PORTER FIVE FORCES ANALYSIS FOR TEXTILE INDUSTRY
ALI MEHDI (004)
COMSATS INSTITUTE OF INFORMATION TECHNOLOGY, COMSATS ROAD ,OFF GT ROAD SAHIWAL. Environmental Scanning
Environmental scanning is the monitoring, evaluation, and dissemination of information from the external and internal environment to key people within the corporation. * Internal
In our external environment further two layers comes
In our previous assignment we did general analysis of Pakistan by using the PEST tool. Now we are doing industry specific analysis.
The task or specific environment includes those elements or groups that directly affect a corporation and in turn, are affecting by it. These are government, local communities, suppliers, competitors, customers, creditors, employees/labor-unions, special-interest groups, and trade associations. A corporation task environment is typically the industry in which firm operates. We are choosing textile industry for this analysis. We are doing this analysis with the help of POTER FIVE FORCE ANALYSIS.
PORTER FIVE FORCE ANALYSIS OF TEXTILE INDUSTRY IN PAKISTAN
Porter five force analysis consist of following five forces
* Entry & Exit barrier
* Level of competition
* Bargaining power of buyers
* Bargaining power of supplier
* Threat of substitute
ENTRY & EXIT BARRIER
In entry and exit barrier we are choosing following indicators to understand this force a) Legal environment and Incentive from government in textile industry b) Energy crises
Let’s start with legal environment regarding textile industry
Generally speaking legal environment is not in the favor of textile industry. The Textile Industry was one of those five industries of Pakistan that enjoyed 0% rating facility, which means that their products were not subject to any sales tax. This exemption was given by the government through SRO 509 (I)/2007 dated 9th June, 2007. But recently a new SRO 231(I)/2011 dated 15th March, 2011 has been issued to have changes in the previous one. The applicability of the new sales tax regime for textile sector has become applicable from April 1, 2011 instead of date of the promulgation of the Presidential Ordinance or issuance of relevant notification i.e., March 15, 2011. This new SRO finished the facility of 100% zero rating and imposed a tax of 4% if the finished fabrics have been sold to the un-registered persons like wholesale market All Pakistan Textile Mills Association (APTMA) has told that government’s actions are not matching with its words for the textile industry. Chairman APTMA said that this government policy is textile industry friendly.
a)NO SUBSIDY FROM THE GOVERNNMENT
Especially the 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
* 16% Federal Excise Duty on banking and insurance services besides 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 negative generation of funds due to unaffordable mark up rate The government has raised special excise duty from one per cent to 25 per cent. So instead of given subsidy to the textile industry the government of Pakistan is making unfriendly policies for the textile industry. So we conclude that entry and exit barrier are very high.
The categories which recorded the highest price increases were: Alcoholic Beverages and Tobacco (18.5 percent); Recreation and Culture (17 percent); Clothing and...