Arete

1. Description of business
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1.1 The opportunity rational

Textile buying house is based on the idea to bridge the gap between the buyers and the manufacturers to make their valued imports timely, smoothly, safely and within their required quality standards. Buying House is a sourcing & quality management company. Our business is based on the idea of Buying House named Arete. Arete is a service organization providing sourcing and design services in terms of variety, competitive prices, and quality and on time delivery. Arete is providing buying services to international clientele and our buyers are dispersed widely. The range of products we deal are home textiles fabrics - made-ups & Apparel. The company will have Merchandisers, Quality Controllers and Administrative staff who are expert to manage production, logistic and operations. The designers will undertake the product development at various factories to meet buyers requirement for color matching, printing, fabric development and sourcing and pre-production samples. The Quality assurance team will conduct regular inline and detailed final inspection as per international standards to guarantee customer specification. The logistic department will responsible for booking, dispatching and monitoring shipments until they reach the final destination. We will build strong business relations with Textile Manufacturers in all the cities of Pakistan. Office furniture is the initial assets required for our business.

1.2 Start up plan

Our buying house will be located in Lahore. We are going to established it in 2013. It will be registered by Partnership Act 1932. We plan to start this business because Textile industry is
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one of the major industries of Pakistan and the largest part of Pakistans GDP based upon textile revenue. Pakistan has huge talent in the field of textile. To use this talent we plan to start this business. We will have strong business relations with Textile Manufacturers in all the cities of Pakistan; our committed, competitive and reliable manufacturers will be the strength of our organization. Quality will be our benchmark. The range of products we deal are home textiles, garments and athlete related products. To make the products according to the specification of customers and on time delivery we will use computer technology in new way. We are going to use 3-D software to check the specification of our customers. We will connect with our customers through video conferencing. The total cost of starting our business will be 2,005,740. At start it will have following resources and its cost will be as follows:

Sr. No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14.

Resources 15 computers @ 20,000 5 printers @ 8,000 Photocopier Machine Furniture 11 Air conditioner @ 40,000 Stationary 4 Bracket fans @ 3,000 12 Wall clocks @ 800 10 Telephone sets @ 1800 Fridge Generator Projector Security camera 2 Water dispenser @ 9,000

Cost (Rs.) 3,00000 40,000 20,000 225,500 440,000 10,000 12,000 9,600 18,000 10,000 3,00000 95,000 17,000 18,000
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Other costs include marketing cost, business and trademark registration cost, rent, security deposit against office etc.

1.3 Vision, Mission & Objectives: 1.3.1 Vision statement

To develop business relationship of mutual growth and to give quality products to all our valued customers.

1.3.2 Mission statement

Arete is going to meet textile needs of our international and national customers by using state
of the state of art technology and ensuring long term strategic partnership with vendors and customers based on mutual trust and credibility and to become the most reliable, environmentally conscious and quality service provider.

1.3.3 Objectives
On time delivery Right quality To strengthen relationships with manufacturers and customers.
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Develop a multiple line extension offering targeted to the need of several users segment in the market Create an environment that promotes confidence in our clients. Promote the success of our clients in meeting their goals. Create Challenging, innovative environment Increase market share Promote the textile designs of Pakistani arts students. Aware the Pakistani manufacturing companies about latest technologies. Customer satisfaction.

1.3.4 Core values

Continuous
Proactive Improvement

Patriotism

Honesty And

Values
i Employee
Empowerment

Integrity

Open
Communication

Teamwork

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To be proactive Patriotism We regard honesty and integrity as paramount. We promote employee empowerment. We foster open communication to create an environment of trust and cooperation. We encourage teamwork. We aim for continuous improvement and believe in result-oriented approach.

1.3.5 Business philosophy

Quality is our promise Setting realistic expectations

1.3.6 Target Market

We are going to provide business to business services thus our target market include major national and international business Textile related brands Boutiques Textile designers

1.3.7 Our industry

Industry in which we are operating is Textile industry. Textile industry is one of the major industry of Pakistan. Pakistans textile industry ranks amongst the top in the world. The Pakistan textile industry contributes more than 60 percent to the countrys total exports that sum around 5.2 billion US dollars. The industry contributes approximately 46 percent to the total output produced in the country. In Asia, Pakistan is the 8th largest exporter of textile products. The contribution of this industry to the total GDP is 8.5 percent. Moreover, it
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provides employment to 38 percent of the work force in the country, which amounts to a figure of 15 million. Because of all these positive points we have selected textile industry. In spite of this there are number of problems that are faced by this industry. These problems can be overcome by The Textile Ministry by developing closer ties within the business organizations and inter-industry platforms, both upstream and downstream, can do much more than simply survive these dangerous times. It can proactively build a better, healthier and stronger national textile industry that can benefit the economy and sustain long-term export growth, once the current period of market turbulence subsides. Changes that is required in textile industry is First and foremost, the Pakistani textile industry in guidance from the policymaker (the Textile Ministry) need to be more proactive in our decision making by focusing on long-term positioning, instead of current or short-term profit taking. Further, going forward our industry needs enhanced transparency, predictable government policies, better supply chain management and awareness.

1.3.8 Company strengths

Strong communication channel with clients(new technology) Good management capabilities Lower business risks Consistent Team Standard quality assurance

1.3.10 Competitive Advantage

Competitive advantage strengthens and positions a business better within the business environment and unlike other buying house we have separate design department to facilitate our customers, and also we are dealing in multiple products by using state of art technology. Our other competitors are dealing in one or two product line for example home textile fabrics or garments. We deal in home textiles fabrics, garments and athletic wear.
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1.4 Location and facilities

Arete will be located at 61A Rewarz Garden, Lahore and facilities that can be beneficial for both internal and external customers are as under: Well developed information system 3D software for visuals Decent furniture Powerful network Experienced staff Relationships with business community and clients Up-to-date with the technology

1.5 Critical Success factor

It is a critical factor or activity required for ensuring the success of a company or an organization. State of art technology On time delivery Ensured quality

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The technology we are going to use is Pico Scanner. It is gadget that combined one pico projector, one Canon 1000D DSLR, one Joby Tripod and a 3D scanning software into one piece of 3D scanner called PicoScan.The PicoScan can be adjusted flexibly according to the angle you want and the snapshots of objects can be turned into a 3D models easily using the 3D Scanning software that based on Mephisto scan engine.the scanner take the measurements of the prepared garments and through internet and scanner software adjust it on the dummy placed on another place,thus helps to find out whether the prepared garment is according to the provided measurements of customer and reduce the rejection rate.

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1.6 Business Model

Customer design specification

Designer of buying house ( cading &engraving)

Strike off printing

Table printing by any factory

Weave Printing

Checking

color hand feel

Thread count

Fabric quality

Sent to the customer with all detail

Rejected

Approved

Working with new specification

financial agreement between factory and buying house

Financial deal with customer

Production starts

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Management Description

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2.1 Form of ownership

Arete will be registered by Partnership Act 1932. The reason is that this is a local project, requires big investment and if any dispute arises among the partners or ex-partners they may resolve the issue through the civil courts. Moreover the tax rates are also low for partnership firms. Detail of the legal requirements is as follows: Formation:

Two Partners will enter into the written agreement for carrying Arete with a private gain. To avoid any misunderstanding regarding the organizational matters, partners will prepare the article of partnership which will include the rights, duties, obligations, and arrangements which the two partners have mutually agreed upon. Financing

Both partners will contribute equally the 50% of the total cost of business. Management

Every partner will have right to take part in management of the organization. The important decisions will be taken with the consent of both the partners. Restriction of transfer of interest

No partner can transfer his share to any other person without the prior consent or willingness of all other partners. Unlimited liability of partners

The Liability of all the partners will be unlimited. If the business suffers Losses and assets of the business are not sufficient to meet its obligations, then the creditor may choose to sue anyone or all the partners to satisfy the debt.
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Duration

The duration of the partnership will be at the end of the life of the company. In case of partners leaves, dies, bankrupt or insane the partnership will be dissolved. Implied authority

It is decided that there will be implied authority: each partner is the agent of the other partner and at the same time of the firm. The moment the agreement is entered into between the partners, this authority automatically comes to each of the partner. Common Advantages

Partners are bound to carry on the business of the firm to the greatest common advantage, to be just and faithful to each other and to render the true account and full information of all the things affecting in the firm to any partners or his legal representative. Indemnity:

Each partner shall compensate the firm for any loss caused to it by his fraud in the conduct of the business of the firm. Loss caused by willful Neglect:

The act provides that a partner shall cover any loss caused to the business by his willful negligence. Provision of Information:

It is duty of the partners to give full information about the affairs of the firm to one another.

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2.1.1 Intellectual Property Rights

The application for the registration of the below shown Trademark has been submitted to preserve the intellectual property rights of Arete. This trade mark after the registration will become (still serving without registration) the exclusive identity mark of all Arete products. The application has been filled to the Registrar of Trademarks (Trademark Registry Karachi) under the Trademark Ordinance, 2001 and the Trademark Rules, 2004.

Logo: The visual trademark that identifies the brand.

Tagline: Quality is our promise

2.2 Organizational structure

An organizational structure consists of activities such as task allocation, coordination and supervision, which are directed towards the achievement of organizational aims. Our organizational structure will be functional structure because Functional organizations contain specialized units that report to a single authority, usually called top management. Referred to as functional units or areas, these specialized units contain personnel with various but related skills grouped by similarities. Each functional unit handles one aspect of the product or service provided: information technology, marketing, development, research, etc. Top management is responsible for coordinating the efforts of each unit and meshing them together into a cohesive whole.

