PRINCIPLES OF MANAGEMENT

(FAUJI FERTILIZER BIN QASIM LTD.)

COURSE: MAN 410

COURSE IN CHARGE: MR. MUHAMMED AKRAM

GROUP MEMBERS: MUHAMMED SHOAIB KHAN 10343

PROGRAM MBA (INDUSTRIAL MANAGEMENT)

DATE: 03- JAN - 2010

MADE FOR
INSTITUTE OF BUSSINESS MANAGEMENT
 Date: 19 DEC,
FAUJI FERTILIZER BIN QASIM LTD. 2009
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TABLE OF CONTENTS
LETTER OF AUTHORIZATION..................................................................................3
IMPORTANCE OF INDUSTRY ANALYSIS...............................................................4
ACKNOWLEDGEMENT...............................................................................................5
EXECUTIVE SUMMARY..............................................................................................6
1INTRODUCTION..........................................................................................................7
1.1 HISTORY.................................................................................................................................................................7
1.2 PRODUCTS...............................................................................................................................................................7
1.3 DISTINCT PART OF OTHER INDUSTRY.............................................................................................................................8
1.4 GEOGRAPHIC SCOPE OF COMPETITION..........................................................................................................................8

2PORTER’ FIVE FORCES............................................................................................8

1.5 THE BUYERS AND BUYER GROUPS................................................................................................................................9
1.6 THE SUPPLIER AND SUPPLIER GROUPS.........................................................................................................................10
1.7 THE COMPETITORS..................................................................................................................................................10
1.8 THE SUBSTITUTES...................................................................................................................................................11
1.9 THE POTENTIAL ENTRANTS......................................................................................................................................11

3ASSESS THE UNDERLYING DRIVERS OF EACH COMPETITIVE FORCE

TO DETERMINE WHICH FORCES ARE STRONG AND WHICH ARE WEAK
AND WHY......................................................................................................................11
1.10 STRENGTH...........................................................................................................................................................11
1.11 WEAKNESS..........................................................................................................................................................12

4OVER ALL INDUSTRY STRUCTURE, AND ANALYSIS FOR CONSISTENCY

.........................................................................................................................................13
1.12 WHY IS THE LEVEL OF PROFITABILITY WHAT IT IS?.....................................................................................................13

5IDENTIFY ASPECTS OF INDUSTRY STRUCTURE THAT MIGHT BE

INFLUENCED BY COMPETTITORS, BY NEW ENTRANTS, OR BY YOUR
COMPANY.....................................................................................................................14

Made For:
Institute of Business Management
 Date: 19 DEC,
FAUJI FERTILIZER BIN QASIM LTD. 2009
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LETTER OF AUTHORIZATION

Dear Readers,
I as student of Industrial Management, with the authorization of our course
instructor Mr. Muhammad Akram have prepared a report about the “Industry Analysis of FAUJI
FERTILIZER BIN QASIM LTD.”. The purpose of this report is to acquire all the possible
information about the different aspects of Management that FFBL practices.

Sincerely,
Muhammed Shoaib Khan ID # 10343

Made For:
Institute of Business Management
 Date: 19 DEC,
FAUJI FERTILIZER BIN QASIM LTD. 2009
Page 4 of 14

IMPORTANCE OF INDUSTRY ANALYSIS

“Management is the most important aspect and the quintessential science to business anywhere.
Whilst most businesses may or may not be familiar with the terminology we study in books today
most businessmen still do use these same management techniques that have been referred to in
our books with specific names.”

Made For:
Institute of Business Management
 Date: 19 DEC,
FAUJI FERTILIZER BIN QASIM LTD. 2009
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ACKNOWLEDGEMENT

To see how the Industry Analysis was applied at FFBL (Fauji Fertilizer Bin Qasim ltd.), I visited
the company located at Bin Qasim in outskirts of Karachi. I met with the company’s Senior
Executive Lt. Col. Mohammad Asif Khan (Ret.) & Distribution Executive Muhammad Javaid
Iqbal to gain insight into the various management roles they perform within the organization, and
the extent to which they analyze other competitive industries.

Presented below is a summary of all the information I managed to gather, starting from a general
discussion of the management system as a whole, proceeding to questions pertaining to the
different management functions of five forces, taking each in turn and elucidating on its
components.

Made For:
Institute of Business Management
 Date: 19 DEC,
FAUJI FERTILIZER BIN QASIM LTD. 2009
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EXECUTIVE SUMMARY

Research Objective
To identify the factors leading to improve the organization at large & the variance between the
actual and projected sales by analyzing the following possible areas:
• Awareness about the product and most effective medium of promotion.
• Organization structure & goals.
• Analysis of different products & target market.
• Five Forces
• Identification of problems & issues pertaining with organization

Method of Research

Method of research used in this report is Exploratory Research.

