Driving Forces Of Change In Textile Industries Commerce Essay

Driving Forces Of Change In fabric Industries Commerce EssayThis project is given us as final assignment in st calculategic management class the topic is The driving forces those forcing to veer the cloth sedulousness of Pakistan the Pakistan is agriculture radical country and the cloth is the back b unrivaled of Pakistan economy. The purpose of doing such types of assignment is to getting the practical exposure of industries the implantation of knowl edge and also familiar with the ch wholeenges and issues which currently the industries is set about. Driving forces roleplay an importance role for the development of economy and for the growth of industries.Through this project assignment we are all familiar with the industries knowledge and experiences and get the depth knowledge of industries and the issues,challenges, problem, norms and valuate of the industry.During our project we also found that fabric industry of Pakistan is facing several problems due to political and economic environment. Currently divert come in of country is actually naughty which has cast upd be of occupation and makes it difficult for the industry to become cost competitive in the global market. A part interest rate problem, Production of the industry is very disturbed due to magnate shortage and law and order situation of the country. This assignment is providing the knowledge of industry and how to solve such issues challenges and problem and how to get the competitive advantage and how to compete rivalryand how to cope up with these changes and how to develop the directions of industries in particular situations and how sustainable in these changes which is due to the driving forces of industries.Chapter 02 books ReviewBackgroundResearch StatementThe driving forces those are forcing to change the fabric industry in PakistanResearch ObjectiveOur research objective is side by side(p)To identify the link between the driving forces and material industriesTo e xplore the have-to doe with of driving forces on stuff industriesTo identify the different driving forces prevailing in the Pakistan economyTo find out the solutions for driving forcesTo find out the reason of driving forcesLimitation of ResearchOur research is limited in Pakistan country wholly and in the framework industry and the driving force whose impact on textile the research is giveed with the information analyzing.Scope of ResearchThe research is conduct only in Pakistan and the research cover the driving forces which is prevailing in Pakistan economy and those who impact the textile industry only.Methods of ResearchThe method for the research we design the data which is taken from different source and then we analyze the data through the study and through the statically tools research method is approximately depend upon the data that we gather from different sources and though the online collection of data and implementation.Data GatheringThe data for this topic is gathering from employee who is currently working in textile industry and from the Pakistan textile journals, different authors articles, textile mills websites, presidential term cancelledicial ministry of textile website, all Pakistan association of textile mills, Google documents, researches etc.VariablesVariable for this research is belowTextile industries of PakistanDriving forces in PakistanHypothesisIf driving forces is their leave behind it impact the textile industries.If driving forces vanished what forget violence on textile industries.If driving forces aretheir will effect and how much it effect the industry.Driving ForcesThe driving forces are the key internal forces micro environment (such as knowledge competences workforce of management and macroenvironment as good (such as economy competition technology) that shape the future of the organization Change in industries is due to the driving forces is participants and driving forces is major(ip) set to bring chang e in industries competitive condition driving forces are emerge from internal and external environment.Driving forces can include changes in social, technological, environmental, economic andpolitical factors, for exampledemographic factors (population addition, in/out migration, changing age/genderstructure, etc).Laws and regulations (affecting get down ownership, labour relations, environmental protection measures, etc).Policies (subsidies, price controls or guarantees, import/export controls, quotasand tariffs, exchange rates, etc).Markets and competition (size of or access to, local, national and internationalmarkets growing competitiveness of producers in other regions, countries etc).Technology (availability of new genotypes, machinery, etc).Institutions (new actors, influences, social organization).Information (availability, communications technology).Non-agricultural employment opportunities (processing, manufacturing, business