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Characteristics: Organization type: functional Decision making: centralized Pattern of communication: Vertical Employee Involvement: Minimum

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Texrile Design Manager

Asst. design Manager

Logistic Manager

Asst. Logistic Manager

opernational Manager
Quailty assurence Manager Auditor

I.T Officer
Mercandizing Manager Asst. Merchandizing Manager

Marketing Officer

CEO
H.R officer
Adminstration & coordination officer

Finance Manager

Accountant

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3.3 Management Team Jobs

CEO Hassan Ali Operational Manager I.T Officer Marketing officer Finance Manager HR officer Administration & Coordination Merchandizing Manager Quality assurance Manager Logistic Manager Textile Design Manager Others: Assistants Sweepers, Guards, Cook Waqas Ali Arsalan Saqib Farhana Aftab Mehreen Azam Sobia Shabeer Ahmed Ali --------------------------Textile engineer/ 15 years BBA (hons) Marketing BBA (hons) Marketing BBA (hons) Marketing BBA (hons) finance BBA (hons) HRM BA BBA (hons) Textile engineer BBA (hons) Textile engineer

Name

Qualification/experience

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MARKETING PLAN

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4.1 Marketing objectives

To create awareness.
To increase sales and number of customers for generating revenue. To build the good name in target market. Negotiation for suitable prices. To generate the profit.

4.2 Market Research

Market research is a mean to gather market information and to make right business decision. It is a mean to provide important information to identify and analyze the market need, market size and competition. Objectives: We identified the following research objectives in order to conduct market research: Is there any demand for our buying house? What are the companies preferences regarding outsourcing in Pakistan and using the help of buying house? What is customers satisfaction level from existing buying houses? What type of services they demand and prefer? What is their outsourcing pattern?

Research Methodology Marketing research is of two types: primary and secondary. To collect data about our customers interest, we gather primary data from the target market. For this purpose we used a questionnaire containing 15 questions. At the end, to draw the conclusion, we processed data through the statistical instrument Statistical Package for Social Science (SPSS).

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Data Analysis & Interpretation:

All efforts of marketing are based on underlying needs. The basic purpose of the marketing is to identify the needs of the customers and try to fulfill their need in order to achieve their satisfaction. 70% of our target customers use the services of other firms to manufacture their products. 40% people agree with the statement that outsourcing add to expertise available for their organization. 70% people agree that outsourcing is most cost effective for their business. 80% of people agree that outsourcing will enhance the quality of their products and services. 60% people agree that quality of business process will increase as our buying house undertake their tasks. 80% of people agree that because of buying house their work will be carried out quicker and more effective. 78% people strongly agree that using the services of buying house will reduce their costs. 58% people want to use the services of Pakistans buying house

Majority people from our target customers agree that they outsource twice a month Majority of businesses from our target customers outsource home textile. 70% people from our target customers outsource bedding From garments 70% people outsource jeans and jackets. Majority of people from our target customers outsource jogging and swimming costumes. Majority of people respond that it is extremely important for them if our buying house perform the services on their behalf.

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Majority of people respond that it is important for them if our buying house performs designing services for them.

4.4 Market trends:

Pakistan textile industry is by far the most important sector of the economy contributing 63% to export earnings and engaging 38% of labour force. Textile Industry has made an investment of about US$ 7.5 billion during the last eleven years. The economic recovery after global recession has already started and some prominent Asian countries such as China, India, Malaysia, Indonesia, Pakistan and Bangladesh are heading towards recovery, while Western countries like USA and prominent European countries which were hard hit by the global economic recession are still struggling to come out of the recession.Pakistan has achieved its highest ever exports mark of $19.3 billion in the financial year 2009-10. The country has so far recorded exports worth $19.3 billion which not only exceeds the target set for exports in 2009-10 i.e. $18.8 billion. Pakistans textile exports fetched a lions share of 51.8% in value terms out of the total exports for the financial year 2009-2010 Exports of textile and clothing, which crossed the $10 billion mark, recorded a growth of 7% as compared to the last year. Pakistan governments decision to withdraw duties on imported textile machineries under National Textile Strategy 2009-2014, has proved to be a big boost for its textile industry. After this decision, the country has registered a growth rate of 25% in textile exports. It also helped to attract higher foreign investments in the country

Economics
4.4.1 Facts about our industry
The industry which we are going to serve is textile industry. Pakistans textile industry is one of the largest industries in the world. We select this because businesses in international market still prefer Pakistan manufacturers because: It is one of the lowest cost options for them because of lower cost labor It has its own supply of cotton and fabric.
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4.4.2 Total Size of Our Market

We are going to serve Europe and America. Our total market size is 520 textile businesses in international market that are using the services of Pakistans manufacturers.

4.4.3 Percent Share Of the Market Will We Have

As we conducted the research through questionnaires, we have found that our market share from the total market of 520 businesses is 55%.it means that 286 textile businesses are ready to use the services of our Arete. We will have greater market share because Arete is one and only buying house having multiple products. The demand for Pakistani textile products is increasing in the international markets and the industry is securing large orders among its regional competitors. The export of textile and garment sector stood at US$ 10.3 billion in 2009-10.

4.4.4 Trends in target market

Todays businesses are focusing on outsourcing rather than producing the products themselves, they are shifting the manufacturing towards the countries in which cost is minimum and raw material is available. Pakistans textile industry is one of the largest industries in the world. It has low cost of labor and its own supply of raw material. Many international businesses are using the services of Pakistanis manufacturers. Because of this we are going to open a textile buying house, which is going to make their imports timely and safely.

4.4.5 Growth potential and opportunity for our business

There is great potential for the growth of our business. We can do market development in other countries. We can also add other products in our product line and increase our service range. The compound annual growth rate of the textile and apparel industry in the period 20062011 was 3.24%.

4.4.6Barriers we face to entry in this market High marketing costs:

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Our business is at international level and we need high customer awareness about our distinct and reliable services. Our business is new one thus it needs high marketing cost.

Consumer acceptance and brand recognition:

New businesses have low brand recognition and have no prior experience and reputation thus it is difficult for us to get customer acceptance at once. For brand recognition and to establish long term relationship with our customers we arrange meetings with them, give them loyalty benefits such as price reductions, in long run we will arrange exhibitions to increase awareness about our buying house. We will use online marketing to reach our target customers in international marketing .

Effects of Change in technology on our business

Our innovative technology is our competitive edge. If we would not adopt new technology we will lack behind in fulfilling the demands of our customer in efficient way. We have to respond fastly towards the dynamic environment.

Effects of Change in government regulations

Politics of Pakistan is very sensitive and involves many fluctuations. It is uncertain that when new party would take over the present Government, the policies made by the current government might be changed. So this factor might be dangerous for our business. Just in case if the new government increases the taxes, the cost of our services would rise up and thats not good sign for a business if the cost is increased. So in this sense change in government regulations have affect on our business.

4.4.7 International businesses prefer Pakistan for outsourcing

Pakistan has Share in total exports of 53.2 per cent having Textile exports $ 10,313.2 million and Investment in textile $ 7.0 billion

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Top American brands currently outsourcing their apparel manufacturing to Pakistan include American Eagle, Abercrombie & Fitch, Hollister, Nike, Quicksilver, Kohls, Sears, Wal-Mart, Gap, Old Navy and Macys because good quality, home-grown cotton low cost labor can fulfill small orders at low cost Increasing talent in textile field (four-year BBA (Honors) in apparel manufacturing and merchandising)

4.6 Competition
4.6.1 Our major competitors
There are number of buying houses in Pakistan but our major competitors are Cotcom and Textillian.

Cotcom
Cotcom Sourcing is a top ranked buying office of Pakistan with their representative office in USA as well.it has experience of 20 years.it is located in Upper Mall Lahore.

Textillian
It is located in Raiwind Road , Lahore, Pakistan.Dealing in home textile and garments Textillian has 21% market share.

4.6.2 Competitive Analysis

Factor Products

Arete Home textile Apparels

Cotcom Home textile

Textillian Home textile

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 Price

Athletic wear 12%commission Skimming pricing Strategy Main focus is on Quality Selection

garments

11% commission Penetration pricing strategy

12%commission Skimming pricing strategy Main focus is on quality ofSelection of

Quality

Main focus is on Quality

Selection

Selection of manufacturers on the basis of quality and low cost

manufacturer on themanufacturer on the basis of relationship basis of relationship Low cost Reliable

Service

Low cost Reliable Fast

Low cost Reliable

(use of latest technology) Company Reputation Location New business having noGood reputation reputation Lahore Market Share Target market EUROPE America Lahore Rawalpindi Karachi Faisalabad America 27% Europe America 21% Europe America Lahore Rawalpindi Faisalabad Good reputation

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Middle east

Our major Customers I. TNC (Town and Country Living):

Town & Country Living, now a third generation family owned business, was founded in 1954. Today, TNC are the undisputed leader in the design, manufacture and import of table linens and kitchen textile products across all channels of distribution. Town & Country is the market share leader in the table linens and kitchen textiles category and were recently awarded "Vendor of the Quarter" at Wal-Mart. TNC have established ourselves as a design, sourcing, quality and execution leader in branded and nonbranded product for more than 50 years. New York City Showroom in the Textile Building,295 5th Avenue, Suite 412. TNC deals with table linen, bath and kitchen linen, sofa slip covers and showers/window curtains.51-200 employees Brands under TNC Country Living Paula Deen Ralph Lauren Mainstays Dollar general Kitchen Aid BadgleyMischka Better Home&Garden Bed Bath & Beyond Brownstone Gallery JC Penny

II. Macys:

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Macy's, Inc. maintains corporate offices in Cincinnati, Ohio, and New York. Primary headquarters operations are located at 7 West Seventh Street, Cincinnati, Ohio 45202. The main switchboard number is 513/579-7000.In 2009, Macy's, Inc. earned net income of $350 million on sales of $23.5 billion.

Macys do sales on a monthly basis Macy's, Inc. and its subsidiaries are firm in their resolve to do business only with those manufacturers and suppliers that share the company's commitment to fair labor practices, including adherence to laws that protect workers and their salaries, both in the United States and abroad.

Macys, Inc. is one of Americas premier national retailers, operating 40 Bloomingdales stores and more than 800 Macys stores in 45 states, the District of Columbia, Guam and Puerto Rico. The company also operates macys.com and bloomingdales.com.

Brands under Macys Bar III Charter Club Hotel Collection Martha Stewart Collection Martha Stewart Luxury Hudson Park Hudson Park Luxury Style&co. Sky Brand X

4.6.3 Competitive edge:

Our competitive edge is technology i.e Pico Scanner. Also we have multiple product line i.e. we are dealing in home textile, garments and athletic wear.
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4.7 Segmentation
Our target segment is international home textile, apparel, athletic garments brands. We have segmented our target market into following segments: Our Business market might be segmented on the bases of following variables: Company Size: We are going to serve international companies having popular brands. Industry: We are going to serve textile related industries including home textile, garments. Situational factors: We will serve those companies that need on time quick order delivery, having large/small orders. Geographic: We have also segmented our market on the basis of geographic variables. We are going to target companies of Europe and America. We have also done need based segmentation as follows:

A price-focused segment:
Companies in price-focused segment are often small, working to low margins and regard the product/service in question as of low strategic importance to their business.

