Indus Motor Company's Financial Performance over 3 years

Topic reason and its context It was imperative to select the topic in which I could submit my finest competence. At first all topics looked trouble-free, but when I studied them thoroughly, they turned complicated for me. Then, I finally reached at the conclusion of trying, “The Analysis of financial situation of Indus Motor Company Limited (IMC)”. It involves appraising how the company has been performing over the years, within the industry and along with other competitors.It leads to calculation of accounting ratios and interpreting them in the light of internal and external factors, which may affect the performance of the company.

Different analytical tools have been used: 1. 1. 1 Ratio analysis Financial ratio analysis is the calculation and comparison of ratios which are derived from the information in a company’s financial statements. The level and historical trends of these ratios can be used to make inferences about a company’s financial condition, its operations and attractiveness as an investment. http://www. inpipe. com/equity/finratan. htm 1. 1. 2 SWOT analysis SWOT analysis provides a structure for analyzing either your own strengths and weaknesses, and the opportunities and threats you face, or in a work context for analyzing the strengths, weaknesses, opportunities and threats a business or event faces. (Pauline Kneale and Sam Aspinall, 2003) http://www. geog. leeds. ac. uk/courses/other/casestudies/intra/SWOTanalysis. doc 1. 1. 3 Porter’s five forces of competitive analysis Five forces analysis helps the marketer to contrast a competitive environment.It has similarities with other tools for environmental audit, such as PEST analysis, but tends to focus on the single, stand alone, business or SBU (Strategic Business Unit) rather than a single product or range of products.

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Five forces analysis looks at five key areas namely the threat of entry, the power of buyers, the power of suppliers, the threat of substitutes, and competitive rivalry (Marketing Teacher Ltd 2000 – 2008) http://www. marketingteacher. com/Lessons/lesson_fivefoces. htm 1. 2 Reasons for SelectionI was enthusiastic of studying and analyzing the financial situations for successful companies and learn from their strategies, now I got a chance to work on it. The chosen topic was explicable and lucid. Automobile industry has a main effect in the national economy of Pakistan and it is being developed in the previous years so I had a keen interest in analyzing the financial performance of this sector. I wanted to practice applying ratio analysis techniques in a real life context. The various models, I have used in my report (SWOT, Porter’s five forces model and ratio analysis) were all part of my studies.The shares of company are quoted on the stock exchanges of Pakistan so collection of its accurate and reliable information was not a big deal. 1. 3 Aims and Objectives of the study: The main aim of my research is to analyze the financial situation of IMC. The analysis of my project will reflect: 1. 3. 1 Ratio analysis 1. 3. 1. 1 Sales and Profitability Profitability ratios measure how well a company is performing by analyzing how profit was earned relative to sales, total assets and net worth. http://kbr. dnb. com/help/Ratios/Profitability_Ratios. htm 1. 3. 1. 2 Liquidity and efficiencyThe proportion of total assets that are readily convertible into cash that a clearing bank must maintain in order to repay deposits on demand. http://uk. encarta. msn. com/dictionary_1861824737/liquidity_ratio. html The efficiency ratio compares operating expenses with operating revenue. It measures how effectively or efficiently operating expenses are used to generate loans, deposits and fee income. http://www. mhastakeholders. com/secure/KPIDefinitions/EfficiencyRatio. doc 1. 3. 1. 3 Debt to Capital structure Debt capital divided by total assets. This will tell you how much the company relies on debt to finance assets. ttp://www. investorwords. com/1326/debt_ratio. html 1. 3. 1. 4 Investment Relationship of the number of ordinary shares and their prices of the profits, dividends and assets of the entity. (P2: FTC Kaplan 2007/2008) 1. 3. 2 SWOT analysis The SWOT analysis is an extremely useful tool for understanding and decision-making for all sorts of situations in business and organizations. SWOT is an acronym for Strengths, Weaknesses, Opportunities, and Threats. (Albert S Humphrey, August 2004) http://www. businessballs. com/swotanalysisfreetemplate. htm 1. 3. 