line,services, migration/ remittances, etc .)Natural resources (characteristics of watershed, water availability, groundwaterlevels, land degradation, etc).Driving Forces AnalysisDriving force can be analyzed in both stepsIdentify relevant driving forceAssessing the impact they will haveTypes of Driving ForcesSome of the common driving forces of industries. change magnitude globalization of industryChanges in cost and efficiencyShifting from standardized to tell products (or vice versa)Regulatory influences government policy changesChanging societal concerns, attitudes, lifestylesChanges in degree of uncertainty riskChanges in long-term industry growth rateChanges in who buys the product how they social function itProduct innovationTechnological change/process innovationMarketing innovationEntry or exit of major firmsDiffusion of technical knowledgeDriving forces In Textile industries of PakistanPakistans textile industry faces several factors, both internal and external, that affect its competitive edge in global ma ke do.An increase in production costs because of the heavy cost of credit financeGovernment levies and taxation have weighed heavily on the industry, domesticated cotton wool wool fiber has not met qualitative needs of the growing spinning and textile spheres.Pakistans downstream users have also impacted the market,Government-backed supportive policies and heavy subsidies of our regional rivals ilk China, Bangladesh, India and Sri Lanka.External trade and tariff barriers, such as high import duties by the U.S. and anti-dumping duties by European Union.Pakistans loss of pick outential access infra the reason System of Preferences (GSP) in the E.U.Other Driving forces in textile industryPakistani move Look For the Competitive EdgeRGST to affect value-added textile sectorZero rated status for all exports to be maintainedGovernment restores zero-rating for textilesTextile Policy 2009-14 AnalysisFinance Bill to Burden labor FurtherIncreasing Cost of Productionelectrical energy Cr isisTight Monetary PolicyRemoval of subsidy on Textile sectorUnited States EU cuts imports of textile from Pakistan crank material PricesEffect of InflationPakistani mill around Look For the Competitive EdgePakistans cotton and textile industries have adapted to changes in the global cotton trading environment during recent years by investing more than U.S. $6 one thousand million in production and technology upgrades. Because of that, Pakistans domestic consumption has surpassed production by about3 million bales. But even with increasing consumption, Pakistans textile industry faces several factors, both internal and external, that affect its competitive edge in global trade. M some(prenominal) mills have incurred losses during the subsist two years. Those mills which could not adopt the necessary changes in the new business environment because of their fiscal restraints and heavy liabilities have experienced the greatest losses. To make their projects viable and to minimize l osses, mills are generally curtailing their production by pass into fine count yarns or closing parts of their units.Current ForecastPakistan emerged as a major player in world cotton trade after a phenomenal increase in its spinning capacity in the last few years. Traditionally, most of the mills in Pakistan still prefer to use Pakistani cotton due to its known spinning characteristics and easy availability for making medium-count yarns. But galore(postnominal) mills have now certain permanent plans and blends based on imported cotton to bridge the shortfall in the local cotton supply.Recently, some mills have bought about 15,000-20,000 wads of Brazilian 2008 crop on call basis for shipment in 2008, and several other mills are inquiring to buy Brazilian cotton on the same basis. Some Brazilian businesses have reported as far as 2009. Some of the mills use this mode of buying to set up their short position in Pakistani cotton. If domestic price goes up, they opt to take shipmen t, and if prices come down to their desired level, they mange to get their import contracts settled with the shipper with unwashed consent. admiting to private estimates, about 2.5 million bales of different growths have been booked in 2006/07 through the end of April. By February 2007, about 1,900,521 bales (170 kgs each) had reached the country. Pakistan may need to buy some other 300,000-400,000 bales, which they may cover mostly from U.S., Brazil, West Africa and Uzbekistan.Pakistans Supply And Demand05/0606/0707/08 (E)Beginning Stock4.453.503.00Production12.4012.4014.20Imports2.052.852.20 chalk up Supply18.9018.7519.40Consumption15.0015.5016.00Exports0.400.250.40Ending Stock3.503.003.00Total Distribution18.9018.7519.40(all figures in million bales of 170 kg. each)cotton wool vision 2015Under cotton vision 2015, the government plans to bring more area under cotton cultivation particularly in Balochistan and Khyber Pakhtunkhwa. According to the