A quality and brand-focused segment:

Companies in this segment want the best quality product and are ready to pay high price for it. Companies in this segment often work to high margins, are medium-sized or large, and regard the product/service as of high strategic importance.

A service-focused segment:
Companies in this segment have high requirements in terms of product quality and range, but also in terms of after sales, delivery, etc. These companies tend to work in time-critical

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industries and can be small, medium or large. They are usually purchasing relatively high volumes.

A partnership-focused segment:
Companies in this segment usually consisting of key accounts, which seeks trust and reliability and regards the supplier as a strategic partner. Such companies tend to be large, operate on relatively high margins.

Target market
Our target market strategy is concentrated marketing i.e. .Arete will go after a large share of one or a few segments or niches. We are going to provide business to business services thus our target market include major international businesses .Our secondary target market include major national textile brands. textile related brands boutiques textile designers

Positioning Positioning on service attributes:

Our buying house will position itself on the basis of its innovative services attributes. We are going to use modern communication technology and computer softwares to communicate with our customers and fulfilling their needs. These technologies make our services more fast and reliable and save from cost of rejection.

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Segmentation

Differentiation

Create value for Targeted customer

Targeting

Positioning

4.7.1 Marketing strategy:

We will focus on differentiation strategy. We are going to differentiate our services on the basis of innovative technology and multiple product line. We are going to provide customized services to our customers. When our current target markets get saturated we will do market development that is enter into new markets.

Strategy
In long run we will focus on following strategies to expand our business.

Market development Overseas offices

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Market development: Market development strategy entails expanding the potential market
through new users or new uses. New users can be defined as: new geographic segments, new demographic segments, new institutional segments or new psychographic segments.

4.7.2.1 Services of our buying house:

We are going to provide the services of intermediary by bridging the gap between the buyer and the manufacturer. We are going to make the imports timely and within the required quality standards according to the specifications of the buyer.

Sourcing of Manufacturers:
We will have strong relationship with Pakistani manufacturers and have data base of Pakistani manufacturers.

Price negotiation:
We will negotiate prices with manufacturer and buyer.

Production planning:
Our merchandising staff will monitor day to day production.

Quality assurance:
We will ensure that products are made according to the quality standards. Our quality ensures personnels will visit the manufacturing site and inspect the production process thus eliminating the last minute rejection. We provide quality inspection services on quality standards

Compliance evaluation:
We will ensure that manufacturers are in compliance with social standards set by the buyers.

Communication:
Regular communication with customer by video conferencing.

Documentation and shipping coordination:

Our logistic department handles all shipping inquiries and checks all shipping documents as per buyers instructions.
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4.7.2.2 Products:
The range of products we deal are home textiles fabrics, garments and athletic wear. Table, Kitchen & Bath:

Table Covers, Placemats, Runners, Kitchen Towels, Napkins, Oven Mits, Pot Holders, Chair pads, Tear, Swag Valence. Bath towels, Hand towels Bath Towels Bath Accessories

slippers Beach Towels Face towels, Bath robes Shower curtains.

Slip Covers

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Chair Pads, Sofa Slipcovers Futon Covers

Baby Bedding

Sheets, Bumpers, Comforter sets, Sleep Bundles, Blankets Burp Cloth Bed Sheets, Quilt Covers, Comforters,

Bedding basics

Bed Canopies Blankets Throws &

Down Comforters

Mattress Pads & Toppers Pillows Sheets

Apparel

Jackets & Coats Jeans Jumpsuits & Rompers

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Pants Shorts Skirts Suits & Suit Separates Swimming costumes Jogging Suits Polos

4.7.3 Value Proposition

Value proposition is the detail of how the value is created. Developing a value proposition is based on a review and analysis of the benefits, costs and value that an organization can deliver to its customers, prospective customers, and other constituent groups within and outside the organization. It is also a positioning of value, where Value = Benefits - Cost (cost includes risk) We are going to provide the best services to our customers by adding the value throughout the process. Getting customers specifications Search for manufacturer Negotiation with customer/ manufacturer

Inspection of quality of products

Inspection of production process

Inspection of raw material

Inspection during logistic

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4.7.3 Niche:
We will focus on those countries that have strong market and economy like Germany, France, America, England, and USA has significant purchasing power per capita, the USA is a highly desirable market for these products.

4.7.4 PEST ANALYSIS PEST analysis stands for "Political, Economic, Social, and Technological analysis" and describes a framework of macro-environmental factors used in the environmental scanning component of strategic management. We conduct the analysis of our environment and found that the following political/legal, economical, social and technological forces can influence the operations of buying house:

Political factors
Politics of Pakistan is very susceptible and involves many fluctuations. When new party would take over the present Government, the policies made by the current government might be changed. So this factor might be dangerous for our business. Just in case if the new government increases the taxes, the cost our services would rise u p and thats not good sign for our business the most important considerations for global business firms are the political and legal forces operative in the countries in which they plan to conduct business. Some foreign governments are unstable, that is, there may be frequent, dramatic and unpredictable regime changes and/or political unrests if the cost is increased. So in this sense the political factors describe below may affect our business.

Taxation Policy Trade regulations Governmental stability employment Policy

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Economical factors:
Following are the economic factors that can affect our business.

Exchange Rates
Transactions between different countries around the world create a need for money exchange. This need comes into play because each country has its own currency system. Companies need to convert currencies by buying or selling the currency of one country to another. This is done by using the exchange rate of different available markets such as the spot market, forward market and the future market depending on the ultimate goals. At this stage, the success of an international company is relative to the currency of the country where it operates. If the currency of that country is soft which means it is not easily convertible, it may present a problem. On the other hand, it can also be a hard currency, which means it can be exchanged with no difficulty.

Inflation rate: due to inflation the cost of providing the services may increase. Recession or Boom Low Spending Power: Due to some economic factors spending power of people may decrease. This factor can also affect the business.

Socio-cultural:
It is important, therefore, to acknowledge and take into consideration the main cultural and social factors such behaviors, education, language, values, customs, as well as religion when conducting international business.

Age distribution. Education levels. Income level. Environment consciousness. population growth life expectancies
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Religion

Technological factors

Technological changes New or improved distribution channels Improved communication and knowledge transfer etc.

Legal factors:
Firms involved in global business must be familiar with and obey the laws of their home country the local laws of each country in which they do business, and international laws

Unemployment law Health and safety Product safety Advertising regulations Product labeling labor laws etc

4.7.5 PORTERS 5 FORCES MODEL This model helps a business to analyze the market and the sector in which it is going to offer its services. According to this model, there are five forces in this model which can affect our business.

Threat of new entrants

Threat of new entrants is a threat that is always present no matter in which field or business you are. There is very low initial investment required to start a new buying house thus we have high threat of new entrants. Although we are using the new technology and have multiple products in which we are providing our services, it can be copied. Our market share may be decreased and in result of this, our profit margin will also be decreased. In order to keep up

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with our business, we would have to change our tactics and way of doing things like nobody would be doing.

Bargaining power of suppliers

A large number of manufacturers are available for us in the marketplace so we have a lot of options that increases our bargaining power.

Bargaining power of buyers

There are number of buying houses available but we are offering distinct services thus in case of our buying house there is medium level of bargaining power of buyers.

Threat of substitutes
There is no direct substitute of our services.

Rivalry among existing competitors

Cotcom and Textilian are our major competitors having good reputation in international market and have experience. There exist high rivalry among existing competitors.

AFFECTS ON ARETE PORTER COMPETITIVE FORCES Low Bargaining Power of supplier Bargaining Power of Buyer Threat of New Entrants Threat of Substitute Rivalry among competitors Medium High

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4.7.6 8 Ps

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Products:
We are dealing with multiple range of textile made products, which includes following types:

Table, Kitchen & Bath: Table Covers, Placemats, Runners, Kitchen Towels, Napkins, Oven Mits, Pot Holders, Chair pads, Tear, Swag Valence. Bath towels, Hand towels, Face towels, Bath robes Shower curtains.

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39

All these products will be made up of 100% cotton and blended, solid dyed, yarn dyed and printed, and designed according to customer specifications.

Place
We will use direct distribution channel. We are going to establish direct contact with our manufacturers and buyers without any middleman.

Price The main purpose of our pricing is to develop a user base and earn profit. As our main
focus is to reduce the cost which will also affects the pricing of product. Customers go for buying house or outsourcing because they want to minimize the cost. The pricing strategy we will use is cost plus pricing as we calculate total cost of providing the services, the cost of manufacturing and charge 11 % commission over it. We will charge 10-11% commission for our services. We will also offer high profit margin for the manufacturers as compare to others. We are also offering other benefits like discounts and additional services to both customer and manufacturers.

Price adjustment strategy

Our price adjustment strategy is geographical pricing i.e. setting prices for customers located in different parts of world.

Promotion:
We will promote our business via business magazines, websites, direct marketing etc. the promotion is not just limited to local market but it will also focus on international market as well. We will place our advertisement on textile business magazine that is textalks. we will send mails to our customers to make them aware about our services.
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Process
Firstly customer will give us its specifications about the product that he/she wants to order, then this specification will be checked by our design department and also reviewed by manufacturer, if both are arranged to design then the further process will be continues, but they will disagree at any point about design specification by customer due to any color combination or technology problem then this is informed to the customer to change it. Our design department will also give suggestion at the changes to customers. Once the design is finalize then the contract will be made with both customer and manufacturer, in this contract all the terms and conditions will be decided from production process to delivery of product. When manufacturer is working on product, our inception team will also visit the quality of the process and product that is produced. After the delivery of the products to the customer, his/her feedback is also conducted so that we came to know about customer response and how we can improve over quality.

Physical environment
Our office layout is specifically designed to provide relax working environment to our employees. We will have a showroom where we will display our products. In future we will open our offices in other countries.

