 USA (%) 2.1 Japan (%) 1.8 1.8 2 1.4 China (%) Indonesia (%) 0 India (%) 2008-09 2009-10 2010-11 2011-12-2 -2.6-4-6 -6.3-8
DOMESTIC CURRENT AFFAIRS Pakistan was badly hit first by the financial crisis which engulfed the whole world in the year 2008. Pakistan was yet to fully recover from the earthquake in 2005 which hit the northern areas, another catastrophe hit in the form of severe floods in Sind which damaged the already crippling economy of our country. Constant energy shortages have also caused a problem to major industries which do not allow the machines to run efficiently at full capacity. The GDP growth in percentage shows that it fell from 3.8% in 2009- 10 to 2.4% in 2010-11. The GDP growth rate for the coming year is expected to increase to about 4.2% .
ACCORDING TO IMF12 10.410 9.1 8.2 7.8 8 6.8 6.9 6.6 6.5 6.3 India 6 5.8 Bangladesh 6 Sri Lanka Pakistan 4.2 3.8 3.8 4 2.4 1.7 2 0 2008-09 2009-10 2010-11 2011-12
PAKISTAN’S AUTOMOBILE INDUSTRY The automobile industry was the fastest growing large-scale manufacturing industry in 2009-10 as it grew by approximately 32 percent and also contributed US$ 3.6 billion to the GDP of Pakistan. The sector is currently employing around 192,000 people. 221,174 vehicles were produced in Pakistan in the year 2011, an increase of 8.7%, while the sales of new vehicle were 215,732 units. There are only three major passenger car assemblers in the market namely: Pak Suzuki Indus Motors and Honda Atlas.
High end cars or 1,300cc automobiles dominated the Pakistani market yet again as Toyota Corolla managed to be the most famous car in Pakistan. Pak-Suzuki has an almost complete monopoly in the small car sub-segment. Pak Suzuki, is the biggest local car assembler in Pakistan and it sold 79,993 units in 2011 capturing a market share of 53%. A few reasons that have adversely affected Pakistan’s automobile industry are: Unstable economic and political situation. Higher interest rates for leasing and financing. Significant depreciation of Pak Rupee against Japanese Yen and US Dollar. High import tariff and increase in the prices of raw material.
ACCORDING TO PAMA 45000 41111 40000 35000 30000 Toyota Corolla Suzuki Mehran 25000 24119 Suzuki Cultus Suzuki Bolan 20000 Suzuki Alto Suzuki Liana 15000 13311 Honda City 11428 11932 Honda Civic 10000 9121 Hyundai Santro 6365 6007 Daihatsu Coure 5000 470 0 2010-11
PAK SUZUKI: AN OVERVIEW Pak Suzuki Motor Company Limited (PSMCL) was formed in August 1983 after a joint venture between Pakistan Automobile Corporation Limited and Suzuki Motor Company, Japan. The company’s existing plant is located at Bin Qasim and was inaugurated in 1989 by the then Prime Minister of Pakistan Benazir Bhutto. This plant has a total area of 259,000m2 and the cost for building it accounted up to Rs. 11.096 billion. This plant has a production capacity of 150,000 units/ annum and works in double shifts.
MILESTONES ACHIEVED 1982:Suzuki FX was launched 1988:Pak Suzuki started manufacturing Suzuki Khyber 1992:Suzuki Margalla was launched 1997:Suzuki Baleno was introduced a replacement for Pak Suzuki 2000: Suzuki Cultus produced as a replacement of Suzuki Khyber 2001: Mehran was re-launched. Mehran, Bolan & Ravi were introduced in CNG. 2006: Suzuki Liana was introduced 2010: Pak Suzuki started the production of Suzuki Swift
VISION & MISSION Vision To be Excellent All Around. Mission To provide automobile of international quality at competitive price. To improve skills of valued employees by imparting training and inculcating in them a sense of participation. To achieve maximum indigenization and promote Pakistan’s automobile vending industry. To make valuable contribution to social development of Pakistan through development of industry in general and automobile industry in particular.