Research Instruments and Technique

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

for asking information directly from the respondent concerning perception. It was kept slightly
open ended so that better understanding could be developed about the market and hence prepare
a more comprehensive report.

Findings

Based on aforesaid data collection technique information were gathered regarding FFBL.
Analysis for the company was carried out and the problems and issues were highlighted.

Made For:
Institute of Business Management
 Date: 19 DEC,
FAUJI FERTILIZER BIN QASIM LTD. 2009
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1 INTRODUCTION

1.1 History

Fauji Fertilizer Bin Qasim Limited is a modern Granular Urea and Di-Ammonium Phosphate
(DAP) fertilizers manufacturing complex, built at a cost of US$ 468 Million and located in
Eastern Zone of Bin Qasim, Karachi, with Head Office at Harley Street, Rawalpindi.

Initially named as FFC-Jordan Fertilizer Company (FJFC), weft 17th Nov 1993, with FFC
(30%), FF (10%) and JPMC (10%) as main sponsors; the company was formally listed with
stock exchanges in May 1996 and commercial production commenced on Jan 2000.

Renamed as Fauji Fertilizer Bin Qasim Ltd. (FFBL) in 2003, as such Jordan Phosphate Mines
Co. (JPMC) had sold its entire equity in the company. Accordingly Phosphoric acid supply
agreement with Jordan was terminated.

The company turned out to be profitable by 2004 and declared 'maiden dividend' in 2004.
Profitability has constantly been on the rise since then and 2007 has been the most profitable
year of the company. Intimacy

1.2 Products

FFBL fertilizer complex is a state of the art manufacturing facility with advanced Distributed
Control System for safe and efficient operation. At present there are three plants operating at
FFBL to produce Ammonia, DAP (Di-Ammonium Phosphate) and Granular Urea. Ammonia
being the feed for both other plants has its 100% consumption on plant. Production capacity for
each plant is provided in table-1.

Made For:
Institute of Business Management
 Date: 19 DEC,
FAUJI FERTILIZER BIN QASIM LTD. 2009
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Table 1: Production Profile

Production Capacity
Plant
(MTPD)
Ammonia 1570
Granular Urea 1920
DAP 2230

1.3 Distinct part of other industry

The products of FFBL are a part of other distinct industry that includes the agricultural industry
which are being provided UREA and DAP by FFBL, the petrochemical industry which are being
provided Phosphoric Acid by FFBL and the fire fighting equipment manufacturers which are
being provided CO2 by FFBL.

1.4 Geographic Scope of Competition

Recently, FFBL is making significant contribution towards agricultural growth of the country by
meeting 45% of the demand of DAP and 13% of Urea in domestic market. Because with its state
of the art Fertilizer Plant, Fauji Fertilizer Bin Qasim Limited is the only Granular Urea
manufacturer in Pakistan. As Urea is a synthetic organic compound containing 46 % nitrogen in
amide form and is available in the form of white solid prills, free flowing for easy application.
Fauji Fertilizer Bin Qasim Limited is also the pioneer of premium quality DAP fertilizer
manufacturing in Pakistan. The DAP plant is the only facility of its kind in the country. The
product meets international quality standards. As DAP contains the second most important
nutrient element, phosphorous besides nitrogen, it is available in free flowing granular form as
the granules are stronger, harder and of uniform size.

2 PORTER’ FIVE FORCES

Made For:
Institute of Business Management
 Date: 19 DEC,
FAUJI FERTILIZER BIN QASIM LTD. 2009
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According the five forces of Porter

WHO ARE?

• The buyers and buyer groups

• The supplier and supplier groups
• The competitors
• The substitutes
• The potential entrants

1.5 The buyers and buyer groups

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

• AL SALFI Petrochemical Co.

• KALOODI Group.
• QaiserLG Petrochemical (Pvt) Ltd.

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

• TYCO Fire and Security Pakistan (Pvt) Ltd.

• HASEEN HABIB Corporation (Pvt) Ltd.

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Institute of Business Management
 Date: 19 DEC,
FAUJI FERTILIZER BIN QASIM LTD. 2009
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• HAC & SONS

• CONCORD Trading Co.

1.6 The supplier and supplier groups

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

Sulphuric acid is needed as a raw material for the DAP production; the main supplier of
Sulphuric acid to FFBL is ICI Pakistan.

Another raw material for the DAP production is the coating oil, PSO and NRL are the two
providers of coating oil to FFBL.

The main raw material for the UREA Plant is the UF-85 which is used as an anti caking agent
(formal dehyde) and that is supplied by a company located in Wah namely Wah Nobel.

