SKF Business Plan

SKF Pakistan (Pvt.) Ltd.

Business PlanSubmitted By:

Saad Mahmood MBA-FA08-124

Madiha Shah MBA-FA08-171

Syeda Rida Fatima MBA-FA08-148

Submitted To:

Miss Faiza Rehman

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CONTENTSPage

1. Company Description 3

2. Product Line 4

3. Organizational Chart 4

4. Executive Summary 5

5. Vision/Mission 6

6. Historical Background 7

7. Campaigns 8

8. Industry Analysis 10 8.1 Competitors 8.2 Company Life Cycle 8.3 External Envoirment 8.3.1 Technological 8.3.2 Socioculture 8.3.3 Economic 8.3.4 Legal/Political 8.3.5 International

9. Company Practices and Analysis 12 9.1 Internal Envoirment Analysis 9.1.1 Code of Conduct 9.2 Competitive Advantage 9.3 Leadership Practices

10. SWOT Analysis 16

11. Competitive Analysis 17 11.1 Porter's Competitive Forces

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12. Analyzing Strategic Business Units 18 12.1 SBUs 12.2 BCG Matrix

13. Problems Identification 19

14. Solutions to Problems 19

15. Conclusions 19

16. Recommendations 20

17. References 20

18. Bibliography 20

19. Evidences 21

20. Annexure 22

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1. Company Description

The SKF Group is one of the leading global suppliers of products, solutions and services in the area comprising rolling bearings, seals, macaronis, services and lubrication systems. The Group's service offer also includes technical support, maintenance services, condition monitoring and training.

The SKF business is organized into three divisions; Industrial, Automotive and Service. Each division serves a global market, focusing on its specific customer segments.

SKF has 110 manufacturing sites distributed all over the world and its own sales companies in 70 countries. SKF is also represented in 140 countries through some 15 000 distributors and dealers. SKF is always close to its customers for the supply of both products and services.

SKF was founded in 1907 and from the very beginning focused intensively on quality, technical development and marketing. The results of the Group's efforts in the area of research and development have led to a growing number of innovations that has created new standards and new products in the bearing world.

The Group has a global IS0 14001 environmental certification and global health and safety management standard OHSAS 18001 certification. Its operations are also certified in accordance with ISO 9000 and other customer specific requirements.

The SKF business is organized into three divisions: Industrial, Automotive and Service. Each division serves a global market, focusing on its specific customer segments. There are seven staff units: Group Legal; Group Communication; Group Finance; Group Demand Chain; Group Business Development; Group Human Resources & Sustainability; and Group Quality & Technology Development.

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2. Product Line

Interactive Engineering Catalogue Condition monitoring products Coupling systems Maintenance and lubrication products Measuring equipment Mechatronics Power transmission products Seals product overview SKF Lubrication Solutions Vehicle service parts

3. Organizational Chart

The organizational hierarchy of SKF consists of the following:

CEO Directors Country Manager Area Manager Sales Manager Marketing Manager Finance/ Recovery Manager Field Workers

*For more detail see Annexure 1

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4. Executive Summary

SKF established in 1907, is known as the world leading supplier of products, solutions and services in the rolling bearing business and one of the leading players in seals, mechatronics, services and lubrication systems. It has its registered head office in Sweden and currently working at 110 sites in 28 countries, with almost 42,888 employees worldwide. The SKF business is organized into three divisions: Industrial, Automotive and Service. Each division serves a global market, focusing on its specific customer segments. There are seven staff units: Group Legal; Group Communication; Group Finance; Group Demand Chain; Group Business Development; Group Human Resources & Sustainability; and Group Quality & Technology Development. In Pakistan it has two offices, in Lahore and Karachi. Lahore office covers the Punjab and N.W.F.P whereas Karachi office covers Sindh and Balochistan. The market demand for SKF's products and services is expected to be higher for the Group. The demand is expected to be higher in Europe and Latin America, significantly higher in Asia and relatively unchanged in North America. The demand is expected to be higher in the Industrial and Service Division and slightly higher in the Automotive Division. The manufacturing level for the second quarter will be unchanged compared to the first quarter 2007 and significantly higher compared to the second quarter last year. Although management believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Accordingly, results could differ materially from those implied in the forward-looking statements as a result of, among other factors, changes in economic, market and competitive conditions, changes in the regulatory environment and other government actions, fluctuations in exchange rates and other factors mentioned in SKF’s latest report on file with the SEC (United States Securities and Exchange Commission) under "Forward-Looking Statements" and "Risk Factors".

