Final SM Report

Strategy Audit Report PAK SUZUKI
AUTOMOBILE INDUSTRY (CURRENT SCENARIO)

Automobile sector is one of the fastest growing sectors of Pakistan. It contributes
toward the nation’s economy in the form of technology transfer, employment,
investment and much more. As the industry is growing, so are the automobile
companies. Every manufacturer was in the process of increasing production capacity
to meet customer demands before recession period, but now they have reduced the
production.
After a significant growth spurt in 2002 to 2006, the auto sector last year has
contributed only US$ 3.6 billion i.e. only about 2% of GDP to the national economy
and employed about 192,000 people. The industry is passing through a critical phase
of its history. The domestic industry for cars and light commercial vehicles (LCVs)
recorded a phenomenal drop of over 24% in sales volume during the calendar year
2008 compared to last year. The industry sold 152,010 units during the year against
200,795 units the last year 2007. Second half of the year (July-December) 2008 was
the worst. Sales volume during this period dropped by over 46% compared to first
half of the year (January-June) 2008.
During July-December 53,054 units were sold against 98,956 units sold in the
immediate preceding half year (January-June), Demand declined due to a
combination of factors like cost-push-inflation resulting mainly from adverse
exchange rate, rising interest rates, restricted financing by banks and leasing
companies and economic recession. Figures for FY08 shows that Suzuki-brand
models represented 62% of the total Pakistani passenger car production and 51.7%
of sales. Toyota is gaining is gaining with Corolla becoming the country’s best selling
model in the first half of FY09.
The market size for motorcycles has improved by 7% over last year. During the year
2008; 580,604 units were sold against 540.385 units last year. However demand for
second half year was 29% lower than first half year. During July-December 2008
units sold were 240.178 against 340/426 units sold during January-June 2008.
One important thing is that Pakistan’s competitive landscape remains narrow

because Japanese car manufacturers control most of the country’s passenger car
production and sale. As many as 60,000 workers and staffers in Pakistan’s auto
sector have lost their jobs from July 2008 to January 2009 due to falling demand of
cars. More job cuts are feared with continuing weakness in demand.
But these negative feedback effects of the global and domestic economic recession
are expected to be temporary. A relative rapid rebound is expected in 2010, with a
projected revival of GDP growth to 7.2%. The long term prospects for the industry in
Asia appear to be quite favorable. So we can say that opportunities are coming
ahead for manufacturers.
Pak Suzuki has 51.7%
Toyota
Honda
PAK SUZUKI MOTORS COMPANY LTD.
COMPANY PROFILE:
Pak Suzuki Motor Company Limited (PSMC) is public limited company with its shares
quoted on Stock Exchanges in Pakistan. The Company was formed in August 1983 in
accordance with the terms of a joint venture agreement between Pakistan
Automobile Corporation Limited (representing Government of Pakistan) and Suzuki
Motor Corporation (SMC) - Japan. The Company started commercial production in
January 1984 with the primary objective of progressive manufacturing,
assembling and marketing of Cars, LCVs, Pickups, Vans and 4x4 vehicles in
Pakistan. The Company's long term plans include tapping of export markets.
The foundation stone laying ceremony of the Company's existing plant located at Bin
Qasim was performed in early 1989 by the Prime Minister then in office.
• By early 1990, on completion of first phase of this plant, in-house assembly of
all the Suzuki engines started.
• In 1992, the plant was completed and production of the Margalla Car
commenced. Presently the entire range of Suzuki products currently marketed
in Pakistan is being produced at this plant.
• Under the Government's privatization policy, the Company was privatized and
placed under the Japanese management in September 1992. At the time of
privatization, SMC increased its equity from 25% to 40%. Subsequently, SMC
progressively increased its equity to 73.09% by purchasing remaining shares
from PACO.
Head Office & Automobile Division:
Address: DSU-13, Pakistan Steel Industrial Estate, Bin Qasim, Karachi
Total Area: 744,935.5m2 - (184.079) Acres Covered Area 83,030m2
Production Capacity: 150,000 units per annum (Double shift)
Motorcycle Division:
Address F-14, Mauripur Link Road, S.I.T.E
Karachi Total Area 16,188m2- (4) Acres Covered Area 9905.75m2
Production Capacity: 37,000 units per annum (Double shift)
COMPANY MILESTONE
1983 Aug Pak Suzuki Motor Company Ltd (PSMCL). Established as a joint venture
between Suzuki Motor Corporation of Japan (SMC) and Pakistan Automobile
Corporation (PACO) (Govt. of Pakistan)
1984 Jan Started commercial operations with start of production (S.O.P.) of

Suzuki FX.
1988 Apr .S.O.P. of l000 cc SWIFT car later on called KHYBER.
1989 Mar Foundation stone of PSMCL Bin Qasim Plant was laid by the then Prime
Minister of Pakistan, Mohtarma Benazir Bhutto.
1990 Mar Start of operation of the first phase of the new plant at Bin Qasim with
engine and transmission assembly.
1992 Jun S.O.P. of MARGALLA at new Plant.
1994 Sep SMC Acquired additional 15% shares from PACO enhancing its
shareholding to 40% and taking over the management.
1996 Jun the Company set-up waste water treatment plant to control
environmental pollution. Jul The joint venture agreement ended, PACO
divested its entire share holding to SMC, raising SMC's equity to 73.9%.
1997 Aug S.O.P. of 1300cc BALENO replacing MARGALLA.
2000 Mar S.O.P. of lOOOcc CULTUS replacing KHYBER. S.O.P. of lOOOcc ALTO.
2001 May CNG version of MEHRAN launched. Sep CNG version of RAVI launched.
Dec CNG version of BOLAN launched.
2004 Jun New plastic injection molding shop commenced operation.
2005 Mar Capacity expansion up to 80,000 vehicles per year completed.
2006 Jan Capacity expansion up to 120,000 vehicles per year completed. Jan
S.O.P. of 1300cc / 1600cc car LIANA replacing BALENO.
2007 Feb Third phase of capacity expansion up to150,000 vehicles per year
completed. Oct Amalgamation of Suzuki Motorcycle Pakistan Limited into
Pak Suzuki Motor Company Limited.
Net Sales and Profit (Rupees in million)

Description 2005 2006 2007
Sales Revenue 35,375 48203 50845
Growth % 45% 33% 8%
Profit before Tax 3,520 5,152 4,281
Growth % 66% 46% -17%
Cars & LCVs Plant Location: Downstream Industrial Estate of Pakistan Steel
Karachi
Total Area: 259,200 m2 (64 acres)
Cost: Rs. 9.674 billion

Paid-up-Capital: Rs. 823 million
Plant Capacity and Actual Production:
Plant capacity (Double shift) 2008 2007
Motorcars 150,000 150,000

Actual production (Double shift)
Motorcars 90,421 120,899
Motorcycles Plant:
Location: Mauripur Link Road Karachi

Total Area: 4 Acres
Cost: Rs. 0.616 billion
Plant Capacity and Actual Production:
Plant capacity (Double shift) 2008 2007
Motorcycles 37,000 37,000

Actual production (Double shift)
Motorcycle 26,692 30,250
Integrated management policy

Pak Suzuki is built on the idea of a responsible corporate citizenship thereby

managing environmental, safety & occupational health matters as an integral part of
our business. In fulfilling this responsibility Pak Suzuki adheres to the following
principles:
1. We are committed to provide top quality products to the satisfaction and

requirement of our customers.
2. We conduct our operations in compliance with applicable environmental,
occupational health & safety laws and regulations. Even where existing laws &
regulations are not adequate, we undertake to operate in a responsible
manner by assuring the HS&E integrity of our processes and facilities.
3. We recognize the interrelationship between energy and the environment, and
we promote the efficient use of energy throughout our system.
4. We ensure safe disposal of waste generated from our facility.
5. We minimize the discharge of waste materials into the environment by
utilizing responsible pollution control practices.
6. We will continuously seek opportunities to improve our adherence to these
principles.
PRODUCT LINE
Pak Suzuki manufactures a range of vehicles that serve the widest spectrum of
customer needs in the country. Each of the Pak Suzuki products enjoys a unique
position of its own and the exceptional successes of these vehicles underscore their
leadership attributes. All products are available in CNG version, except potohar. The
Pak Suzuki products range includes:
MEHRAN 800 CC:
Unrivalled in its class, mehran is Pakistan’s largest selling car. More smart features
like crystal head lamp, matching front grill and a two spoke steering wheel gives it
the tidy look. With functional economy, peak performance and unmatched fuel
efficiency, mehran VXR is the leader.
ALTO 1000 CC:
Alto has bright, roomy, comfortable cabin which keeps body relaxed and has a strong
and lighter body shell resulting in smooth drive due to reduction of unpleasant noise,
harshness and vibrations. Its small turning radius and compact body make parking a
breeze.
CULTUS 1000 CC:
Cultus is a blend of space and craft. Its trim body conceals ample space, flexibility
for both passengers and storage. Suzuki Cultus assures everyone, exceptional value
and quality.
LIANA 1300 CC and 1600 CC:
The Suzuki Liana available in 1300cc manual transmissions and 1600cc automatic
transmission takes you out of the ordinary and into a realm. Liana is entirely
different car, it’s style, dimension and comfort will inspire you to see every day as an
open door to a new age.
POTOHAR 4X4 1000 CC:
Steady, sturdy and smart, Suzuki Potohar with new wide tread brings you the
ultimate pleasure of a real 4-wheel drive. It has got all the sporting spirit to go along
for adventurous free souls.
BOLAN VAN 800 CC:

The Suzuki Bolan Hi-roof gives you everything you ever wanted in a van. Spacious
interior for comfort, tough engine to carry large loads and plenty of room for
passengers to enjoy a comfortable day long ride. Air-conditioned model (dual thrust)
has been recently introduced.
RAVI PICK-UP 800 CC:
Suzuki Ravi is the veritable cargo vehicle with an amazing capacity for load-bearing
and durability, Undoubtedly, the unrivalled commercial vehicle in its class, Ravi is the
breadwinner for millions in Pakistan. This light commercial vehicle referred to as the
mini revolution, replaced the animal-drawn vehicles in Pakistan.
STRATEGIC MANAGEMENT ONCEPT AT PSMC

STRATEGIC MANAGEMENT definition:
“It’s an art and science of formulating, Implementing and evaluating cross-functional

decision making that enable an organization to achieve its objective”
ACCORDING TO PAK SUZKI MOTORS COMPANY:
Pak Suzuki Motors Company ltd. put great importance on strategic management
in the organization. Since its inception PSMC has acknowledged the importance of
strategic management and used it as not only a tool to analyze the environment
(both internal and external) but to forecast the changes and trends in the automobile
industry. PSMC has analyzed that Pakistan is a country of people having low buying
power, and this is the reason why PSMC became a leader in economical car
manufacturing after just 2 years of its operations in Pakistan.
Pak Suzuki’s slogan for the year 2008 is “Cry for Help”. This is due to the economic
recession in Pakistan.
NON FINANCIALBENEFITS THROUGH STRATEGIC

MANAGEMENT:
Non financial benefits Yes No
Identifying & exploiting of opportunities Yes
support in establishing objectives Yes
Creates framework for internal communication activities Yes
Clear view of management problems No
Minimizes the adverse effects of unfavorable situations No
Integrate the employees No
Encourages forward thinking Yes
Clarify individual responsibilities Yes
FINANCIALBENEFITS THROUGH STRATEGIC MANAGEMENT:
• Increased profit margin

• sales growth
• market share
OUR VISION
To be Excellent All Around.