3 Porter’s five forces of competitor analysisPorter’s Five Forces model provides suggested points under each main heading, by which you can develop a broad and sophisticated analysis of competitive position, as might be used when creating strategy, plans, or making investment decisions about a business or organization. (www. businessballs. com) 2. INFORMATION GATHERING SOURCES Sources of information 2. 1 Primary Sources It is the information specifically collected for the study by means of field research. Primary data collection is necessary as it is more reliable than secondary sources, so I was more interested in getting primary data at possible extent.Three basic means of obtaining primary data are observation, surveys, and experiments. The choice will be influenced by the nature of the problem and by the availability of time and money. (http://telecollege. dccd. edu/mrkt2370/chapters/ch3/3prim. html) Research can be defined as the collection, collation and analysis of data. The research carried out for this project can be divided into two categories: primary and secondary. The latter enabling cost-effective analysis of several data sources than the former which proved to be challenging to carry out. (Dave Hall, Rob Jones, Carlo Raffo, 1999)Firstly, I had a meeting arranged with Mr. Awais Ahmad (Manager at Toyota Motors – IMC). To get the best out of the meeting I had already arranged comprehensive questions on my note book. My questions were mostly related to the proceedings of automobile sector in Pakistan and steps taken by the government to support this industry and restrict the imports of used vehicles. The company’s regional head was kind enough to explain me most of my queries giving me the required information in the same sitting. He also told me about the organization’s hierarchy and also the task each department performs.Amalgamated information helped me to understand the company and its performance deeply. 2. 2 Secondary sources ?I got Audited Annual financial statements of Indus Motor Company (IMC) from the Lahore Stock Exchange for the past three years i. e. 2007, 2008 and 2009. This is one of the best sources to get the financial information required in carrying out an analysis of a company and which also helps in predicting the future performance of a company. ?Annual audited reports of Honda Atlas Cars Pakistan Limited (Competitor Company) were collected from its Office / factory at Manga Road, Lahore. ?Annual audited reports of Pak Suzuki MotorsCompany Limited (Competitor Company) were collected from its office at The Mall Road, Lahore. ?I also reviewed my Paper 2. 5 text-book and class notes to refresh my memory regarding ratio analysis. ?Surfing net and getting information through different websites have provided me with the various outlooks on the present and future states of the sector. ?Review of business sections in local and international newspapers like Daily Business Recorder etc to remain up to date on the latest economic trends. ?Articles of student accountant magazine also provided great help for effectively writing a report. I used to watch trade news on national TV channel PTV and various local TV channels such as GEO TV and ARY-digital to get familiar with automobile industry and especially IMC’s current affairs. ?Secondary data can be used differently such as: ?To create new ideas ?To compare two statistics ?Where direct collection of data is impossible Secondary data was collected from several sources. The list of them is given below. ?I consulted BPP and Foulks Lynch/ FTC Kaplan textbooks for ACCA to sharpen my technical knowledge in some areas of report that require thorough understanding.I had purchased these books during the course of my ACCA qualification. ?I went through articles of different business magazines such as Pakistan Economist; they helped me widen my knowledge about the industry as well as the company. I also read Student Accountant Magazine for transparency of concepts and to learn basic requirements of the report. ?One of the most convenient and reliable sources for information gathering was internet. It included using search engines like www. google. com. pk, company’s website, Lahore and Karachi Stock Exchange’s website (www. se. com. pk), (www. kse. com. pk) and many more. 2. 