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5. Vision/Mission

Vision

To equip the world with SKF knowledge

Mission

To be the preferred company...

For our customers, distributors and suppliers:Delivering industry-leading, high value products, services and knowledge-engineered solutions;

For our employees:creating a satisfying work environment where efforts are recognized, ideas valued, and individual rights respected;

For our shareholders:delivering shareholder value through sustainable earnings growth.

DriversProfitabilityQualityInnovationSpeedSustainability

ValuesHigh ethicsEmpowermentOpennessTeamwork

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6. Historical Background

SKF has a long history in Pakistan dating back to the 1940’s. In 1994 SKF established a liaison office to support the SKF distributor network and its customers. In 2004 SKF Pakistan Pvt. Ltd. was founded to be able to service and market its products in even a better way than ever before. SKF Pakistan Pvt. Ltd. is a wholly owned subsidiary from SKF AB, Sweden.

SKF Pakistan employs a team of dedicated engineers who are responsible for the marketing & sales of bearings and related products via its wide distributor network. The engineers working for the company offer customers technical support in the field of bearings operations. The last 5 years SKF has been growing in Pakistan with more than 25% annually.

The Company is totally committed to ensuring that the quality of its products and services constantly meet our customers' expectations and delivered in accordance with SKF standards.

The Company gears itself towards developing long-term strategic partnership with its customers by helping them to maintain effective and efficient operation of their plant processes. A solid proof to this partnership is the more than 30 Service and Supply contracts with our key customers nationwide dating as far back as 1997. These partnership agreements span across many industries from Cement & Minerals, Pulp & Paper, Textile, Sugar, to Food & Beverage, Petrochemical, Automotive and other manufacturing industries.

We provide value to our customers through our local expertise in bearing application engineering, installation and maintenance, failure analysis, condition monitoring and vibration analysis. Our local capability and competence in both fields of bearing technology and reliability systems are unparalleled with our well-equipped and experienced engineers, our leading-edge technologies backed up by SKF’s global engineering and logistics resources.

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7. Campaigns

SKF 100-Year Jubilee

Curiosity, persistency, making products and solutions smarter and more efficient - has since Sven Wingqvist's days been the very meaning of SKF's existence. For one hundred years, our focus has been to improve the prerequisites of the industry, driven by a true passion for knowledge. Since 1907 and the birth of the self-aligning ball bearing, we've made an astonishing journey. In only 25 years we established SKF factories and offices in 40 countries; which in those days was an outstanding effort. Ever since our beginning, we have come to set the standards for our industry - through innovation and constant renewal of products and solutions. We've been at the helm of industrial evolution for the past hundred years, and we will keep that position - embracing the next centennial, working for a sustainable world, equipped with SKF knowledge.

Gothia Cup

2006 SKF became one of the official partners in Gothia Cup, the worlds biggest and most international youth football tournament. It is annually held in Gothenburg, Sweden and every year 1500 teams representing 65 -70 nations takes part in the tournament. In addition, SKF is widening the existing concept by creating more meeting places around the world, pre-events called Meet the World. These pre-events is taking place in 20 countries. Twelve up to thirty-two teams are invited to each event and the winners at these events will win a trip to the Gothia Cup in Gothenburg, in July 2007. This way, a greater number of youth will get the chance to come to a meeting place and play football.

