industrial management report

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PRINCIPLES OF MANAGEMENT(FAUJI FERTILIZER BIN QASIM LTD.)

COURSE: MAN 410

COURSE IN CHARGE: MR. MUHAMMED AKRAM

GROUP MEMBERS: MUHAMMED SHOAIB KHAN 10343

PROGRAM MBA (INDUSTRIAL MANAGEMENT)

DATE: 03- JAN - 2010


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FAUJI FERTILIZER BIN QASIM LTD.Date: 19 DEC,

2009Page 2 of 14

TABLE OF CONTENTS

LETTER OF AUTHORIZATION..................................................................................3

IMPORTANCE OF INDUSTRY ANALYSIS...............................................................4

ACKNOWLEDGEMENT...............................................................................................5

EXECUTIVE SUMMARY..............................................................................................6

1INTRODUCTION..........................................................................................................7

1.1 HISTORY.................................................................................................................................................................71.2 PRODUCTS...............................................................................................................................................................71.3 DISTINCTPARTOFOTHERINDUSTRY.............................................................................................................................81.4 GEOGRAPHIC SCOPEOF COMPETITION..........................................................................................................................8

2PORTER FIVE FORCES............................................................................................81.5 THEBUYERSANDBUYERGROUPS................................................................................................................................91.6 THESUPPLIERANDSUPPLIERGROUPS.........................................................................................................................101.7 THE COMPETITORS..................................................................................................................................................101.8 THE SUBSTITUTES...................................................................................................................................................111.9 THE POTENTIAL ENTRANTS......................................................................................................................................11

3ASSESS THE UNDERLYING DRIVERS OF EACH COMPETITIVE FORCE

TO DETERMINE WHICH FORCES ARE STRONG AND WHICH ARE WEAK

AND WHY......................................................................................................................11

1.10 STRENGTH...........................................................................................................................................................111.11 WEAKNESS..........................................................................................................................................................12

4OVER ALL INDUSTRY STRUCTURE, AND ANALYSIS FOR CONSISTENCY

.........................................................................................................................................13

1.12 WHYISTHELEVELOFPROFITABILITYWHATITIS?.....................................................................................................13

5IDENTIFY ASPECTS OF INDUSTRY STRUCTURE THAT MIGHT BE

INFLUENCED BY COMPETTITORS, BY NEW ENTRANTS, OR BY YOUR

COMPANY.....................................................................................................................14

Made For:Institute of Business Management


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LETTER OF AUTHORIZATION

Dear Readers,

I as student of Industrial Management, with the authorization of our course

instructor Mr. Muhammad Akram have prepared a report about the Industry Analysis of FAUJI

FERTILIZER BIN QASIM LTD.. The purpose of this report is to acquire all the possible

information about the different aspects of Management that FFBL practices.

Sincerely,

Muhammed Shoaib Khan ID # 10343



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IMPORTANCE OF INDUSTRY ANALYSIS

Management is the most important aspect and the quintessential science to business anywhere.

Whilst most businesses may or may not be familiar with the terminology we study in books today

most businessmen still do use these same management techniques that have been referred to in

our books with specific names.



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ACKNOWLEDGEMENT

To see how the Industry Analysis was applied at FFBL (Fauji Fertilizer Bin Qasim ltd.), I visited

the company located at Bin Qasim in outskirts of Karachi. I met with the companys Senior

Executive Lt. Col. Mohammad Asif Khan (Ret.) & Distribution Executive Muhammad Javaid

Iqbal to gain insight into the various management roles they perform within the organization, and

the extent to which they analyze other competitive industries.

Presented below is a summary of all the information I managed to gather, starting from a general

discussion of the management system as a whole, proceeding to questions pertaining to the

different management functions of five forces, taking each in turn and elucidating on its

components.



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EXECUTIVE SUMMARY

Research Objective

To identify the factors leading to improve the organization at large & the variance between the

actual and projected sales by analyzing the following possible areas:

Awareness about the product and most effective medium of promotion.

Organization structure & goals.

Analysis of different products & target market.

Five Forces Identification of problems & issues pertaining with organization

Method of Research

Method of research used in this report is Exploratory Research.

Research Instruments and Technique

Data was collected through interview-based questionnaires. This is a semi-structured instrument

for asking information directly from the respondent concerning perception. It was kept slightly

open ended so that better understanding could be developed about the market and hence prepare

a more comprehensive report.

Findings

Based on aforesaid data collection technique information were gathered regarding FFBL.

Analysis for the company was carried out and the problems and issues were highlighted.



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1 INTRODUCTION

1.1 History

Fauji Fertilizer Bin Qasim Limited is a modern Granular Urea and Di-Ammonium Phosphate

(DAP) fertilizers manufacturing complex, built at a cost of US$ 468 Million and located in

Eastern Zone of Bin Qasim, Karachi, with Head Office at Harley Street, Rawalpindi.