3Methods used to collect information and limitations of information gathering Secondary research consisted of the following: ?The Audited Annual Financial Statements of the company; one of the ideal sources of financial information required in carrying out an analysis (for e. g. Ratio analysis). I obtained financial annual report of Indus Motor Company from Lahore Stock Exchange (Guarantee) Limited (LSE). ?Reading articles from the business section of newspapers (Dawn etc. ), and business magazines (for e. g.Daily Business Recorder) to gain up-to-date appraisal of Indus Motor Company. ?Consulting BPP and Foulks Lynch/ FTC Kaplan textbooks for ACCA to aid understanding in some areas of the report and refresh my technical knowledge. These study texts I had already purchased during the course of my studies. ?Went through numerous ACCA Student Accountant articles. Technical articles and those written specifically for this research project were an invaluable aid. Some publications I had collected at some stage in my studies and others being available on ACCA website. I also referred to many business studies and interpersonal skills books throughout the project, which I found from different government and private colleges libraries. ?The internet assisted in initial research and provided access to wide range of information. Searching for relevant facts and figures was time consuming due to the vast amount of information that was uncovered through use of search engines like Google and other search engines. 2. 4Ethical issues Preliminary information gathering involves the seeking of information in depth of what is observed. Several ethical issues addressed while collecting data.During conducting the interview, I have encountered important and confidential information that enabled me to produce valuable analysis. The company secretary was friend of my elder brother, that’s why he helped me very much. Against it I have assured him that I will respect the confidentiality that is my prime duty as an accountant and ACCA student. The information, I acquired during the telephone conversation with the head of risk management, corroborate with secondary information to check that whether it is worthwhile or not. Thus the mass of information have collected through the interviews and library search.Attempts to obtain information through deceptive means avoided at all cost as they engender distrust and anxiety within the system. 2. 5Explanation of accounting and business techniques and limitations Ratio analysis The ratios used to analyze the performance of companies. However, no similar set of standard ratios exists for the analysis of a company’s internal management accounts. The reason for this is that more detailed information is available and the formats and headings are likely to be specific to each company’s trade and circumstances. Following main types of financial ratios are as given below:Sales and Profitability Profitability ratios measure how well a company is performing by analyzing how profit was earned relative to sales, total assets and net worth. Liquidity and efficiency The proportion of total assets that are readily convertible into cash that a clearing bank must maintain in order to repay deposits on demand. The efficiency ratio compares operating expenses with operating revenue. It measures how effectively or efficiently operating expenses are used to generate loans, deposits and fee income. Debt to Capital structure Debt capital divided by total assets.This will tell you how much the company relies on debt to finance assets. Investment Relationship of the number of ordinary shares and their prices of the profits, dividends and assets of the entity. (P2: FTC Kaplan 2007/2008) But these have some limitations and require the interpreter to be conscious while interpretation: •Based on balance sheet figures which are at a particular time may not be typical. •Balances used by seasonal business may not represent average levels. •Ratios are subject to manipulation. •Ratios concern past not future. •Can be distorted easily by inflation or rapid growth. (FTC F9 book 2007/08) SWOT analysisSWOT analysis combines the results of the environmental analysis and the internal appraisal into one framework for assessing the firm’s current and future strategic fit, are lack of it, with the environment. SWOT stands for strengths, weaknesses, opportunities, and threats. Strengths and weaknesses are internal factors. Opportunities and threats are external factors. SWOT can now be used guiding strategy formulation. a)Match strengths with market opportunities strengths that do not match any available opportunity are of limited while opportunities which do not have any matching strengths are of little immediate value. )Conversion this requires the development of strategies that will convert weaknesses into strengths in order to take advantage some particular opportunity or converting threats into opportunities which can then be matched by existing strengths. (BPP P3 2007/08) Simple rules for successful SWOT analysis •Be realistic about the strengths and weaknesses of organization when conducting SWOT analysis. •Always apply SWOT in relation to competition i. e. better than or worse than competition. •SWOT should always be specific. Avoid grey areas. •SWOT analysis should distinguish between where organization is today, and where it could be in the future. . ANALYSIS 3. 