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Corporate Campaign

In May, 2006 SKF launched an exciting new corporate campaign. This is the most aggressive and comprehensive campaign ever produced in SKF’s history. Based on our strong industry leadership and experience, SKF can today offer one of the most comprehensive assortments of technology and competence that can offer customers results beyond their expectations? Supported by our growing strength in the technology platforms, and our strong network of industry, segment and product specialists, and the innovate shared culture of SKF employees around the world, today we can offer one of the most comprehensive and truly global offers of any company. Think about what you can do to help meet the challenge as we work to show our customers, and the world, the true power of our experience, expertise and creativity. Help do your part to show the true Power of SKF Knowledge Engineering.

The Swedish Ship Götheborg

The journey to China of the Swedish Ship Götheborg started in Götheborg, Sweden on October 2, 2005 and will also end there on September 12, 2007. There will be approximately seventeen stopovers, nine of which on the way to China where Shanghai is the final destination. At each stopover, the sponsors and SOIC are setting up a so called SOIC Village where the public will be able to go on-board the ship and the Swedish sponsors will be able to meet their local customers. The ship will dock for four months in Shanghai before starting her journey back home in mid December 2006. The first stop on her trip back will be Hong Kong on New Year's Eve.

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8. Industry Analysis

8.1 Competitors

FAG NTN NSK Hundreds of Taiwan and Indian companies

8.2 Company Life Cycle

SKF, at present is at the stage of growth in its life cycle. It has been through the stage of development and introduction and has made substantial financial gains, but now it may start moving towards its maturity stage its business because of increased competition in the market. SKF still have the ability to expand to the more countries as it is still expanding and till now it covers 28 countries of the world with 110 units.


8.3 External Envoirment

Engineering and Mechanical Industry enjoys active demand in the International as well as domestic markets.

These products are continuously demanded worldwide, whole of the year.

The customers are willing to pay for quality products The sales of this sector’s were $40 billion in the past year. The manufacturing bases for these products are shifting towards

developed countries, primarily due to the expertise engineers and the cost of training of inexperienced operational staff.

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8.3.1 Technological

Complex and highly competitive global market Industry consolidation, partnerships, and collaboration Rapid rate of technology development and change

8.3.2 Socioculture

SKF encourages workforce diversity, provides quality Envoirment for the employees, and discourages child labor.

8.3.3 Economic

SKF is influenced by the macro-economic factors. There has been a change in macro-economic factors of Pakistan and SKF is influenced by these factors. The increase in taxes has an adverse affect on the company’s revenue. Government of Pakistan is committed to deregulate and liberalize industry through privatization of state-owned companies.

8.3.4 Legal/Political

Political pressure for marketing of products to local manufacturers where expenditure is more than revenue seriously affects the revenue of SKF.

There is proper union in the organization that is working for the benefit of the employees and there are no serious conflicts between the management and union because of friendly environment between both parties

8.3.5 International

SKF partners with international automobile manufactures. SKF have signed agreements with world’s leading companies to

increase business by updating market needs and fulfilling them. SKF’s shares are sold internationally.

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9. Company Practices and Analysis

9.1 Internal Envoirment Analysis

The SKF business is organized into three divisions: Industrial, Automotive and Service. Each division serves a global market, focusing on its specific customer segments.

9.1.1 Code of Conduct

For an international company such as SKF to be consistently successful, it is vital that in performing our duties, each and every one of us does so in such a way that SKF is perceived and acknowledged as economically, socially and ethically responsible.

Responsibility towards customers, distributors and suppliersTo gain and maintain business by continuous development and research and to be able to provide products, services and solutions that meet customers' expectations regarding quality, safety and environmental care, while always applying the highest standards of business ethics.

Responsibility towards employeesTo respect employees and their rights, to offer safe and good working conditions, to offer non-discriminatory conditions and to continuously develop skills and competencies to enable the individual's satisfaction and career possibilities.

Responsibility towards societyTo manage the business as a responsible member of our society, showing respect for laws, customs and needs of the different countries where we are present, as well as respecting the protection of internationally proclaimed human rights. The aim of our environment and social responsibility initiatives is to actively contribute to a sustainable development.