DEMOGRAPHIC PROFILE & TARGET MARKETOF PAK SUZUKI Demographics Target Market Age: 18 years and above Gender: Male and Female Family Size: 2-5 people Social Status: Upper Middle Class, Middle Class and Lower Middle Class
LIFESTYLE OF PAK SUZUKI OWNERS Activities: Students, Business purposes, Early Professional career, Household purposes Interests: Personal Use and Luxurious lifestyle
PORTER’S MODEL OF COMPARISON Threat Of Substitute UnfavorableSuppliers of Raw Material, and Buyers Bargaining Power Components Threat Of Rivalry Moderate Moderate Favorable Threat Of New Entrants Favorable
BCG MATRIX High Low Prioritize Divest High • BOLAN •SWIFT MARKET GROWTH Invest Liquidate •MEHRAN Low •APV •CULTUS •LIANA •ALTO MARKET SHARE
SWOT ANALYSISS W TRENGTHS EAKNESSES • Less focus on the looks and • Pioneer in Pakistan automobile design of cars industry • Tough competition from • Largest dealership network cheaper imported cars. • Low price vehicles • None of the local Suzuki cars • Highest market share offer airbags. • A household name • Mehran, Cultus & Bolan are • Availability of spare parts globally obsolete cars which Internal • Reliable after-sales service are no longer produced or • Good resale value sold in any other country. factors • Innovative & deep product line • Not many automatic • Well managed & competitive staff transmission vehicles in the • Most number of company fitted market.O T CNG cars. PPORTUNITIES HREATS • Tough competitors like Toyota & Honda. • Increased demand for cars. • Smuggling of auto parts. • Large market size to operate • High inflation rate. in. • Imposition of heavy taxes. • As the demand for CNG • Increase in fuel prices. vehicles is on the rise in • Floods in Pakistan & External Pakistan, their small size earthquake in Japan. factors CNG cylinders save space. • Appreciation of Japanese • The deteriorating transport yen against Pakistani Rupee. system has awakened the • Sharp rise in international need of owning personal prices of raw materials. transport means. • Lack of skilled labor & technology. Positive Negative
PEST ANALYSIS Political Analysis Economic Analysis Tax Policy Economic Growth Labor Law Interest Rate Trade Restrictions Exchange Rate Tariffs Inflation Rate Political Stability Technological Social Analysis Analysis Population Growth Rate R&D Age Distribution Automation Religion Technological Change Education Innovation Outsourcing
COMPETITIVE STRATEGIES & INDUSTRY POSITIONING Over all low-cost provider strategy Broad differentiation strategy•Tough competition • New product innovation• Firm sets out to become the low cost •Technical superiorityproducer in its industry. •Product quality & reliability•Used by new comers to attract buyers. •Comprehensive customer service•Example: Pak Suzuki. •Examples: Toyota & Honda. Focused low cost strategy Focused differentiation strategy•The focuser selects a segment or group of •Enough resources to cater the nichesegments in the industry. market.•Tailors its strategy to serving them to the •Can defend against rivals throughexclusion of others. customer goodwill.•In cost focus a firm seeks a cost •Competitors do not have the capability toadvantage in its target segment. match the skills needed to cater the niche•Example: Adam Revo. market. •No other rival concentrates on the same segment •Examples: Mercedes & BMW.
ACCORDING TO PAMA 24119 225132500020000 13311 Daihatsu (Coure)15000 11439 Suzuki (Mehran) Suzuki ( Bolan)10000 6007 5301 5000 0 Sold (2009-10) Sold (2010-11)
PAK SUZUKI VALUE CHAIN Supply Chain Sales &Management Operations Distribution Marketing Service Profit Margin Product R&D, Technology and System Development Human Resource Management General Administration
SUPPLY CHAIN MANAGEMENT Pak Suzuki procures most of the raw material from Japan but some items are also brought in from Korea and Thailand. The mode of payment is through a Letter of Credit and the estimated lead time required is 4 months. The parts are shipped by Sea or Air and Port Qasim deals with the handling of the cargo arriving from Japan, Korea and Thailand. The annual demand is calculated by considering the inputs of all department heads and then sent to the chairman for approval. Back to Pak Suzuki Value Chain
OPERATIONS Pak Suzuki works in an environmental friendly environment. Although the sales grew in the current year the plant at Port Qasim still did not function at full throttle. The growth was seen at 52% for auto cars and 30% for the 2 wheelers. 79,138 units of cars were sold and 14,659 units of motorcycles were sold. Back to Pak Suzuki Value Chain
DISTRIBUTION Pak Suzuki has the largest distribution network in Pakistan. There are currently 74 dealers of Pak Suzuki which are spread all over the cities of Pakistan. The dealers are strategically placed all across the nation to provide customer service at the premium quality. Back to Pak Suzuki Value Chain
SALES & MARKETING Pak Suzuki has a very strong distribution network all across Pakistan which makes the availability of spare parts very easy for customer. This has been one of the reasons for the market share of Pak Suzuki to reach up to 53% in 2011. The exports of Suzuki Ravi Pickup to Bangladesh are gradually increasing. During the year five hundred and fifty one (551) units of Suzuki Ravi Pickup and six units of Suzuki Liana worth Rs.190 million were exported. Last year three hundred and sixty units (360) of Suzuki Ravi Pickup worth Rs.117million were exported. Five units of Suzuki Ravi Pickup and Suzuki Bolan worth Rs.2 million were exported to Suzuki Motor Corporation Japan as well during the year. Back to Pak Suzuki Value Chain