1 Automobile Sector Automobile sector is one of the fastest growing sectors in Pakistan. It contributes towards the nation’s economy in the form of Technology Transfer, Employment, Investment and much more. As the industry’s growing, so are the Automobile companies. Every manufacturer is in the process of increasing production capacity to meet customer demands. Through out the 1990’s the annual automobile production remained constant around 45,000 but due to consistent policies and positive macro economic conditions the industry boomed to more than 120,000 units per annum in just 4 years.In 2008-2009, the local automotive industry for the fifth year running made an impressive contribution towards the economic growth of the country. The market for locally assembled passenger cars 82844 units sold in 2008-2009 less as compared to 164650 units sold in 2007-2008. Continued import of used cars and rise in interest rates restricted the growth rate compared to earlier years which is bad effect on local automotive industry of Pakistan. (http://www. pama. org. pk) 3. 2 Profile and historical background of the companyIndus Motor Company (IMC) is a joint venture between the House of Habib, Toyota Motor Corporation Japan (TMC) and Toyota Tsusho Corporation Japan (TTC) for assembling, progressive manufacturing and marketing of Toyota vehicles in Pakistan since July 01, 1990. Indus Motor Company (IMC) is a joint venture between the House of Habib, Toyota, Motor Corporation Japan (TMC) and Toyota Tsusho Corporation Japan (TTC) for assembling, progressive manufacturing and marketing of Toyota vehicles in Pakistan since July 01, 1990.IMC is engaged in sole distributorship of Toyota and Daihatsu Motor Company Limited vehicles in Pakistan through its dealership network. The company was incorporated in Pakistan as a public limited company in December 1989 and started commercial production in May 1993. The shares of company are quoted on the stock exchanges of Pakistan. Toyota Motor Corporation and Toyota Tsusho Corporation have 25 % stake in the company equity. The majority shareholder is the House of Habib. IMC’s production facilities are located at Port Bin Qasim Industrial Zone near Karachi in an area measuring over 105 acres.Indus Motor company plant is the only manufacturing site in the world where both Toyota and Daihatsu brands are being manufactured. Heavy investment was made to build its production facilities based on state of art technologies. To ensure highest level of productivity world-renowned Toyota Production Systems are implemented. IMC’s Product line includes 6 variants of the newly introduced Toyota Corolla, Toyota Hilux Single Cabin 4×2 and 4 versions of Daihatsu Cuore. We also have a wide range of imported vehicles. The dealership network expanded from 25 to 29 dealers during 2008-2009. ttp://www. toyota-indus. com/company/history. asp 3. 3 Ratio analysis Indus Motor Company Limited (IMC) performance has been compared with its three latest year financial annual statements. IMC’s year end is 30 June. The financial statements of IMC were available upto the year ended 30 June 2009. 3. 3. 1 Sales and profitability 200920082007 Sales Revenue Rs. (000)37864604 4142384339,061226 Sales Units (Nos. )352765080250,557 IMC has increased its production capacity to cater to the demand for its vehicles. The company crossed production of 250,000 units since its inception.It achieved over 35276 units of sales during the year 2008-2009. Sales revenues of Indus motor company for the year 2008-2009 decreased to a record Rs. 3559239000, compared to Rs. 2362617000 achieved in 2007-2008. Decrease of higher sales volumes, stop of car leasing by most of the banks and ban by government of Pakistan and import of old cars. Indus motor company sold 35276 units up by 15526 from the last year figures owing to overall decrease in demand of cars. The decrease in sales less production is solely attributable to decreased quantity sold during the year owing to decreasing trend in demand of cars in the country.Company’s sales for the year 2008, were record 50802 units compared to 50557 units achieved last year. Since 2007 it has continued on a downward trend, touching 6. 