OUR MISSION
• To provide automobile of international quality at
competitive price.
• To improve skills of employees by imparting

training and inculcating in them a sense of
participation.
• To achieve maximum and promote the

automobile vending industry.
• To contribute to Pakistani indigenization society

through development of industry in general and
automobile industry in particular.
EVALUATION OF PAK SUZUKI MOTOS COMPANY

MISSION STATEMENT:
Customer Product & Service Markets
NO YES NO
Technology Concern for Philosophy

survival, Growth &
Profitability
YES YES NO
Self- Concept Concern for image Concern for

employee
YES YES YES
CONCEPT OF MISSION AND VISION STATEMENT OF

PSMC
PSMC has crafted its mission statement in the year 2001. Since then it has never
been revised or reviewed because management don’t find the need to revise the
mission statement. Before that PSMC was working on the policy of manufacturing
economical cars for Pakistani customers. But afterwards due to high competition the
management realized the need for a mission statement to be pursued by utilizing all
the efforts and resources in order to have a clear path way to follow to achieve the
highest profits. The main aim of Japanese management is to get highest profits in
the market so all the activities and decisions revolve around finding and following the
ways to maximize the profits. Much importance has been given to the mission
statement and it is placed everywhere in Pak Suzuki Head Office. Even every
employee has learned it by heart.
Management always makes decisions that are compatible with the mission
statement. All the decisions and strategic planning is centered on the vision and
mission statement.
Management never matched the mission statement with their competitors because
they cater a different market i.e. economical cars segment of the market and their
competitors are mostly serving the needs of upper class customers, so management
have never found a need to match its mission statement with the competitors’.
EMPLOYEE INVOLVEMENT IN MISSION STATEMENT:
Top management did not believe in the employee involvement for developing the
mission statement. Mission statement was developed in Japan by the top
management of parent company and is implemented here in Pakistan.
The mission statement was communicated to the Heads in a meeting of Heads of the
Departments and then the Heads communicated it through internal letters
(memorandums and e-mails).
All the members of BOD and the employees are committed and satisfied with the
mission statement.
Factors Rating
Very high High Average Low No
President: Very high

Board of directors: high
Executive members/ Head of Departments high
Employees:
Senior employees Average
Middle level employees high
Lower level employees No
PAKISTAN ASSOCIATION OF AUTOMOTIVE PARTS

ACCESSORIES MANUFACTURERS (PAAPAM)
PAAPAM was formed in 1988 to represent and to provide technical and management
cooperation to its members. PAAPAM, with its almost a decade old history, has
attained a level of an indispensable and extremely effective link between the policy-
making echelons at government and the whole entity of its member firms.
The Association achieved recognition form the Government of the Pakistan in 1999
and today is represented in many Government and semi government as well as
Private Institutions by its members. PAAPAM is the member of the Federal of
Pakistan Chamber of Commerce & Industry (FPCCI). With a registered
membership base of over top line tier 278 members and general manufacturers base
of over 1200 companies, PAAPAM has under its wings manufacturing
companies making parts for Pakistan's Cars, Motorcycle, Tractors, Trucks
and Buses assemblers. Investments in place now exceed US$ 1.5 billion. to
become a member of our association
FEATURES:
• The Association has more than 200 members at present and this number is
constantly increasing. It is estimated that the total number of auto-parts
manufacturers has exceeded one thousand and providing jobs directly or
indirectly to over 200,000 persons.
• The auto-parts manufacturers have contributed significantly to indigenization

of the locally assembled vehicles as well as in development of the
engineering/industrial capabilities. Massy Ferguson and Fiat Tractors have
been indigenized to 87%, various models of Suzuki vehicles from 30% to
65%, Hino & Nissan trucks 40%, Mazda trucks 35%, Honda and Toyota cars
28%, Honda and Yamaha motorcycles 80%.
• The PAAPAM member firms want to manufacture sophisticated parts e.g.

pistons, engine valves, gaskets, camshafts, shock absorbers, and struts,
steering mechanism, cylinder head, wheel hubs, brake drums, wheel
bumpers, instruments and instrument panels, gears of all types, radiators,
cylinder liners, blinkers and lights, door locks, auto air conditioners, etc.
• The industry has been by and large developed through its own indigenous
resources and some through technical tie-ups with well-known multinationals,
both Japanese and Western.
• PAPPAM members with full support of Export Promotion Bureau have

participated in international exhibitions in Frankfurt, Düsseldorf, Taiwan,
Jakarta, Poland, Los Angeles and Tehran. As a result, orders from Germany,
Indonesia, Iran and USA have been received by the exhibitors. PAAPAM also
participated in Indian Auto Expo Exhibitions two times and participated in
Imtex one time. PAAPAM also organized two Exhibitions in Pakistan, one in
Islamabad in 1995 and the 2nd in Lahore in 1997. Due to organization of
Exhibitions, our export of automobile components increased manifold.
• PAAPAM is also represented through its members in the Government and

business bodies e.g. indigenization Committee, National Engineering
Manufacturers Export Council, Engineering Development Board, Lahore
Chamber of Commerce & Industry, Federation of Pakistan Chambers of
Commerce & Industry, Employers Federation of Pakistan etc.
• PAAPAM is professionally managed association at national level and has

members all-over the country. The Association operates on completely
democratic lines with election of the Chairman, Vice Chairman and Managing
Committee for a full term of two years.
• PAAPAM being the only representative (Regd.) body of auto-parts

manufacturers is also playing active role for the promotion of Engineering
Sector in Pakistan and for this purpose with the help of Engineering
Development Board, I.S.D.P. Book is printed for different categories of
vehicles.
STARTEGY FORMULATION, IMPLEMENTATION AND

EVALUATION PROCESS
AT
PAK SUZUKI MOTORS COMPANY

STRATEGY
STARTEGY
EVALUATION at
FORMULATION by
SMC IN JUNE &
“Strategic Planning
JULY & at PSMC is
committee” at SMC in
done MONTHLY &
JAN & DEC
ANNAULLY
PAK SUZUKI MTORS

COMPNAY
STRATEGY
IMPLEMENTATION STARTEGY REVIEW
by PSMC on Short
At PSMC in MARCH Term Basis by
& OCTOBER every “Strategic
Management
year Committee”
STRATEGY FORMULATION PROCESS

AT Pak Suzuki Motors Company Ltd
Pak Suzuki Motors Company ltd. put great importance on strategic management
in the organization. Since its inception PSMC has acknowledged the importance of
strategic management and used it as not only a tool to analyze the environment
(both internal and external) but to forecast the changes and trends in the automobile
industry. PSMC has analyzed that Pakistan is a country of people having low buying
power, and this is the reason why PSMC became a leader in economical car
manufacturing after just 2 years of its operations in Pakistan.
Pak Suzuki’s slogan for the year 2008 is “Cry for Help”. This is due to the economic
recession in Pakistan.
All the strategic planning is done at corporate level by the “Strategic Planning
Committee” of parent company i.e. Suzuki Motors Company in Japan, in the
months of December and January. They review the strategies in the month of Jun
and July when the financial year ends. Every year in March and October the parent
company sends “strategic decisions” in “Grand Strategy Manual” to Pak Suzuki to
implement for the next six month, i.e. from March to October and from October to
the next year’s March. Monthly sales plans are set by the parent company.
Strategies and objectives are formulated at parent company for the duration of three
years but these strategies are communicated/ translated annually to Pak Suzuki in
“Annual Directors’ Meeting”, these strategies are neither communicated to the
middle level nor to the lower levels. Hidden approach is used by the top
management. Pak Suzuki management considers the strategies as their policies. At
Pak Suzuki “Weekly Coordinating Meeting” is conducted, in this meeting the
Heads or the Departments’ directors communicate the short term policies/strategies
to the middle management and get insight of the overall organizational performance
from the middle management. Budgeting to implement the strategies is done each
year in April. The company’s financial year is from Jun to According to
Mr. Abdul Majeed Sheikh; SMC does follow the strategic management process given
in the book informally but the exact process the company follows is only known by
the top level management in parent company in Japan. But they do analyze the
internal and external environment by different tools and techniques. They don’t take
services of external consultants or experts because the top level management itself
is highly experienced and professional team. But when the situation is crucial or
quite uncertain the SMC may get the services of outside consultants as well. They
use very sophisticated computer tools/ soft wares to analyze the findings of internal
and external information.
STRATEGY REVIEW
By PSMC’s Strategic Management Committee
The strategies acquired by top level management are reviewed on a short term basis
by the “Strategic Management Committee” of Pak Suzuki Motors Company. The
“Strategic Management Committee” includes 4 Japanese and 3 Pakistani
Directors of Functional Departments. Among 4 Japanese 3 are working here
in Pakistan and 1 is dummy Director. They review the strategies of current year
in April and the coming year strategies are reviewed in October and November.
According to the situations and external conditions sometimes committee modifies

the strategies and if the strategy requires major changes due to the occurrence of
favorable or unfavorable indicators the management retreats the strategies and
bring new strategies.
Pak Suzuki is very much responsive to the changes which occurred in the
environment that’s why it has introduced different brands to cater the new
requirements of the travelers. For e.g. it has introduced APV for large size family,
Mehran, Alto, Khyber and Cultus for 4 and 5 member’s family etc economical
motorcycles for lower income group customers.
Moreover, recently PSMC has lowered its prices, and it’s a new step just because of
the decrease in demand due to the decreasing buying power and economic
recession.
INTUITION AND ANALYSIS FACTOR:
Factor Top level decisions Middle level Operational

decisions decisions
Intuition 50 – 70% 20-30 % 5-10 %
Scientific 20-30% 50-70 % 50-70 %

analysis
Other: 10-20% 30% 30%

Mostly used criteria during the formulation stage:
Is the strategy appropriate in view of

available resources?
ROI & O/I APPROACH:

PSMC uses a blend of both RBV and OI approach in strategic decision making
because the management believes that both internal and external factors are
important for getting the competitive advantage among the competitors.
CULTURE OF PSMC:
The culture of PSMC is quite aggressive. It quickly responds to the changes that
occurred in the environment. In 2006, when the demand for automobile was
increased a lot due to the car financing, lease financing and auto loans the
management rapidly changed the working shifts and increased the production
capacity from 100,000 to 150,000 units by acquiring more land and production
facilities near the main production unit/head office and it also planned the production
capacity to 250,000 up till 2009.
The Director operations Mr. Abdul Majeed told us that organizational culture is not
constant at Pak Suzuki; according to the strategies they modify the culture at work
place, so it can be said that culture is quite flexible and supportive for most of the
strategies but if there is a need arises to change the culture and make it more
supportive for the strategy implementation, they change the culture and minimum
resistance comes by the employees because all of the employees are quite flexible,
committed to the mission and they are always ready to accept the changes in order
to achieve the goals.
Proactive or Reactive Decisions:
PSMC is not proactive in decision making; rather the management makes reactive
decisions. And the management at PSMC regards it as a lacking in
competition. Only once it has made proactive decision and that was the
introduction of CNG vehicle. PSMC is providing maximum number of number 1 Italian
made factory fitted CNG vehicles. It was then followed by the competitors as well
and now every automobile company is providing factory fitted CNG vehicles.
ETHICAL PERCEPTION AND PRACTICES AT PAK SUZUKI MOTOR

COMPANY:
Pak Suzuki has recently formulated its Business Ethics Policy and it has been
implemented very effectively throughout the organization. The management believes
that this policy will support the strategies and activities within the organization. It
covers all the issues of management, employees, customers, competitors, vendors,
dealers, and natural environment as well.
SIGNIFICANT POINTS OF ETHICAL POLICY:
• Pak Suzuki insists on integrity and honesty of its employees in doing

business. Any unfair or corrupt practice to solicit business is fundamentally
inconsistent with business codes of company.
• Pak Suzuki believes in compliance to regulatory obligations.
• Pak Suzuki believes in free and fair business practices and open competitive
markets. Developing any association with competitors to distort the pricing
and supply of products is contradictory to company’s business code of
conduct.
• Pak Suzuki believes in transparency in business transactions and they are to

be recorded accurately and fairly in books of accounts in accordance with
standard procedures.
• Pak Suzuki expects its employees to act in company’s best interest while
holding confidential information. Company expects its employees neither to
solicit internal information from others not to disclose company’s data or any
other material information to any unauthorized person/ body.
• Pak Suzuki believes in individuals respect and growth, its employment policies
do not discriminate on the basis of race, religion, gender or any other factor.
• Pak Suzuki does not believes in political affiliation.

CORPORATE SOCIAL RESPONSIBILITY STRATEGIES

AND ACTIVITIES AT PAK SUZUKI:
Pak Suzuki Motors Co. put great emphasis on corporate social responsibility
activities. Under CSR the activities involve social welfare (donations and charities),
environment protection activities, pollution reducing tools and methods in production
and much more. It has been mentioned in the “Management Integrated Policy”.
Some important highlights of CSR activities are as under:
WASTE WATER TREATMENT PLANT:
While formulating and implementing the production strategies, the management

analyzed the ways for the removal of waste water and other harmful wastes. Taking
initiative to control environmental pollution, the company set up its “waste water
treatment plant” with a cost of Rs. 40 million. The treatment plant commenced
operations in June 1996. While Pak Suzuki already meets emission control standards
set by the Pakistan Environment Protection Agency (EPA), the latest Biochemical
water treatment plant took the company a step further. The plant not only purifies
water through more sophisticated cleaning processes
DISCHARGE OF WASTE MATERIALS:
Pak Suzuki minimizes the discharge of waste materials into the environment by
utilizing responsible pollution control practices.
AID FOR EARTHQUAKE VICTIMS AND EDHI FOUNDATION:
Pak Suzuki has always put emphasis on the social welfare activities. After the
earthquake of 2005, Pak Suzuki is continuously providing aid to the victims’ in terms
of blankets, other relief items in the subsequent years. The company also provides
funds to Edhi Foundation as a social wellbeing activity.
PAK SUZUKI SEEKING EURO-II COMPLIANT AUTO PARTS FROM

INDIA:
Pak Suzuki Motor Company, Pakistan's leading car assembler, is lobbying for
permission to import Euro-II compliant auto parts from India at zero-rated duty in
the face of stiff opposition from the local vendor industry.
The Pakistani auto vendor industry has strongly opposed Pak Suzuki's move because
Maruti Suzuki produces the same model with Euro-II engines
Pak Suzuki proposes to use Euro-II compliant auto parts imported from India for
manufacturing cars with Euro-II engines. Members of the Pakistan Association of
Automotive Parts and Accessories Manufacturers, speaking on condition of
anonymity, said the Euro-II standard is an advance technology that is environmental
friendly but the models especially produced by Suzuki in Pakistan are decades old.
EXTERNAL AUDIT
External audit or environmental scanning is one of the important activities at Pak
Suzuki in the strategy formulation process. In external audit, the company put more
emphasize in collecting the information of social trends, customer changing needs,
economic trends (ups & downs), technological aspects and competitors’ activities.
In Pak Suzuki, a team of managers from each department collects the information,
make a report and send it to Suzuki Motors Company, Japan. The “Strategic Planning
Committee” in the parent company analyzes this report and itself gathers the
information through secondary sources and then analyzes this information further to
formulates the strategies according to that analysis.
In our report external audit includes:
• Competitors
• SWOT analysis
• Technologies
• Vendors network
• Dealers network
Data Source:
Information is collected by a team through forward and backward linkages. I.e. the
team directly interacts with members of Suzuki vendors’ association and
Suzuki dealers regarding the customer choices and preferences, they use industry
espionage and spying techniques to gather the information about the
technologies and the strategies used by the competitors. They send their spies to the
competitors’ head office and dealers and get the information. But this activity is done
in most ethical way. The team gathers both qualitative and quantitative information
using a secondary source of a separate body called “PAAPAM”.
SWOT ANALYSIS:
SWOT analysis is done in an informal way and it’s not given in the hard form. SWOT
analysis is done on periodic basis usually in April, because in April the managers at
PSMC evaluates the performance of implemented strategies and they find out if there
are any changes occurred in the external opportunities and threats and internal
strengths and weaknesses.
s.no. Opportunities
1 Lesser number of small size imported cars has increased the opportunity for Suzuki
800 & 1000CC.
2 Online CNG manufacturing has the opportunity of export to European
countries.
3 Great potential for motorization.
4 Designs made by Maruti Suzuki can be manufactured and marketed in Pakistan.
5 Export of Liana and light commercial vehicles like Ravi pickups and
Motorcycles in Asian countries.
6 First time buyer is a major segment
7 PSMC can provide cars on lease through dealers thus increase the sales
s.no. Serious threats
1 Economic recession
2 Increase in Inflation
3 Sophisticated technology used by competitors.
4 Declining GDP causes sales decline
5 Restricted financing by banks and leasing companies
6 Political instability
7 Lack of long term policies by govt.
s.no. strengths
1 Highest Production capacity
2 Providing 800 CC and commercial vehicles
3 Products are versatile (like hi roof, pick up, APV)
4 Competitive/ low prices
5 Highest number of vendors and dealers with good relationship.
6 High rate of part localization

7 Introduction of CNG vehicles
8 Strong management information system
9 Steps taken for environment safety
10 Online CNG manufacturing
11 Reliable after sales services
12 Better value chain system as compared to the competitors
s. Weaknesses
no.
1 Reactive in decision making, not proactive
2 Centralized decision making, competitors have decentralized decision

making.
3 Far behind competitors in using sophisticated technology, thus somewhat low
quality of products.
4 Company is not as properly organized as the competitors are.
5 Weak corporate culture as compared to competitors
6 Supply chain needs more strategic planning because it can’t support

operations properly.
7 Marketing department needs more strategic planning
8 Infrastructure is not that developed
9 Low customer acceptance of LIANA 1300 cc in Pakistan
COMPETITORS:
Since its inception Suzuki has been enjoying the position as market leader in 800 CC
small cars and 1000 CC passenger cars segment like jeeps (potohar), Margalla.
While Indus motors and Honda compete for the large size, high price segment of
market. In 1993, Toyota started its operations and in preceding year 1994, Honda
commenced its operations in Pakistan as the main competitor in 1300-2000CC
segment. So far; Pak Suzuki, Indus Motors and Honda have been dominating the
market despite the entry of imported cars and Dewan Farooq Motors, Diahatsu and
Haundai Motors with a number of new product line such as:
• 850 CC Diahatsu Coure by Dihatsu
• 1300 CC Kia Classic by Dewan Farooq Motors
• 1000 CC Haundai Santro by Haundai
PSMC has gained the highest share in small car segment through its competitive
prices and wide dealership network and other timely strategies. Now there is no
competitor in the 4x4 (800 CC) vehicle but still the management considers “Indus
Motors” and “Honda” as its competitors in the current scenario as these are the only
organizations operating in Pakistan and providing attractive and quality products.
In the current scenario, PSMC has no threat of any entrant because the tariff
structure is quite complicated, interest rate is increasing and the sales are
declining. Country is in the recession period actually, so right now PSMC is not
expecting any new entrant. Again the reactive belief is there. Whenever new
company will enter into the industry, the PSMC management will formulate the
strategies accordingly.
At present, PSMC is lagging behind its competitors in terms of technology

being used. No global challenges and issues affect the PSMC operations and
activities because it serves and operates in Pakistan. But the parent
company i.e. Suzuki Motors Company and “Maruti India” do face these
challenges and respond them as well.
PSMC is following the trend of localization of raw materials and components average
65% on its all models and Toyota is following 35% on its all models of 1300-2000 cc
Corolla.
To sum up; PSMC has monopoly in 800 CC, it shares the market with its
competitors in 1000 CC cars, and it lacks and have minimum share in 1300
CC. PSMC enjoys sort of monopoly in commercial vehicles like Suzuki Carry,
Ravi pick up and Hi roof because these are versatile products and
competitors have not accessed this segment yet. So management believes
that LCVs may be the potential areas of competitiveness. PSMC does not
have any threat from imported products.
COMPETITIVE EDGE:
The areas in which PSMC has gained competitive edge include:

• Introduction of CNG vehicles boosted up the sales to a height
• Only Pak Suzuki is providing 800 CC cars in the market (other than
imported reconditioned cars). Competitors are dealing in 1300 CC
vehicles.
• PSMC deals in commercial vehicles like trucks, heavy weight vehicles
• PSMC deals in versatile products like pick ups, large family vehicles
like APV, Bolan and Suzuki Hi-roof.
• PSMC has converted APV into CNG thus boosted up the sales in the
tough economic period.
• Low prices
• Providing Improved After sale services
• Highest number of dealers and vendors
• Highest production capacity
• Maruti Suzuki’s designs have an edge
COMPETITIVE PRICES:
Competitive prices are the key factor in the success of Pak Suzuki. The
prices of substitute products do not affect the pricing decisions of PSMC. It
works on “cost plus pricing” method.
INTRODUCTION OF CNG VEHICLES:
Pak Suzuki also took a step further by taking the lead in introducing CNG in all of its
products, as it is the most environment friendly, safe and economical fuel source
available today.
Pak Suzuki has been awarded with “National Award on Occupational Safety, Health
and Environment” in recognition of its achievements in the area of occupational
health and safety practices and promotion of health and safety environment at the
work place.
TECHNOLOGY:
The automobile manufacturers are using hybrid technology, introducing
water driven cars, electrical vehicles etc. but there is no technological
advancement at PSMC. The technology or engine models used by PSNC ae
given below, but thee are far behind the competitors.
Models Technologies:
• SS80: 1982- . A modified version of the Suzuki Alto SS40, with a

796 cc engine.
• Mehran (originally Alto): 1988 to date, renamed Mehran in 1992.