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Responsibility towards shareholdersTo protect the shareholders' investments and strive for a sustainable and improving return. Return on the shareholder's invested money is always considered when determining important strategies and financial action alternatives. We keep our shareholders all over the world well informed about the activities, results and strategies of the Group, complying with the rules of the stock exchanges where the SKF shares are listed.

Responsibility towards customers, distributors and suppliersWe demand honesty and integrity in all parts of our activities and expect the same from all parties with whom we have any business relation - customers, suppliers, partners, agents. We advocate free and fair trade, striving for competition and ethical conditions within the rules of the legal framework.SKF encourages its suppliers to adhere to similar codes of conduct and their performance in this respect has a significant impact on our selection process. Consequently, a supplier who does not meet these standards runs an increased risk of being excluded from our demand chain.

Responsibility towards societyIt is our policy to be open and approachable, to provide factual and consistent information about the Group's products, services and development. Information essential to the stakeholders of the company shall always be given as fast as circumstances permit.We act in a socially responsible way and within the framework of the national legislation of all the countries where we are present, creating jobs and supporting our customers. Our ability to profitably manage and grow our business is the foundation by which we meet our social responsibility.

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9.2 Competitive Advantage

SKF is worlds number 1 company and a brand that is recognized worldwide. It is in the market for almost a century therefore it has a wide number of customers that are fully satisfied by the products and services offered. Some more advantages of SKF on its competitors are as follows:

Always up to date Knows market needs Qualified R&D Department Satisfies customer needs by quality products

9.3 Leadership Practices

Leadership and the relationship between employees within SKF are based on our four core values. Among other things these values require that:

all employees be treated equally, fairly and with respect regardless of race, gender, age, national origin, disability, caste, religion, sexual orientation, union membership or political affiliation.

SKF does not engage in or support the use of forced labour, nor shall any employee be required to lodge "deposits" or identity papers when commencing employment with SKF.

SKF does not engage in or tolerate the use of child labour. We define as child any person less than 15 years, unless local minimum-age law stipulates a higher age for work or mandatory schooling, in which case the higher age shall apply. If, however, local minimum-age law is set at 14 years in accordance with developing country exceptions under ILO Convention 138, the lower age will apply.

SKF respects the right of all employees to form and join trade unions of their choice and to bargain collectively. SKF will ensure that official representatives of such trade unions are not subject to discrimination and that such representatives have access to the

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union members and their workplace. SKF ensures that wages and other related benefits meet at least

the legal or industry minimum standard in the country in question. SKF complies with applicable laws and industry standard on

working hours in each country where we operate. SKF is committed to offering safe and healthy workplaces for all

employees. SKF is certified to ISO 14001 and OHSAS 18001. The Group's aim, related to health and safety, is to eliminate rather than just reduce work-related accidents and injuries throughout its facilities.

SKF strives to give employees good opportunities to train for job enrichment and wider responsibility, as expressed in the Individual Development Plan.

SKF will give all employees a fair chance to compete for job opportunities. Unless overridden by national legislation, only relevant skills and competencies shall be the differentiating factors in selecting the right person for the job.

SKF ensures that the registration, filing and use of employee data is treated with strict confidentiality and in accordance with local legislation.

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10. SWOT Analysis

Strengths

World wide brand. Almost all the well known companies in the world use SKF products in its production line.

In the market for almost a century due to which it has a kind of monopoly in the market.

SKF always stays up to date and tends to keep its customers updated with the help of providing continuous training its staff.

SKF tends to know all the market needs, therefore it continuously sends the research teams in the market so as to fulfill them promptly. This acts as a main factor for the success for SKF.

Qualified R&D Department is one of the primary reason for its success. SKF hire qualified personnel from around the globe.

Weakness

High Price is one of the main factors that can effect SKF adversely especially in those countries and customers that are price conscious.

As SKF is doing business on a global scale so it has to cover large area which can be a hurdle in promptly implementing the decision worldwide.