plan, the government wanted to in crease cotton production by 20 million bales through potential areas of Balochistan and KP. Having considered several(a) options for production provement, it was currentized that the production level of 20 million bales could be achieved by 2015 with a modest increase in sowing areas in potential cotton growing areas of Balochistan and NWFP matesd with an average of 5% growth in per hectare yield. The sources said that cotton alone contributes nearly 65 portionage of the foreign exchange hire of Pakistan. To bring more area under cultivation and ensure food security, the government plans to purchase 100 bulldozers for land development work in Balochistan with financial assistance of Italian government. The bulldozers procured will be deployed for development of 78 thousand hectares of land (70 percent new and 30 percent existing) throughout the life of the bulldozers. The bulldozers would be given to the farmers at the rate of Rs 550 per hour against operational cost of Rs 39 94.60 per hour involving 86 percent subsidy. (February 16, 2011)RGST to affect value-added textile sectorRGST bill was most compound than on-going GST and urged the government not to impose RGST that was going to push the export-oriented and labor intensive Textile Value Added Textile Sector to the wall. He said that the textiles exporters had strong exceptions to the government for continuously ignoring the reservations of the exporters regarding the imposition of the RGST and Zero Rate facility would not be withdrawn. But it is fact the Govt. had not yet cleared the outstanding refund claims of billions of rupees so far.He mentioned that the government was also holding up millions of exporters money under export rebate which was at present around 1%. Now it seems impossible in the present state of functioning that FBR could smoothly release 15% of GST refunds. To meet this shortfall in working capital, textile exporter/entrepreneur would resort to cant for financing its export for which mark-up rate itself is on a parallel rise. Thus Textile Value Added Textile Sector would be lead to an ultimate collapse, which facing shortage and day-by-day growing bills of Gas, Electricity and basic raw material.RGST may lead textile industry to bankruptcyHe said textile industry was devour 15 percent (600mmcfd) of total lodge of 4000mmcfd but the shortage is already being shifted on the industry which is unfair. According to him, textile industry has already wooly $1.5 billion exports last year as a sizeable capacity remained idle on account of non-availability of gas. This loss is likely to touch $3 billion this year due to increase in value of commodities, if the gas supply to the industry is discriminatory suspended. He feared industry production loss to the extent of 30 percent ahead in case textile industry is denied gas during peak load period starting from November till February. Textile industry has already suffered from 44 days unprecedented gas load shedd ing during summer. The industry worries are piling up fast with regard to the next 12 months load management policy.Government restores zero-rating for textilesThe government has restored the zero-rating for textile exporters and lowered the rate of general sales tax (GST) to four to six percent on sales of textile goods in local markets from the earlier notified 17 percent. Now manufacturers will not have to render GST on their purchases if the goods manufactured are meant to be exported.If a registered taxpayer or exporter buys yarn with an aim to sell finished products made of it (yarn) in local markets, then he will pay four percent GST. And afterwards, four percent GST will be charged at every level of value-addition instead of 17 percent.If an unregistered taxpayer buys yarn, then he will be liable to pay six percent GST, and four percent GST will be charged on every step of the value-addition chain. Moreover, authorities have also clarified that the particular(a) excise dut y will only be charged from other than zero-rated sectors. And those imports that are made for the purpose of exports will also remain zero-rated. The rate of deny tax has been fixed at one percent. All these decisions will come into force with effect from April 012011.The decisions announced in these respects on March 15 through presidential ordinances and subsequently notified through statuary regulatory orders (SROs) have become null and void. The new decisions were taken by finance minister Abdul HafeezShaikh and chairperson of FBR Salman Siddique at a grand brush with textile makers.Delegates from Federation of Pakistan Chambers of Commerce and Industry, chambers of commerce of different cities and representatives of textile bodies participated in the meeting held at Islamabad. This is a win-win situation for the government and textile makers, said a participant of the meeting. There was consensus on the rates of taxes.Officials agreed to implement