People
As we know that quality of service is inseparable from service provider. It is important for service provider to train their employees and customer to get better output and monitor the performance of employees. In buying house we are going to provide training to our employees so that they can provide better services according to the established standards of buying house. Also we are going to provide information to our customers so that they can understand our services and actively participate in it.

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Productivity and quality

As we know that quality is essential to differentiate our services from others and productivity is essential for cost management. Main focus of buying house is to provide high quality services to its client. For high product quality we will provide regular inspection services.

4.7.7 Branding
Brand elements

Name: ARETE Buying house. It is a descriptive name .ARETE means excellence. It describe the excellence of our buying house services.

Logo: The visual trademark that identifies the brand.

Tagline: quality is our promise URL: www.aretebhouse.com

Branding strategy
We are going to use corporate branding strategy i.e. we will try to further modify our existing brand. In whatever products we will deal .we will use the same name that is ARETE.

Brand development strategy:

Aretes brand development strategy will be brand extension i.e. extending an existing brand name to new product categories.

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Line Extension

Brand Extension

Multibrands

New brands

4.8 Sales strategy

Sales Strategy Direct
Arete will use direct sale strategy. A direct sales strategy is the sales technique used most of the time. A direct sales strategy means going head to head, feature for feature against your competition. A direct sales strategy is a hard way to sell, unless you have clear superiority over your competition.

Advertising Strategies
The advertising strategy that we adopted for promotion is:

Direct marketing:
We are going to use internet for marketing purpose. We have established a website for Arete buying house. We are going to send mails to our target customers.

Production channel:
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Our front line staffs, services cape help us to send positive messages to customers.

Blogs and online rating

Public relations

4.9 Marketing budget:

ACTIVITY Business mag (techtalk) Visiting cards Internet marketing Full page ad(2 months) 500 (two months package) COST 1200 euro 2000rs 150 euro

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Flower of services of Arete

Information

Payment

Consultation

Billing
core

order taking

Exceptions

Hospitality

Safekeeping

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Information:
Arete is going to provide timely and accurate information to its target customers through its website, mails, through front line employees, videotapes etc

Order taking:
Our order taking system is online. The process of order taking of Arete is polite , fast and accurate so that customer donot waste time and endure unnecessary mental and physical effort.

Billing:
Our billing system is timely, accurate and stimulates faster payment. It is according to the prices that are set during order taking.

Payment:
As we are involved in international business, to make the payment system more reliable we are going to use the services of bank.

Consultation:
Consultation involves dialog to probe customer requirements and then develop a tailored solution. We are going to provide online consultation 24 hours. It involves personal counseling, technical consultation.

Hospitality:
Arete is going to develop long term relationship with its customers.

Safekeeping:
We provide safety and security to our customers .We are going to keep the data of our customers confidential.

Exceptions:
Exceptions involve supplementary services. We have developed contingency plans in advance to respond promptly and effectively to our customers when they need special assistance.

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Strategic plan

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5.1 The External Factor Evaluation (EFE) Matrix:

Key external factors Weight Rating Weighted score Opportunities: 0.10 4 0.4 Large, Potential Domestic and International Market 0.09 3 0.27 Market is gradually shifting towards Branded Readymade Garment. 0.15 4 0.60 Increase interest of youth in textile designing 0.03 2 0.06 field. 0.12 4 0.48 Subsidiary for textile sector Textile Exports of Pakistan Threats: 0.12 1 0.12 Energy crisis 0.08 1 0.08 Political instability 0.12 4 0.48 To make balance between price and quality 0.07 1 0.07 Rising inflation 0.12 4 0.48 Continuous Quality Improvement is need of the hour as there are different demand patterns all over the world. Total 1.00 3.04 The average total weighted score is 3.04 which indicate that our textile buying house is responding in an outstanding way to existing opportunities and threats in industry. 5.2 The Internal Factor Evaluation (IFE) Matrix: Key external factors Strengths: Equipped with MIS System Use of technology Multi products buying house Quality Customized services Customer loyalty/relationship Management Low cost weaknesses: New business reputation Small international market share Less promotional activities Depends upon manufacturer for on time delivery Total Weight 0.08 0.15 0.10 0.15 0.05 0.15 0.09 0.05 0.04 0.04 0.01 0.09 1.00
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Rating 4 4 4 4 3 4 4 3 1 1 1 1

Weighted score 0.32 0.6 0.4 0.6 0.15 0.6 0.36 0.15 0.04 0.04 0.01 0.09 3.27
48

The average total weighted score is 3.27 which indicate that our textile buying house is internally strong.

5.3 The SPACE Matrix

Financial Position (FP) Return on investment Payback period Rating +6 +5 11

Competitive Position (CP) Product quality Business depends upon customer loyalty Modern Technology Greater market share Control over manufacturer -1 -2 -1 -1 -2 -7 Stability Position (SP) Environmental stability Technological changes Rate of inflation Competitive pressure Risk involved in business Taxation -2 -6 -4 -3 -5 -20 Industry Position (IP) Growth potential Profit potential +4 +5
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Productivity, capacity utilization Financial stability

+6 +5 20

Conclusion:

SP Average is -20 5 = -4 CP Average is -7 5 IP Average is +20 4 = 5 FP Average is + 11 2 = 5.5 = -1.4

Directional Vector Coordinates: x-axis: -1.4 + (5) = + 3.6 y-axis: -4 + (5.5) = +1.5

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SPACE Matrix: FP
+7

Conservative

+6 +5 +4 (3.6, 1.5)

Aggressive

+3 +2
+1

IP

CP
-6 -5 -4 -3

-2 -1

1 2 3 4

6 7

-1 -1.5 -2 -3 Defensive -4 -5 -6 Competitive

SP Textile buying house should purse aggressive strategies like integration, Market penetration, Product development and diversification.

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Product quality should be -1 because we have loyal customers and they are loyal because of our quality. Right quality is our main objective. Market share should be -2 because we have limited defined customers. In beginning of the business we cant get large market share. Control over manufacturer should be -2 because they are manufacturing according to our specification and our quality department have strong check and balance upon quality. Competitive pressure should be -4 because we are dealing in multiproduct business and yet there is no such a business. Financial stability should be + 5 because we are not sure about our projected profit because of dynamic environment.

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5.4 Quantitative Strategic Planning Matrix (QSPM):

Market development Product
development

Key Factors Opportunities: Large, Potential Domestic and International Market Market is gradually shifting towards Branded Readymade Garment. Increase interest of youth in textile designing field. Subsidiary for textile sector Textile Exports of Pakistan Threats: Energy crisis Political instability To make balance between price and quality Rising inflation Continuous Quality Improvement is need of the hour as there are different demand patterns all over the world. Total Strengths: Equipped with MIS System Use of technology Quality Customized services Customer loyalty/relationship Management Low cost Weakness: New business reputation Small international market share Less promotional activities Depends upon manufacturer for on time delivery

weight
0.10 0.09

As
4 3

TAS
0.4 0.27

AS
4 1

TAS
0.4 0.09

0.15 0.10 0.12

----1

----4

0.12

0.48

0.12 0.08 0.12 0.05 0.07

----4 --4 0.48

----1 --2 0.12

0.28

0.14

1.00

0.08 0.15 0.10 0.15

0.05 0.15 0.09 0.05 0.04 0.04 0.01 0.09

4 4 4 4 4 ----1 2

0.32 0.6 0.40 0.6 0.2

3 3 3 3 3 -----

0.24 0.45 0.30 0.45 0.15

0.04 0.08

2 1

0.08 0.04

0.09

0.18

Total

1.00

3.88 UOG |FMAS 53

3.12

AS: (Attractiveness Scores) TAS (total Attractiveness Scores)

1= not attractive 2= somewhat attractive 3= reasonably attractive 4= highly attractive

Previous SPACE matrix aggressive strategies like integration, Market penetration, Product development and diversification were recommended to us. But QSPM matrix filtered these strategies and recommend as one single strategy which is market development.

5.5 BCG Matrix

The Boston Consulting Group (BCG) Matrix is a simple tool to assess a companys position in terms of its product range. It helps a company think about its products and services and make decisions about which it should keep, which it should let go and which it should invest in further.

Stars (high growth ,high market share) As the buying house has long run opportunities for growth and profitability, high relative market share, industry growth rate is high. Forward, backward and horizontal integration, market penetration, market development are appropriate strategies that buying house can consider.
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Operational plan

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6.1 Mass Customization Focus strategy

Our business success depends on the satisfaction of customers (textile designer firms) and vendors (textile manufacturing firms). We have to help customer for making textile products according to the design from vendor. If customer wants to change its design then we have to negotiate it with vendor and fulfill our customers desire. Due to this reason we will use mass customization focus strategy for Arete. Mass customization focus strategy is the rapid, low

cost production that caters to constantly changing unique customer desires. In mass customization products/services are build to order. It means producing to customer order, not forecasts. The reasons to select mass customization strategy are: Textile product design is imaginative and fast. Process design is rapid, flexible and able to accommodate changes in design and technology. Tight schedules that track orders and material from design through delivery can be effectively implemented only with dedicated personnel. Responsive partners in the supply chain yield effective collaboration. Cooperation with fast open information exchange b/w textile design firms and textile manufacturing firms. Large quantity and large variety of products are produced through textile manufacturing firms. Rapid changeover on flexible equipments Flexible operators are trained for the necessary customization. Custom orders require many job instructions. Sophisticated scheduling is required to accommodate custom orders. Fixed costs tend to be high but variable costs must be low. This will help us to accurately predict budget.

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6.2 Service process design

Our service process strategy is separation in which we structured services so customer must go where the service is offered. Textile designer firms go to design manager to give them design which he/she will make, for taking the facility of logistic they will go towards logistic manager, for price negotiation firms will go towards merchandizing manager, for the finalization of order firms will negotiate with CEO. A brief description of the services of our business is given: As we are in the business of service providing, we really understand the needs and wants of our customers. We believe in facilitating our customers in the best possible way .
Descriptions of our valuable services are:

Sourcing manufacturer Sourcing and price negotiation Product development Production planning Quality control Shipping & Logistics

6.3 Layout & Location

Office Layout
Our layout will be office layout in which we selected cellular office. Cellular office is one in which employees work on their own or in small groups. It has partitions, doors, windows. There will be fewer distractions for employees, Offices can be used for meetings, employees can personalize their environment, and there will be less noise.