The version of the Suzuki Alto CA71 modified for export, with a
796 cc engine. Restyled in 1998 and 2004.
• Baleno: 1998 - 2006. The Suzuki baleno. Replaced by the Liana.
• Alto: 2000 to date. The Suzuki Alto HA12 with a 970 cc engine.
• Cultus: 2000 to date. The Suzuki Cultus Generation 2 as
produced in Hungary from 1992 to 2003, with a 993 cc engine.
• Liana: 2006 to date. The Suzuki liana sedan with 1.3- or 1.6-litre
engines.
• Potohar: the Suzuki Samurai produced by Santana Motors from
1985 to 2003, with a 1-litre engine.
• Bolan and Ravi: respectively the van and pick-up versions of the
Suzuki Super Carry with a 796 cc engine.
• The Suzuki Jimny and APV are also imported to Pakistan
DEMOGRAPHIC TRENDS AFFECTING THE MARKET SIZE:
The demographic trends that may affect the market size of automobile include:
• disposable income
• Perception of quality in the mind of potential customer.
MARKET LEADER & FOLLOWER:
PSMC stands on 5th ranking among the world’s renowned Motor Companies. PSMC
regards itself as a market leader in terms of highest market share, highest
production capacity in the country, highest number of dealers and vendors in
Pakistan and abroad as well. But the management does accept that in terms of
“Technology”, PSMC is a market follower. They still do not use the highly
sophisticated technologies in their brands, as their competitors do.
Description No. of Vendors

Vendors (Automobile Division) 125
Vendors (Motorcycle Division) 52
VENDORS NETWORK
Pak Suzuki is serviced by 120 vendors who are engaged in manufacturing and
supplying local automobile parts to the company. Most of them are local vendors and
are close enough to Pak Suzuki. Previously the vendors were 170 in number but Pak
Suzuki lessened the number of vendors in different stages and now these are 120.
This is done to achieve cost effectiveness. Suzuki has allotted land on contract basis
to 11 vendors near the production area in order to cut the cost of transportation and
timely availability of raw materials and components, stores, spares and other parts.
Because the production is done on Just-in-Time principle therefore the company
can obtain the raw materials and components any time it needed.
Vendors Network
Pak Suzuki continues to be in the fore front for indigenization or localization of
components for all Suzuki vehicles and is committed to national self reliance. The
company has achieved over 71% indigenization (also called localization) in its main
product Mehran 800 CC and over all 65% products have been indigenized. A large
number of technical collaborations have been arranged by Pak Suzuki between
Pakistani and Japanese vendors. The transfer of technology by Pak Suzuki and
guidance by highly qualified automobile experts is provided to upgrade vendors’
capabilities to achieve the mission of international quality level.
• According to the top management increasing localization of parts can increase
the market share because the company will be able to have parts and
components and thus will make timely deliveries to its customers.
• Through localization the company wants to support the economy of Pakistan
by importing parts in lesser amount.
Pak Suzuki has established its “Vendor Coordination Department” which specifies
written comprehensive procedures to its vendors. This department involves in the
following activities to make good relations and have best raw materials from the
vendors.
• It conducts the technical evaluation of vendors’ raw material and parts.

• It does succession (future) planning with vendors.
• It sends vendors on overseas tours on different courses for the improvement
of components and materials.
• Provides in-house training to vendors.
• It safeguards the interest of the company against vendors.
RECENT ACTIVTIES OF “VENDOR COORDINATION DEPARTMENT:
Vendor ERP Training:
Pak Suzuki Motor Company Limited will implement new ERP inventory system for
January, 2009. Refreshers ERP training was held for vendors at Karachi and Lahore
on 12th and 13th December, 2008 respectively at local hotels. Vendors were trained
about the unique features of the new system; like ordering, printing of DI slips and
parts tags, receiving at PSMC etc. A team of Pak Suzuki Comp. officials from SCM,
MHD and IT explained the queries of the vendors for better understanding of the
system.
Vendor Coordination Meeting:
Yearly meeting use to be held at Bhoorban in which all the vendors use to participate
in it.12th Vendor Coordination Meeting was held on 29th and 30th October, 2008 at
Local Hotel Karachi and Lahore respectively .A total of 103 vendors participated in
the meeting.
DEALERS NETWORK
Pak Suzuki has a network of 70 dealers throughout Pakistan. The
relationships with the dealers are so properly maintained that the company
conducts informal dealer survey while introducing the new brands.
3S Dealers (Sales, Service, Spare parts):
PSMC under its penetration strategy brought a new idea in automobile industry
according to which all the point of sales and after sales service facilities have been
brought under one roof. These facilities include Sales, Service, and Spare parts. The
basic idea behind this strategy was to facilitate the Suzuki clients at maximum and to
save money, time and energy of customers. Recently in 2008, 5 dealerships were
inaugurated in the following cities:
1. Chaudry Motors, Rawalpindi.
2. United Motors, Vehari
3. Sethi Motors, Lahore.
4. Riaz Motors, Karachi.
5. Fort Motors, Multan.

PAK SUZUKI DEALERS NETWORK

AUTOMOBILE (Division)
PROVINCE NO. OF DEALER
Sindh 22
Punjab 41
NWFP 4
Baluchistan 2
FATA 1
Total 70
MOTORCYCLE (Division)
Province No. of Dealer
Sindh 13
Punjab 118
NWFP 5
Baluchistan 2
FATA 2
Total 140
INTERNAL AUDIT
Internal audit of PSMC includes the following Functional Areas:
• Management Audit
• Marketing Audit
• Production/ Operations Audit
• Research & Development Audit
• Human Resource Department Audit
MANAGEMENT AUDIT
ORGANIZATIONAL STRUCTURE:
PSMC management follows the policy of “Management by Objectives”. Every

employee is given with its own goals and targets. A daily task sheet is maintained by
each employee in which he specifies his own daily objectives. It is a sort of action
plan. It helps the employee in self reviewing of its performance and goal
achievement. The performance is further communicated to the Head of the
department. Generally the management tries its best to achieve the quantitative
objectives rather than qualitative objectives. Financial objectives may include
achieving planned sales at a given percentage, increasing the shareholder’s wealth,
maintaining current ratio or increasing it up to planned level etc. Qualitative
objectives are rarely formulated at PSMC.
The management of PSMC faces many difficulties because the parent company does
not share enough facts with the company. The management in Pakistan does not
know how the cost and benefits of different strategies are evaluated.
MARKETING AUDIT:
Marketing audit includes the analysis of following areas:

• Advertising activities and Marketing planning
• Exports
ADEVRTISNG ACTIVITIES AND MARKETING PALNNING:
PSMC does not believe much in advertising of its brands. The reason is that it
provides affordable, small and large family cars, commercial vehicles like pick ups,
vans etc, so the people who are from lower income group but can afford to buy and
maintain a car, their first choice is “Suzuki”. Therefore, Pak Suzuki finds no reason of
advertising its brands. PSMC can’t do marketing planning because of uncertainties in
the environment, decrease in demand due to the heavy taxes and other economic
problems. Monthly sales are planned by the management and they are evaluated on
weekly basis and sometimes on daily basis as well. Other than that no marketing
planning is done. Suzuki provides vehicles on lease financing, insurance facility are
given to the clients, clients can purchase on lease from the dealer and on the back
end, bank pays finances to the dealer. According to Mr. Abdul Majeed Sheikh
Marketing department requires more strategic planning.
EXPORTS:
During the year 2008, Pak Suzuki exported Liana cars to Bangladesh first time ever
with a first consignment of 20 units worth Rs. 14 million. This was done to pursue
the goal of developing the market for Suzuki Liana in different geographic areas
because Liana has not gained much attention of customers in Pakistan. The company
has acquired the order of 1000 Liana cars from Bangladesh and Pak Suzuki regards it
as a success of Liana in Bangladesh.
The exports of Suzuki Ravi Pickup to Bangladesh and exports of sheet metal parts of
Suzuki Cultus to Europe are going well. During 2008, 312 units of Suzuki Ravi Pickup
and parts worth Rs. 86 million and Rs. 28 million respectively were exported.
Pak Suzuki also exports its high volume CNG parts to European market and in
Myanmar, Burma. Hungry is the main country through which it exports the CNG
parts. Its local swift cars are used in Europe as well.
Despite these exports, the company is still exporting only 0.01% of its total sales
and is far behind from its competitors. But since Pak Suzuki is not much interested to
increase its exports to different countries, it does not consider this as its weakness
and therefore it has no global challenges to face.
RESEARCH AND PRODUCT DEVELOPMENT AUDIT

Though PSMC has established its R&D department but still it puts less emphasize on
the innovation of product, product development and research for new technological
advancement. This department requires more attention and highly skilled and
experienced staff to create and maintain the innovative and quality features in the
brands. R &D and engineering work is done in Maruti Suzuki India. Company takes
the product designs parent company or from Maruti Suzuki India therefore much
attention is not given to in-house product designing and innovation. Parent

company’s R& D department provides the standards of production, CAD and CAM
data, inspection and engineering standards.
In Maruti Suzuki India; 200 engineers have been employed for the product designing
and they have designed different cars with 100 colors. Nissan and Mitsubishi have
acquired two designs from Maruti Suzuki India.
Company conducts informal dealer survey while introducing the new brands. But still
one of the reasons of failure of Suzuki LIANA was the lack of good marketing
research.
PRODUCTION & OPERATIONS AUDIT

The production and operations audit involves many aspects at Pak Suzuki. We have
included some of these aspects as under:
• Production mechanism
• ISO Certification
• Value chain
• Capacity expansion plan
PRODUCTION MECHANISM:
Pak Suzuki is operating ISO certified production mechanism. Different technologies

are used for different brands. Whenever demand increases company increase the
working shifts from 2 to 3 shifts.
PRODUCTION FACILITIES
The production facilities in the plant are integrated and comprise of the following:
1. PRESS SHOP:
The press shop consists of most modern stamping facilities equipped with two
tandem press lines. It distinguishes Pak Suzuki from the other automobile plants.
The press shop constitutes a major investment in machines and dies and has
contributed in the high level of localization achieved in Suzuki vehicles.
2. WELDING SHOP:
Welding shop caters for welding of all Suzuki vehicles comprising of 07 models.
The process consists of welding of plane parts to complete body shell through
technically advanced welding jigs & Fixtures, spot welding and CO2 welding
process. Moreover, hemming press facility enables the in-house manufacturing of
doors/ hoods of different Suzuki models.
3. PAINT SHOP:
Paint shops have the most modern conveyorised painting facility including state-
of-the art cathodic electro-deposition system. Al transfers are automatic and
spray final coat is carried out in very sophisticated temperature controlled booths
and ovens. Painting operation for solid and metallic colors is carried out in
modern paint booths.
4. VEHICLE FINAL ASSEMBLY:
Vehicle final assembly comprises of three separate lines for trim and assembly as
follows:
a) Car line: Mehran, alto, cultus, and liana cars.
b) Comerical vehicles line: Ravi Pickup and Bolan Van.
c) 4x4 Vehicle line: Potohar 4X4 vehicle.
One of the characteristics features of Pak Suzuki is the automation of final

assembly car line with the integration of new ‘Automated painted body storage (PBS)
system’ to meet the challengeable production targets.
5. ENGINES & TRANSMISSION ASSEMBLY:
Assembly shop consist of five sections including cylinder block line, cylinder head
assembling of three different types of engines( F-Types, G-Types, and M-Types)
is carried out.
6. PLASTIC INJECTION MOLDING SHOP:

Plastic injection molding shop consists of injection molding facilities for

manufacturing of bumpers, instruments panels, and front grills and wheel caps.
Plastic shop also paints the molded bumpers of different cars models. In addition,
assembly of instrument panel and sub assembly of bumpers are also done by
plastic shop.
INSPECTION AND TESTING FACILITIES
1. PARTS INSPECTION DEPARTMENT:
Parts inspection department involves in checking and inspection of locally

developed parts, which is carried out in three phases.
PHASE-1: Initial sample verification by dimensional inspection using coordinate

measuring machine (CMM) and metallurgical using metallurgical testing
equipment.
PHASE-2: Pilot lot verification on inspection fixture.
PHASE-3: Issuance of trial lot based on Pilot lot results.
2. VEHICLE INSPECTION DEPARTMENT:
The vehicle Inspection Department is responsible for all the vehicles being
delivered to marketing from state-of-the-art ‘Vehicle Inspection Line’ from where
it ultimately goes to the dealers and then to the customers. In this Department,
each vehicle has to go through the following tests:
a) Toe In Tester: the most modern ultrasonic wheel alignment equipment.
b) Side Slip Tester: this equipment verifies the wheel alignment.
c) Drum Tester: Vehicle is run on free rollers up to speed of 100 km/hr for
checking of any abnormal behavior of the vehicle and the calibration of
speedometer.
d) Brake Tester: the most modern equipment for checking the braking
force with an additional provision of checking ABS system.
e) Head Light Tester: this equipment is used for aiming and focusing of
the headlamps.
f) Turing Radius Tester: it is used to adjust and verify the turning angles
of vehicles.
g) Shower Tester: All vehicles are shower tester for checking water
leakages.
3. TEST COURSE / CNG / GLOBAL CUSTOMER AUDIT:
All vehicles are road tested on a test rack especially designed to match out the
local road conditions. There is a road, wavy road, rough roads and jumps with
speed backers to bring the test track closer to the actual conditions. Vehicles with
CNG version have to go through a turning test on chassis dynamometer. In
addition, 7 to 8 Okayed vehicles per day are audited through a system called
Global Customer Audit.
ISO CERTIFIED MECHANISMS
ISO 14001: 2004 CERTIFICATE
The 21st century is called the ‘’ century of the environment”. Therefore, receiving
high ranking in terms of environmental protection efforts would lead to further
improvement in the image of Pak Suzuki products. The environmental management
system addresses the needs of a broad range of interested parties and the evolving
needs of the society for environmental protection. In August 2005 the company’s
environmental management system (ISO 14001:2004) was certified by M/s AIB-
Vincotte International of Belgium.
NATIONAL AWARD ON OCCUPATION AL HEALTH & SAFETY

MANAGEMENT SYSTEM
The Occupational health & safety management system is concerned with the
conditions and factors that affect the well being of employees, temporary workers,
contractor personnel, visitors and any other persons in the work place. Its
measurable results are related to the company’s control of the health and safety
risks based on the company’s clearly started overall health & safety objectives. The
company’s occupational health & safety Management system (OHSAS 18001:1999)
was certified by M/s AIB Vincotte International of Belgium in August 2005. In
recognition of its achievements at the work place, the company has received once
again the national Award for being among top ten organizations in the country. The
award so far distributed only twice.
VALUE CHAIN SYSTEM:

Value chain is a process by which a firm determines the cost associated with
organizational activities from purchasing raw materials to manufacturing new
products and to market those products. It aims to identify low cost advantages and
disadvantages it is a useful tool to identify the strengths and weaknesses.
PSMC also uses Value Chain system in order to analyze and control the cost behavior
of production.
There are three functional levels of value chain system at PSMC.
IPP: Import Part Purchasing
LPP: Local Part Purchasing
GPP: General Procurement Purchasing

The company controls the cost of production through:
• Multi sourcing i.e. acquiring the components and raw materials from
more than one vendor.
• Complimentary Sourcing
Because the production is done on Just-in-Time principle therefore the company

can obtain the raw materials and components any time it needed. According to Mr.
Abdul Majeed Sheikh the local parts are more competitive no single stoppage has
been occurred due to the late deliveries of imported parts. Further he said that PSMC
has better value chain system as compared to the competitors.
(Director Operation has not told us much about value chain analysis, he was
quite reserved in sharing this information.)
CAPACITY EXPANSION PLAN:

The Suzuki Management immediately after privatization pursued plant expansion
strategy and started expansion of the existing plant to increase its installed capacity
to 50,000 per annum. The expansion was completed in July 1994.
However capacity remained substantially underutilized until 2002 because of

economic recession. Thereafter realizing growth in demand, the Company increased
capacity in phases. The first phase was completed in January 2005 when capacity
was enhanced to 80,000 vehicles .The second phase was completed in January 2006
and capacity was raised to 120,000. The third phase was completed when on 6th
February 2007 Prime Minister of Pakistan Mr. Shaukat Aziz inaugurated 150,000
vehicles capacity expansion facilities up till 2009.
On 25th April 2007, the Boards of Directors of Pak Suzuki Motor Company Limited
(PSMC) and Suzuki Motorcycles Pakistan Limited (SMPL) approved Scheme of
Arrangement (The Scheme) to amalgamate SMPL into PSMC with effect from 1st
January 2007. The scheme was approved by the shareholders of the respective
Companies at the Extraordinary Genera! Meeting held on 30th June 2007. The
scheme was sanctioned by the Honorable High Court of Sind (the court) on 17th
September 2007. The certified copy of the Order of the Court sanctioning the scheme
was fifed with the Registrar Companies Karachi on 1st October 2007, from which date
the scheme became operative.
PSMC and Suzuki Motor Corporation (SMC) Japan held 41% and 43% shares in SMPL
respectively. Pak Suzuki issued and allotted 1,233,300 ordinary shares of Rs.10/-
each to the qualifying shareholders of SMPL @ one ordinary share in Pak Suzuki for
every twenty one shares held by SMPL shareholders as on the date of final book
closure i-e. 29th October 2007. The trading of shares of SMPL on Karachi and Lahore
Stock Exchanges ceased from the same date,
The Company continues to be in the fore-front of automobile industry of Pakistan.

Over a period of time, the Company has developed an effective and comprehensive
network of sales, service and spares parts dealers who cater to the needs of
customers and render effective after-sale service country wide.
MANAGEMENT INFORMATION SYSTEM

Pak Suzuki Motors have got a really sophisticated management information system.
It has maintained the sophistic information system because the management uses
information system in decision making. All the information both local and
international is put in the information system and managers use them whenever they
need to make decision or to be well informed.
Recently Pak Suzuki has taken steps forward in the following areas:
AGREEMENT WITH MICROSOFT:
Pak Suzuki Motors Company has signed “SELECT Agreement” with Inbox Business
Technologies on behalf of Microsoft Corporation, it has expertise in “software
licensing”. According to the agreement, Pak Suzuki will acquire number of Microsoft
licenses including Microsoft office 2007, Microsoft Vision 2007, Microsoft Project and
Microsoft Server (CAL) licenses.
A STEP TOWARDS PAPERLESS OFFICE:
• Information technology department (head office) in coordination with

Operations Division has developed a Transport Requisition system TRS to
control and monitor the pool vehicle usage in Pak Suzuki. The TRS has been
successfully implemented in all divisions and departments of PSMC head
office. This is a first workflow application introduced by IT dept. in the
company to provide an efficient system for the arrangement of transport.
• Warranty claims of SMC parts were printed on “warranty claim application

form” every month and a copy was sent to SMC through courier by After
Sales dept. IT dept. HO developed software in coordination with After Sales
dept. to upload data on SMC’s website SCAN (Suzuki Computerized Advance
Network). After successful testing and confirmation from SMC, the facility has
been provided to After Sales Dept. to start uploading of warranty claim data.
HUMAN RESOURCE DEPARTMENT ACTIVITIES:
Human resource department works with the coordination of training department at

Pak Suzuki. PSMC put much emphasize in the training & development and career
counseling of its employees. There is competitive compensation system used at
PSMC, financial rewards are given to the employees after the month end evaluation
i.e. pay on performance tool is used in order to motivate the employees. Some
recent activities conducted by the department are as follows.
EMPLOYEE TRAINING ACTIVITIES (an important consideration of

Pak Suzuki):
Pak Suzuki Motors realizes the importance of trained and well acquainted employees,
that’s why the HR division held different training courses and workshops for the
employees on and off. They have split the training programs in two parts; one part
comprises on “workshops” and second part comprises of “Employee Training
Scheme” which involves “foreign and local training” of the employees as a
performance and skill enhancement tool. Employees are sent on foreign training
programs and they are paid as normal employees in their absence.
WORKSHOPS:
Training workshops are usually conducted for two to three days. The aim of
workshops is to aware the employees with the latest business activities, work styles,
leaderships, technologies and other things.
WORKSHOP ON “Effective Managerial Skills”:
In the series of “Management & Leadership Development Programs”, a two day

workshop on “Effective Managerial Skills” was arranged in-house by HRM department

during October 2008, for 26 managers and Departmental Heads, who have recently
been promoted as Manager/Departmental Heads, Ms Rahela narejo has conducted
the training program. Pak Suzuki also involves Managers and Heads in order to train
the employees.
FOREIGN AND LOCAL TRAINING:
Pak Suzuki sends its managers and potential managers on the two-year foreign
training program to Japan and Malaysia. Recently, 6 officers were sent to Japan for
AOTS training, and 9 other employees were sent on different local training programs
to different external institutions.
TRAININGS BY MOTORCYCLE DIVISION:
A training program for General Mechanics was conducted by Motorcycle division in

