PRINCIPLES OF MANAGEMENT

(FAUJI FERTILIZER BIN QASIM LTD.)

COURSE: MAN 401

COURSE IN CHARGE: MR. HASHIM ZIA JAFRI
SYED FRAZ HUSSAIN RIZVI 10455
FURQAN RASHEED KHAN 10090
GROUP MEMBERS: MUHAMMED SHOAIB KHAN 10343
MUHAMMAD JUNAID KHAN 10584
SAAD MEHMOOD SIQDIQUI 09838
PROGRAM MBA (INDUSTRIAL MANAGEMENT)
DATE: 19 DEC - 2009

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 MANAGEMENT IN BUSINESS.....................................4
ACKNOWLEDGEMENT...................................................................................5
EXECUTIVE SUMMARY.................................................................................6
1 INTRODUCTION.............................................................................................8
1.1 HISTORY..................................................................................................................................................8
1.2 PRODUCTION CAPACITY..............................................................................................................................8
1.3 MARKET SHARE........................................................................................................................................9
1.4 COMPETITORS...........................................................................................................................................9
1.5 SWOT ANALYSIS....................................................................................................................................9

2 OPPORTUNITY & ISSUE ANALYSIS........................................................13

2.1 ANALYZING OPPORTUNITIES......................................................................................................................13

3 OBJECTIVES..................................................................................................14
3.1 GOAL FORMULATION...............................................................................................................................14
3.2 MISSION STATEMENT...............................................................................................................................14
3.3 VISION...................................................................................................................................................14
3.4 PLANNING PROGRAMS..............................................................................................................................14

4 PROBLEM OR ISSUES.................................................................................15
4.1 NATURE OF ISSUE/S OR PROBLEMS.............................................................................................................15
4.2 CURRENT PRACTICES/POLICIES/PROCEDURES................................................................................................15
4.3 UNDERSTANDING THE NEEDS.....................................................................................................................16

5 ACTION PROGRAMS...................................................................................17
5.1 DEVELOPING STRATEGIES.........................................................................................................................17
5.2 ACTION PLANS.......................................................................................................................................17

6 FINANCIAL PROJECTIONS.......................................................................18
6.1 BUDGET PLAN........................................................................................................................................18
6.2 MILE STONES.........................................................................................................................................18

7 CONTROLS.....................................................................................................19
7.1 FEEDBACK MECHANISM............................................................................................................................19
7.2 CONTROL MECHANISM.............................................................................................................................19

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

Dear Readers,
We as students of Principles of Management, with the authorization of our
course instructor Mr. Hashim Zia Jafri have prepared a report about the “Management
operations at 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,
Syed Fraz Hussain Rizvi ID # 10455
Furqan Rasheed Khan ID # 10090
Muhammed Shoaib Khan ID # 10343
Muhammad Junaid Khan ID # 10584
Saad Mehmood Siqdiqui ID # 09838

Made For:
Institute of Business Management
 Date: 19 DEC,
FAUJI FERTILIZER BIN QASIM LTD. 2009
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IMPORTANCE OF MANAGEMENT IN BUSINESS

“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 principles of management were applied at FFBL (Fauji Fertilizer Bin
Qasim ltd.), we visited the company located at Bin Qasim in outskirts of Karachi. We
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
follow the principles of management in their organization.

Presented below is a summary of all the information we 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 planning, organizing, influencing
and control, 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

Problem
High competition of fertilizer producing industries in Pakistan.

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.
• SWOT Analysis of the organization.

0.1.1.1 Method of Research:

Method of research used in this report is Exploratory Research.

0.1.1.2

0.1.1.3 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.

Made For:
Institute of Business Management
 Date: 19 DEC,
FAUJI FERTILIZER BIN QASIM LTD. 2009
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Population Definition:
The population comprises of current fertilizer product users are the lower middle class
people in urban areas with ages from 30 to 60 years.

Made For:
Institute of Business Management
 Date: 19 DEC,
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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.

1.2 Production Capacity

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.

Table 1: Production Profile

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

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 Date: 19 DEC,
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1.3 Market Share

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.

1.4 Competitors
♦Fauji Fertilizer Company
♦ENGRO Chemicals Pvt. Ltd.
♦Fatima Fertilizer Company (production to be commenced soon)
♦National Fertilizer Development Company (Not in production)
♦Dawood Hercules (Not in production)

1.5 SWOT Analysis

Table 2: SWOT Analysis

Strengths Weaknesses
♦ Only DAP Producer in Pakistan ♦ Marketing being outsourced to FFC
♦ Location ♦ Lack in training procedures
♦ Authority lies with CEO and ♦ Unavailability of raw material in
Chairman Pakistan
♦ High Urea quality (large ♦ Management lies with army men
granules)
♦ IMS Certification
♦ Safety and Health

Opportunities Threats
♦ Unsaturated urea and DAP ♦ Entrance of new competitors
market in Pakistan ♦ Loss of key staff due to intervening
♦ Forward integration competitors
♦ Proper R&D ♦ Depleting natural gas reserves in
Pakistan
♦ Unstable economical and political
conditions

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

1.5.1.1 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.