SERVICE There are around 87 dealer workshops which gives state of the art expertise and mechanical manpower. Pak Suzuki offers a warranty of 2 years and 40,000 km whichever comes first. Free services for the Pak Suzuki customer are given for the first 1.5 months or 1500 kilometers. Back to Pak Suzuki Value Chain
PRODUCT R&D, TECHNOLOGY AND SYSTEMDEVELOPMENT Pak Suzuki is run by state of the art technology along with technical support in terms of tools and equipments. Some of the technological equipments Pak Suzuki has are: Engine Analyzer Smart Diagnostic Tester Wheel Balancing Wheel Aligner A/C Equipments CO tester Paint Booth Chassis Aligner Car Wash Back to Pak Suzuki Value Chain
HUMAN RESOURCE MANAGEMENT The relationship between the management of Pak Suzuki and its employees has always been a healthy one. Multiple training sessions are also held time to time in order to train the employees. The multiple forms of training held at Pak Suzuki are: In House Workshops Simulation Training Effective Lectures Visual Based Training Outside Training Back to Pak Suzuki Value Chain
GENERAL ADMINISTRATION BOARD OF DIRECTORS Mr. Hirofumi Nagao Managing Director & CEO Mr. Satoshi Ina Deputy Managing Director Mr. Hidekazu Terada Director Mr. Jamil Ahmed Director Mr. Mumtaz Ahmed Shaikh Director Mr. Kenichi Ayukawa Director Mr. Wazir Ali Khoja Director CFO & COMPANY SECRETARY Mr. Abdul Hamid Bhombal Back to Pak Suzuki Value Chain
CSR AT PAK SUZUKI Pak Suzuki Motors works hard to maintaining a good working environment. Some of the CSR activities they have been involved in are: In 2010, there were 125 relief tents setup by Pak Suzuki as well as a few Suzuki Ravi pickups provided which were helpful in transporting people to safe places and distribution of commodities in Sindh. Rs. 15 million collected by Pak Suzuki employees who gave away their one day’s salary for the needy which helped in the setting up of camps and relief centers. Pak Suzuki also runs a yearly internship program where bright undergraduates are invited at Pak Suzuki During the summer vacations of 2011, the children of the direct and the indirect employees of Pak Suzuki were called upon to attend a “Computer Literacy Program”. In May 2011, Pak Suzuki donated Rs.20 million to the Japanese government after the earthquake and tsunami that devastated the lives of millions in Japan.
SALES INCOME 45,000,000 700,000 40,000,000 600,000 35,000,000 500,000 30,000,000 2008 2008 400,000 25,000,000 2009 2009 20,000,000 300,000 2010 2010 15,000,000 200,000 10,000,000 100,000 5,000,000 0 0 Net Income Net SalesRatio 2008 2009 2010 Ratio 2008 2009 2010Net Sales 39,669,730 26,234,061 42,642,762 Net Income 624,785 255,219 211,143
ACTIVITY RATIO Accounting ratios that measure a firms ability to convert different35.0 accounts within their balance sheets30.0 into cash or sales.25.020.015.010.0 2008 5.0 0.0 2009 2010 Activity Ratios 2008 2009 2010 Stock Turn Over 5.1 3.7 4.8 Payable Turnover 25.0 11.5 12.70 Account Receivable Turnover in days 2.6 5.2 2.06 Payable Turnover in days 14.6 31.6 28.74 Fixed Asset Turnover 7.7 5.0 10.09 Total Asset Turnover 2.3 1.5 2.22
LIQUIDITY RATIO A class of financial metrics that is used to determine a companys ability to pay off its short-terms debts obligations.4.504.003.503.00 20082.502.00 20091.50 20101.000.500.00 Current Ratio Quick Ratio Activity Ratios 2008 2009 2010Current Ratio 4.44 3.74 3.01Quick Ratio 0.94 1.07 0.61
SOLVENCY RATIO One of many ratios used to measure a companys ability to meet long-term obligations.40.0035.0030.0025.00 200820.00 200915.00 201010.00 5.00 0.00 Interest Coverage Ratio Financial Leverage Activity Ratios 2008 2009 2010 Interest Coverage Ratio 19.56 35.05 32.29 Financial Leverage 1.20 1.23 1.33
PROFITABILITY RATIO A class of financial metrics that are used to assess a businesss ability to 4.50% generate earnings as compared to its 4.00% expenses and other relevant costs 3.50% 3.00% incurred during a specific period of 2.50% 2.00% time. 1.50% 1.00% 2008 0.50% 2009 0.00% 2010Ratios 2008 2009 2010Gross profit margin ratio 1.48% 2.17% 2.35%Operating profit margin ratio 1.02% 0.54% 0.79%Net profit margin ratio 1.57% 0.97% 0.50%Return on equity 4.41% 1.78% 1.46%Return on sales 1.57% 0.97% 0.50%Return on assets 3.68% 1.45% 1.10%
MARKET RATIO A ratio used to find the value of a company by comparing the book value of a firm to its market value.8.007.006.005.00 20084.00 20093.00 20102.001.000.00 Divident Per Share Divident Pay Out Earning Per Share Ratio Ratios 2008 2009 2010 Dividend Per Share 4.98 0.99 0.50 Dividend Pay Out Ratio 0.66 0.32 0.19 Earning Per Share 7.59 3.10 2.57
RESEARCH BASED ON CUSTOMER LOYALTYAND SATISFACTION The sampling technique we chose was the convenience based sampling. According to the sample there were 100 respondents out of which 60 people responded which made the response rate around 60%. The demographics of the population were families consisting of maximum 5 people and students.