Opportunity

SKF has a great opportunity as it has been in market for almost a century and has great experience in working globally.

Due to worldwide recognition SKF can penetrate in local markets very easily as compared to newly emerging companies.

Threats

Local competitors that have low quality might be a threat to SKF

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11. Competitive Analysis

SKF supports free enterprise and therefore competes fairly and recognizes other companies' equal rights to do so. The Company supports the development of competition laws to protect this principle. It sets its commercial policy independently and does not fix prices in agreement or collusion with competitors.

11.1 Porter's Competitive Forces

Threats of new entrants Low threat SKF is a world wide recognized brand so there is difficulty for new

entrants to challenge the brand. Another reason is the quantity of capital requirement and economies of scale which cannot be easily crossed by the competitors.

Threats of Substitute Products Low Threat SKF products are of high quality, unique and well known for there

performance and till now no new substitute products are introduced.

Bargaining Power of Buyers Low bargaining powers of buyers SKF have a fixed price and discount rates worldwide and is in a

kind of monopoly situation as it does not have any potential competitor.

Bargaining Power of Suppliers Low bargaining powers of buyers SKF is operating on a global scale therefore its suppliers are also

not in one region. In case the existing suppliers are charging more then SKF can promptly shift to another company due to its operation in 28 countries


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12. Analyzing Strategic Business Units

12.1 SBUs Mechatronics Tools Bearing and Units Services Seals Lubrication Systems

12.1 BCG Matrix

1. Stars: Bearing and Units This SBU has large market share, moreover it has potential

of additional growth and as SKF in on total at growth stage and this product is most profitable to them.

2. Question Marks: Mechatronics Tools Although they are not a newly launched product but have

low market share but are expected to have a lot of share and rapid growth. These products might become a star if it captures big portion of market or can be a dog if its market share does not increases, thus creating still a great risk for the company.

3. Cash Cows: Services Seals These SBUs are SKF's cash cow because they have slowed

down in growth and lies between growth and maturity stage. Still it is rated high among its competitors and has been successful in capturing more market share as compared to other competitors.

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4. Dogs: Lubrication Systems This is so because its market share is low and has small

growth rate. It is making little profits for the company as compared to the rest of the products


13. Problems Identification

Due to poor marketing practices for the products like no advertisement leads to sale decline.

Lack of checks on the field workers. A high price forces the buyers to buy cheap products.

14. Solutions to Problems

There should be specific marketing procedure other than directly marketing the targeted customer

There should be performance checks on the field workers and a supervisor should be hired to check their daily, weekly or monthly performance.

SKF should take in consideration the buyers with low budget and should provide discount that can result in increase in sale volume.

15. Conclusions

Overall the company is working profitably, and on a global scale. It faced a lot of problems in the initial phase but now it is working smoothly. Company is now concentrating on expand its business by entering into more countries.

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16. Recommendations They should introduce creativity in their work so that the

employees can do their work active mindedly. There should be specific marketing procedure other than directly

marketing the targeted customer There should be performance checks on the field workers and a

supervisor should be hired to check their daily, weekly or monthly performance.

SKF should take in consideration the buyers with low budget and should provide discount that can result in increase in sale volume.

17. References Habib Ur Rehman Grewal

Sales EngineerDesk: +92 42 575 6128 – 33Cell: +92 302 865 2575E-Mail: [email protected]

Ehtsham-ul-Haq Distributor Development/Recovery OfficerDesk: +92 42 575 6128 – 33Cell: +92 302 844 0397E-Mail: [email protected]

Atique AhmedSales & Application EngineerCell: +92 302 8222 059E-Mail: [email protected]

18. Bibliography www.skf.com Annual Financial Statement SKF “Management” by Danny Samson & Richard L. Daft (Pacific Rim

Edition)

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19. Evidences

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20. Annexure

Annexure 1

Organizational Chart (hierarchy)

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Annexure 3Company Life Cycle

Annexure 3Porter’s Competitive Forces Model

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Annexure 4

BCG Matrix

SKF Business Plan

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