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shifted his business from a small shop to a multi-storey building in Badami Bagh, near General Bus Stand. Shafi Malik saw a potential in the market of auto spare parts since there was hardly any firm that manufactured auto parts and decided to get into auto parts manufacturing business. He thought of making auto filters for vehicles. For this, he required technical skills and trained labor. He sent his son Iftikhar Ali Malik to Europe to get some technical knowledge about filter manufacturing. In 1960, a manufacturing firm with the name of Malik Auto Industries (later changed to Malik Auto & Agriculture (Pvt.) Ltd.) was incorporated with Mr. Shafi Malik as Chairman and Mr. Iftikhar Malik as Managing Director. In the beginning, it was difficult to sell Pakistani filters in the local market, in competition with the established Japanese firms. In order to enter into the market, initially the Guard Filters management offered filters for free trials to transporters. The transporters found these filters to be cost effective and of good quality, thus, they started using them in place of Japanese filters. On one hand, the company was establishing its name in terms of quality and on the other hand it was striving for quality improvement of current products and increase in number of new products. In 1974, with the collaboration of a German Firm, Guard Filters added an automated plant for manufacturing filters. The Company established a separate R&D department under the supervision of Director Technical, Waqar Ali Malik, third son of Mr. Shafi Malik. The remaining two sons, Shahbaz Ali Malik and Shahzad Ali Malik also joined the family businesses in 1970s as Director Finance and Director Marketing respectively. In the mean time, the company took a step forward and instead of assembling filters from their parts, it started in-house manufacturing of related components required to manufacture a filter. This strategy not only proved to be cost effective, but also led to scheduling efficiency and continued quality in products. In the late 1970s, Guard Group started mass production of filters. Gradually the company added new products to its name. In 1985 it started supplying brake oil with its parent brand name Guard Oil. Another addition to the portfolio was brake parts. Till 2005, the company was producing more than 300 varieties of filters in the oil, air and fuel category. Currently it has a 70% market share in air and oil filter category while its close
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competitors are Malaysian and Chinese manufacturers. These filters are also exported to various countries. Also, in the lubrication category the company has a 70% share in the local market. In 1989, after 29 years of its inception, Guard Group thought of diversifying from its core business, i.e., auto parts business. There were some incentives offered by a Japanese firm to Pakistani businessmen, for installing an agricultural plant of their company in Pakistan. Some incentives were also offered by the Government of Pakistan in the form of tax exemptions and import duty exemptions for importing agricultural machinery. Management saw this as an opportunity and installed a rice plant in Pakistan. Currently Guard Group has 98% market share of total Packaged Rice market of Pakistan, which is 2% of total rice market. Currently company is also investing in R&D of Agriculture and trying to develop BT seeds for different crops. A summarized overview of Guard Group of Companies can be seen in Exhibit 2.
Family in Business
As the four brothers ran the business successfully for 61 years, their younger generation also got ready to enter into the family business. A family organization chart with respected designations can be seen at Exhibit 3. A family board, who has kept all the powers for key decision making with it, comprises of four brothers of second generation. All second generation members are called Senior Directors except Mr. Iftikhar Ali Malik, who is the Managing Director. Whether there is a question of introducing new management system in any of subordinate organization, or it is a call to invest in a new venture, all the decisions are made within this council. All of the third generation cousins have qualified from reputed universities of the world and some of them have also worked abroad. For example, Mr. Shahjehan Malik did his BS in Finance from Stern School, New York University, MS in Finance and Accounting from London School of Economics and worked for J. P. Morgan for two years as an investment banker, and then returned to Pakistan to join his family firm.
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The eligibility criterion to join the firm is simple. All the third generation cousins have to join the firm at the same level, i.e., Executive Director. Although Senior Directors encourage third generation to have a work experience in firms other than their family firm, it is not mandatory. The compensation package for all of the cousins is the same. All have equal salaries with equal perks.
mechanism, he decided to consult with his brothers. He knew that this would be a difficult endeavor, because his family had continued doing business based on their old practices. To propose a change in the policy, especially one related to financials would require perseverance and conviction. To avoid any possible offense to his brothers he decided to involve two or three of the most senior employees of the company who held the trust of all the directors. It took him almost 6 months to convince his brothers to establish a formal system for cash withdrawals by senior directors. Under the new system, all directors were entitled to withdraw equal amounts. But still, there was not any upper limit for withdrawal for any director. For example, if one director withdrew X amount of money on parchi from the firm, the other three directors automatically became entitled to withdraw the same amount of money.
Strategy Ahead
Although the new system is better than having no system, parchis are still active in the company. Mr. Shahjehan Malik has worked with one of the leading banks of the world and knows the importance of proper checks and balances but does not know how to establish one in his family firm. He is also worried about the critical nature of family relations where a single reform taken by a younger family member can estrange the whole family.
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Annual Sales Revenue Sales & Marketing Expenses Net Income Expected Growth
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Automotive Industries
Food
Brake Parts
Seeds
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References
http://www.guardfilters.com.pk/product_list.php?page=8 http://www.itifasia.com/itif2005/ShowDirectory2005_03.pdf http://www.dailypaperpk.com/urdu-columns/ammar-choudhry/112085/turning-point http://lcci.com.pk/shahzad_ali.php Mr. Shahjehan Ali Malik Executive Director - Guard Group of Companies
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