1.5.1.2 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.

1.5.1.3 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.

1.5.1.4 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
♦ 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

1.5.1.5 IMS Certification

FFBL adopted IMS (Integrated Management System) in 2007 which integrated ISO
9001, ISO 18001 and ISO 14001; which is one of the milestone and biggest
achievement for the company.

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Institute of Business Management
 Date: 19 DEC,
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1.5.1.6 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.

1.5.2 Weaknesses

1.5.2.1 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.

1.5.2.2 Lack of Training

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

1.5.2.3 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.

1.5.2.4 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.
.

1.5.3 Opportunities

1.5.3.1 Unsaturated Urea and DAP market in Pakistan

Demand for urea and DAP in Pakistan is higher than the cumulative production of all
urea and DAP producers in Pakistan; resulting in urea imports, to bridge up the
demand and supply gap. Therefore, there is an opportunity lies with all fertilizer
manufacturers to increase with their production to meet the market needs.

1.5.3.2 Forward Integration

FFBL can integrate forward to develop its own marketing staff as well as its own
distribution channels to maximize its profits.

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 Date: 19 DEC,
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1.5.3.3 Proper R&D

Proper Research & Development programs found a bright scope for the further
improvement of urea quality as well as for the development of new fertilizer
products.

1.5.4 Threats

1.5.4.1 Entrance of New Competitors

Entrance of new fertilizer companies like Fatima fertilizer and ENGRO Chemicals
(Pvt.) Ltd in fertilizer market, pose an apparent threat for the market share of FFBL
and other fertilizer companies.

1.5.4.2 Loss of Key Staff due to intervening competitors

The company staff is shifting to new companies in urea business as they are offering
better salary packages and facilities. This creates a window of opportunity for the
competitors to take advantage of a situation and to poach the executive talent from
the company. If this situation is not handled the BEST and BRIGHTEST leave first

1.5.4.3 Depleting Natural Gas reserves in Pakistan

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. Due to
depleting natural gas reserves in Pakistan the price of gas is constantly increasing which
poses a certain threat to fertilizer industries in Pakistan.

1.5.4.4 Unstable Political /Economic Conditions

Unstable economic and political conditions are largely effecting the agricultural
production of Pakistan which subsequently poses a threat to the Fertilizer Industry.

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 Date: 19 DEC,
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2 OPPORTUNITY & ISSUE ANALYSIS

2.1 Analyzing Opportunities

The below mentioned are the opportunities for FFBL. These points are already
discussed in SWOT analysis.

♦Unsaturated urea and DAP market in Pakistan

♦Forward integration
♦Proper R&D

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 Date: 19 DEC,
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3 OBJECTIVES

3.1 Goal Formulation

FFBL has achieved the milestone of adopting Integrated Management System (IMS) and
directed itself towards advance quality management techniques like TQM with the aim
to enhance the customer satisfaction in all deliverables.

3.2 Mission Statement

“Pursue as a team, the progressive strategy based on the principle of maintaining the
spirit of excellence to remain among the best companies for delivering competitively
priced quality products, achieving sustainable growth rate in all activities and generating
optimum profits to the satisfaction of all stakeholders.”

3.3 Vision
♦Be a leading fertilizer company with a diverse product base
♦Continue to excel in operations
♦Commitment to business ethics, safety, health, environment and involvement in
the community
♦Remain a good corporate citizen
♦Be one of the best corporate employers
♦Keep exploring other project investment opportunities to remain progressive,
flexible and viable

3.4 Planning Programs

3.4.1 Production Planning:

Weekly meetings take place between Sales, Marketing & production departments to
estimate the amount of production to be made for each product & to make production
schedule for the whole coming week.

3.4.2 Future Planning:

♦The Company is actively looking out for further diversification opportunities by
either going for own projects or participating with other investors in opportunities
like privatization, Liquefied Natural Gas (LNG) Terminal, Independent Power
Projects, Cement Sector etc.
♦Land of 16 Canals has already been acquired at Defence Housing Authority
(DHA) PHASE II, Islamabad for the construction of Head Office building.

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 Date: 19 DEC,
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4 PROBLEM OR ISSUES

4.1 Nature of Issue/s or Problems

♦Bureaucratic environment prevails in the company.
♦All the authority & selection are confined to Army Officials.
♦Inflationary Pressures pushing costs upward. Almost all material costs, Raw
Material, Packing Material, etc. have increased by 52%. Leading the Direct
Material (i.e. Raw + Packing) costs from 60% to 80%.
♦No proper training programs organized by Human Resource Department.
♦No proper advertisement of the product due to which 2nd grade products are
entering the market
♦No proper prints available for the farmer’s education which increases poor
farming practices.
♦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
effect their sales due priority based marketing.
♦No Proper Complaint Channel for the farmer. One has to go the Distributor
regarding any complaints.
♦There is no long-term human resource development program to improve
qualifications of researchers and extension workers to professional level and also
provide for short-term trainings to equip them with knowledge and skills in
important areas.
♦FFBL will also stop receiving compensation from the government in lieu of non-
implementation of the Fertilizer Policy 1989. It currently has a loan of Rs5.8 billion
from the government, which requires payment of Rs648 million per annum. So far,
this payment got netted off by receivable from the government. But now, FFBL
would need to make actual cash payments. This would enhance the pressure on the
Company, already under pressure due to DAP inventory pile-up.