14 (FY09). The decrease in the margin has been due to the ever increasing cost of goods sold. The cost has increased hugely due to high rupee depreciation and the global oil crisis. Costs are also increased due the high inflation rate prevalent in 2008-2009. Toyota Corolla out-performed its competition and established a market segment leadership position in Pakistan with 59% market share in the year 2006-07.Daihatsu Cuore increased its share to 26% in 2006-07 from 18% last year in the economy car segment that continues to show impressive growth. The New Generation Camry introduced in the beginning of 2006-07 fiscal years showed impressive performance. It increased its share from 16% last year, to 54% by June 2007, in its segment. In the new SUV category, company increased market share from 62% to 88% this year, with increased focus on fleet customers who are secure in the reliable performance, durability and after sales service and product support capability of Indus.Hiace and Hilux increased market share from an already impressive 63% last year to a market dominant position of 84% this year. 200920082007 Gross Profit Margin (%age)6. 149. 2911. 37 Net Profit Margin (%age)(16. 8)2. 32. 7 Return on capital employed (%age)30. 4524. 2834. 13 Net revenue6. 1+41. 439. 1 The gross profit margin has remained consistent over the years. It increased from FY01 (6. 83) to FY03 (13. 73). Then it decreased for two years to 12. 17 (FY05), then remained steady for two more years (FY05 – FY07). Since FY07 it has continued on a downward trend, touching 6. 4 (FY09). The decrease in the margin has been due to the ever increasing cost of goods sold. The cost has increased hugely due to high rupee depreciation and the global oil crisis. Costs are also increased due the high inflation rate prevalent in FY09. The net profit margin has also maintained a steady graph. Both net profit and sales increased from FY04 to FY07, the margin remained consistent. Since FY07, the margin has decreased due to decreasing operating profit and operating income. The net profit decreased from around 2. 7 billion rupees to around 1. 4 billion rupees.In FY09, the margin decreased due to heavy increase in administrative expenses (16% YoY). The return on common equity (ROE) decreased consistently from FY06. It was due to decreasing net profit amid increasing equity. Equity has continued to increase throughout due to continuous additions to the general reserve. We can understand that the decrease in net profit was greater than the increase in equity. The ROE touched 13. 49 (FY09) from 42. 32 (FY06). The return on asset (ROA) had increased until FY08, after which it decreased in FY09 (6. 70). The ROA’s decrease can be attributed to an increase in total assets (50% YoY for FY09).Though this decrease can be translated as a failure on part of the assets to perform, we know that the decrease in returns is due to an industry wide slowdown of demand. The sales of Passenger Cars and Light Commercial Vehicles have decreased by over 47% in FY09. 3. 3. 2 Liquidity and efficiency 200920082007 Current ratio1. 69:12. 56:11. 83:1 Inventory turnover (times)10. 5713. 6710. 15 Stock turnover (days)30 Debt collection period (days)1596 The liquidity situation has improved consistently since FY03 when the current ratio hit a low of 1. 19. Liquidity touched a high of 2. 56 (FY08) before decreasing to 1. 9 (FY09). From FY05 to FY06, current assets and current liabilities increased almost proportionally resulting in a small change in the current ratio (from 1. 46 to 1. 49). In FY07 both current assets and current liabilities decreased, though liabilities decreased by a greater amount, thus leading to an increase in the current ratio. In FY08, sales decreased due to lower demand. Large declines in both current assets and liabilities were seen, and again the decrease was far greater for current liabilities (-49% YoY). This decrease was fueled by a drastic (-80% YoY) decrease in advances.Thus the current ratio spiked to its highest in recent history, i. e 2. 56. FY09 saw the current ratio fall drastically. The decrease came amid large increases in cash and bank balance (124% YoY) and stock-in-trade (55% YoY). It was mainly due to a disproportionate increase in current liabilities caused by an over 500% YoY increase in advances (from customers and dealers). This substantial increase is due to the fact that the advances in FY08 were abnormally low. This figure had decreased by over 80% YoY from around 4. 5 million rupees to less than a million. The trend clearly shows that FY08 was an odd year for the company.Inventory turnover has remained consistent since FY03 at around 42 days. It decreased in FY07 to 28 days due to a large decrease in stock-in-trade and stores & spares (over -25% YoY). The decline continued in FY08 (to 24 days) due to increased net sales and decreased stores & spares. Currently (FY09), the inventory turnover has slightly increased to previous levels of around 40 days on the back of large increase in stock-in-trade (55% YoY) and a lesser decrease in net sales (-8. 