FFBL utilizes Natural Gas as the most important raw material for the production of Ammonia;
which is the major input for the production of Urea and DAP. The major supplier of natural gas
to FFBL is SSGC.

1.7 The Competitors

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

competitors of the industry are

• Fauji Fertilizer Company - FFC

• ENGRO Chemicals Pvt. Ltd.

Made For:
Institute of Business Management
 Date: 19 DEC,
FAUJI FERTILIZER BIN QASIM LTD. 2009
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• Dawood Hercules
• Haripur Hazara Phosphate Fertilizer
• Pak China
• Pak Arab

1.8 The Substitutes

There are currently no substitutes of FFBL.

1.9 The Potential Entrants

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

3 ASSESS THE UNDERLYING DRIVERS OF EACH COMPETITIVE FORCE TO

DETERMINE WHICH FORCES ARE STRONG AND WHICH ARE WEAK AND
WHY.

1.10 Strength

1.10.1 Only DAP Producers

FFBL is the only fertilizer complex in Pakistan that produces DAP fertilizer, thus makes
significant contribution towards agricultural growth of the country by meeting 45% of the
demand of DAP.

1.10.2 Location
Being located near sea port; FFBL enjoys an ease in transportation of raw material.
Phosphoric acid and UF-85 are the major raw materials that are being imported through
shipments.

1.10.3 Authority lies with CEO and Chairman

All authorities lie with CEO and chairman. There’s a hierarchical reporting system of
problems. Junior Staff reports to the senior staff and this report can further go to the GM,
CEO or the Chairman depending up on the nature of the issue.

1.10.4 High Urea quality

FFBL product, granular urea (Sona Urea) has the cutting edge over the conventional Prilled
urea with the following superior qualities:

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

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Institute of Business Management
 Date: 19 DEC,
FAUJI FERTILIZER BIN QASIM LTD. 2009
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• Less acidifying than many other nitrogenous fertilizers hence most suited for high pH
soils
• High concentration of nutrients makes packing, storage and transport cost cheaper
• Larger granular size
• Greater granules strength
• Minimum fines, dust and powder
• Minimum losses in the air
• Least caking property
• Easy to spread in the fields
• No settling on crops/leaves

1.10.5 Safety & Health

FFBL maintains a safe workplace by following safety and health rules and practices.
Accidents, injuries, and unsafe equipment, practices or conditions are immediately reported
to a supervisor or other designated person. FFBL is committed to keep the workplace free
from hazards.

1.11 Weakness

1.11.1 Marketing being outsources to FFC

FFBL doesn’t have its own marketing department; their products are being marketed by FFC
due to which they get their revenue after a week. It may also affect their sales due priority
based marketing.

1.11.2 Lack of Training

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

1.11.3 Raw Material Import

Urea and DAP production at FFBL largely depends upon the imports of raw material
including Phosphoric acid, sulfuric acid, sand, coating oil and UF-85. This increases their
reliance on imports.

Made For:
Institute of Business Management
 Date: 19 DEC,
FAUJI FERTILIZER BIN QASIM LTD. 2009
Page 13 of 14

1.11.4 Management Lies with Army men

Most of the management in FFBL is controlled by retired army officers who have army
mindset due to which the company faces difficulties in problem analyzing and problem
solving steps.

4 OVER ALL INDUSTRY STRUCTURE, AND ANALYSIS FOR CONSISTENCY

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

1.12 Why is the level of profitability what it is?

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

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

• Mass Production
• High Standardize Quality
• Make to Stock Strategy
• Flexibility in Product

2009 2008 2007

Dap Projections
Tons Tons Tons
9 Month Actual 1,140,000 291,000 766,000

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Institute of Business Management
 Date: 19 DEC,
FAUJI FERTILIZER BIN QASIM LTD. 2009
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4th Quarter 410,000 484,000 633,000

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

2009 2008 2007

Urea Projections
Tons Tons Tons
9 Month Actual 4,631,000 4,023,000 3,402,000
4th Quarter 1,669,000 1,456,000 1,515,000
Full Year Sales 6,300,000 5,479,000 4,917,000

5 IDENTIFY ASPECTS OF INDUSTRY STRUCTURE THAT MIGHT BE INFLUENCED

BY COMPETTITORS, BY NEW ENTRANTS, OR BY YOUR COMPANY

The fertilizer industries in Pakistan are not fulfilling the market demands in current
scenario, and we use to raw materials from outside, so the influence of competitors or
new entrants don’t affect the industry structure.

The major aspect of industry structure that might be influenced by competitor, by new
entrants or by our company is to increase the productivity of urea and DAP so that we
can meet the market demand and instead of importing the raw material we can start
exporting them and make the industry structure strong.

Made For:
Institute of Business Management