Alpha Chemicals – Drive for growth

Alpha Chemicals Pakistan Ltd is a leading B2B chemical company based in Lahore,
Pakistan. Established in 2005, the company has been a key player in the chemical
manufacturing and distribution industry, catering to a diverse range of industries
including textiles, pharmaceuticals, and agriculture. With a strong commitment to quality
and customer satisfaction, Alpha Chemicals has seen steady growth over the years.

Mian Bashir Ahmed, who is the CEO of this family run business has been at the driving
seat at Alpha since 2005. He has a conventional mindset and it’s hard for him to adapt to
new ideas, though his younger brother Mian Zahid and their younger sister Ms. Saima are
more enterprising and have been steadily introducing newer production techniques and
forward-looking talent in the business.

Total employee headcount: 1500; 200 management and 1300 non-management

Revenue in 2023: PKR 800 million
Net Profit Margin: 15%
Market Share: 20% in the local B2B chemical industry

Misc.
2% Share Breakdown
Construction
8%

Agriculture
20% Textile
50%

Pharmaceuticals
20%

Alpha grapples with persistent challenges in attracting and retaining skilled professionals
for various reasons:

1. The chemical manufacturing industry faces perception challenges, making it less

appealing to potential candidates.
2. Fierce competition with other industries for qualified professionals.
3. Alpha's limited visibility as an employer of choice.

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Alpha is also beset by structural challenges. They include:

Outdated IT Infrastructure:
Alpha Chemicals’ existing IT infrastructure is outdated and lacks the necessary
capabilities for seamless digital integration. This hampers the implementation of modern
technologies, including ERP systems, online platforms, and real-time tracking systems.

Resistance to Change:
Employees exhibit resistance to change, fearing disruptions to established workflows.
This resistance impedes the smooth adoption of new technologies, as employees may be
hesitant to embrace digital tools and processes.

The Chemical Manufacturing Industry in Pakistan:

The chemical manufacturing industry in Pakistan is a vital component of the country's

industrial landscape. It spans a diverse range of sectors, including textiles,
pharmaceuticals, agriculture, and more. The industry plays a crucial role in supporting
various manufacturing processes, providing essential raw materials and chemicals for
end products.

 Fragmented Market: The market is largely fragmented with numerous small to

medium-sized players catering to specific niches. However, there are a few key
players that hold substantial market shares.

 Growth Trends: The industry has been experiencing steady growth, aligning with the
overall economic development of Pakistan. Increased industrialization and a growing
population contribute to the demand for chemical products.

 Regulatory Environment: Stringent regulatory standards govern the chemical

industry to ensure safety, quality, and environmental sustainability. Compliance with
these regulations is crucial for market players.

 Technological Advancements: Continuous advancements in technology influence

manufacturing processes, with a shift towards more sustainable and environmentally
friendly practices.

 Global Competitiveness: The industry faces competition not only from domestic
players but also from international chemical manufacturers. Global market dynamics
and geopolitical factors impact the industry's competitiveness.

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Customers

Industry Growth Projection Preference

(2024-2028) CAGR
Textile 7% 1. Sustainable and eco-friendly dyes and
chemicals.
2. Cost-effective fabric treatment solutions.
3. Timely delivery to support just-in-time
manufacturing processes.
Pharmaceuticals 9% 1. High-quality pharmaceutical-grade chemicals
and solvents.
2. Compliance with international pharmaceutical
standards.
3. Customized solutions for specific drug
manufacturing processes.
Agriculture 5% 1. Advanced and environmentally friendly
agrochemicals.
2. Precision farming solutions and smart
fertilizers.
3. Education and support services for
sustainable farming practices.
Manufacturing 6% 1. Specialized chemicals for advanced
& Construction manufacturing processes.
2. Innovation in construction materials for
sustainability.
3. Efficient supply chain and reliable product
availability.

Considerations by the Customers:

 Digital Integration: All customer segments show a preference for suppliers with
integrated digital solutions, including online ordering platforms, real-time order
tracking, and digital invoicing. Although the pharma industry is more evolved and
demanding, textiles because of the pressures from their export customers, are also
not demanding seamless integration.

 Environmental Sustainability: Across industries, there is a growing preference for

environmentally sustainable and green solutions. Suppliers incorporating eco-friendly
practices and offering products with a reduced environmental footprint are likely to
gain a competitive edge.

 Integrated Solutions: Customers value suppliers who actively engage in collaborative

partnerships, providing not only products but also expertise, support, and innovation
tailored to their specific needs.

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 Regulatory Compliance: Particularly crucial in the pharmaceutical and healthcare
sectors, customers prioritize suppliers who adhere to stringent regulatory standards,
ensuring product safety and compliance with industry regulations.

Time to Decide

In an attempt to grow the business at a faster rate, there are two alternatives that the
company can explore:

Alternative 1: Acquisition Opportunity

Alpha Chemicals is presented with a unique growth opportunity – the potential

acquisition of its competitor, Shah Sons Industries Ltd. Shah Sons is a well-established
chemical manufacturer with a similar product portfolio but with a stronger foot print in
the pharmaceutical sector. The recent irregularities in compliance to standards have
forced many of its customers to rethink their partnership with Shah Sons.

The acquisition however promises increased market share, synergies in production and
distribution, and the elimination of a significant competitor.

Financial Snapshot of Shah Sons Industries (FY 2023):

Revenue: PKR 400 million
Net Profit Margin: 10%
Market Share: 10% in the local B2B chemical industry

Financial Implications:
Investment Potential Revenue Growth Regulatory
Option (PKR) (CAGR) Compliance
Acquisition of Shah Sons 2 billion 10% 30%
Investment in Compliance
Enhancement 200 million 15% 80%

Alternative 2: Investment in Capacity Enhancement for Alpha Chemicals:

As an alternative to acquiring Shah Sons, Alpha Chemicals can focus on enhancing its
own capacity. If Alpha chooses this, they can gain another 8-10% in market share. This
involves investing in upgrading facilities, technology, and processes to meet growing
demands and improve efficiency.

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Cost Estimates for Capacity Enhancement:

Estimated
Investment Component Cost (PKR)
Facility Upgrades (modernizing production units and infrastructure.) 50 million
Technology Integration (implementing advanced manufacturing technologies) 30 million
Process Optimization (streamlining operational processes for efficiency) 20 million
Total Investment Estimate 100 million

Questions:

1. Please prioritize the challenges that Alpha is facing. Create an Elevator Pitch of the
problem.

2. How would you solve the talent attraction and cultural challenges that Alpha faces?

3. Should Alpha acquire Shah Sons? Why? Why Not?

4. In case of acquisition, what would be your top 3 actions to ensure seamless

integration of Shah Sons with Alpha Chemicals.