6% YoY). The decrease in sales is not unique to Indus Motors alone. (www. brecorder. com) 3. 3. 3 Debt and capital structure 200920082007Debt to equity0:10:10:1 Traditionally IMC has shown no reliance on long term debt. The same trend continues in 2008-09 as well. However, we see that the TIE ratio has shown a sharp incline. This is because of a reduction in the mark-up that is to be paid to the customers against their advances. The decline in this head signifies that the company is able to make delivery of its vehicles on a timely basis. 3. 3. 4 Investor’s Ratios 200920082007 Earning per share (Rs)17. 629. 234. 93 Market price per share (Rs)107. 72200. 05305. 50 Price earning ratio (Rs)6. 116. 868. 75 Dividend per share (Rs)10. 0010. 5013 Dividend yield (%)9. 85. 254. 26 Dividend Payout (%)56. 7536. 0337. 21 The company’s book value has increased consistently over the years. Currently it stands at Rs 131 with a YoY increase of 9. 1%. This increase is due to the high increase in reserves. Reserves have continued to increase while no new shares have been issued. This continuous increase has shown that the stockholders are well catered to and their share in the business has continued to increase. This also shows that the management is taking good care of the stockholders interests. Earnings per share (EPS) for the company had also showed continuous increase from FY01 (2. 9) to FY07 (34. 93). Onwards, the EPS has continued to decrease due to decreasing profits (). Profits have decreased on the back of decreasing demand in the market. The decrease in demand can be attributed to many factors. These factors include increasing inflation, the subsequent drying up of liquidity, decreased available consumer finance, and some government regulations (namely increased sales tax and withholding tax). Dividend per share had increased from FY03 (7) to FY07 (13); and since has decreased to 10 (FY09). This too has been due to the decreasing profits for the company.The price to earnings ratio (P/E) has showed variance. It was 3. 19 in FY02, from whence it decreased to 2. 81 (FY03). Then onwards the P/E ratio increased to 8. 68 in FY08, after which it decreased to 7. 80 (FY09). The market price of the company’s share was 14. 65 (simple average) in FY02. The price then increased consistently till FY07 when it was 261. 63 (simple average). It decreased to 253. 03 in FY08, and then plunged down after the collapse of the stock market. At the end of FY09, the market price of the company’s share was 107. 72, while the average for FY09 became 137. 37 (a YoY decrease of around -46%).The spare parts segment of Indus Motors showed a healthy growth of 9% YoY, reaching Rs 1. 5 billion. This segment has high possibilities which are restricted by the continued negative practices of under invoicing and smuggling. Though initiatives have been taken to reduce such acts, there is a lot to be done. (www. brecorder. com) 3. 4 SWOT Analysis of IMC Strengths ?Brand equity ?Powerful, stylish and more modernized new models ?IMC is the only company who supplies its vehicles to Army and Police department in the country ? Market safe, innovative, reliable, durable and outstanding quality products ? Use of advanced technologies Employee satisfaction, commitment and excellent labor – management relation ? Indus’s good corporate image ?Wide dealership network all over the country ?Worldwide recognition ?Membership of UN Global compact ?IMC is ISO 9002 and ISO 14001 certified ?Customer satisfaction as IMC is fulfilling their motoring needs ? Support of Toyota, Japan ?Continuous growth ?Toyota Marketing Award 2006 – Overall ?Indus Motor Company received the 2nd Consumers Choice Award from Consumers Association of Pakistan in 2006 ? After sales services Weaknesses ?Customer’s complaints due to late delivery http://presidentofpakistan. gov. pk/TPRespondsQsComplDetail. spx? WTPresidentQsID=342 ? Deletion level is very low i. e. 60% which results in increased costs of input as it has to import 40% of its components. Opportunities ?In the 2008-2009 budgets the government had announced a restriction on the age of imported used vehicles, disallowing imports of vehicles older than 3 years. ?Auto Industry Development Plan, prepared by the Engineering Development Board in consultation with the auto industry would pave the way for further investment, technology flow, greater competitiveness and employment in the auto sector and as well as the nation’s economic growth on sustainable basis. Geo News(10 February,2008) ?Introduction of a tariff based system that is WTO compliant http://www. toyota-indus. com/company/press. asp ?Huge demand of cars in the country. 