HRM Term Report

[Type the document subtitle] | Maham Hussain

SBM Term
Report

Submitted by:
Ahsen Aamir Murad
Faraz Nafees

2 Small Business Management

Contents

Incorporation of Business........................................................................................... 4
About Sara Solar (Pvt) Ltd....................................................................................... 4
Muhammad Zaid Azam............................................................................................ 4
Market Research...................................................................................................... 5
Development of Business Plan................................................................................ 5
The Actual Launch................................................................................................... 5
The Decision............................................................................................................ 5
Taxation (Sales, Income Tax etc.) & Regulation (Patents, Trademarks, Copyrights
etc.)............................................................................................................................ 6
Red Ocean/ Blue Ocean:............................................................................................. 7
Business Initiation (Finance, Marketing & Location)...................................................7
Finance:................................................................................................................... 7
Marketing:............................................................................................................... 8
Promotional Strategy of Sara Solar......................................................................8
Target Market....................................................................................................... 9
The Problem......................................................................................................... 9
Evaluation of the Alternatives............................................................................ 10
The Final Call...................................................................................................... 10
Location:................................................................................................................ 11
Management (Layouts, HR, Operations etc.) & Use of Technology...........................12
Management............................................................................................................ 12
HR function:.......................................................................................................... 13
Manpower planning, recruitment and selection:................................................13
Performance Management:................................................................................ 13
Compensation and benefits:.............................................................................. 14

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Training and Development:................................................................................ 15
Labor Laws:........................................................................................................ 15
Organizational Development:............................................................................. 15
Layout:.................................................................................................................. 16
Managing Operations & Risk & Opportunity Analysis...............................................16
Operations............................................................................................................. 16
Risk and Opportunity Analysis...............................................................................17
SWOT Matrix...................................................................................................... 18
Formal Business Associations................................................................................... 20
Issues and Challenges.............................................................................................. 20
Government.......................................................................................................... 20
City........................................................................................................................ 20
Environment.......................................................................................................... 21
Analysis and Recommendations...............................................................................21
Appendix.................................................................................................................. 23
Contact person- Mr. Zaid Azam............................................................................. 23
About Sara Solar................................................................................................... 24
Solar Outdoor Lighting.......................................................................................... 25
Solar Stand Alone Power Systems.........................................................................26
Solar Tubewells...................................................................................................... 27

4 Small Business Management

Management (Layouts, HR, Operations etc.) & Use of Technology

Management
Sara Solar is a business on a partnership. The partnerships are between
family members, father, and son. It is for this reason that the management
flow is very hierarchical. Management is a tool most used by the CEO and
then further down used by the directors i.e. Finance Director, Marketing
Director, HR manager, etc.
The Organization Chart is as follows
CEO

Managing
Partners

Finance
Director

Marketing
Director

R&D
Director

HR Manager

Production
Manager

Quality
Control
Manager

Line
Supervisors

staff workers

The CEO is the main decision maker at Sara Solar, he believes everything
needs to be in his control and he needs to stay as the role model for all the
managers and directors working under him. Mr. Muhammad Zaid Azam is a
firm believer of the quote: Effective leadership is putting first things first.
Effective management is discipline, carrying it out. By Stephen Covey.
Hence, it is due to this reason that he believes more in an active role in the
organization where the CEO is the key decision maker as he wants to lead by
example, a true characteristic of a leader.

HR function:
The Human Resource department of Sara Solar is mainly managed by 3
personnel, including the HR manager. The unit of these three HR personnel is

5 Small Business Management

responsible for managing the entire HR division of the company which

encapsulates logging, compensation and benefits, training, appraisals,
recruitment and manpower planning.
For a company employing over 300 people and possessing the potential of
expanding this human capital base substantially in a short period of time, the
HR unit of merely three personnel is not sufficient. The company requires a
stronger and larger HR team to aptly manage the numerous Human
Resource aspects the current team is not large enough to handle.
Manpower planning, recruitment and selection:
Manpower planning for Sara Solar is only designed for two years. For a
company which involves functions and products that focus on being longlasting and sustainable, surely a consistent manpower is needed that can
match its pace with the life-cycle of its products and eventually the company
itself.
However, despite a short-term manpower planning, the attrition ratio of the
company is relatively low. This can be attributed to the fact that there are
not many competitors in the renewable energy market to whom Sara Solar
can potentially lose its talent.
The human capital requirement of Sara Solar is primarily the well-educated
white-collar employees with a specialization in engineering owing to the type
of products offered by the company. Keeping this requirement in perspective,
the company recruits directly via penetrating into engineering universities
like University of Engineering and Technology (UET), Sir Syed University of
Engineering and Technology (SSUET) and National University of Science and
Technology (NUST). Advertisements for job applications are solely on the
internet through Rozee.pk website, without any print advertisement.
Selection criterion for Sara Solar is only based on the required engineering
qualification and interview. Since the company is very focused and
streamlined in its recruitment strategy, only specialized and specifically
qualified personnel apply and are hence selected. It works in favor of the
company as it makes the process of recruitment and selection more efficient
and less time-consuming. On the flipside, the applications of only
engineering centric applicants deprives the company of the necessary
business graduates required to drive the integral management of the
company and develop it as a strong corporate entity in its respective
industry.