WHICH OF THESE FACTORS AFFECT YOUR SATISFACTION TOWARDS SUZUKI CARS Which of these factors affect your satisfaction towards Suzuki Cars Frequency Percent Valid Percent Cumulative PercentValid Features 10 16.7 16.7 16.7 Low Maintenance Cost 13 21.7 21.7 38.3 Comfort 10 16.7 16.7 55 Style 14 23.3 23.3 78.3 After Sales Service 13 21.7 21.7 100 Total 60 100 100
WHAT IS YOUR LEVEL OF SATISFACTION TOWARDS SUZUKI CARS? What is your level of satisfaction towards Suzuki cars? Frequency Percent Valid Percent Cumulative PercentValid Highly Satisfied 12 20 20 20 Satisfied 14 23.3 23.3 43.3 Neutral 14 23.3 23.3 66.7 Dissatisfied 7 11.7 11.7 78.3 Highly Dissatisfied 13 21.7 21.7 100 Total 60 100 100
WHAT IS YOUR OPINION TOWARDS THE FUEL CONSUMPTION OF YOUR SUZUKI CAR What is your opinion towards the fuel consumption of your Suzuki car Frequency Percent Valid Percent Cumulative PercentValid Highly Satisfied 16 26.7 26.7 26.7 Satisfied 15 25 25 51.7 Neutral 9 15 15 66.7 Dissatisfied 11 18.3 18.3 85 Highly Dissatisfied 9 15 15 100 Total 60 100 100
HOW DO YOU RATE THE SAFETY FACTOR IN SUZUKI CARS? How do you rate the safety factor in Suzuki cars? Frequency Percent Valid Percent Cumulative PercentValid Highly Satisfied 9 15 15 15 Satisfied 10 16.7 16.7 31.7 Neutral 14 23.3 23.3 55 Dissatisfied 21 35 35 90 Highly Dissatisfied 6 10 10 100 Total 60 100 100
ARE YOU SATISFIED WITH THE SPACE AVAILABLE INSIDE YOUR SUZUKI CAR? Are you satisfied with the space available inside your Suzuki car? Frequency Percent Valid Percent Cumulative PercentValid Highly Satisfied 9 15 15 15 Satisfied 7 11.7 11.7 26.7 Neutral 10 16.7 16.7 43.3 Dissatisfied 18 30 30 73.3 Highly Dissatisfied 16 26.7 26.7 100 Total 60 100 100
WHAT IS YOUR PERCEPTION ABOUT SUZUKI CARS? What is your perception about Suzuki cars? Frequency Percent Valid Percent Cumulative PercentValid Highly Satisfied 9 15 15 15 Satisfied 15 25 25 40 Neutral 12 20 20 60 Dissatisfied 11 18.3 18.3 78.3 Highly Dissatisfied 13 21.7 21.7 100 Total 60 100 100
WHERE WILL PAK SUZUKI STAND IN THECOMING FUTURE Despite of all the negatives of the economy and the political situation in the country, Pak Suzuki continues to be in the front position in the automobile industry. It has a market share of 53% which has increased significantly from 48% last year which shows considerable improvement through years. The automobile industry is one of the major contributors to the GDP of our nation. The Government of Pakistan needs to provide necessary the much needed support for the expansion of Auto Industry.