1,000 cars is added into main stream only in Lahore. Threats ?Import of used cars continues to impede growth of the local auto industry. It can lead to closure of the local auto manufacturing plants as has been the case in New Zealand. ?IMC does not produce CNG equipped cars which have low cost per mile. This may lead to lowering of demand of its vehicles. ?Rise in oil prices and other input costs may shrink the margins of the company. Tightening monetary policy by the government ?The depreciation rate of 2% per month amounting to 50% in two years creates a further anomaly as locally produced cars are allowed a depreciation of only 15% per year. ?Chinese are also eyeing the market in a big way. The vehicles are fitted with cabin ventilation. The product is cheap and has been exclusively made for Pakistan. http://www. nation. com. pk/daily/dec-2004/22/bnews2. php 3. 5 Porters five forces of competitive analysis Threat of New Entrants The barriers to entry are high due to the following reasons Huge capital investment is required ?New brand takes time to be famous among the public ?Existing players not only enjoy economies of scale, but will also react very fiercely if a new player tries to enter the market. ?Political uncertainty and unrest has badly affected the market sentiment in recent past while law and order problem, particularly in the wake of assassination of Benazir Bhutto, added to the market worries. http://www. brecorder. com/index. php? id=698864;currPageNo=1;query=;search=;term=;supDate= Threat of Substitutes There is no threat of substitute to cars.Everyone prefers his own conveyance facility for the family mainly due to the poor condition of public transport and traffic system available in the country. Bargaining Power of Customers Bargaining power of customers is getting higher in the automobile industry due to more than one option available for them, covering their price range. There are many new models launched by the companies at the same time having good quality. Moreover, now the customers have the option of buying imported cars, which are better in quality and sometimes lower in price.It may increase further in future. Bargaining Power of Suppliers The bargaining power of suppliers of imported components is low particularly for IMC because it imports them from Toyota, Japan which also has a stake in the company. However, for locally manufactured components, it is also low because there are large number of suppliers who cannot charged prices of their own, they do not have customers from outside the country, and the fact that buyers have low switching costs. Rivalry amongst CompetitorsDue to the increasing demand of cars established in the country all the companies are enjoying high sales growth, as they all have increased their production capacity and the quality of their products, so succeeded in maintaining their share in the market. Since the demand is increasing and they will hopefully sale whatever they produce, rivalry is presumed to be low. 3. 6 Conclusion and Recommendations Keeping in view, the aims and objectives defined earlier in this report, following conclusions can be drawn regarding Indus Motor Company Limited (IMC). As a corporation, Indus Motors is making greater profits.It continues to be a reliable investment and has seen its share price increase dramatically over the years, though that has decreased recently. Indus Motors continues to strive to become a good corporate citizen. It has regularly undertaken social initiatives regarding road safety, environment, technical education, etc. It takes care of all its stakeholders. 3. 6. 1 Auto industry The industry for light commercial vehicles and locally assembled passenger cars downfall because of heavy import of reconditioned cars, continuing the industry growth trend but by a smaller amount as compared to the past years.The reason behind the deceleration is obvious: rising interest rates and imported cars. Although the government has banned the import of cars older than 3 years, the depreciation of 2% per month allowed to the imported cars sways the situation in their favour. The sales of the low capacity cars showed an increase while the cars with higher engine power showed a decline in 2008-2009. Imposition of with holding tax has increased the prices of the cars, thus slowing down the growth rate. 3. 6. 2 The companyIMC is a joint venture between the House of Habib – renowned business group of Pakistan – Toyota Corporat