Performance Management:
With respect to Performance Management, the company follows an arbitrary
method. Employees are not evaluated annually, bi-annually or monthly using
sophisticated techniques like the Hay management system; rather they are

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evaluated daily based on the number of hours they put in. The performance
of the employees is measured against the production objectives. Standard
process time in production is 20 minutes but in cases where this is exceeded,
the supervisor is questioned and his justification impacts his performance for
the day.
A performance management of such kind leaves huge margin of doubt,
uncertainty and requires a strong and fair judgment call from the
performance evaluator. Delays in standard time of process can be caused my
technical and mechanical faults too; using them as a pre-requisite for
measuring an employees performance is not a very reliable and accurate
system of performance management. Although a small and medium
enterprise cannot invest in comprehensive performance management tools
like Hay, they can devise techniques which are aligned with their vision,
mission and manpower planning strategies so performance is measured
against the long-term plan for that personnel.
Lack of explicit and elaborate job description is also responsible for this
inefficient performance management system. The absence of tailored
objectives for an employee disables the performance evaluators to measure
performance against set standards.

Compensation and benefits:

Since 95% of the employees are educated at Sara Solar, they are offered
salaries which are at par with the market and that is being offered by the
comparators to their engineers. The take-home salary is divided into fixed
and variable pay where the variable pay is dependent on the number of
production targets being achieved.
Other perks and bonuses being offered to the employees include a return
ticket to employees who are not working in their hometown and medical
allowance is provided to approximately 50% of the employees.
Rewards in terms of bonuses are given to employees who exceed
expectations against the production objectives. Hence, this reward system is
individual based, calibrated against performance. In addition, if an employee
possesses additional set of skills which the company requires, he/she is
compensated accordingly for the extra job undertaken.
Benefits provided by other companies like Provident Fund and Employees
Old-Age Benefit Institution (EOBI) are all provided to Sara Solars employees.

7 Small Business Management

Training and Development:

in-house
training

Abroad
training

Request
ed
training

Training and
Development at Sara
Solar

The first stage of training starts immediately when a person is recruited at

Sara Solar. As most of the engineers hired are graduates, they do not own
the required practical skills imperative for the job they would be undertaking.
This is usually an in-house training where senior and experiences employees
train the newly recruited employees.
During the course of their employment, employees are then sent abroad to
acquire more technical skills and diversify their skill set. Furthermore, the
employees have the freedom to put forward a request to attend their job
related training and the company gives its approval after diligent
contemplation.

Labor Laws:
Sara Solar claims that it strictly adheres to all the Labor laws of Pakistan
outlining the working hours, wages, holidays, overtime compensation and
baseline safety precautions.
The company as mentioned before majorly employs educated blue-collar
engineers due to which it does not have to face issues directly involving the
Labor Unions for unskilled employees.

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Organizational Development:
Sara Solar is a Sethiya company where this subsidiary of Sara Corporation
mushroomed under the family business. The dynamics of family business is
such that the control lies with the family members and they are the sole
drivers of the company.
Given this type of company, the company does not have a formal
documented mission statement, vision or standard values which are
developed in the bigger picture of corporate culture. Due to this, the
company has a very primitive corporate culture which can hinder future
prospects of organizational development.
The limitation of a family business further hampers the entry of new and
fresh talent who can attain senior managerial positions to drive the company
towards corporate excellence. Hence, employees have no strategically
devised growth plans which serve as motivation resulting in greater
productivity.
Therefore it is highly imperative for Sara Solar to focus on its succession
planning whereby a family member is nurtured and trained to take over
control of the family business in the coming years.
Layout:
The production layout used by Sara Solar is Product Layout. A product layout
(also called a flow-shop layout) is one in which equipment or work processes
are arranged according to the progressive steps by which the product is
made. The path for each part is, in effect, a straight line. Production lines for
shoes, chemical plants, and car washes are all product layouts.
As the raw material is imported from abroad and the assembling is
performed in Karachi, Pakistan. A product layout suits the needs of the firm.
It is a layout in which a strict format is followed in the production plant
whereby there is a production line and each (for example) piece is added
onto the product step by step in a confined manner. This is the practice
employed at Sara Solar which has proved to be very successful and also
helped Sara Solar cut down on unnecessary expenditure.

