CASE: SAGA sports company (A story of successful entrepreneur)

Sialkot is famous all over the world for its sports goods and surgical instruments, it tribulations doesnt matter where the Fifa world cup and other major supports like cricket, hockey and volleyball is being played Sialkot made footballs, cricket accessories, hockey sticks are used. Mr. Khurshid Ahmad lived in Sialkot and was an orphan which didnt added to his misery but boosted him as a determined and committed individual. He received primary and secondary education from Sialkot. He went on to do his undergraduate degree from Govt Marry College Sialkot.From the childhood he was very fond of sports especially football and cricket. He always wanted to buy sports goods and accessories of his own in early age but he couldnt due to economic conditions. Mr. Khurshid considered an opportunity of beginning a modest business of manufacturing footballs but on the other hand was diminutive of resources. In the establishment of SAGA sports (Pvt) Ltd faced loads of tribulations but ultimately after selling his mothers jewelry gathered financial resources for business. After a rough journey, started small manufacturing unit of football making, initially he took modest orders and received immediate cash on selling footballs. There were only three employees at that time of initiation and he himself worked with his employees. His footballs became suddenly admired in the industry because of the hand stitched factor and quality. Due to his immense popularity and business growth many local manufacturers contacted Mr. Khurshid to work with him in collaboration over certain projects. They gave him good percentage of orders and convinced him to pay shortly with no such hurdles which Mr. Khurshid quickly accepted with no such barraging and complains. There were many manufacturers who wanted their name to be printed on footballs but SAGA sports (Pvt) ltd did not agreed on it because the business was growing and the name was to be recognized all over the world so he rejected such proposals. His business steadily grew, after three years he named his company as SAGA sports Company and got it registered. SAGA became quickly admired all over Pakistan in sports goods manufacturing. Its employees increased to a number above 150 but now the drawback being faced at that time period was to expand the production area for which there was shortage of capital. In order to expand the facility they took interest free loan from the relative which resolved the issues for short-term period. He extended the production area to the capacity of 500 employees. His point of success was honest dealing and expertise in hand stitched footballs. SAGA sports (Pvt) ltd extended
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product lines and incorporated manufacturing of rackets and volleyballs. For making quality rackets he contacted various suppliers of animal fat and was not in position to buy raw material on direct cash so he went to some suppliers from utilizing various references which at last agreed to give raw materials on thirty days credit terms. Since he hired employees who were not educated and did not have skills to become skilled at and gain knowledge of the work quickly, so constructed a training facility for employees where they will work for minimum two weeks to learn the skills of stitching and other related tasks. He leased in one boiler machine for the manufacturing purposes. When his first production batch of rackets went to the market they were sold rapidly, which greatly satisfied him. The next orders were on pre ordering and payment was the issue which was arising with the costumers. Various retailers did not wanted to give full payment at once so deal was made between company and retailers that half payment was to be made on ordering and half should be deposited in the bank on the delivery of consignment. SAGA revenues were growing rapidly and now various business professionals were getting involved with the business which helped business to further grow on stable wavelength. By the end of 1992 SAGA sports (Pvt) ltd was having more than 700 workers and more than 50 business professionals. These professionals involved various people who knew how to operate different machines. Company now owned more than 10 sewing machines, because the work load was so much that footballs and other sports good could not be made by hand on short dates. They gave different categories of options to the costumer that if they want to buy hand stitched products they need to pay more than basic costs and in contrast if they want to buy machine made products then different rates were applied to the consignments. Suppliers became more flexible in credit terms with SAGA because they were getting enough orders so some suppliers were now only doing business only with SAGA now. This represents the bargaining power of SAGA with the suppliers which define the capacity of efficient dealing management. This worked in SAGAs favor as their working capital increase and eventually their reserves increased. SAGA was having enough reserves to extend their product lines and now their managers researched out and gave options of starting production of surgical instruments a completely diversified business. Owner approved the proposal and machines were imported from Germany for manufacturing surgical instruments. Various hospitals were ready to pick surgical instruments on very short credit approximately around 10 days which none of their costumers offered such short time in cash payment agreements. Regarding employees they were given high
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incentives to work and who ever worked over time was given extra benefits which motivated employees to work more over time and with determination and it resulted in more revenues which lead to more profits in long-run. Now SAGA credibility and popularity as a manufacturing giant increased and they were in position to extend their payment to suppliers. SAGA now was nationally known producer of sports good and surgical instruments. Mr.Khurshid Ahmed visited some countries to know the demands of SAGA products and he offered them to supply hand stitched footballs and other surgical instruments on an affordable prices. He got international orders before returning back to Pakistan which was an achievement in itslef. He exported footballs and other products to foreign markets and received an un-expectable response SAGA made products were loved in international markets. Now SAGA exports were also increasing and SAGA was known as the leading exporter of the sports good. SAGA achieved big order of footballs for the FIFA WORLD CUP 1994 that turned out to be a critical moment in SAGA history. They decided to temporary suspend all the national order and wanted to fully concentrate only on fulfilling international orders. They successfully completed orders and a large number of footballs were exported for world cup. SAGA international footballs consignment made the company to increase its profits now SAGA was getting orders from many countries. SAGA was now a big company fulfilling national and international demands.Saga Sports alone accounted for $33 million of the industry's $210 million total. For Sialkot's 45,000 stitchers, who earn less than $100 a month on average, soccer balls making was a sourcing of earning a living for them. As the time progressed to increase cash inflows and maintain steady growth SAGA allowed other brands like Nike, Puma, Mikasa etc to print their names on products made my SAGA because these companies were ready to pay a large amount of extra money to SAGA for outsourcing. Years passed by and SAGA continued to grow and show great deal of success. Their employees increased and SAGA was now one of the largest sports goods exporter in Pakistan and makes soccer balls, protective equipment and apparel for some of the leading sporting brands in the world like Nike, puma, Mikasa, etc. He had by the time established three factories of sports goods like football, volley ball, tennis ball, rugby ball, cricket balls, sports wears, apparel things etc. Two factories were in Mubarak Pura and the 3rd one is in Daska Road Sialkot which is too large as compared to others sports goods companies. Football remained his primary, cost effective and profitable product.