four to six percent GST on local sales instead of 17 percent after they were made to realize the menace of Afghan Transit Trade (ATT). If the government had not lowered the taxes, it would have encouraged smuggling under ATT and through other channels. According to an estimate, goods charge $2.5 billion were smuggled into the country last year under the garb of Afghan transit trade.Textile Policy 2009-14 AnalysisThe first ever National Textile Policy was announced by the government in 2009 and is being generally hailed by the stakeholders since it not only addresses some of their key concerns and demands but also shows (albeit after a long wait) the required commitment and premise of ownership by the Textile Ministry for providing meaningful policy direction to this largest national manufacturing sector.While the announced policy tends to be quite comprehensive and well researched its winner will largely depend on the team assigned to micro manage its implementation and the operational strategy it then goe s on to adopt. More very much than not, perfectly good policies in the past failed to yield the desired expirations owing to blatant micro-management failures. Further, we find that embedded in the policy itself are measures that represent its meat strength but ironically remain beyond the executionary ambit of the Textile Ministry. For example, it is all very well to announce Priority in Gas and Electricity Load Management, but to be able to effectively carry this out poses some serious practical challenges. First, to implement such a measure requires lucifer assurance and willingness by the related yet different ministries, namely Water Power and Oil Gas. Second, the textile industry itself is scattered and does not draw business office from either dedicated textile feeders or textile specific power stations. Therefore ensuring continuity of supplies only to textile mills while switching off others, may operationally not be doable. Third, the textile industrial units (espec ially the small and medium sized) are so grossly intertwined with residential areas in virtually all industrial centers such as, Faisalabad, Gujranwala, Sialkot, Sheikhupura, Multan, etc., that it gets to be virtually impossible to separate the gas and electricity supply lines of domestic users from the industrial ones.Perhaps a better betterment would have been to consult with relevant ministries and announce thata) Textile units in all sizes are entitled to alternative feeder arrangement that ensures continuity of supply from one feeder while the other is switched off for load management,b) Gas to be made available at the doorstep of textile units (like in the earlier days) to get across the current prohibitive cost of simply getting a gas connection installed a cost that at present literally denies a material portion of the industry from cheap, efficient and clean furnish in shape of natural gas,c) Since gas supply management is there to stay, especially in winters, why not just announce a reduced gas tariff (like in Bangladesh) for industry that can in-turn help average out additional fuel costs undertaken by the industry during the period when gas is not available, andd) An establishment of a joint cell consisting of representatives from related ministries and the industry to create a forum that is easily accessible to mill managements and that can at the same time ensure to resolve problems that emerge on an on-going basis.Increasing Cost of ProductionTextile industry of Pakistan is facing problems in competing in the international market due to increase in the cost of production. The increase in the cost of production is due to the facts like interest rate, inflation and the continuous depreciation of Pakistani rupee value.Textile exporters rightfully demand reduction of Kibor rate to 8% to avoid a spartan decline in exports. A three-year comprehensive textile policy is expected to be announced before budget 2009-10. The textile policy has been d esigned to enhance the exports of textile sector to $ 25 billion in next three years. This was stated by the Minister for Textile Industry RanaFarooqSaeed Khan. Textile Minister that informed that the spinning and weaving sector would get its due share from the Export Investment Support Fund, worth Rs. 40 billion allocated in the federal Budget 2009-10.Electricity CrisisAs a consequence of load-shedding the textile production capacity of various sub-sectors has been reduced by up to 30 per cent. The joint meeting of APTMA other related organization was held at APTMA House to formulate a joint strategy to address the alarming electricity crisis being faced by the textile industry. The meeting unanimously decided to constitute a joint working group of electricity management for the textile industry in the big interests of the value chain of the textile industry. The joint working group will meet shortly to design a detailed plan to pursue the interest