Managing Operations & Risk & Opportunity Analysis

Operations
Sara Solar also faced a couple of occasions when the organization ran out of
cash and there was a liquidity crisis, but again managed to do well. He says,
such cyclical fluctuations are inevitable whatever the size of your
organization may be. He says he never had any specific long-term goals in

9 Small Business Management

life except for a feeling that he ought to do something substantial in life. He

thinks entrepreneurship demands a lot from a person especially when it
comes to managing the work-life balance. It sometimes gets a bit difficult to
give time to his family, but he says the beauty of life lies in understanding
and managing time. Its about fulfilling ones responsibilities towards
everyone who is related to us. According to him, beside education, his family
is his greatest asset. He says time required for doing business is everincreasing. As much the business grows as does the responsibility of the
entrepreneur. However, he acknowledges the fact that his job has become
more managerial now, and the business is largely in a maturity phase, where
it requires lesser initiative from the founder. He plans to go public in the
future. He thinks it is only to a certain extent that a business can be
effectively run by an entrepreneur. A time comes, when professionals should
be allowed to come in and take reins. Although professionals could be
brought in by the founder too, but for them to work more effectively, the
ownership structure has to be made conducive for them, which can only be
made possible through a public limited company. Mr. Zaid never went for
creating a partnership initially because of a couple of reasons: First, it was
his wish to take his business forward the way he wanted to take. He didnt
want anyone elses vision get mingled with his one. Second, he thought it
would be very difficult to find a person who could share your style of doing
things and who thought the way you did, thus why bother. Initially, he got his
finances from his father in the form of a loan that he continues to repay.
Since he always wanted to be a self-sufficient individual he preferred a loan
instead of a financial assistance as is common in the Pakistani society. He
seems a bit tired, as he lightly says that he plans to work only 180 days a
year and he would love to retire and live a peaceful life at only 45. Zaid
thinks, everyone can become an entrepreneur. Its about having a clear
vision and a deep understanding of a socioeconomic gap that can be filled
through a venture. Moreover, he is of the school of thought that
entrepreneurial attributes are largely learned and not innate.
Moreover, for Zaid, spirituality and especially religious spirituality are
essential for an entrepreneur to succeed. He says it is absolutely necessary
to work hard for a living, but what you get is Gods blessing. He thinks, his
belief is a very big source of internal strength, especially at a time when he
has to confront failure in life. It is absolutely necessary that one has the
spiritual strength to tackle the especially crude situations that an
entrepreneur has to confront.
Risk and Opportunity Analysis
For doing this we decided to use the SWOT matrix.
The Strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix

10 Small Business Management

The SWOT matrix is a matching tool that helps develop 4 strategies SO

(strengths-opportunities)
Strategies,
WO
(weaknesses-opportunities)
Strategies, ST (strengths-threats) Strategies, and WT (weaknesses-threats)
Strategies. We need to match external and internal factors to develop a
SWOT matrix. By doing so we capitalize on external opportunities using
internal strengths. Every firm wants to try and make their weaknesses
change to their strengths. WO strategies help an organization to overcome
their weakness by concentrating on opportunities. At times their might be
opportunities that can be tapped on but due to internal weaknesses they
might not be able to do so. ST strategies use an organizations internal
strengths to overcome external threats, this does not mean that we deal with
every threat face to face but it means we deal it tactfully. WT strategies
require an organization to reduce internal weaknesses and avoid external
threats, such firms are in trouble and they need to think about retrenchment,
diversification or in worse situations even liquidation. Firms use WO, WT and
ST strategies to get into situations to apply SO strategies.
A SWOT matrix has 9 cells, 4 key factor cells are the ones labelled S
(Strengths), W (Weaknesses), O (Opportunities) and T (Threats), 4 strategy
cells are labelled SO, ST, WO, WT and the 9 th cell always is a blank one. We
go about making a SWOT matrix using the following steps. List down the O,
T, S and W. Now match the strengths with opportunities and write the SO
strategies. Then match the weakness with opportunities and write down the
WO strategies. Next step match the strengths with threats and write the ST
strategies and lastly match the weaknesses with threats and write down the
WT strategies.
SWOT Matrix
1
2
3
4

