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Industry pro cess


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Industry pro cess

  1. 1. Introduction to process industry:<br />Industrial processes are procedures involving chemical or mechanical steps to aid in the manufacture of items, usually carried out on a very large sale. <br />Most process make the production of an otherwise rare material vastly cheaper, thus changing it into a commodity; i.e. the process makes it economically feasible for society to use the material. Production of a specific material may involve more than one type of process, Most industries processes results in both a desired products ad by products, many of much are toxic, hazardous, or hard to deal with.<br />Some major sectors associated with the process industry include: <br />Chemicals <br />Metal and Steel production<br />Petroleum refining <br />Fertilizer <br />Medicines & basic drugs <br />Beverage<br />Pharmaceutical<br />Food processing etc. <br />Some major companies doing in progress in Pakistan are mentioned below:<br />National refinery <br />Pakistan refinery <br />Pak-Arab refinery <br />Engro chemicals<br />Fauji fertilizer <br />IcI<br />Nestle<br />Pepsi co.<br />GlaxoSmithKline<br />Abbot<br />2. EVOLUTIONARY Process :<br />2.1 long run changes in growth <br />In 1947 some 5 percent of the large sale industrial facilities in British. India were located in what become Pakistan. The country started with virtually no industrial base and no institutional, financial or energy resources. Three small hydroelectric power station provided limited electricity to a few urban areas. Further there was a shortage of management personnel and skilled labour.<br />Processing industry base in Pakistan is very low. The industry base is low because of basic structural weakness not rectified over the years. The processing industry has not developed like other developing countries. This sector contributes almost 25 percent to the GDP in developing countries but in Pakistan we have not developed like others. <br />2.2 reductions in uncertainty:<br />Under the current situation and past history, the processing industry should continue growth and government should play the role of promoter and facilitator.<br />Foreign investment would also be encouraged. Under the percent depressed economic conditions, the government through authorities should play a catalytic role in order to provide boost to industrial activities in the country. <br />2.3 diffusion of propriety knowledge:<br />There is a lack of diffusion knowledge in the processing industry which is hindering the evolution of this industry in Pakistan.<br />The share of knowledge and technology intensive Engineering, electronics, pharmaceutical, chemical and non-metallic mineral products should be strengthened and enabled through fiscal and tariff means as well as building of alliances with international partners and technical institutions.<br />2.4 Accumulation of experience: <br />The processing industry lacks highly experienced professionals. This can be related to the literacy rate in Pakistan which is still low. Although the number of universities has increased from four to 25 and there are an equal number of private universities, including specialized management, engineering, and medical universities. There is a very small number of professional in this field that can excel by international standards. Most of the expertise in this industry is outsourced from foreign developed countries <br />However, efficient sue is the key and this an area where things can be improved by developing managerial and labour skills and technology upgradation.<br />3. EXPANSION:<br />The pace of growth in processing industry sine independence has not been up to the requirements. It has fluctuated in response to changes in government policy and to world economic conditions. That’s why there are tremendous changes of expansion in this industry owing to ever growing demand.<br />There are only a few industrial units of processing in the country which cannot even fulfill the demand of domestic and ultimately the requirements are fulfilled by importing. The expansion and growth chances for particular sectors of process industry are discussed below:<br />Petroleum refining, is one of the industries where in the medium to long term, excess where the demand situation appears prevailing in the economy.<br /> Cement is another sector where the demand is expected to remain strong. The country at present has 29 percent plants with an installed capacity of producing around 37 million tons of cement. Development programs, an increasing number of real-estate development projects for commercials and residential use, demand in the external markets like Afghanistan, Iran Bangladesh and Middle East are all indicators of possible expansion opportunities in the sector. <br />In fertilizer sector the level of consumption in Pakistan is one the lowest among agrarian economies. This sector is still facing a urea supply shortfall problem, though its severity has declined. Over the last 5 years, the average fertilizer off taken growth was 2.1 percent. Fertilizer manufactures are running at 100 percent plus capacity utilization levels and many are also in process to expansion. This excess demand coupled with the government efforts to encourage farmers to raise the fertilizer off take, it will not be unrealistic to foresee an increasing demand for fertilizer going ahead, which would force the expansion of this sector and ultimately the process industry.<br />Pharmaceutical is another sector where if appropriate measures are taken, domestic a see substantial growth going forward. At percent a large segment (almost 50 percent) of population in the country lacks access to Medicare.<br />Steel and metal processing is also a sector which is undergoing immense expansion and the gap in demand and supply is ever increasing due to large sale development projects. The sector is not able to fulfill the demand of the domestic market and occasionally steel items are imported to balance the demand supply situation. <br />Pakistan’s process industry has expanded very slowly and does not fulfill the demand situation of even the domestic market. But in the last decade this expansion process has intensified but the demand of the products of processing industry has risen exponentially, which is more expansion opportunities.<br />4. Market conditions:<br />The market of the processing industry is highly open buyers are actually waiting for the output of the industry. The reent boost in industrialization and urbanization, the need for the products like chemicals, steel and other processed products has increased in Pakistan.