goals immediate total exempt ion from Electricity load shedding for the textile industry value chain Rationalization and reduction of electricity tariff. The load-shedding of electricity cause a rapid decrease in production which also reduced the export order. The cost of production has also risen due to instant increase in electricity tariff. Due to load shedding some mill owner uses alternative source of energy like generator which increase their cost of production further. Due to such dramatic situation the capability of competitiveness of this industry in international market effected badly. Fig.1. illustrates comparison between electricity production and consumption (Business Recorder Pakistan -Special report, 2009).Tight Monetary PolicyDue to the stiff monetary policy the cost of production is high. Due to high interest rate financing cost increases which cause a severe effect on production. The withholding tax of 1% also effects the production badly. The high cost of doing business is because of intensiv e increase in the rate of interest which has increased the problems of the industry. The government should take immediate measures to remove slowdown in the textile sector.Removal of subsidy on Textile sectorThe provisions of Finance Bill 2009-10 are not textile industry friendly at all. provisions like reintroduction of 0.5% minimum tax on domestic sales, 1% withholding tax on import of textile and articles etc., are nothing but last strick on industrys back. Reintroduction of minimum tax on domestic sales would invite unavoidable liquidity problem, which is already reached to the alarming level. The textile industry was facing prohibit generation of funds due to unaffordable mark up rate.United States EU cuts imports of textile from PakistanUnited States cancel more than 50% of textile orders of Pakistan .US also impose a high duties on the import of textile of Pakistan which effect the export in a bad manner. US EU are the major importer of Pakistan textile which create a hug e difference in export of Pakistan textile after imposing a restriction on import of Pakistani textile goods.Raw material PricesPrices of cotton other raw material used in textile industry fluctuate rapidly in Pakistan. The rapid increase in the price raw material effects the cost of production badly. The increase in raw material prices fluctuates rapidly due to double flesh inflation instable internal condition of Pakistan. Due to increase in the cost of production the demand for export home as well decreased which result in terms of downsizing of a firm. Hence the unemployment level will also increase. Government should take serious step to survive the textile industry. In order to decrease the price raw material for textile we need to increase our production capability. Simultaneously, the government should make arrangement for introducing international system of cotton wool Standardization in Pakistan to enhance quality and value of Pakistan lint cotton by utilizing the tech nical services of Pakistan Cotton Standard Institute.Effect of InflationInflation rate is measured as the change in run throughr price index (CPI).Inflation is basically a general rise in the price level. It is decline in the real value of money. Inflation can have adverse effect on economy. Pakistan is one of prey of inflation. It still faces high double digit inflation. The increase in inflation causes the increase in the cost of production of textile good which return in downsizing. The double digit inflation causes reduction in exports of textile. (FPCCI)Chapter 03Industry ProfileBackgroundWorld Textile Industry was initially started in Britain at the beginning of the 18th century was the production of textilesas the spinning and weaving machines were invented in that country.Preston barber Richard Arkwright in 1769, patented a machine that would take cotton spinning from home to the factory. Arkwrights water frame was the first textile machine to use water power rather than mu scle power. From this marked the factory system started, which later spread to other industries.According to statistics, the global textile market possesses a worth of more than $400 billion presently. The industry has faced high competition and opportunities in a more globalize environment. It was forecasted that Global textile production will grow by 25% between 2002 and 2010 and Asian region or the Asian countries will largely contribute in this sector.The WTO has taken so many steps for uplifting the textile industry sector. In 1995, WTO had renewed its MFA and adopted agreement on textiles and clothing (ATC), which states that all quotes on textile and clothing will be removed among WTO member countries.However the level of exports in textiles from developing countries is increasing even if in the presence of high tariffs and quantitative restriction by economically developed countries.Moreover the role of multifunctional