November 2008. It was about the theory and practical for the general mechanics
(Engine disassembly and assembly).
Internal Financial Audit
Operating Results
The Company earned after-tax profit Rs. 624.788 million against 2,774.532million last year. The
Company could not perform well because of a number of reasons explained hereunder. Sales
volume of cars and LCVs dropped by 25% from 124/233 units sold last year to 93,123 units sold
during the year. Looking at demand, Company had to curtail its production to 90/421 units against
120/899 units produced last year. Thus forty percent of production capacity remained unutilized-
The demand for Suzuki Motorcycles declined by 10% because of retail prices increases pushed
by costs of materials and exchange rate> During the year Company sold 27,023 units against
30,255 units last year-
Sales revenues decreased by 22% (Rs.11 J 74 billion) due to lower volume. Gross profit
decreased from Rs.4760 billion to Rs. 590.606 million. Gross profit margin declined from 9.4% to
1,5% due to unprecedented depreciation of Pak Rupee versus foreign currencies, higher prices of
steel and lower production volume. Though Company increased selling prices but could not pass
on full impact of cost-In order to avoid losses Company took all possible measures to curtail
controllable expenses. Distribution expenses decreased by Rs.117.583 million from Rs. 427.041
million to Rs. 309,458 million. The saving was recorded in advertising and sales promotion.
Administration expenses also marginally decreased from Rs. 511.055 million to Rs. 504.617
million.
Financial charges decreased from Rs, 143.786 million to Rs. 53.470 million- Preceding year
included Rs. 73.431 million for compensation paid to customers for deliveries beyond 60 days.
This expense was saved during the period as deliveries were made timely. Other income
increased from Rs- 921.011 million to Rs. 1,342.913 million. The other income is higher because
it included reversals of prior years’ provisions for custom duty and sales tax aggregating Rs,
438.206 million. Contributions for Workers' Profit Participation Fund/ Workers' Welfare Fund and
expense for income tax have decreased consequential to decrease in profit.
Pak Suzuki
Volume 48,900
No. of Shares (million) 82.3
Market Capt. (million) 5,746.18
Authorized Capital (million) 1500
Total Paid Up Capital (million) 823
Operating Results:
The Company has earned after-tax profit of Rs. 624.788 million in the year 2008
against 2,774.532million last year due to the sales decline. The profit percentage
was 1.6% in 2008 and it was 5.5% in 2007. The Company could not perform well
because of a number of reasons explained hereunder. (Note: see more operating
results in Exhibit A-1).
DEMAND FOR MOTORCARS AND MOTORCYCLES:
Sales volume of cars and LCVs dropped by 25% from 124,233 units sold last year to
93,123 units sold during the year. Looking at demand, Company had to curtail its
production to 90,421 units against 120,899 units produced last year.
The demand for Suzuki Motorcycles has declined by 10% because of retail price
increases pushed by costs of materials and exchange rate. During the year Company
sold 27,023 units against 30,255 units last year.
SALES VOLUME (in units):
Items 2008 (units) 2007 (units)
Motor cars 93,123 124,333

SALES VOLUME (in Rupees):
Items 2008 (Rs. In 000) 2007 (Rs. In 000)
Motor cars 39,808,720 51,414,676
Motorcycles 1,305,939 1,415,418
PAK SUZUKI - Sales Results (Model wise)

Model 2004 2005 2006 2007
Mehran 29,343 33,296 36,255 ..................
37,549 ..
Cultus 11,806 18,361 24,335 30,258
Alto 9,486 13,272 19,667 20,686
Liana 510 8,306 4,250
Baleno 4,464 6,635 90
Ravi 2,718 3,936 7,806 11,179
Bolan 6.268 9,009 12.034 17,849
Potohar 1,035 1,060 1,666 976
APV (Imported) 417 1,784 958
Jimny (Imported) 44 186 527
Others . 62 44 1
Total 65,120 86,602 112,173 124,233
Market Share (CAR & LCV) 50.5% 50% 57% 61%
Market Share CAR 49.9% 51% 55% 58%
REASONS OF DECLINE IN DEMAND:
According to Mr. Majeed Ur Rehman, the demand for motorcars and

motorcycles was declined due to a combination of factors like:
• Cost-push inflation resulting mainly from adverse exchange rate
• Rising interest rates
• Restricted financing by banks and leasing companies
• loan defaults
• Economic recession.
• Decline in GDP rate

• Other quantitative and qualitative aspects
Despite sluggish demand for automobile, Pak Suzuki could retain its 61% market
share.
In 2006 the market had good conditions, sales reached up to billions. Pak Suzuki
decided to increase the capacity from 150000 units to 250000 units till 2009 and it
was also decided to export the products to different countries as well. To increase
the capacity according to the plan, Pak Suzuki acquired more land near the main
production area to produce 100000 more units. But when the economic condition of
Pakistan has changed, the top management reviewed this strategy and stopped
producing excess units and reduced the production. In Pakistan motorization level is
7 vehicles per thousand persons. This level is far below than the world norms of
around 100 vehicles per thousand persons.
PRODUTION CAPACITY:
Thus 40% of production capacity of vehicle remained unutilized due to the decrease
in demand of vehicles.
Items 2008 (units) 2007 (units)
Motor cars 90,421 120,899

GROSS PROFIT MARGIN:
Sales revenues decreased by 22% (Rs.11.74 billion) due to lower volume.

Gross profit decreased from Rs.4.76 billion to Rs. 590.606 million. Gross
profit margin declined from 9.4% to 1.5% due to:
• Unprecedented depreciation of Pak Rupee versus foreign currencies,
• higher prices of steel and
• Lower production volume.
Though Company increased selling prices but could not pass on full impact of cost.
In order to avoid losses Company took all possible measures to curtail
controllable expenses. Distribution expenses have been decreased by
Rs.117.583 million from Rs. 427.041 million to Rs. 309,458 million. The
saving was recorded in advertising and sales promotion. Administration expenses
have also been marginally decreased from Rs. 511.055 million to Rs. 504.617
million.
FINANIAL CHARGES: (Note: financial charges do not include the long term
debt interest)
Financial charges decreased from Rs, 143.786 million to Rs. 53.470 million.
Preceding year included Rs. 73.431 million for compensation paid to customers for
deliveries beyond 60 days. This expense was saved during the period as deliveries
were made timely. Other income increased from Rs- 921.011 million to Rs.
1,342.913 million. The other income is higher because it included reversals of prior
years’ provisions for custom duty and sales tax aggregating Rs, 438.206 million.
Contributions for Workers' Profit Participation Fund/ Workers' Welfare Fund and
expense for income tax have decreased consequential to decrease in profit.
SHARE HOLDERS:
PSMC and Suzuki Motor Corporation (SMC) Japan held 41% and 43% shares in
SMPL respectively. Pak Suzuki issued and allotted 1,233,300 ordinary shares of
Rs.10/-each to the qualifying shareholders of SMPL @ one ordinary share in Pak
Suzuki for every twenty one shares held by SMPL shareholders as on the date of
final book closure i-e. 29th October 2007. The trading of shares of SMPL on
Karachi and Lahore Stock Exchanges ceased from the same date.
Pak Suzuki
Volume 48,900
No. of Shares (million) 82.3
Market Capt. (million) 5,746.18
Authorized Capital (million) 1500
Total Paid Up Capital (million) 823
LIABILITIES:
PSMC has no long term debt obligations because the company already has enough
reserves and surplus funds. Whenever the company requires excess funds for a great
deal of activity, it obtains funds from the parent company i.e. SMC Japan. And the
company does not pay the interest on loan amount to the parent company rather it
just pays back the principal loan amount to the parent company. It’s strength of
PSMC.
ECONOMI CONTRIBUTION:
The company has a distinctive position in the automobile industry as a leading

contributor to the public exchequer. The duties and taxes paid and the foreign
exchange saved by the company in the last six years of operations are as follow
DUTIES & TAXES FOREIGN EXHANGE

YEAR
(Rs. billion) SAVINGS (Rs. billion)
JAN-DEC 2003 6 8
JAN-DEC 2004 8 13
JAN-DEC 2005 12 15
JAN-DEC 2006 16 20
JAN-DEC 2007 13 24
JAN-DEC 2008 13 24
EXHIBIT A-1:
Operating Result
2008 2007 2006 2005 2004
Sale Revenue 39,66 50,844, 48,203, 35,37 24,461,

9,730 632 084 4,556 966
Profit Before 99 4,281, 5,152, 3,519 2,139,

Taxation 2,176 263 044 ,541 816
Profit/ Loss After 6,24 2,774, 3,353, 2,236 1,403,

Taxation 4,785 532 851 ,880 572
Dividend (Cash/ 8 411 270, 27 49,

Bonus Shares) 2,300 ,499 222 0,222 131
Retained Profit 54 2,363, 3,083, 1,966 1,403,

2,485 033 629 ,658 572
Capital Employed
2008 2007 2006 2005 2004
82 823 799,4 54 491,

Share Capital 3,000 ,000 33 0,444 312
12,69 10,332 6,973, 4,94 3,580

Reserves 4,414 ,053 570 7,297 ,185
Inappropriated 6,35 2,821 3,417, 2,33 1,404

Profit 2,677 ,982 673 8,403 ,221
Shareholder's 14,15 13,977 111,906, 7,82 5,475

Equity 2,681 ,035 796 6,144 ,718
14 99, 57, 1,55

Deferred Liabilities 6,000 000 939 1,000 -
2,65 7,125 12,025, 10,77 7,972

Current Liabilities 7,462 ,302 474 0,697 ,559
16,95 21,201 23,274, 18,74 13,448,

6,143 ,337 089 7,841 277
ANNUAL GM:
Pak Suzuki’s achievements against plans during first three quarters of 2008 and
counter measures for the last quarter of the year were discussed and finalized.
Successful examples of .SMC Japan (1-1-1) and other SMC overseas plants for cost
reduction were explained to vendors. All the vendors assured to cooperate with
PSMC in this crisis situation for mutual survival.
EXPORTS:
During the year 2008, Pak Suzuki exported Liana cars to Bangladesh first time ever
with a first consignment of 20 units worth Rs. 14 million. This was done to pursue
the goal of developing the market for Suzuki Liana in different geographic areas
because Liana has not gained much attention of customers in Pakistan. The company
has acquired the order of 1000 Liana cars from Bangladesh and Pak Suzuki regards it
as a success of Liana in Bangladesh.
The exports of Suzuki Ravi Pickup to Bangladesh and exports of sheet metal parts of
Suzuki Cultus to Europe are going well. During 2008, 312 units of Suzuki Ravi Pickup
and parts worth Rs. 86 million and Rs. 28 million respectively were exported.
Pak Suzuki also exports its high volume CNG parts to European market and in
Myanmar, Burma. Hungry is the main country through which it exports the CNG
parts. Its local swift cars are used in Europe as well.
Despite these exports, the company is still exporting only 0.01% of its total sales
and is far behind from its competitors. But since Pak Suzuki is not much interested to
increase its exports to different countries, it does not consider this as its weakness
and therefore it has no global challenges to face.
STRATEGY IMPLEMENTATION STAGE