Initially named as FFC-Jordan Fertilizer Company (FJFC), weft 17th Nov 1993, with FFC

(30%), FF (10%) and JPMC (10%) as main sponsors; the company was formally listed with

stock exchanges in May 1996 and commercial production commenced on Jan 2000.

Renamed as Fauji Fertilizer Bin Qasim Ltd. (FFBL) in 2003, as such Jordan Phosphate Mines

Co. (JPMC) had sold its entire equity in the company. Accordingly Phosphoric acid supply

agreement with Jordan was terminated.

The company turned out to be profitable by 2004 and declared 'maiden dividend' in 2004.

Profitability has constantly been on the rise since then and 2007 has been the most profitableyear of the company. Intimacy

1.2 Products

FFBL fertilizer complex is a state of the art manufacturing facility with advanced Distributed

Control System for safe and efficient operation. At present there are three plants operating at

FFBL to produce Ammonia, DAP (Di-Ammonium Phosphate) and Granular Urea. Ammonia

being the feed for both other plants has its 100% consumption on plant. Production capacity for

each plant is provided in table-1.



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Table 1: Production Profile

PlantProduction Capacity

(MTPD)Ammonia 1570

Granular Urea 1920

DAP 2230

1.3 Distinct part of other industry

The products of FFBL are a part of other distinct industry that includes the agricultural industry

which are being provided UREA and DAP by FFBL, the petrochemical industry which are being

provided Phosphoric Acid by FFBL and the fire fighting equipment manufacturers which are

being provided CO2 by FFBL.

1.4 Geographic Scope of Competition

Recently, FFBL is making significant contribution towards agricultural growth of the country by

meeting 45% of the demand of DAP and 13% of Urea in domestic market. Because with its state

of the art Fertilizer Plant, Fauji Fertilizer Bin Qasim Limited is the only Granular Urea

manufacturer in Pakistan. As Urea is a synthetic organic compound containing 46 % nitrogen in

amide form and is available in the form of white solid prills, free flowing for easy application.

Fauji Fertilizer Bin Qasim Limited is also the pioneer of premium quality DAP fertilizer

manufacturing in Pakistan. The DAP plant is the only facility of its kind in the country. The

product meets international quality standards. As DAP contains the second most important

nutrient element, phosphorous besides nitrogen, it is available in free flowing granular form as

the granules are stronger, harder and of uniform size.

2 PORTER FIVE FORCES



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According the five forces of Porter

WHO ARE?

The buyers and buyer groups

The supplier and supplier groups

The competitors

The substitutes

The potential entrants

1.5 The buyers and buyer groups

The products of FFBL (Urea and DAP) are being purchased by farmers from all over sindh andmajor areas of punjab as FFBL is meeting 45% of the demand of DAP and 13% of Urea, thebuyer groups also include the petrochemical industry which includes

AL SALFI Petrochemical Co.

KALOODI Group.

QaiserLG Petrochemical (Pvt) Ltd.

The fire fighting equipment manufacturers are also a part of the buyer group of FFBL whichincludes

TYCO Fire and Security Pakistan (Pvt) Ltd.

HASEEN HABIB Corporation (Pvt) Ltd.

http://www.list-of-companies.org/Details/10309906/Pakistan/Kaloodi_Group/http://www.list-of-companies.org/Details/10208968/Pakistan/QaiserLG_PetroChemical_Pvt_Ltd_/http://www.list-of-companies.org/Details/10208968/Pakistan/QaiserLG_PetroChemical_Pvt_Ltd_/http://openpopwin%28%22companyinfo.asp/?Code_No=48277%22,%20500,%20420,%20%22scrollbars,resizable=no%22,%20200,%2050)http://openpopwin%28%22companyinfo.asp/?Code_No=48277%22,%20500,%20420,%20%22scrollbars,resizable=no%22,%20200,%2050)http://www.list-of-companies.org/Details/10309906/Pakistan/Kaloodi_Group/http://www.list-of-companies.org/Details/10208968/Pakistan/QaiserLG_PetroChemical_Pvt_Ltd_/http://openpopwin%28%22companyinfo.asp/?Code_No=48277%22,%20500,%20420,%20%22scrollbars,resizable=no%22,%20200,%2050)


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HAC & SONS

CONCORD Trading Co.

1.6 The supplier and supplier groups

Phosphoric Acid, being the main raw material for DAP production is being imported fromMorocco. To ensure the continuous supply of this strategic raw material to run our DAP plant atKarachi, Office Cherifien des Phosphates (OCP), Morocco, the biggest industrial group ofKingdom of Morocco and the Fauji Group( Fauji Foundation, FFC and FFBL) entered into ajoint venture for its uninterrupted supply.

Sulphuric acid is needed as a raw material for the DAP production; the main supplier of

Sulphuric acid to FFBL is ICI Pakistan.