Strengths
Manufacturing setup
Warranty
Short lead time
Custimizablity

5 After
sales
service,
knowledge and experince

1
2
3
4

Weaknesses
Lack of govt support
Financial constraint
Lack of legislation
Lack of skilled man power and
retention

5 No set law following in Customs

6 Trained Work Force

7 Distribution network
8 Location
Opportunities
1 Prices of Raw Material

SO Strategies
WO Strategies
1 Add 2 new product lines 1 Earn
support
through
using
different
raw
Government Projects (W1, O2)
materials to beta test the
price effect (S1, S4, O1)

11 Small Business Management

2 Government Projects
3 Non reliability of local
eletric supply
4 Duty on import of solar
panels from China
5 Expensive
Energy Fuel

Subsitute

Threats
1 Exchange Rate Fluctuation

ST Strategies
1 Purchase Dollars as soon
as an order arrives to quote
price on today's Dollars
rate (S3, T1, T2)

2 Volatile input cost

2 Increase
distribution
network by 20% (S7, T6)

3 Fraud

3 Increase Warranty Expense

by 5% to enhance after
sales service (S2, T5)

WT Strategies
Lobby to have a regulated law
following in Customs for Solar
Panel Imports (W5, T2)

4 Uneducated Customers
5 Competition
(Chinese
Solar panels)
6 Limited number of Quality
Solar Cell Producers

SO Strategies:
1. Add 2 new product lines using different raw materials to beta
test the price effect: Since Sara Solar has a manufacturing setup
(S1), and it has been dealing in customized solar cells (S4), it can
capitalize on the decline in the prices of raw materials (O1) through
introducing 2 new product lines; a 500watt solar cell line and a 200
watt solar cell line. These product lines will enhance the output
potential of the company, in case of bulk orders.
WO Strategies:
1. Earn support through Government Projects: Sara Solar can divert
its efforts to gain the support of Government (W1) in its solar energy
business through obtaining Government tenders (O2). Government is
looking forward towards alternate energy solutions and is a potential
customer for Sara Solar.
ST Strategies:

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1. Purchase Dollars as soon as an order arrives to quote price on

today's Dollars rate: Exchange rate fluctuation (T1) causes the
prices of raw materials for Sara Solar to vary a lot (T2). Raw material
acquisition takes time; therefore purchasing dollars as soon as an order
arrives will help in reducing the price variations caused by exchange
rate fluctuations. The short lead time (S3) of Sara Solars cell
production will enable it to transfer these costs to its customer,
thereby further reducing the price variations.
2. Increase distribution network by 20%: One of Sara Solars
strengths is its distribution network (S7). It can further enhance its
network through a 20% increase, which will enable the company to
overcome the competition from Chinese solar panels (T5).
3. Increase Warranty Expense by 5% to enhance after sales
service: The competitive threats from Chinese solar panels can further
be reduced through introducing customer oriented after sales services.
The introduction of these services will increase the warranty charges,
but will give a competitive edge to the company over Chinese cells.
WT Strategies:
1. Lobby to have a regulated law following in Customs for Solar
Panel Imports: A major source of volatility in input costs (T2) is nondocumented polices followed by the Customs Office (W5) in applying
import duties on the raw materials imported by the firm. The firm can
lobby, with support of other solar panel distributors to introduce a
documented set of policies for solar cell and raw material imports.

The purpose of a matching tool like SWOT matrix is to identify alternate

strategies and not to decide the feasibility of either options or which one to
pursue. SWOT matrix has its own limitations. Since SWOT does not show
how to do something it should not be the end in itself but means to ends.
With the help of this matrix we should be able to start thinking about how we
can implement strategies. Since SWOT is a matrix that talks about one point
in time, the S, W, O and T might change. And lastly we might overemphasise
on a single internal or external factor in making a strategy, and the
relationships amongst these factors internally arent expressed in the SWOT
either.
Formal Business Associations
The formal business associations Sara Solar is linked to are REAP (Renewable
Energy Association of Pakistan) and PRCET (Pakistan Council for Renewable
Energy and Technology) which is government owned. REAP is the very first
registered Association in the field of Renewable Energy, of Pakistan. REAP, is

13 Small Business Management

a membership based, non political, nongovernmental, non-profit and non

sectarian association, committed to achieve energy independence & reduce
green house gases. To achieve its goal, REAP has been organizing events
addressing various communities aimed at creating awareness and capacity
building regarding Renewable and Alternative energy opportunities. It does
lobbying by creating awareness about the industry through promotion efforts
from industry as a whole, directed towards legislators and policy makers. It
strives to create favorable circumstances for firms within the industry. It also
arranges seminars for the awareness of alternate source of energy in the
local business environment so that people get to know about how they can
use other sources to electrify their setups, whether businesses or houses.