Strategy implementation stage is of utmost importance because only by properly
implementing the formulated strategies the company can achieve its short and long
term objectives.
LEVELS OF STARTEGY IMPLEMENTATION:
At PSMC there is a functional span of management i.e. objectives and strategies are
communicated to the Heads and Directors of each functional department in an
annual meeting. They then communicate these objectives to the managers and they
further communicate these objectives and direct the employees to achieve them at
every level of performance. The organizational hierarchy/ structure is quite dynamic.
HR department frequently repositions the employees at top, middle and lower level
as well. Job rotation, job enrichment, job enhancement is a continuous
activity/practice in Pak Suzuki. They do so just to enhance the skills and capabilities
of their employees at every level so that they become more productive and efficient
for the organization. Japanese believe that by job rotation and repositioning one
employee can be an all rounder. In the “strategic management committee” there are
7 Directors in which 4 Japanese and 3 Pakistani Directors are from Functional
Departments. Among 4 Japanese 3 are working here in Pakistan and 1 is
dummy Director. Among 3 Pakistani Directors, 2 are working and 1 Director is from
the public sector (stake holder).
As we have mentioned that all the strategic planning is done at corporate level by
the “Strategic Planning Committee” of parent company i.e. Suzuki Motors
Company in Japan, and the Strategies and objectives are formulated for the duration
of three years but these strategies are communicated/ translated annually to Pak
Suzuki in “Annual Directors’ Meeting”, these strategies are neither communicated to
the middle level nor to the lower levels. Hidden approach is used by the top
management. Pak Suzuki management considers the strategies as their policies. At
Pak Suzuki “Weekly Coordinating Meeting” is conducted, in this meeting the
Heads or the Departments’ directors communicate the short term policies/strategies
to the middle management and get insight of the overall organizational performance
from the middle management. Then middle management communicates and directs
the lower staff regarding the implementation of those strategies.
Every year in March and October the parent company sends “strategic decisions” to
Pak Suzuki to implement for the next six month, i.e. from March to October and from
October to the next year’s March.
BUDGET ALLOCATION/ RESOURCE ALLOCATION:
Budget allocation is not a problem at PSMC. Every department maintains its own
budget schedule and funds are provided by the finance department according to the
budget schedule and “DSC i.e. Daily Scheduled Capacity”. Budgeting to implement
the strategies is done annually in the month of April. All the departments follow the
technique of zero based budgeting. Usually Fixed costs are not so much emphasized
rather they work on variable costs. One interesting point is that the budget has
never showed an incremental trend; rather means and ways have always been
identified to cut the costs down and cut the expenses as well. Resources are
allocated according to the project of new product development and for the facilities
enhancement.
PSMC BELIEVE IN EQUITY FINANCING:
PSMC does not borrow funds from banks or financial institutions because it has
maintained high reserves. Whenever it requires substantial amount of capital it
borrows from the parent company and pays a mark up as well. When PSMC has
decided to manufacture Motorcycles, it took loan from the parent company. PSMC
believes in equity financing. Most often PSMC make and implement plans according
to their budget. Company’s financial year is from Jun to July. To increase the profits
“Investment Planning” is done to invest in different securities and projects.
SUPPORTIVE STARTEGIES:
PSMC’s strategic management committee formulates the strategies that are

supportive to the corporate level strategies. But there is no hard and fast rule of
making these strategies. Whenever
BUSINESS PROCESS REENGINEERING:
Business process reengineering is “definition”. At PSMC reengineering is done almost

continuously. There is a committee that collects suggestions from the employees and
production workers especially and the production department analyzes those
suggestions and implements them if they are found feasible for the company.
Workers are provided a small financial benefit of Rs.30 for giving their suggestions.
SMC conducts Annual International Competition and awards the workers who give
best suggestions regarding the reengineering processes. PSMC use “KIAZAN
APPROACH” which means continuous improvement in work at every level of
management, most of the Japanese companies follows this management technique.
The facilities defined in the section of “Production and Operations Audit” are the
result of these reengineering process. It includes
• Press Shop was established to press the sheets through machine. It was a
new idea.
• Plastic Shop was established by Rs. 0.5 billion investment, now they are self
relied in making plastic items.
• Converted APV into CNG thus boosted up the sales of APV.
• Weight Savers
• Waste Water Treatment Plant, as its contribution to the environment.
MAJOR ISSUES AT FUNCTIONAL LEVEL WHILE IMPPLEMENTING THE

STARTEGIES
According to MR. Abdul Majeed Sheikh; generally no significant issues occur in any
functional department regarding the implementation of strategies. Employee book
is maintained by each employee, he/she knows his daily tasks therefore minimum
resistance comes from the employees because all of the employees are quite flexible,
committed to the mission and they are always ready to accept the changes in order
to achieve the goals.
Management has strong leadership skills to resolve the matters. If any conflict or
resistance occurs internally then the managers at departmental level resolves these
internal and external issues through discussion. Further more, HR dept and top
management arrange “awareness sessions” in which they discuss about the issue
with employees, asks for their suggestions and resolve the issues. Sometime HR
dept. use incentive tools to lessen the resistance if any. External issues (issues of
vendors and dealers) are also resolved with discussions between management and
the concerned parties.
LEVEL OF COMMUNICATION B/W MANAGEMENT AND EMPLOYEES:
There is a strong upward, downward and horizontal communication between the

management and employees at PSMC. Communication methods include “weekly
coordination meeting”, “weekly and monthly sales review meetings by marketing

department”, and letters and memorandums are floated by management for
employees within the organization about the attention getting issues. Since
employee empowerment is not there, rather centralization is there and employees
are not involved in decision making but still whenever employees have any issue
regarding anything they are free to go to the management to resolve it.
Management Information system maintained by IT department is quite strong and
provide very timely and accurate information to the management.
BALANCING THE WORKERS’ WORK LIFE AND HOME LIFE:
This concept has not entered in PSMC yet. HR department has formulated
compensation policy, bonus policy, leave policy, medical allowance policy and other
policies but the concept of making a policy to balance the workers’ work life and
home life is not there. Whenever required; the HR dept. give rewards to motivate the
workers towards performance, provide relaxation in leave and medical policies, high
attendance awards is given to the employees. But they do nothing more than that.
SUCCESS IN IMPLEMENTING THE STRATEGIES:
According to MR. Abdul Majeed Sheikh (Director Operations); PSMC has been very
successful in implementing the strategies since its inception. 95% strategies have
been implemented as planned and brought good results. The details are given in the
section of “Strategy in Action”.
STRATEGY EVALUATION STAGE

PSMC’s performance evaluation is done by the parent company SMC and the frame
work or process of evaluation is known by the top management in Japan.
EVALUATION CRITERIA/ KEY PERFORMANCE INDICATORS (KPIs) AT

PSMC:
At PSMC, the strategic management committee also evaluates the performance by

using the following quantitative indicators and sends the report to parent company
who further analyze and evaluate it:
• Number of units produce and sold (weekly, monthly and

annually)
• Gross margin (weekly, monthly, annually)
• Profitability review (weekly, monthly, annually)
• Financial evaluation (annually, sometimes quarterly & semi

annually)
• Market evaluation (competitors’ sales and production rate)
• Actual number of hours worked are determined against

planned hours.
The evaluation is done weekly, monthly and in the end of the year a cumulative
evaluation is done by the management in which the financial ratios are determined.
PSMC put great emphasize on sale and profitability because Japanese management
just want maximum profits. The key performance indicators may change according
to the situation. Trend extrapolation is used in the evaluation of strategies during the
year.
Comparison during the evaluation process by PSMC:
Comparing the firm’s performance over different time

periods
Continuous evaluation is done by the line managers through a process of “PDCA”

which stands for ‘Plan’, ‘Direct’, ‘Check’, and ‘Action’. It follows a simple
policy of:
Plan: planning the activity,
Direct: directing the workers towards its achievement,
Check: check and control their performance and identifying the weaknesses or
deviations,
Action: take corrective actions.
Here in PSMC, the management system is target oriented; the management wants to
achieve the targets prescribed by the parent company.
EMPLOYEE INVOLVEMENT IN EVALUATION PROCESS:

PSMC involves employees in the evaluation process. As it has been told earlier that
employees maintain their own “employee book” in which their prescribed tasks and
working schedule are written, so they themselves evaluate their performance
according to their tasks. Then they inform their line managers about their
performance who prepare the report and present it in the “weekly coordination
meeting”. This meeting is conducted weekly, monthly, and annually. Managers
involve in brainstorming in identifying the ways to improve the deviations in
performance if any. But the evaluation report is prepared monthly and annually. The
evaluation results are communicated to the employees in the month end
coordination meeting. Those employees who performed well in the whole month are
given financial rewards. Through these continuous evaluation meetings employees
can now set their future targets in line of ultimate objectives in order to improve
their performance. Here the concept of “MBO management by objective” is being
used. And it is considered as performance enhancement tool because as the workers
will set their objectives they will be better committed to those objectives and will try
their maximum to achieve them. Employees are sent on training courses, workshops
and skill development courses are conducted so often at PSMC. The details of these
activities have been highlighted in the section of “HRM Audit”.
Effects of Seasonal Events on Production and Sales:

There are certain seasonal events that occur every year so PSMC maintains its
production level according to these events. Like in Ramadan, they produce lesser
and maintain only one shift instead of two. In January and December people buy
fewer cars because they want New Year’s model car and they wait till February and
March. Like wise; June is a month of panic buying. So sales usually boost up in these
months. In order to meet these events, PSMC management has created a production
calendar for 365 days. This calendar describes the number of units to be produced
during the year and the number of shifts in different months.
BENEFIT OF CONTINOUS EVLUATION (Quick Attention towards

Deviations):
PSMC management quickly pays attention to the favorable or unfavorable events.
This is has become possible due to the continuous evaluation. The activities are
very flexible. Whenever management finds any deviation during evaluation,
it takes immediate steps to remove it. Usually immediate decisions are
made to remove the problem instead of skipping the strategy, that’s why
the strategies that have been implemented throughout have reaped good
results.
Last year due to less demand for automobiles and heavy load shedding PSMC
immediately reduced its 20% production in order to save the money loss and energy
loss.
PSMC has loose the leader ship in terms of profits last month due to the sales
decrease. The major reason identified through dealer information was the “decrease
in buying power of customers”.
A car goes into the process in 15 minutes, if a worker waste 15 minutes it

means the loss of 1 car has occurred. So the shift timings are from 12 a.m.
to 8.30 a.m. and second shift is from 8.30 a.m. to 4.30 p.m. The
management has eliminated third shift due to the decrease in demand and
economic recession.
Factors that Create Hindrances in Achieving the Production