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One of the important things that Mr.khurshid said, at the time when I started with 3 of my employees and fourth employee was Khurshid himself was price that I would charge It was very difficult to set price at that time because we were producing hand stitched footballs and there were very few people who were doing this so myself didnt done anything special. I just visited markets and analysed prices what other companies were charging to my amazement viewing such high prices which did not matched the quality of products they provided. I came back and checked costs of buying raw materials and analyzed that we could not afford to charge low because we were buying raw materials at a high cost but I took risk and presented my hand made footballs to market initially on which shopkeepers did not agreed to buy them so I offered them with short credit term which just did job for me, maybe I was lucky enough or may be my hard work pay-me off SAGA at beginning used simple formula of adding their cost and little profit over it and set the price. Although this looks so simple but Mr. Khurshid excellent client tackling and politeness earned him with such a place in market. His behaviour with his employees was worth mentioning here he gave breaks to his employees for Namaz and he himself offered Namaz with them. Conspiracy about his death still remains intact but his family gave this verdict that he was killed by robbers on his way back to home. His death became serious threat to his company and company was dented badly unless his wife stood up and took charge to keep his husband mission going. His wife Mussarat Khurshid tried to run again but failed to do it. Gradually his younger daughter took interest in SAGA and he commanded the high office.Although still SAGA has not been able to regain their complete command over market from that time. But still they are at the level from where they can easily re-build on lost reputation and clientele base.

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SAGA Revenue model which resulted in increased cash capitalization

SAGA quality hand stitched products had implications over revenue model. SAGA was negotiating on tough standards due to its popularity and a name of quality with the buyers regarding the cash payments and minimum or no discounts was being offered to them. They have two simultaneous cash inflow or revenue streams which added to the benefits of increased sales and fulfilling short-term cash requirements. The methodology of payments was refined to reduce short term cash shortages buy demanding initial 50% payment before initiating production increased revenues before even delivery. The production streams integration resulted in capturing two segments of the market without confrontation on prices.

SAGA working capital model

SAGA leased out machinery for the sports and surgical instruments rather than going for high interest loans, which reduced the overall net cash outflow and reduced fixed costs associated with purchasing machinery. SAGA developed a Partnership with suppliers as there were many suppliers who were doing business only with them. So, it resulted in increase bargaining power with the suppliers and that resulted in flexible credit terms. The pre-order production technique and strategy reduced idle inventory that also reduced the overall stagnant cash and increased the working capital on a whole. SAGA has successfully competed itself through various competitors with more professional and financial soundness over the years. It has excelled to become a world renowned sports goods manufacturer and sustained its image and perception over a long period of time with sheer determination and emphasizing on quality and core competitive strength of handmade sports goods. The business model of SAGA was perfectly balanced in an approach of value creation, delivery and capturing value for itself. But after death of the owner and founder of SAGA it experienced a downfall which was due to lack of determination, motivation and strategic approach. The development of a competitive business model is not the solution to every problem or key to success but sustaining it through the life of business and re-evaluating it for certain changes is the key. The stagnant business model (virtuous cycles) always leads to growth-trap that results in no innovation and change. The ultimate goal should never be only growth, but the pursuit of a strategy that generates virtuous cycles that create and capture increased value over time.

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Teaching Methodology
CVP (Customer Value Proposition)

SAGA provides hand-made sports goods with best quality for the athletes at an affordable price

Revenue model

Exports increased their sales. Different product lines increased their revenue Production streams integration

Working Capital model

Half payment when they got order keeps their daily activities going Forty days of accounts payable time. So they have money in banks for forty days which can be used for other purpose of business. Instant cash on short orders.

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