The second association that Sara Solar attracts attention of is PCRET, this is
government owned. It is brought into existence for the wellbeing of the end
customers inlike REAP that is there to help the firms associated with
alternate source of energy. They give recommendations to government about
policy related issues like subsidies etc.

Issues and Challenges

Government
Custom duties are not applicable on Sara Solar, since our custom officials are
corrupt Sara Solar has to face inconsistencies in terms of cost of custom
clearance. This makes it difficult to calculate costs for the firm and then
market accordingly. There is no fixed policy by government for this industry
therefore making further investments by those who are already present and
those interested to enter becomes difficult.

City
Law and order situation in the country is extremely volatile leading to a
difficult for businesses to operate. Secondly power outages increase the cost
of doing business thus adversely affecting the profitability of firms. Bhatta is
taken as an additional cost by all the manufacturers working in Karachi, you
can either call it safety money or extortion but everyone working in the local
industrial areas need to pay this to the relevant parties in their areas.

14 Small Business Management

Environment
The competition is highly fragmented therefore there is no significant threat
from a single source but the sheer number of competitors makes the
competitive environment tough.

Analysis and Recommendations

The two product lines of standardized and customized solar panels,

simultaneously offered by Sara Solar do not bring out a coherent
strategic positioning. Instead, it gives a confused outlook about what
actually differentiates Sara Solar against its competitors. Although, just
dealing in premium, customized products will drastically increase the
cost of selling, it will create room for charging premium prices.
Moreover, not to leave the standard specs market to importers, Sara
Solar can create a separate division or Business unit, which shall have
distinct process capabilities and separate organizational structure and
culture. This particular initiative might be costly in the short run, but is
expected to reap very high profits in the long-run.
Sara Solar occasionally peeps into the installation business for
relatively smaller customers, apart from the large ones that cannot be
served by the specialized installation companies. This diminishes the
magnitude of business for Sara Solars core clients, i.e. the installation
companies, resulting in a sort of conflict between the supplier and
customer. A way around to tackle this issue, without letting go of the
installation business, is to create a new company with a different name
and same ownership that handles installation services for Sara Solars
clients. This alternative will enable Sara Solar to retain its
specialization in B2B business and also allow for greater profits across
the value-chain.
So far, Sara Solars focus, generally has been building the internal
capacity of the organization, rather than paying attention to the
environmental forces affecting the profitability of the firm.
Notwithstanding the prime significance of internal organizational
strength, efforts towards maneuvering the external factors in the
companys favor carry no less weight. The company needs to spend on
promotion for awareness and demand creation, in addition to
committing resources behind the industry association to push the
government to strengthen legislation for solar industry. Also,
promotional efforts are needed towards strengthening Solar energys
image as a feasible alternate energy source
For further growth, theres a need for a leaner organizational structure,
where more and more decisions are delegated down the organization.

15 Small Business Management

With the current decision framework, where almost all the decisions
are concentrated with the office of the owner, it is very difficult to
achieve growth beyond a certain point. In fact, for Sara Solar to
achieve its vision of diversifying into other segments of the alternate
energy industry, it is imperative that professionals are given decision
rights and responsibilities for different divisions. A sound example can
be found in the case of IKEA, where the original founder has reduced
his role to one that of monitoring and supervision only.
One of Sara Solars shortcomings is its weak supplier power. All the raw
materials for Sara Solars products are imported from abroad, which
makes it vulnerable to fluctuations in the value of Dollar. Accuracy in
cost estimates becomes a goal, difficult to attain, thus adversely
affecting profitability. Sara Solar can go about investing in development
of local suppliers, especially for raw materials which, in other forms,
are already being produced, such as the aluminum and glass sheets.
Nevertheless, developing manufacturers of the Solar Cell may be a farfetched goal in the near future.
In the Solar industry, the availability of trained manpower is absolutely
crucial. It is a completely engineering based industry in which
specialized skills are essential for design, manufacturing, and
development of solar panels. However, there is no presence of
educational organizations that train such personnel. Rather than
sending employees abroad for training, Sara Solar should sponsor one
of the local engineering universities to develop a training centre for
solar technology.

16 Small Business Management

Appendix

Contact person- Mr. Zaid Azam

17 Small Business Management

About Sara Solar

18 Small Business Management

Solar Outdoor Lighting

19 Small Business Management

Solar Stand Alone Power Systems

20 Small Business Management

Solar Tubewells

21 Small Business Management