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Our office layout will be look like that:

Location
Our buying house will be located in 61A Rewarz Garden, Lahore. Our business timing will be 9:00 A.M to 5:00 P.M

6.4 Inventory Management

Arete is not having raw material, WIP and finished goods inventories. Its a service type of business. Textile design and manufacturing firms has own their inventory system we act as an intermediary between them. We will or will not make direct shipment from manufacturing firm to designer firm according to the particular order. Therefore, we do not need any inventory management system.

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6.5 Supply chain management

Supply chain management is the integration of the activities that procure materials and services, transform them into intermediate goods and final products, and deliver them to customer. The objective is to build a chain of supplier that focus on maximizing value to the ultimate customer. As Arete strive to increase their competitiveness via service customization, high quality, cost reductions and speed to market, added emphases is placed on the supply chain. Effective supply chain management makes suppliers Partners in the firms strategy to satisfy an ever changing marketplace. A competitive advantage may depend may depend on a close long term strategic relationship with a few suppliers. Supply chain management helps us to: Respond quickly to changing requirements. Select primarily vendors for capacity, speed and flexibility. Develop responsive system with buffer stocks positioned to ensure supply. Invest aggressively to reduce service lead time.

6.6 Vendor Selection

For Arete we will consider three stage process for vendor selection.

A) Vendor Evaluation:
The first stage of vendor evaluation involves finding potential vendors and determining the likelihood of their becoming goods suppliers. This phase require the development of evaluation criteria. Our evaluation criteria are: Criteria for vendors Engineering/research/innovation skills Production process capability (flexibility/technical assistance) Distribution/delivery capability Quality systems and performance Facilities/location Financial and managerial strength (stability and cost structure) Information systems capability Weights .20 .15 .05 .10 .05 .15 .10
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Integrity (environment compliance/ethics) Total

.20 1.00

We will select particular vendor according to the customer textile design. But according to criteria for vendor our potential vendor will be: Chenab textile mills Nishat textile Sitara textile mills Gul Ahmed Classic textile mills Raahet textile mills Itehad textile mills Zeenat textile mills Masood textile mills Yunus textile Kohinoor Textile Mills Hajra Textile Mills Olympia Textile Millsetc

B) Vendor development: Vendor development includes everything from training, to engineering and production help, to procedures for information transfer. In this stage Arete makes sure the vendor has an appreciation of quality requirements, products specifications, schedules and delivery, the purchasers payment system and procurement policies. C) Negotiations Regardless of the supply chain strategy adopted, negotiation regarding the critical elements of the contractual relationship must be take place. These negotiations often focus on quality,
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delivery, payment and cost. We will use cost based price model strategy in which vendor open books to the Arete. The contract price is then based on time and material or on fixed cost with an escalation clause to accommodate changes in the vendors labor and material cost.

6.7 Supply Chain Strategy

For goods and services to be obtained from outside sources, the Arete must decide on a supply chain strategy. We will use two strategies at different time period. Many suppliers Partnering

Firstly when we are searching for vendors which will make textile products according to our customer desire we will use negotiating with many suppliers strategy and playing one supplier against another. Secondly when our customers and vendors become loyal to Arete, we will make long term relationship with a few vendors to satisfy the end customer. Drop shipping

Arete will use Drop shipping opportunity for effective management in supply chain. Drop shipping means the vendor will ship directly to the end customer rather than to the seller saving both time and reshipping costs. This will help us to reduce shrinkage (lost, damaged or stolen merchandise) and handling cost.

6.8 Managing the supply chain

As managers move towards integration of the supply chain, substantial efficiencies are possible. But there are significant management issues that may result in serious inefficiencies. Success begins with mutual agreement on goals, followed by mutual trust. A) Mutual agreement on goals An integrated supply chain of Arete requires more than just agreement on the contractual terms of buy/sell relationship. Partners in the chain must appreciate that the only entity puts
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money into a supply chain is the end customer. Therefore, establishing a mutual understanding of the mission, strategy and goals of participating organizations is essential. B) Trust: Trust is critical to an effective and efficient supply chain. Members of the chain must enter into a relationship that share information. Visibility throughout the supply chain. Supplier

relationship are more likely to be successful if risk and cost saving are shared and activities such as customer research, sales analysis are joint activities. This relationship will build mutual trust for Arete.

6.8 Logistic Management

Logistic management will be done by on order directly from vendor warehouse to customer destination. We will charge differently according to distance covered. Logistic can be done by trucking and PIA Cargo

Lahore to Karachi 1,239 km (14 hours, 32 mints)

Distance and hours Lahore to Faisalabad to Faisalabad Gawader 155 km (2 hours, 1,757 km,(21 20mints) hours 31 mints)

Lahore to Gawader 1,853km, (22 hours 39 mints)

Diesel price 2012 High Speed Diesel Light Speed Diesel Rs. 106.19 /Ltr Rs. 93.3 /Ltr

Vehicles Container

Size 20 fit 40 fit

Truck
.

Lahore to Karachi 35,00040,000Rs 55,00060,000 25,000-31000

Lahore to Faisalabad 13,000-15,000Rs 20,000-25,000 8,000-7,000

Rent Faisalabad to Gawader 50,000-70,000 65,000-80,000 45,000-60,000

Lahore to Gawader 60,000-80,000 75,000-90,000 55,000-75,000

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Supply Chain Management of Arete

Sample Cash inflows

by

Textile design firm

Quality and Design assurance

Cash inflows

On order Shipment to customer by Arete

Searching vendors

Textile Manufacturing Firm

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Customers: TNC (Town and Country Living) Macy Kohls Pakistan institute of Pakistan etc

Vendors: Nishat textile Sitara textile mills Gul Ahemd Raahet textile mills.etc

6.9 Methods of Quality control

It is the responsibility of Quality Department to provide its customers with the best products and services possible and to be their partners to achieve continuous improvement. This commitment will allow providing the highest quality of product and customer service, meeting and surpassing their requirements. The Quality Controller insures that all their vendors produce quality goods in a safe environment for their workers, and meet all local laws and customers requirements pertaining to labor, age, wage, health, safety and security.

6.10 Customer service

A brief description of the services of our business is given: As we are in the business of service providing, we really understand the needs and wants of our customers. We believe in facilitating our customers in the best possible way.

Description of our valuable services

Sourcing manufacturer Sourcing and price negotiation Product development Production planning Quality control Shipping & Logistics

6.11 Personnel
Our number of employees will be 19 Type of labor that is required by us is professional. Our buying house will have a team of professionally trained merchandisers, designers, quality
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auditors and admin staff to manage logistics and operations. We want to recruit the best, talented employees for our buying house. We will recruit employees from universities by conducting career fair in universities. We will use referral system for hiring and recruiting of employees. The staff hired by company will be professional and their quality will be improved through training.

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Human Resource Management

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7. Organizational Structure

Texrile Design Manager

Asst. design Manager

Logistic Manager

Asst. Logistic Manager

opernational Manager
Quailty assurence Manager Auditor

I.T Officer
Mercandizing Manager Asst. Merchandizing Manager

Marketing Officer

CEO
H.R officer
Adminstration & coordination officer

Finance Manager

Accountant

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Human Recourse Management

HR management is conduct in our textile buying house. In this function we are recruit, select, train, assess and reward employees for achieving organizational objectives. The reasons for selecting in house HRM are start up small business, having enough staff and budget. Our HR objectives are: 1. 2. 3. 4. 5. 6. 7. 8. 9. To help the organization to reach its goals. To communicate HR policies to all employees. Legally compliance Enhance performance Attraction of job Increase job satisfaction of employees Retention Attendance Referral-establish meaningful referral program that makes employees work for HR, tracking success of referred employees to none referred employees.

7.1 Human recourse Planning:

We have done human recourse planning to determine future human recourse requirements, HR availabilities, conduct external & internal environmental scanning ,determine gap and develop action plans to close gap.

(3) Conduct environment scans

(1) Forecast HR requirements Compare (2) Forecast HR availabilities

HRP

(4) Determine gaps

(5) Develop action plans

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7.1.1. Initial Decisions:

Before HRP can be undertaken, there are several critical decisions that must be made. These decisions will shape the nature of the resultant HRP process.

Comprehensive of planning:
HRP takes places as an integral part of an organizations business planning process this is referred plan based HRP.

Planning time frame:

Since planning involves looking into future, the logical question for an organization to ask is, how far into the future should out planning extend? For plan based HRP the time frame are same as that of business plan (three years).

Job categories and levels:

In our business HRP is done for top level management, lower level management and non managerial level. Job categories are:

Top Management:
1. CEO

Middle level Management:

2. HR officer 3. Finance Manager 4. IT officer 5. Administration & coordination officer 6. Marketing officer 7. Operational Manager 8. Design manager 9. Merchandiser Manager 10. Quality insurance Manager

First line management:

11. logistic Manager 12. Assistant designer 13. Ast. Merchandiser 14. Quality Auditor 15. Ast.logistic 16. Accountant
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Others: 1. 2. 3. 4. Sweeper Guards Receptionist Tea boy

Head Count (current workforce):

In our business we have number of current workforce which is on the post of CEO, HR, finance, marketing, Operational, IT managers.

Roles and responsibilities:

Both line manager and staff specialists become involved in HRP so the roles and responsibilities of each must be determined as a part of HRP. The HR staff takes the lead in proposing which types of HRP will be undertaken and when and in making suggestions with regard to comprehensiveness, planning time frame, job categories and levels and head counts. Final decisions on these matters are usually the prerogative of line management (top management). In our business CEO and partners has the responsibility of HR and hire all other managers. Later on HR staff and other managers together will hire their subordinates.

7.1.2. Forecasting HR requirements:

Forecasting HR requirements is a derivative of business and organizational Planning. In our business we are using judgmental technique. The reason is that our business has small size and investment does not need huge staff.