Another raw material for the DAP production is the coating oil, PSO and NRL are the two

providers of coating oil to FFBL.

The main raw material for the UREA Plant is the UF-85 which is used as an anti caking agent

(formal dehyde) and that is supplied by a company located in Wah namely Wah Nobel.

FFBL utilizes Natural Gas as the most important raw material for the production of Ammonia;

which is the major input for the production of Urea and DAP. The major supplier of natural gasto FFBL is SSGC.

1.7 The Competitors

There are number of competitors of FFBL struggling in the industry. Potential

competitors of the industry are

Fauji Fertilizer Company - FFC

ENGRO Chemicals Pvt. Ltd.



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Dawood Hercules

Haripur Hazara Phosphate Fertilizer

Pak China

Pak Arab

1.8 The Substitutes

There are currently no substitutes of FFBL.

1.9 The Potential Entrants

The current entrant in the Fertilizer industry is the Fatima Fertilizers Company Ltd.

3 ASSESS THE UNDERLYING DRIVERS OF EACH COMPETITIVE FORCE TO

DETERMINE WHICH FORCES ARE STRONG AND WHICH ARE WEAK AND

WHY.

1.10 Strength

1.10.1 Only DAP Producers

FFBL is the only fertilizer complex in Pakistan that produces DAP fertilizer, thus makes

significant contribution towards agricultural growth of the country by meeting 45% of the

demand of DAP.

1.10.2 Location

Being located near sea port; FFBL enjoys an ease in transportation of raw material.

Phosphoric acid and UF-85 are the major raw materials that are being imported through

shipments.

1.10.3 Authority lies with CEO and Chairman

All authorities lie with CEO and chairman. Theres a hierarchical reporting system of

problems. Junior Staff reports to the senior staff and this report can further go to the GM,

CEO or the Chairman depending up on the nature of the issue.

1.10.4 High Urea quality

FFBL product, granular urea (Sona Urea) has the cutting edge over the conventional Prilled

urea with the following superior qualities:

Cheapest among all nitrogenous fertilizers based on per unit cost of nutrient



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Less acidifying than many other nitrogenous fertilizers hence most suited for high pH

soils

High concentration of nutrients makes packing, storage and transport cost cheaper

Larger granular size

Greater granules strength

Minimum fines, dust and powder

Minimum losses in the air

Least caking property

Easy to spread in the fields

No settling on crops/leaves

1.10.5 Safety & Health

FFBL maintains a safe workplace by following safety and health rules and practices.

Accidents, injuries, and unsafe equipment, practices or conditions are immediately reportedto a supervisor or other designated person. FFBL is committed to keep the workplace free

from hazards.

1.11 Weakness

1.11.1 Marketing being outsources to FFC

FFBL doesnt have its own marketing department; their products are being marketed by FFC

due to which they get their revenue after a week. It may also affect their sales due priority

based marketing.

1.11.2 Lack of Training

No proper training programs have been defined and conducted for managerial staff.

1.11.3 Raw Material Import

Urea and DAP production at FFBL largely depends upon the imports of raw material

including Phosphoric acid, sulfuric acid, sand, coating oil and UF-85. This increases their

reliance on imports.



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1.11.4 Management Lies with Army men

Most of the management in FFBL is controlled by retired army officers who have army

mindset due to which the company faces difficulties in problem analyzing and problemsolving steps.

4 OVER ALL INDUSTRY STRUCTURE, AND ANALYSIS FOR CONSISTENCY

To determine the Overall industry structure, and test the analysis for consistency we undergo

with:

1.12 Why is the level of profitability what it is?

To determine the Overall industry structure, and test the analysis for consistency we undergo

with:

The level of profitability depends on major factors which are as under:

Mass Production

High Standardize Quality

Make to Stock Strategy

Flexibility in Product

Dap Projections2009

Tons

2008

Tons

2007

Tons

9 Month Actual 1,140,000 291,000 766,000



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4th Quarter 410,000 484,000 633,000

Full Year Sales 1,550,000 775,000 1,399,000

Urea Projections2009

Tons

2008

Tons

2007

Tons

9 Month Actual 4,631,000 4,023,000 3,402,000

4th Quarter 1,669,000 1,456,000 1,515,000

Full Year Sales 6,300,000 5,479,000 4,917,000

5 IDENTIFY ASPECTS OF INDUSTRY STRUCTURE THAT MIGHT BE INFLUENCED

BY COMPETTITORS, BY NEW ENTRANTS, OR BY YOUR COMPANY

The fertilizer industries in Pakistan are not fulfilling the market demands in current

scenario, and we use to raw materials from outside, so the influence of competitors or

new entrants dont affect the industry structure.

The major aspect of industry structure that might be influenced by competitor, by new

entrants or by our company is to increase the productivity of urea and DAP so that we

can meet the market demand and instead of importing the raw material we can start

exporting them and make the industry structure strong.


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