4.2 Current practices/Policies/Procedures

4.2.1 Sales & Marketing

FFBL delivers its products to FFC for Sales and Marketing.FFC is responsible for the
timely and safe delivery of these goods.FFC sells the products to the Dealers which are
responsible for the further sales .Any complains received by dealers are forwarded to
FFBL.

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4.2.2 Promotion /Advertising:

FFC is responsible for the marketing of DAP and Urea by FFBL.FFC is not interested in
marketing as they have a very high demand as compared to production.

4.2.3 Sales Performance:

Sona Urea Sales during the quarter ended 31 Mar 2009 are 114 thousand tones showing
an achievement of 134% against the target, however this was 30% lower as compared to
the sales of 164 thousand tones for the same period of 2008.These sales were limited to
product availability during the product under review. Sona DAP sales during the quarter
are 105 thousand tones, showing an achievement of 192% against the target, whereas
8000 tones of DAP was sold in the corresponding period of the last year.
FFBL share in urea and DAP markets remained 7% and 55% respectively during the
period under review.

4.3 Understanding the needs

♦Due to the current increase in demand FFBL should expand its production plan to
meet the needs of today.
♦FFBL requires its own marketing department.
♦Better advertising and feedback mechanism should be adopted.
♦Development & Implementation of proper research & development programs is
needed.
♦Proper training programs are required.

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

5.1 Developing Strategies

♦Capture the available market demand.
♦Marketing Department to be established.
♦Allocation of budget for advertisement
♦Customer complaint Department to be established
♦R&D Programs to be Developed

5.2 Action Plans

5.2.1 Capacity enhancement

FFBL planning department needs to carry out a revamp or parallel production unit
installation project to increase its production capacity to meet the market demand for
urea and DAP.

5.2.2 Establishment of Marketing Department

FFBL needs to establish its own sales & marketing department to avoid priority based
marketing and selling of its products.

5.2.3 Advertising & Feedback Mechanism

FFBL needs to go for proper advertising programs to increase farmer’s awareness and
should define a proper feedback mechanism to register complains regarding its products.

5.2.4 Research & Development Programs

FFBL needs to organize proper research and development programs for the further
improvement of its products’ quality and development of new products.

5.2.5 Employees Training Programs

Human Resource Management should pick up the outstanding employees and provide
necessary training and skills development education to enhance and shape employees
MBO skills. This will motivate employees and empowered them and make them
aggressive towards attainment of goal and better business for the company.

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

6.1 Budget Plan

No budget plans are available for FFBL to present in this report.

6.2 Mile Stones

Table 3: DAP Projections

2009 2008 2007
Dap Projections
Tons Tons Tons
9 Month Actual 1,140,000 291,000 766,000
4th Quarter 410,000 484,000 633,000
Full Year Sales 1,550,000 775,000 1,399,000

Table 4: Urea Projections

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

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 Date: 19 DEC,
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7 CONTROLS

7.1 Feedback Mechanism

♦There’s a hierarchical reporting system of problems / issues / day-to-day
activities. Junior Staff reports to the senior staff and report can go to the GM, CEO
and Chairman depending on the nature of issue.
♦As far as sales department is concerned they sell their product to the dealers from
where the product is being retailed out. Farmers report their feedback to dealers
who further forward it to the FFBL.

7.2 Control Mechanism

♦Appropriate action is taken whenever there’s a need. In this regard, GM, CEO
and Chairman direct their subordinates on what strategy to follow or what to do.
♦Organizational authority lies with the CEO and Chairman of the Fauji
Foundation.
♦Supervisors control employee’s performances through key performance
indicators (KPI’s).
♦They have their own quality control department with relation to the product
quality. As far as the documentation of processes is concerned the Quality
Assurance is moderate.
♦To eliminate chances of theft, espionage and violence strict security measure are
taken at all entry and exit points under the supervision of army.
♦Every employee is obligated to protect the Company's confidential information.
All information developed or shared as a result of the business process is
proprietary to the Company and must be treated as confidential.
♦Company documents and records are part of the Company's assets, and
employees are charged with maintaining their accuracy and safety. Employees are
required to use excellent record-management skills by recording information
accurately and honestly, and retaining records as long as necessary to meet
business objectives and government regulations. Financial records must accurately
reflect all financial transactions of the Company.

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