Judgment techniques:
Judgmental techniques represent human decision making model that are used for forecasting HR requirements. Firstly partners forecast HR requirements and hired employees referred by own in our business. Later on when the business will be established top down and bottom up approach will be used. Now number of HR required 24 . In which seven jobs are filled remaining jobs need to be hiring.
Job CEO HR Officer Finance Manager IT Officer Number of employees 1 1 1 1 Job filled/empty Filled Filled Filled Filled

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Administration & coordination Officer Marketing Officer Operational Manager Design manager Merchandiser Manager Quality insurance Manager logistic Manager Assistant designer Ast. Merchandiser Quality Auditor Ast. Logistic Accountant Sweeper Guards Receptionist Tea boy Total

1 1 1 1 1 1 1 1 2 2 1 1 2 2 1 1 24

Filled Filled Filled Empty Empty Empty Empty Empty Empty Empty Empty Empty Empty Empty Empty Empty HR required=17

7.1.3 Forecasting HR Availabilities:

A judgmental technique like succession planning is used to forecast HR availabilities.
Job Design manager Merchandiser Manager Quality insurance Manager logistic Manager Assistant designer Ast. Merchandiser Quality Auditor Ast. Logistic Accountant Sweeper Guards Receptionist Tea boy Required employee 1 1 1 1 1 2 2 1 1 2 2 1 1 Availability of employee 0 0 0 0 0 0 0 0 0 0 0 0 0

7.1.4 External and internal Environmental Scanning:

External Scanning:
Item Employed Labor 2006 47.37 2007 49.68 2008 51.62 2009 52.71 2010 54.05 2011 55.17

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Rural Urban Unemployment Rate (%) Rural Urban

Noted from SBP website

32.78 14.59 6.20 5.35 8.04

34.90 14.79 5.20 4.71 6.34

34.32 17.30 5.46 4.73 7.11

35.53 17.18 5.46 4.73 7.11

36.27 17.78 5.55 4.82 7.21

36.72 18.45 5.55 4.85 7.21

Source: Pakistan Economic Survey & PSLM

7.1.5. Determine gaps:

Job category CEO HR Officer Finance Manager IT Officer Administration & coordination officer Marketing officer Operational Manager Design manager Merchandiser Manager Quality insurance Manager logistic Manager Assistant designer Ast. Merchandiser Quality Auditor Ast. Logistic Accountant Sweeper Guards Receptionist Tea boy Current workforce 1 1 1 1 1 1 1 --------------------------HR required 1 1 1 1 1 1 1 1 1 1 1 1 2 2 1 1 2 2 1 1 HR availabilities 1 1 1 1 1 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 GAP No gap No gap No gap No gap No gap No gap No gap -1(shortage) -1(shortage) -1(shortage) -1(shortage) -1(shortage) -2(shortage) -2(shortage) -1(shortage) -1 (shortage) -2(shortage) -2(shortage) -1(shortage) -1 (shortage)

7.1.6. Action plan:

Action planning involves four basic steps: 1. 2. 3. 4. Staffing objectives Generate alternatives Assess alternatives Choose alternative activities

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Staffing objectives: Quantitative target:

Job category/level Middle level Design manager Merchandiser Manager Quality insurance Manager Logistic Manager First line management Assistant designer Ast. Merchandiser Quality Auditor Ast. Logistic Accountant Others Sweeper Guards Receptionist Tea boy Head count

1 1 1 1

1 2 2 1 1 2 2 1 1

Qualitative objectives:
KSAO target: Knowledge: Textile engineering MBA Marketing MBA or BBA Metric or less Skills: Communication skills Negotiation skills Microsoft office Problem solving skills
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CGPA 3.00 CGPA 3.00 CGPA 3.00 50% marks

Experienced Experienced Experienced Experienced

Quantitative skills Social skills CAD skills Abilities: Cognitive abilities Sensory abilities

Generating alternative staffing activities:

Employee Shortage

Hire

Transfer work out

Assess and choose alternatives:

Being a start up business we have chosen hire staffing activity because through it we can achieve our hr objectives.

Core workforce:
In our business we will hire regular full time employees. The reasons are that core workforce provides stability, continuity and predictability. The regularity of the employment relationship fosters a sense of commitment and shared purpose toward the organizations mission.

Staffing philosophy:
Our business staffing philosophy is external staffing. The reasons for selecting are: Brings employees in with new KSAOs Large number of minorities and women to draw from. Large labor market to draw form Employees may require less training time

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8. Job analysis

Understand the purpose of the job analysis

Review draft with supervisor

Understand the roles of jobs in the organization

Develop draft

Seek clarification

Benchmark positions

Determine how to collect job analysis information

Being a start of new business we want to know the job required to run our business their duties, skills, qualification, salary and job context. All of these will help us to recruit, select, train, reward and developed our employees. Through job analysis we have make our organizational structure competitive. The roles of main jobs in organization are: The main role of design manager job is to ensure the design techniques are according to the customers standards. In this job merchandizing manager is play a bridge role between vendor and customer while making sure not to impair the interest of anybody involved. The main role of quality assurance manager id to provide the customer with the best product and services possible and to be their partners to achieve continuous improvement. This commitment to total quality will allow us to provide the highest quality of product and customer service, meeting and surpassing their requirements. In job logistic manager is ensure logistic execution of shipments in terms of planning, paper work and payment release.

We have Benchmark our designer manager, merchandizing manager, quality insurance manager and logistic manager with the jobs are main competitors: Cotcom and Textilian . We have collect job information by using observation method, individual interview method and diary method. We discuss all UOG |FMAS 75

the results of job analysis with the manager of our competitors and make job description. Review JDs with our final project supervisor. JD for jobs is attached in appendix.

9. External Recruitment:
For our textile business we are using to identify and attract job applicants from outside the organization. External recruitment is centralized and done by HR officer. We need qualified and well experienced workforce thats why we are used target recruitment. For target recruitment we have done: Job requirement Matrix Demographics (number of years of experience) Geographic area (Pakistan) The Military (for guards)

Recruitment Sources:
Fortunately for organization, when conducting a search for applicants, they do not have to identify each possible job applicant. Instead there are institutions in our economy where job seekers congregate. Intermediaries between the applicant and employer to ensure that a match takes place. These institutions are called recruitment sources.

1. Employee referrals:
In our buying house we need experienced well trained employee to ensure the success so for this employees currently working for an employer are valuable source for finding job applicants. CEO, HR officer, Marketing, Finance, IT and operational manager will suggest design, logistic, merchandizing and quality assurance manager through their referrals. Further workforce can be recruiting through suggestion and advertisement. Referral programs have many potential advantages like low cost/hire, high quality hires, decreased hiring time and opportunity to strengthen the bond with current employees.

2. Advertisement:
We will do advertisement through newspapers. The names are following:

Newspapers:
The news DAWN NEWS

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76

Advertisement cost:
Position 18 cm* 1col. The news Edition Khi/lhr/Rwp Rate 11,250Rs.

Day Sunday Mondays

Size Half page Half page

DAWN NEWS Page Standard rate 9 52$ 9 40$

Rate over standard rate 15% 25%

Total cost 5,382Rs 45,00Rs

3. Recruiting online: Website names for our job ad posting in this website we will post job free of cost as well we post in Arete website. http://www.mustakbil.com/ http://placingjobs.com/ http://pk.tiptopjob.com/

UOG |FMAS

77

10. Selection process:

HR notified of opening(s)

Middle level and first line mgt

mgtma
Employee referral

Search applicant file

Qualified applicants
Yes

Or

Ad in newspaper and business magazines .etc

Contact applicants Review resumes

Invite for interview Yes Applicant interview No

Send rejection letter

No

Opt out
Yes

Interview HR or manager Opt out

Offer job Yes

No

Send letter or call

Place ad or employee referral No or

Counter offer

Accept offer

Opt out

referral

Screen resumes Medical tests

No

Yes

Search applicant file

Receive telephone call to start work

Yes

Confirm as employee
Source: staffing by Herbert G.hebenam

Pass two mo probation periods

No

Dismissed

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78

Explanation:
CV will be select by mail. Panel interview will used to select the candidates. Panel of CEO, HR, Marketing, finance, IT, and operational manager will select together middle management and first line management. Furthe managers along with HR officer will hire their assistants. We will also take require some medical test to which will help to give employees medical insurance. For applying candidate these medical test are required by certified and popular Pakistani laboratory Fatima Memoyral hospital laboratory Lahore. Eye Color blindness test Blood test Urine test Hemoglobin test Diabetes test Cholesterol level test Hepatitis test

11.Training and development:

Orientation will be given to all employees after hiring. After this training through mentoring is provided for one month.

12. Compensation system:

12.1Pay Structure:
Jobs CEO Financial Manager HR officer A&C officer Operational Manager Marketing Officer I.T officer Quality Manager Textile design Manager Logistic Manager Merchandizing Manager Assistant Textile design Manager Assistant Logistic Manager Quality Auditor Accountant Salary Range 100,000-2,00000 45,000- 60,000 30,000-45,000 30,000-45,000 45,000-60,000 30,000-45,000 30,000-45,000 40,000-55,000 40,000-55,000 40,000-55,000 40,000-55,000 20,000-30,000 20,000-30,000 20,000-30,000 16,000-25,000 UOG |FMAS 79

Assistant Merchandizing Manager Sweeper Guards Receptionist Tea boy

40,000-55,000 8,000-10,000 9,000-12,000 8,000-15,000 8,000-10,000

Additional Benefits:
Jobs
Medical insurance Transportation allowance

Additional benefits
Mobile allowance Home rent allowance Eid Bonus Provided funds Informal recognition

CEO Managers Assistants Guards sweepers

Yes Yes Yes Yes

Yes Yes Yes No

Yes Yes Yes Yes

No Yes Yes Yes

Yes Yes Yes Yes

Yes Yes Yes Yes

May or may not Yes Yes Yes

Medical insurance (payment of doctor fee) Transportation allowance (1000Rs each month) Mobile allowance 400Rs each month Home rent allowance (4000 each month) Eid Bonus (salary will be double each employee) 12% will be cut as a provided fund. Informal recognition at the end of project

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80

Financial Plan

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81

Financial Plan
It is the most crushable portion of the project. Finance is the backbone of any organization. Financial Plan ensure that there are adequate funds available to acquire the resources needed to help the organization achieve its objectives; ensure costs are controlled; ensure adequate cash flow; establish and control profitability levels. One of the major roles of the Finance department is to identify appropriate financial information prior to communicating this information to managers and decision-makers, in order that they may make informed judgments and decisions. The three core functions of the Finance Department are to provide strategic financial support for business and operational planning and to provide day-to-day financial services to the investors, its departments. Meet external and internal financial reporting requirements.