Objectives:
After evaluation the management has identified some factors which create
hindrances in achieving the production objectives thus affect sales as well.
• Load shedding
• Strikes
• Political instability
• Danger of Epidemics near production area (dengue fever etc.)
• Traffic jams
• Poor condition of infrastructure in the city (now it has improved.
Director Operations said that despite these factors, the strategies that were
formulated and implemented for the three brands including Suzuki Mehran,
Suzuki Alto and Suzuki Cultus are reaping good results.
CONTINGENCY PLANNING:
Whenever management observes some favorable or unfavorable events in market,

they implement the contingency plans. Again contingency plans are also prescribed
by the parent company in the “Grand Strategy Manual”. So PSMC does not need
to formulate contingency plans. The reason of formulating contingency plans is that
most of the Japanese companies work on Just-in-Time principle and so does PSMC.
Their strategies are so flexible that even they can change their production plan any
time, reduce or increase the prices if they analyze the increasing buying trend. PSMC
management is allowed by the parent company to formulate contingency
plans in the favorable or unfavorable sudden situation, but these plans are
implemented on short term basis like recently they have reduced the prices
in order to increase the sales because a huge number of produced cars are
still in the warehouse. This price reduction is for a limited time period. The entire
departments mainly production, finance and marketing are so coherent that they do
not find any difficulty to alter their activities according to the contingency plans.
SWOT MATRIX
Strengths (S) List strengths Opportunities List

(O) opportunities
Weaknesses List weaknesses Threats (T) List threats

(W)
CONCLUSION/ RCOMMENDATION:
Wheeling into the future
Whenever the automobiles history of Pakistan is written, Pak Suzuki will surely
constitute its preamble. Since the time of its inception in 10983, the company has
produced a wide spectrum of vehicles to provide mobility to people and goods.
Pak Suzuki’s first product in the early 80’s was soon termed the people’s car because
of its affordability and comfort. The level of the commitment and dedication at Pak
Suzuki makes it evident that the company has been driving the nation on the road of
prosperity and progress.
Pak Suzuki has provided job opportunities to thousands of Pakistanis, transferred

technology, paid taxes to the national exchequer, promoted downstream vendor
industries in the private sector, saved on foreign exchange and attained high level of
product indigenization over a period of two decades. From the modest mehran to the
top class Liana, Pak Suzuki has managed to adhere to the standards and
requirements of its Pakistani customers and it’s for this reason that it proudly claims
today that ‘Mehran’, is the largest selling car in Pakistan.
Automobile industry has a vast potential to make a contribution to the national

economy and can be termed as mother of all industries. Pak Suzuki invested Rs. 3.4
Billion in last two years on expansion modernization and balancing of business
operations, introduction of new model and upgrading of existing
models. The road to success has no short cuts and Pak Suzuki with the commitment
of its management, dedication of its employees, dealers and vendors is all set extra
mile in order to be steering ahead in the automobile industry.
THE PLAYERS:
National Motors, a public limited company which is said to be the pioneer in the
industry, came into existence in the 50s. Established by General Motors of USA in
1953, National Motors assembled passenger cars as well as commercial vehicles
carrying General Motors brands such as Bedford, Vauxhall, Chevrolet and Holden
before being bought over by Pakistani entrepreneurs. It was subsequently
nationalized and was once again bought over by Ghandhara Industries Limited, the
initial owners.
After that, others like Hinopak Motors, Naya Daur Motors, Pak Suzuki Motors, Sind
Engineering Limited, an arm of Pakistan Automobile Corporation and assemblers of
Mazda Pickups, Indus Motors, assemblers of Toyota cars and still others like Honda
Atlas have come to enter the local market. A regular car industry started in the
country in 1983 with the introduction of Suzuki car with the commitment of providing
an affordable car for the middle income group which constituted the larger segment
of the society.
Like other industries, the development of automobile industry, too, depended on

persistent government policies. Any sudden changes in the official priorities certainly
affect the long-term planning of an industrial sector.
This is particularly true of the automobile industry where production units require
heavy amount of capital investment and long-term commitment.
Different policies were introduced by different governments at different times but the
latest one — imposition of ban on import of used cars — was introduced in February
1994 on the insistence of local assemblers that such imports were killing the local
industry. On their part, they assured the authorities that there would be no increase
in prices.
Things have never been the same again as the assemblers increased their prices
more than six times since then on the pretext of rupee devaluation, inflation, etc.
(Since then, the prices (of automobiles) have been increased six times with a total
average of about 75 per cent over the prices
Ever since the announcement of this year's budget, increase in the prices of
passenger cars and other vehicles is the most favorite topic of discussion in many
circles including the industry itsel. The local manufacturers keep blaming the policy-
makers for imposing heavy taxes and duties; the government keeps shrugging its
shoulders which mean they cannot help it, while the overall result is a vastly
shrunken market compared to last year which, in turn, means much lesser
development in the industry as a whole.
The automobile industry which has been in operation for more than a quarter of a
century now, is still unable to solve its own problems due to what the players in the
industry called 'inconsistency' of the government policies.
The government's taxation policy, too, has been in question from time to time since
it appears that whatever government comes to power uses the taxation policy as a
tool to subjugate the industrialists.
In 1995, the formulas for taxes on import of completely knocked down (CKD)
and completely built-up (CBU) units of vehicles were simplified. All the previous
import taxes and duties were rolled into one import duty of 30% on CKD kits as well
as assembled vehicles. A sales tax of 15% is charged on the total of the cost,
insurance and freight value and import duty. The import duty charged on CBUs starts
at 100% and increases with the engine size for passenger cars while in the case of
commercial vehicles it is fixed at 60%. For taxation purposes, the CBU passenger
cars have been categorized into four groups. Those below 1000cc are in one group,
those in the 1000cc and 1300cc bracket constitute another group while those in
1300cc to 1800cc are grouped together separately and those above 1801cc are
placed in yet another category.
The whole industry is now facing uncertainty as a result of introduction of the new
taxes in the budget which have been levied according to the new policy. The sales
tax on CBU has been increased to 18% while the 10% regulatory duty stays. In
addition to that, a Capital Value Tax (CVT) of 4% for those who have already
acquired a National Tax Number (NTN) and 10% for those without NTN has been
imposed, according to market sources.
The CVT rates recently introduced to the automobiles sector were also categorized
on the basis of tax-payers and non-tax-payers and according to the capacity of the
vehicle. A non-tax-payer planning to buy a car of up to 800cc will have to pay 2.5%
while tax-payers or those in possession of NTN are exempted in this category.
Vehicles of up to 1000cc are subjected to 7.5% CVT for non-tax-payer while tax-
payers are still exempted from this tax. Vehicles falling between 1000cc and 1300cc
are subjected to 10% Capital Value Tax in case of non-tax-payers and two per cent
for tax-payers. A 12.5% CVT is to be paid in case of non-tax-payers and four per
cent in case of tax-payers in the 1300cc-1600cc cars category whereas for vehicles
above 1600cc, the CVT is fixed at 15% for non-tax-payers and 6% for tax-payers.
The result of this increase in prices and the introduction of new CVT will be that the
consumers will have to pay for it again in terms of another increase in prices, since
the latest price increase was just before the budget when the prices were increased
in the name of rupee devaluation.
Sources at one of the manufacturers were quoted as saying that the increase was
imminent.
But according to Yousuf Shirazi, the chairman of Honda Atlas Cars, assemblers of
Honda cars in Pakistan, "The budgetary measures are expected to push
inflation upward and consequently push the cost of production which would
in turn increase the prices of different models."
Though the City's car assemblers, like Toyota, KIA and Honda are yet to announce
officially the increase in their prices, prices in the car market have already been
pushed up by three to five percent. Sources from the Indus Motor Company,
assemblers of Toyota cars and pick-ups in the country are quoted as saying that the
company has already increased the prices of its vehicles (Toyota range) by
nine percent.
Analysts in the market are of the opinion that the increase in prices would not hurt
the assemblers as such because as usual it will simply be passed on to the
consumers and they (the consumers) cannot back out at this stage because at least
some of these assemblers, if not all have got cars booked for the next six to eight
months and, therefore, production would go ahead in any case.
The only new entrant who may have to suffer due to these taxes is going to be
Ghandhara Nissan Limited, assemblers of Nissan range of trucks in the country who
are now coming in with Nissan Sunny cars. Though all efforts to get a word from the
company proved futile, sources in the market indicated that the company is set to
launch the first range of Nissan Sunny cars in the city in October this year. The
Nissan 1.4 Diesel engine which is expected to roll out of the production line then,
may not find a happy market to settle in. Though the company's plan, sources in the
car market said, is to follow the 1.4cc with another 2.8cc diesel engine that will
compete directly with Toyota's 2.0cc diesel engine that is already in the market, it
may now look like more of a dream than reality.

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Strategy Audit Report PAK SUZUKI

AUTOMOBILE INDUSTRY (CURRENT SCENARIO)

One important thing is that Pakistan’s competitive landscape remains narrow

Pak Suzuki has 51.7%

PAK SUZUKI MOTORS COMPANY LTD.

Production Capacity: 150,000 units per annum (Double shift)

1984 Jan Started commercial operations with start of production (S.O.P.) of

1988 Apr .S.O.P. of l000 cc SWIFT car later on called KHYBER.

1992 Jun S.O.P. of MARGALLA at new Plant.

1997 Aug S.O.P. of 1300cc BALENO replacing MARGALLA.

2004 Jun New plastic injection molding shop commenced operation.

2005 Mar Capacity expansion up to 80,000 vehicles per year completed.

Net Sales and Profit (Rupees in million)

Description 2005 2006 2007

Sales Revenue 35,375 48203 50845

Growth % 45% 33% 8%

Profit before Tax 3,520 5,152 4,281

Growth % 66% 46% -17%

Total Area: 259,200 m2 (64 acres)

Cost: Rs. 9.674 billion

Plant Capacity and Actual Production:

Plant capacity (Double shift) 2008 2007

Motorcars 150,000 150,000

Location: Mauripur Link Road Karachi

Plant Capacity and Actual Production:

Plant capacity (Double shift) 2008 2007

Motorcycles 37,000 37,000

Integrated management policy

Pak Suzuki is built on the idea of a responsible corporate citizenship thereby

1. We are committed to provide top quality products to the satisfaction and

MEHRAN 800 CC:

ALTO 1000 CC:

CULTUS 1000 CC:

LIANA 1300 CC and 1600 CC:

POTOHAR 4X4 1000 CC:

BOLAN VAN 800 CC:

RAVI PICK-UP 800 CC:

STRATEGIC MANAGEMENT ONCEPT AT PSMC

STRATEGIC MANAGEMENT definition:

“It’s an art and science of formulating, Implementing and evaluating cross-functional

ACCORDING TO PAK SUZKI MOTORS COMPANY:

NON FINANCIALBENEFITS THROUGH STRATEGIC

Non financial benefits Yes No

Identifying & exploiting of opportunities Yes

support in establishing objectives Yes

Creates framework for internal communication activities Yes

Clear view of management problems No

Minimizes the adverse effects of unfavorable situations No

Integrate the employees No

Encourages forward thinking Yes

Clarify individual responsibilities Yes

FINANCIALBENEFITS THROUGH STRATEGIC MANAGEMENT:

• Increased profit margin

To be Excellent All Around.

• To improve skills of employees by imparting

• To achieve maximum and promote the

• To contribute to Pakistani indigenization society

EVALUATION OF PAK SUZUKI MOTOS COMPANY

Customer Product & Service Markets

Technology Concern for Philosophy

Self- Concept Concern for image Concern for

YES YES YES