Assignment # 2 STRATEGIC MARKETING

SITARA CHEMICALS

DATED : 14.4.2013

Presentation Agenda

Industry Overview Company Overview Scope of Industry Structure of Industry Interview Findings PESTNC Analysis SWOT Analysis Porters 5 forces TOWS matrix
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Ayesha Khalid 12121002 Iqra Kausar 12121001 HASSAN TARIQ 12121003 Khalil ur rehman 12121010 Haider Dar 12121014
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Industry Overview
The

chemical sector is one of the five highest growth and globally traded sectors Key contributor in the economic development of any country It is Basic chemicals producing industry thus producing raw materials for other industries. Annual Production of Caustic Soda in the year 2010 was 137 MT. Annual production of Soda Ash was 300.7 MT. Annual Production for Chlorine Gas was 11.5 MT Annual Production of Sulphuric Acid is 61.7 MT

Industry Overview (Cont..)

2.5% GDP growth in fiscal year 20102011 out of which 18.4% share is contributed by Chemicals.
close approximation of investment in chemical sector ranges between Rs. 550 600 billion.
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Sub- Division(Chlor Alkali Industry) Major Products

Caustic Soda Liquid,( Flakes & Solid) Liquid Chlorine, Hydrochloric Acid, Sodium Hypo Chlorite, Ammonium Chloride, Bleaching Powder etc. PVC Urea Sulphuric Acid Lime
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Company Overview

Sitara chemicals incorporated in 1981 Founded y Haji bashir Ahmed Produce basic chlor-alkali products B2B type business Produce almost 600 MT of caustic Soda per day. Process flow is continuous Produce basic chemicals, specialty chemicals, gases and agricultural chemicals.7

Structure and Market Share

Structure of the Industry is oligopolistic having few market leaders. Total market share being covered by the 4 companies accounts for 99 %
Market Share
Sitara Ittehad 2% Engro Nimir

28% 40%

30%

Scope of the Industry

Recent developments in technology The overall increase in the imports of chemicals has been at an average rate of 33 percent per annum. Modern agriculture is heavily dependent on chemical, s. In particular, chemicals are a keystone of world manufacturing, as they are an integral component of all manufacturing sub-sectors.

Caustic Soda Production (%) 2010

Total Production = 435,000 MTPY Sitara 42 % (180,000) Ittehad 33 % ( 145,000) Engro Polymers 23 % (100,000) Nimir 2 % (10,000)

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Trade in Chemicals Sector

Chemical Trade (Million US $)
6000 5000 4000 3000 2000 1000 0 768 118 253 400 472 367 538 411 2788 4133 4362 3599 5718 5166

2003- 2004- 2005- 2006- 2007- 2008- 20092004 2005 2006 2007 2008 2009 2010 Imports Exports

(Source TECHMA Report on Chemical Industry Vision)

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Interview Findings

In chlor-alkali Business Caustic soda is the most demanded product. Wide Range of chemical Products. PIE for Caustic Soda is about 3196 Million. Market Share is biggest in Sitara, then ittehad, Engro and Nimir respectively accounting for 40 %, 30%, 28% and 2 %.
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Interview Findings (Cont)

Totally B2B type of business Major Raw materials are Salt and Electricity. About 60 % Revenues are generated from Caustic Soda Production. Less competition due to less players. Excess Quantity of Caustic Soda add to exports

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Interview Findings (Cont)

Engro has more variety in products apart from basic chemicals they also manufacture Fertilizers and PVC. New Entrants require heavy investment and experience so its very difficult for them to enter in this business. Suppliers For Salt, they have hired own salt mine in Warcha.

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PESTNC Analysis Political

Political intervention is affecting the business due to energy crisis. Apart from WAPDA these industries are having their own energy producing plants so they are affected but not badly affected.

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Economic

The GDP growth has not met its target of 4 and its 2.4 % in the year 2011. Also there is imbalance in trade where imports are higher than exports. Requires huge investment Cheap labor available Increase in prices of fuel and electricity
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Social

As this industry considered being one of the health hazardous. As the mercury process caused a lot of damage, all most most of the firms globally have being shifted to membrane cell technology. This industry is also playing an important role in minimizing unemployment by providing jobs to 1500 people directly and about 10,000 indirectly.
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Technological

The demand for innovative products and technologically improved product is increasing The chlor-alkali production process involves mercury cells, diaphragm cells or membrane cells Research and development department efficient

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SWOT Analysis
Strengths

Own Energy producing plants mines at Khewra ,Warcha thus local minerals at cheap prices. Experienced work force Using better technology

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Weaknesses

The Caustic Soda manufacturing produces chlorine as a by-product which has limited usage in the country High cost of energy Non availability of natural gas and electricity
High freight cost to export surplus capacity

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Opportunities
Surplus capacity of caustic soda available to export
While in the rest of the world chlorine is the main driver for the plant and caustic soda is considered as a by-product. Here it is produced as by product so this can be exported abroad. HCL is also produced as by-product and it has usages. Can make new plants for PVC fertilizers also by using the chlorine which is produced as by-product
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Threats
Other companies using their own chemicals in further manufacturing of other products. Innovative Products Global Markets like china, India, Bangladesh giving same product ar low prices.

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Porters 5 forces
Barriers to entry

Oligopolistic Structure so difficult to enter. Only few market leaders to set prices. And they require huge large investment. Also because Electricity is used as raw material and due to energy crisis it is very difficult because the companies have their own energy units. So they have power edge. Specified and expert manpower is needed to handle the delicate technology. Learning Economies
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Bargaining Power of Suppliers:

Suppliers have bargaining power but due to Government Intervention they cant exploit their market power.

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Rivalry Among Competitors

Pakistans industry is facing pressures from globally competitive markets. Engro chemical has edge due to better pricing and innovative products. The market is less competitive and its growing at the same time.

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Bargaining Power of Buyers

Buyers dont have the bargaining Power. They are forced to but at the stated price due to less competitors in the market. Engage in B2B type of business industrial customers involve in Textile, Soap, Ghee, Chemical and Fertilizer etc., production. They have less choice to switch to others. Alone textile sector of Pakistan is 43% of caustic soda consumption. Second major consumption is in the manufacturing of soap & detergent contributes about 19%. So with this less competitive market they cant influence the prices.
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Threat of New Substitutes

In chemical industry , the substitutes for chemicals are not there, So threats of substitutes is low.

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TOWS Matrix
Strengths Weaknesses

Opportunities

Can use their own chemicals for further processing. Can increase their product line by R & D efforts.

Can use by products like HCL and Chlorine for further manufacturing.

Threats

They have margin to decrease price because Have to diversity their products range to have their own mine hired at khewra and overcome pressures from global markets warcha and their own energy plant also.

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