Capital Requirement for starting business

We are going to provide middle man services to our customers. The initial capital require for our business is Rs. 20, 00000 Startup costs: 15 computer@20,000 each 5 Printer @8000each Photocopier machine Furniture 11 air conditioner@ 40,000 Stationary Bracket fans 12 Wall clocks@800 10 Telephone sets@1800 3,00000 40,000 20,000 225,500 440,000 10,000 12000 9600 18000
UOG |FMAS 82

Fridge Generator Projector Security camera Scanner Water dispenser Marketing cost Business + trademark registration cost Rent Installation expenses Recruitment cost Security deposit against office Commercial meter connection for electricity Telephone installation cost Internet installation

10,000 3,00000 95000 17000 242,000 18000 140300 34,340 75,000 10,000 21,132 2,00000 30,000 4000 4,000 2,268,872

Total

Detail of capital expenditure

No. of items

Furniture

Computer

Miscellaneous expenses

(Rs.) CEO Table Rolling chairs Chairs Printer 1 1 3 1 4000 5000 4500

(Rs.)

Air conditioner+ projector (Rs.)

8000
UOG |FMAS 83

Computer AC Table Rolling chair Printer Chairs Computer AC Table Rolling chair Printer Chairs Computer AC Table Rolling chair Chairs Computer AC Table Rolling chair Chairs Computer AC Table Rolling chair Chairs Computer AC Table Rolling chair Chairs

1 1 1 1 1 2 1 1 1 1 1 2 1 1 1 1 2 1 1 1 1 2 1 1 1 1 2 1 1

20000 40,000 Operational Manager 4000 3500 8000 3000 20000 40,000 IT manager 4000 3500 8000 2000 20000 40,000 Marketing Manager 4000 3500 3000 20000 40,000 HR Manager 4000 3500 3000 20000 40,000 Administration &coordination Manager 4000 3500 3000 20,000 40,000

Textile Design Department 2 8000 1 3500 2 3000

UOG |FMAS 84

Computer AC Table Rolling chair Chairs Computer AC Table Rolling chair Chairs Printer Computer AC Table Rolling chair Chair Printer Computer AC Table Chairs Projector Computer AC Sofa set Table for sofas Total

2 1

40000 40,000 Logistics Department 8000 3500 3000 40000

2 1 2 2 1 Quality Assurance Department 2 8000 1 3500 2 3000 1 8000 2 40000 1 Merchandising Department 2 8000 1 3500 2 3000 1 8000 2 40,000 1 Meeting room 1 15,000 15 52500 1 1 20,000 1 Visiting room 1 25000 1 10,000 225,500 340,000

40,000

40,000

40,000

95000 40,000

535,000

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85

Marketing budget:
Activity Internet Business Magazine Total Duration(Months) 2 Cost 18300 122000 140300

Recruitment cost
Position 18 cm* 1col. The news Edition Khi/lhr/Rwp Rate 11,250Rs.

Day Sunday Mondays

Size Half page Half page

DAWN NEWS Page Standard rate 9 52$ 9 40$

Rate over standard rate 15% 25%

Total cost 5,382Rs 45,00Rs

9.1 Break- even analysis

Sales= fixed cost + variable cost + profit 551091Q= 1122100 + 25,000Q + 0 551091Q-25,000Q=1122100 526091Q=1122100 Q=1122100/526091 = 2.13 If we have two contracts per month then we will achieve break-even point.

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86

9.2 Important Assumptions Revenue:

Arete is a service organization providing sourcing and design services in terms of variety, competitive prices, quality and on time delivery. Arete is providing buying services to international clientele and our buyers are dispersed widely. We will focus on those countries that have strong market and economy like Germany, France, America, England, and USA has significant purchasing power per capita, the USA is a highly desirable market for these products. Our target market is England, Germany and France. Our sample size is 50. Total population is 520. Demand: 70% agree that they want to outsource from Pakistan. 60% want to outsource twice a month. 60% are willing to pay 25,00000 total cost of their product outsourced excluding commission fee.

Number of sales:
As 70% agree that they want to outsource from Pakistan and we have assumed that 15% are not willing to outsource. 55%* 520=286 Per unit cost = Depreciation expenses No. of units 312,208 = 1091 286 We will take 11% commission from both buyer and manufacturer.
UOG |FMAS 87

Per unit price+ commission 1091+ 22% As in our survey 60% are willing to pay 25, 00000. 25,00000*22% = 550,000 1091+ 550,000 = 551091 60% are willing to outsource twice a month Then, 551091*2=1102182 is per month sale Per year sale: 1102128*12= 132261184 2nd year sale: We have assumed that our buyer will become our loyal costumers due to assurance of right quality and time delivery and our contract with our buyer will increase. Then, 551091*3 =1653273 1653273*12=19839276 3rd year sale: 551091*4=2204364 2204364*12=26452368

9.3 Income statement

Notes Revenue General and admin Expenses Marketing expenses Depreciation expenses Salaries 3 1 2

2012 RS. 132,01,083

2013 RS. 19,839,276

2014 RS. 26,452,368

140300 341,278 7,872,000

152530 341,278 8659200

177479 341,278 9525120 UOG |FMAS 88

Utility expenses Preliminary write off Stationary expenses Maintenance expenses Miscellaneous expenses Office on rent per year Total operating Expenses Operating Profit Tax Income after Tax Distributed earnings Retained earnings

4 9 7 5 6

360,000 6994 10000 60,000 20,000 900,000 9710,572 3490,511 698,102 2,792,408 2,094,306 698,102

391200 6294 10500 64,200 21,000 990,000 10,636,202 9,203,074 1,840,614 7,362,459 5,521,844 1,840,614

446440 5665 11025 66,768 22,470 1089000 11,685,245 14,767,123 2,953,424 11,813,699 8,860,274 2,953,424

10 11

9.4 Balance sheet

Notes ASSETS Current Assets Cash in hand Fixed assets Furniture & Fixtures Computer Printers Photo copier Machine Generator Fridge Wall clocks

2013

2014

2015

1,346,606

3,583,193

6,753,461

225,500 300000 40,000 20,000 300000 10,000 9600

225,500 300000 40,000 20,000 300000 10,000 9600

3,00000 360000 40,000 40,000 300000 25,000 9600

UOG |FMAS 89

Telephone sets Water dispenser scanner Bracket fans Projector Security cameras AC Security deposit against office Preliminary expenses write off Total Assets 9

18,000 18000 242,000 12000 95000 17000 440000 200000 62,946

3,356,652

18,000 18000 242,000 12000 95000 17000 440000 200000 56,651

5,586,944

18,000 27,000 242,000 12000 95000 17000 440000 200000 50,985

8,930,046

9.5 Cash flow state

LIABILITIES+OWNER EQUITY Owners equity Retained earning Accumulated Depreciation Total liabilities and owners equity Indirect Method 2,268,872
698,102 2,966,974 1,840,614 779,356 5,586,944 4,807,588

ment

2,953,424
1,169,034 8,930,046

389,678 3,356,652 Notes

1st year

2nd year

3rd year

Operating activities: Opening cash Net Income Add depreciation Add written off Preliminary exp. Cash provided by operating activities Investing activities: Furniture Equipment 8 (225,500) (1,521,600) (74,500) (104,000)
UOG |FMAS 90

1,346,606 2,792,408 1 9 389,678 6994 3,189,080 7,362,459 389,678 6294 9,105,037

3,583,193 11,813,699 389,678 5665 15,792,235

Preliminary Expenses Security deposit against office Cash used by investing activities Financing activities: Equity Distributed income Cash used by financing activities Net increase in cash and cash equivalents Cash & cash equivalents at end of period

(69,940) (2,00,000) (20,17040) (178,500)

2,268,872 (2,094,306) 174566 (5,521,844) (5,521,844) 3,583,193 (8,860,274) (8,860,274) 6,753,461

1,346,606

3,583,193

6,753,461

Notes to the Accounts:

1. Depreciation Expenses: Method used for depreciation is straight line method: Depreciation = Price of the asset / Useful life of the asset

Price Computers Printers Projector Photocopier Machine Air conditioner Generator 3,00000 440,000 3,00000 40,000 95000 20,000

Useful life 3 3 5 3

1st year 1,00000 13333 19000 6666

2nd year 1,00000 13333 19000 6666

3rd year 1,00000 13333 19000 6666

88000

88000

88000

60,000

60,000

60,000

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91

Security camera Furniture Water Dispenser Bracket fans Telephone sets Scanner Wall clocks Fridge Total

17000

5666

5666

5666

225,500 18,000

7 3

32,214 6000

32,214 6000

32,214 6000

12,000 18,000

3 5

4,000 3600

4,000 3600

4,000 3600

242000 9,600 10,000 1,505,100

5 7 7

48,400 1371 1428 389,678 1371 1428 389,678 1371 1428 389,678

2. Pay and Allowances:

Following would be the salaries of employees of Arete; The following pay is inclusive of all allowances i.e medical allowance, transportation allowance, mobile allowance, house rent allowance. There will be 10% increase in salaries of all employees due to increase in number of sales. Position Strength Monthly Salary Annual Salary Annual Annual Per Person 2013 (Rs.) Salary 2014 Salary 2015 (Rs.) (Rs.) (Rs.) 100,000 1200000 1320000 1452000 45,000 540000 594000 653400 30,000 360000 396000 435600 30,000 360000 396000 435600 45,000 540000 594000 653400 30,000 360000 396000 435600 30,000 360000 396000 435600 40,000 480000 528000 580800 40,000 480000 528000 580800 40,000 480000 528000 580800
UOG |FMAS 92

CEO Financial Manager HR officer A&C officer Operational Manager Marketing Officer I.T officer Quality Manager Textile design Manager Logistic Manager

1 1 1 1 1 1 1 1 1 1

Merchandizing Manager Assistant Textile design Manager Assistant Logistic Manager Quality Auditor Accountant Assistant Merchandizing Manager Sweeper Guards Receptionist Tea boy Total