<br />Although the economy of Pakistan has suffered in the past from decades of internal political disputes, a fast growing population, mixed levels of foreign investment, and a costly, ongoing confrontation with India and terrorists. The market is partially independent of the above mentioned conditions as their products are essential part of the economy and life in Pakistan. So the market condition is still available to the new entrants.<br />5. Life cycle:<br />The life cycle of the process industry is depicted in the following curve. The industry is in growth stages as there is a lot of growth and expansion opportunities. The production of the industry is not able to meet the domestic demand and hence not in the maturity region.<br /> <br />6. industry analysis <br />6.1 survivals <br />The survival of the process industry in Pakistan is due to the following reasons:<br />Excessive demand of process industry products.<br />Pressure on government of Pakistan for imports to fill the demand supply gap.<br />Growth opportunities for investors.<br />Global competition due to imposition of WTO.<br />The factors limiting the survival of process industry are as follows:<br />Lack of technical expertise and experience for setting up the prossing plants.<br />Growing power shortage.<br />Heavy and long term investment involved in setting up proessing plants.<br />Heightened political tension.<br />Deteriorating law and order situation.<br />Cumulative impact of monetary tightening and rising ost of doing business<br />6.2 strategies:<br />The process industry must put greater upon strengthening the basic competitive position to the industry through modernization, quality control and standardization rather than seeking excessive protection to survive with their own weakness and inefficiencies. Vertical integration and supply chains may prove to be an attractive strategy for the industrial units. For example in sugar sector vertical integration can deliver results and can produce products such as ethanol, bio ethanol, a direct by-product sugar production.<br />Chemical industries an also benefit from vertical integration. Production of naphtha in a case in point. Produced in oil refineries, naphtha an be further processed to create a large number of chemicals and pharmaceuticals. To achieve this, naphtha raking plants need to be set up in country. Domestic production of chemicals generated from naphtha will not only help meet local needs but will be exported to a growing international market. Today India is the only south Asian country to have naphtha raking facilities. <br />Given the size of Pakistan’s own domestic market, the future lies not only in terms of an inward looking domestic market approach but also in boldly facing the competition and aggressively seeking higher share of the world market. This will require that we improve our skills, modernize the industries technology, ensure availability of raw materials at competitive rates and undertake an aggressive marketing initiative to get a better market share internationally.<br />7. Buying power: <br />Traditionally buyers of the products of processing industry have no option but to buy from them because of few or no competitors. For example IcI is the only plant manufacturing a chemical PTA. So all buyers of PTA have no choice but to buy from IcI. Similarly the competition in fertilizer, steel, oil and chemicals is also limited and the buyer’s do not possess a bargaining position. Recently due to ease of import procedure and growing demand of the products buyers are able to import products from international market. This import trend has given some bargaining power to the buyers.<br />8: Supplier’s power<br />The economist of sale in industry particular in china and India pose a threat to Pakistan’s process industry. The planning omission officials warned that the industrialization nation Japan and America were making India the hub of major trade and industrial and it should be noticed by the policy makers.<br />10. Degree of rivalry:<br />Since the processing is in growth phase of its life cycle that’s why the competition among the different sectors of the industry is negligible. Hence the degree of rivalry is null. The only situation of rivalry and competition exists in low cost operation better customer services. The companies in processing sector are now focusing towards better customer services<br />12: New competitors entry:<br />New players are entering in the process industry which is increasing the competition in the industry. But this introduction of new entrants among the small number of industrial units in the processing industry will not create mush competition. The demand of the products of the industry is immense and all new entrants will have the buyers lined up to consume their products. However in the long run as the process industry will move towards its maturity stage of life cycle, the competition will increase.<br />13. Trade standards:<br />The trade standards in processing is regulated by Pakistan standard trade classification (PSTc) which were introduced for categorization of exported commodities and the previous group classification, i.e. primary products, semi-manufactured commodities and manufactured goods was replaced by the 10 seconds of PSTc as under:<br />From July, 1984, the commodity list was further expanded by adoption of 4-digit commodity odes in accordance with the standard international trade classification (SITc) volume 2 revision 2(1981).currently harmonized system is used as a commodity classification system in which articles are grouped largely according to the nature of the materials of which they are made. HS coding system was developed under the auspices of the customs cooperation council (CCC) now known as world custom of organization (Wco)<br />Few trade organization and treaties which apply on the processing industry are:<br />ECO (Economic Corporation Organization) <br />SAFTA (South Asian Free Trade Agreement)<br />ASEAN (Association of Southeast Asian Nation)<br />WTO (World Trade Organization)<br />14: Conclusion:<br />The provision of facilities for testing laboratories, R&D, vocational and technical training, infrastructure and communications, are all necessary inputs which are regarded as being imperative for the processing industry. Value additions in products and process also have to be strengthened through backward and forward linkages. The process industry is no doubt a gold mine for investors and there are tremendous growth opportunities in its product market.<br />