textiles, eco-textiles, e-textiles and customized textil es are considered as the future of textile industry.Types of Textile IndustryThese are the industry lie in the textile sectorCotton industryWoolen industrySilk industryLinen industryPakistan Textile Industry DescriptionWhenever we think of manufacturing industry in Pakistan, it is textile industry that instantaneously comes to mind that is playing an important position in terms of the employment generation and value added special contribution towards the exports. Pakistans textile industry is one of the most important sectors of Pakistan. We can say that after agriculture sector, the textile industry is the backbone of Pakistan as it contributes significant part to the country GDP, exports as well as employment. s the fourth largest cotton producer in the world. Because of its plentiful, indigenous cotton supply, the textile industry is central to the Pakistani economy.The Pakistan textile industry has strong base of raw material, started its journey from non existence in 1947 with meager size of 78000 spindles and merely 3000 looms that was unorganized sector, and only 8% domestic demand was catered. The industry has gone through a long way and now possesses 443 units, 8.4 million spindles and 166,000 rotors, 20,000 shuttles less looms, 200,000 power looms, over 600 processing units and over 2500 garments units.Textiles and Clothing, no doubt is the largest industrial sector of Pakistan from the investment, employment and export point of view. It accounts for approximately 27 percent of total industrial output, absorbs about 38 percent of industrial labor force, and contributes around 60 to 65 percent to export earnings.Pakistan Economics Survey.The cotton country..Fourth largest producer of cotton after USA, China and India.Third largest consumer of cotton.Third largest exporter of cotton textiles.Second largest provider of cotton yarn with26% share of the international market.These are the main sectors of Textile IndustrySpinningWeavingFinishingDyeing/ Pri nting wardrobeFashion designingSpinningIt is the process of converting raw material into yarn. The raw materials may be natural materials such as cotton or manmade fibers such as polyester. Sometimes, the term spinning is also used for production of manmade filament yarn.WeavingIt is the process of making cloths like t-shirts, jeans and all, rugs, blankets and other products by crossing two set of threads over and under each other. Now, weaving machines are used for this process. Weaving is the most important sub-sector of textile. The exports of interweave fabrics and other related woven made-ups form a major portion of textile exports from Pakistan.FinishingFinishing of cloth is one of the chief arts in the textile industry. The appearance of the any product is the first concern, and the appearance of any fabric is just because of the methods of finishing.Dyeing/ PrintingThe Dyeing of clothing and other materials is a fairly simple process. It doesnt consume much time and workact ually it often depends on what type of dye you purchase. Printing is something through which cloths are printed with different designing and prints.PressingThe cloths which came after the process of color and printing would go for the pressing. It is simply pressing the cloths.Fashion DesigningIt is new in the textile industry, actually the popularity of fashion designing begin from previous couple of years. It is the applied art dedicated to clothing and lifestyle accessories created within the cultural and social influences of a specific time.Process of Textile Value ChainChallenges to textileFrequent fashion changes.Anti dumping policies imposed by major importers.Non tariff barriers may increase such as standards relating to child labour, human rights, recompense and working conditions, use of carcinogenic chemicals, inflammable materials, etc.Increased competition from India, China, Turkey, Caribbean Sub-Saharan countries and others who have preferential trade arrangements w ith major importing countries.High power cost frequent power cuts.Lesser usage of eco-friendly materials.Lack of international marketing efforts.Higher rate of interest on loans for modernization and expansion.Less sensation in acquiring international quality certifications.Chapter 04Company ProfileNameOwnerLocationAdil TextileGulistan Textile Mills LimitedQuetta. TextAccord TextileGulistan Spinning Mills LimitedQuetta Textile Mils LtdAhmed Hassan Textile Mills LimitedGulshan SpinningRashid Text.Ahmed Spinning Mills LimitedHafiz TextileRavi Textile MillsAl -Azhar TextileHajra TextileRedco TextilesAl-Abid Silk MillsHala SpinningRegent TextileAli Asgahar TextileHamid Textile MillsReliance CottonAlif TextileHarnai Woolen MillsReliance WeavingAl-Jadeed TextileHaroon OilsResham TextileAllawasaya TextilesHarum TextileRuby Textile MillsAl-Qadir TextileI.C.C. TextilesRupali Polyester LimitedAmazai TextileIbrahim Fibre Ltd.Sadoon TextileA