1 1 1 2 1 2 2 2 1 1

40,000 20,000 20,000 40,000 16,000 40,000 16,000 18,000 8,000 8,000 656,000

480000 240000 240000 480000 192000 480000 192000 216000 96000 96000 7872000

528000 264000 264000 528000 211200 528000 211200 237600 105600 105600 8659200

580800 290400 290400 580800 232320 580800 232320 261360 116160 116160 9525120

3. Marketing Expenses:
Marketing expenses will increase by 10% in 2nd year and 15% in 3rd year. Activity Duration (Months) 2 Cost 1st year 18300 122000 140300 20130 134200 152530 23,149 153304 177479 2014 2015

Internet Business Magazine Total

4. Utilities Expenses:
Utility expenses include electricity and telephone expenses. We have categorized electricity bill in two parts that is electricity bill with AC and electricity bill without AC. We have considered this because in the summer season consumption of electricity increases due to the use of air conditioner and fans. In 2nd year there is an increase of 13% in Electricity bill it is because of the inflation. In 3rd year there is an increase in Electricity bill of 20%. Utility bills Per Amount Per year 2014 2015

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93

month Electricity Bill: Electricity bill with AC Electricity bill without AC Telephone Total 10,000 50,000 15000 25,000

2013

25000*6=150,000 169,500 15000*12=90,000 203,400

101,700 10,000*12=120,000 3600,000 120,000 391,200

122,040 121,000 446,440

5. Miscellaneous Expenses:
Total Miscellaneous Charges 2nd year 1000+20,000 = 3rd year = 20,000 20,000*5%= 21,000

21000*7% = 1470 1470+21000 = 22,470

6. Rent:
Rent for 1 month Rent for the 1st year = = 75,000 75,000*12

= 900,000( Rent for the 2nd year 900,000*10% = 9,90,000 Rent for the 3rd year
UOG |FMAS 94

9,90,000*10% = 10,89,000 Rent will increase 10% annually as agreement.

7. Maintenance Expenses:
Maintenance of computers, printers, generator and all other equipment is required. Maintenance Charges = 5000 per month = 5000*12 1st year expenses 2nd year expenses 60,000*7%= 4200 4200+60000= 64,200 3rd year expenses 64200*4%= 2568 = 60000

2568+64,200=66,768

8. Equipments: Equipments Computers Printers Photocopier Machine Bracket fan Security camera 4 1 12000 17000 12000 17000 12,000 17,000
UOG |FMAS 95

Quantity 15 5 1

1st year 3,00000 40,000 20,000

2nd year 3,00000 40,000 20,000

3rd year 360,000 40,000 40,000

Fridge Projector Air conditioner Generator Water dispenser Telephone scanner Wall clocks Total

1 1 8 1 2 12 1 12

10,000 95000 440,000 3,00000 18,000 18,000 242,000 9600

1,521,600

25,000 95000 440,000 3,00000 18,000 18,000 242,000 9600 1,521,600 95,000 440,000 3,00000 27,000 18,000 242,000 9600
1,625,600

9. Preliminary expenses:
Preliminary Expenses Registration of the Partnership Trademark Registration Telephone installation cost Electricity installation cost National tax number Total We will write off 10% each year Year 2013 year 2014 year 2015 6994 6294 5665 RS. 500 21600+12240=33840 4000 30,000 1600 69,940

69940-6994=62,946 62,946-6294=56,651 56,651-5665=50,985

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96

10. Tax:
20% of operating profit will be paid as tax each year and will be deducted from the operation profit. 1st year Operating profit 3490,511 20% tax 698,102 Income after Tax 2,792,408 2nd year operating profit
9,203,074

3rd year operating profit

14,767,123 2,953,424 11,813,699

1840,614
7,362,459

11. Distributed earnings:

75% of income after tax will be distributed and 25% will be retained earnings.

1st year Income after tax

2,792,408

2nd year income after tax

7,362,459 5,521,844 1,840,614

3rd year income after tax

11,813,699 8,860,274 2,953,424

75% distributed earning

2,082,306

Retained earnings
698,102

Financial ratios: Activity ratios

Fixed Asset Turnover Ratio: Sales/Fixed Asset

1st year 132,10,083/2,010,046 6.57 times

2nd year 3rd year 19,839,276/2,010,046 26,452,368/2,010,046 9.87 times 13.16 times

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97

Total Asset Turnover Ratio: Sales/Total Asset

1st year 132,10,083/3,356,652 3.93 times

2nd year 19,839,276/5,586,944 3.55 times

3rd year 26,452,368/8,930,046 2.96 times

Profitability ratios
Operating Profit Margin: EBIT/Sales

1st year 3490,511/132,10,083 0.26 times

2nd year 9,203,074/19,989,779 0.46times

3rd year 14,767,123/26,452,368 0.55 times

Net Profit Margin: Net Income/Sales 2nd year 7,362,459/19,989,779 0.36 times 3rd year /11,813,69926,452,368 0.44 times

1st year 2,792,408/132,10,083 0.21 times

Return on Asset: Net Income/Total Asset

1st year 2,792,408/3,356,652 0.83 times

2nd year 7,362,459/5,586,944 1.31 times

3rd year 11,813,699/8,930,046 1.32 times

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98

Risk management

UOG |FMAS

99

10.1 Management Risks

Our business is service related, so we can face management risk which may be created by our employees. Management risk is related with ineffective, harsh or underperforming management, which can hurt the companys financial position, and market reputation. Management risk refers to the risk of the situation in which the company would have been better off without the choices made by management. Sometimes company managers will put their own interests ahead of the interest of the company which could be harmful for our company. The main reason for this type of risk is poor management. Management means how you can organize you activities in a way that would produce output more efficiently. Management risk occurs due to several reasons like Management is inefficient and do not have enough capabilities for managing the business, employees are not motivated to do their jobs so they are reluctant to leave it, sometimes management of the company puts its own interest before those of the company and its stakeholders, management is doing favoritism among some employees. In order to minimize these types of activities we need to take different actions including; We must have a check and balance at our management team We should hire experienced and well educated employees We must provide our employees with best facilities, incentives to reduce biasness Defining rules and regulations to perform the certain activities regarding management We must train and develop our employees in order to increase their efficiency for managing the business The owner must make surprise visits to the work place

UOG |FMAS

100

10.2 Marketing risk

Marketing is that part of your business that transforms production activities into financial success. Many unforeseen forces such as actions of competitors, market trends and government actions can lead to improbability of costs, prices and demand in the market and, therefore. Marketing risk can be created because of changing in market trend, competitors actions, wrong market research, threats for our intellectual property of being copied, advertisement/ marketing tools are not effective, speculations, and wrong demand and supply anticipation.

1. The one big marketing risk is that the marketing strategy that we adopt might be failed. This can be due to the inappropriate strategy selection and inappropriate way of marketing. 2. Another marketing risk is the better marketing strategies of our competitors. If our competitors have an advantage of a better marketing strategy, it can threaten our business. 3. Market availability risk is related to loss of market access due to competition or loss of a major customer, and loss of marketing power due to the small size of service providers relative to service takers.

Marketing risk can be minimized by: Developing a strategic marketing plan (must be flexible) Appointing Skilled and experienced marketing manager Continually updating marketers abilities by learning new skills Training

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101

10.3 Operational risk

Operational risk can be described as a human risk. It is the risk of business operations failing due to human error. Operations are like moments which are compulsory for any business organization if any business is not operated then it could be closed. It includes risks resulting from breakdowns in internal procedures, people and systems. It is associated with our business' operational and administrative procedures. Our business is based on human resources, physical and financial resources. If we cannot access any one of them then we can face difficulty in performing our activities/ operations. If any employee of our business who has cognitive abilities leaves his job, then we can face difficulty in managing our operations. Because that type of employees are considered as a very important asset for any organization. For this reason we have to motivate our employees by providing those incentives, bonuses, authority, rewards and appreciations. We can also loss our human resource if any employee dies. To tackle this we should use more efficient recruitment process by which we can replace that gap. Other types of physical resource are buildings and equipment. If our office buildings damaged due to fire, weather, or earthquake. Then for this we have to insured our buildings, and try to anticipate for type of threats in advance. Lack of proper equipment can also create difficulty for our staff in order to perform their actions i.e. insufficient computers, table, chairs, and office supplies. For this we have to estimate the equipment required and provide our employees with them. There are also several reasons of operational risk including computer software/IT systems using for book keeping, customer/employee database, and Government action against our business. Breakdown of existing IT system will be a problem in performing the operations. For this we have to recruit those persons who are well trained in these types of software and know how to tackle their problems. To reduce government impact at our business we have to follow the rules and regulations imposed by them.

10.4 Technological risk

Technological risk incurred due to lack of getting expected cost saving benefits from it and looses the investment which business made on it. To get competitive advantage we will use
UOG |FMAS 102

advance technology. We can face technological risk if our technology does not provide cost saving benefit.

10.5 Country or sovereign risk

Country or sovereign risk is a type of risk faced by businesses who are involved in international dealing. In country or sovereign risk payment is seized by the host country due to political affairs. We can face this risk because we are dealing in international business too.

UOG |FMAS

103

Reference:
Lovelock,C.( ).Service Marketing people,technology,strategy.New Jersey:Pearson Prentice Hall. Yasin,A.(n.d).Textile industry of Pakistan. Retrieved july 23,2012, from http://horizonpak.com/db/Reports/research.pdf Ali,Z.(2010,Octuber 12).The role of merchandiser in managing the supply chain.Retrieved july 27,2012,from http://bada.hb.se/handle/2320/6708 Tim,D.(N.D).The role of marketing past, present and future. Retrieved August 1, 2012, from http://www.emeraldinsight.com/journals.htm?articleid=857874&show=html Noor,A.(n.d).Pakistan as major Asian market for textile machinery manufacturing nations.Retrieved August 1, 2012,from http://www.ptj.com.pk/Web-2011/08-2011/Dr-NoorAhmed.htm

Fred R.David.Strategic management concepts and cases . India: Prentice Hall. Milkovich,Newman.Compensation. Jary.H.Operation and production managemnet

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104