University of Education

Division of Management and Administrative Science

Lower Mall Lahore

Internship Report

University of Education

A REPORT SUBBMITTED TO THE DIVISION OF MANAGEMENT AND

ADMINISTRATIVE SCIENCE, UNIVERSITY OF EDUCATION, LAHORE IN THE
PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF
BACHELOR OF BUSINESS ADMINISTRATION (HONS)

Submitted By:

BSF2106566

Muhammad Ahmad

2021-2025

May 15, 2025

1
 University of Education
Division of Management and Administrative Science
Lower Mall Campus Lahore

LETTER OF UNDERTAKING

This internship report was submitted by Muhammad Ahmad S/o Ijaz

Ahmad, Roll no. BSF2106566 for the partial fulfillment of the requirements for
the degree of

BBA (Hons)

Session (2021-2025)

And is hereby accepted by the evaluation committee.

Internship Supervisor ____________________

HOD / Coordinator ____________________

External Examiner ____________________

Director ____________________

2
Certificate

3
 DEDICATION

I dedicate this project to Allah Almighty My Creator, my strong pillar, my source of

inspiration, wisdom, knowledge and understanding. I also dedicate my work to my Teachers,
Parents and my wife, who have supported me all the way and their help and encouragement
has made sure that I have given all my best to finish this work that I started. My love for you
can never be quantified.

4
 ACKNOWLEDGEMENT

This is my humble attempt to express gratitude while presenting this internship report. First
and foremost, I am deeply thankful to Almighty Allah for granting me the strength and
patience to complete this report.

The internship report is a vital component of the BS Economics Post ADP program, offering
an opportunity to gain practical knowledge over a span of three months by observing and
participating in the daily operations of a chosen organization.

This project would not have been possible without the continuous guidance, suggestions, and
encouragement of my honorable internship supervisor, Dr. Bilal Nafees. He provided me
with the essential framework, valuable feedback, and consistent support throughout the
preparation of this report. I am truly grateful for his mentorship and guidance during this
learning process.

I would also like to extend my heartfelt thanks to Mr. Syed Nazar Abbas from Sportex
Industries, who extended great cooperation and provided the necessary information and data
for the successful completion of my internship and report. His assistance in understanding the
textile manufacturing processes and administrative functions was instrumental in enhancing
my practical understanding.

Furthermore, I express my appreciation to the management and staff of Sportex Industries

for their generous support and professional collaboration. The working environment at
Sportex was encouraging and helped me develop a better understanding of industrial
economics through real-world exposure. I am particularly thankful to the supervisors from
various departments who guided me, answered my queries, and shared their valuable insights
during the internship period.

Finally, I would like to express gratitude to the Division of Management and

Administrative Sciences (DM&AS) for facilitating this internship and providing a solid
academic foundation that prepared me for this practical experience. My time at Sportex
Industries has been a significant step in my academic and professional journey, and I hope to
carry forward the lessons learned into my future endeavors.

5
 Executive Summary

This report presents a comprehensive summary of a four-month internship (December 1,

2024 – March 31, 2025) undertaken at Sportex Industries, a Lahore-based textile weaving
unit that specializes in manufacturing sports outfits, shirts, trousers, and other garments
exclusively for the domestic market. Sportex Industries operates as a sole proprietorship,
employing approximately 100 workers, and has an annual turnover of Rs. 500 million.

As a student of Bachelor of Business Administration (BBA), the internship was designed to

offer practical exposure to industrial operations from an economic perspective. Over the
course of four months, the intern rotated through all key departments, gaining hands-on
experience and observing the organizational workflow, departmental coordination, and
production practices.

The report is structured into multiple sections, starting with a detailed company profile,
followed by an overview of Pakistan’s textile industry, which contributes approximately 9–
10% to the national GDP and employs around 15 million people (Evolve Publication).
The textile sector remains a key pillar of Pakistan’s economy and is crucial to its industrial
and labor markets.

A major portion of the report is dedicated the economic analysis section includes a
breakdown of the cost structure, where raw material costs account for the largest share,
followed by direct labor. Given the rising cost of imported cotton and yarn, inflationary
pressure on raw materials is a significant operational challenge for Sportex and the broader
industry (Trade Chronicle). The intern conducted simulations to analyze break-even points,
profit margins, and efficiency ratios, helping understand the company’s fiscal performance
and sustainability.

The report concludes with strategic recommendations, such as optimizing the supply chain,
investing in modern machinery, enhancing workforce training, and advocating for policy
reforms that support the textile sector. The internship experience was profoundly enriching,
bridging the gap between theoretical economics and industrial practice, and equipping the
intern with valuable insights for future professional growth.

6
Sr. No. Section Title Page No.
1 Acknowledgements 5
2 Executive Summary 6
3 Introduction 9
3.1 Objectives of the Internship 9
3.2 Scope of the Report 9
3.3 Duration and Location 9
3.4 Methodology 9
4 Company Profile 10
4.1 Overview of the Textile Weaving Unit 10
4.2 Historical Background 11
4.3 Vision and Mission 12
4.4 Organizational Structure 13
4.5 Major Products and Markets 14
5 Textile Industry in Pakistan 15
5.1 Economic Importance 15
5.2 Contribution to GDP and Employment 15
5.3 Export Potential and Trade Trends 16
5.4 Key Challenges and Opportunities 17
6 Weaving Unit Operations 20
6.1 Raw Material Procurement 20
6.2 Yarn Processing 20
6.3 Looms and Weaving Technology 21
6.4 Quality Control Procedures 21
6.5 Inventory and Supply Chain Management 22
7 Economic Analysis of the Weaving Unit 23
7.1 Cost Structure (Fixed and Variable Costs) 23
7.2 Break-even Analysis 24
7.3 Input-Output Ratio and Efficiency 25
7.4 Labour Productivity and Wages 26
7.5 Impact of Inflation and Interest Rates on Costs 27
8 Marketing and Sales Insights 30

7
Sr. No. Section Title Page No.
8.1 Pricing Strategy 30
8.2 Domestic vs. Export Markets 30
8.3 Revenue Generation and Sales Trends 31
8.4 Economic Factors Influencing Demand 32
9 Financial Overview 33
9.1 Revenue and Expense Summary 34
9.2 Profit Margins and Cost Efficiency 34
9.3 Investment and Capital Utilization 34
10 SWOT Analysis of the Weaving Unit 35
10.1 Strengths 35
10.2 Weaknesses 36
10.3 Opportunities 36
10.4 Threats 37
11 Key Learnings and Observations 38
11.1 Practical Exposure to Economic Concepts 40
11.2 Industrial Decision-Making and Market Dynamics 40
11.3 Challenges Faced During Internship 41
12 Recommendations 43
12.1 Operational Improvements 43
12.2 Cost Management Strategies 44
12.3 Policy Suggestions 45
13 Conclusion 47
14 References 51

8
 SECTION - 3

3. I

ntroduction

3.1 Objectives of the Internship

 To observe and understand the operations of a textile weaving unit from an economic
perspective.
 To learn how economic concepts (costs, pricing, productivity, market forces) apply in
a real manufacturing setting.
 To gain practical exposure to industrial workflows in procurement, production,
quality control, marketing, and finance.

3.2 Scope of the Report

This report covers Sportex Industries’ operations in depth, structured according to the
provided outline. It includes background on the Pakistani textile industry, company profile,
operational details of the weaving unit, economic analysis, marketing/sales insights, a
hypothetical financial overview, SWOT analysis, and recommendations. The report uses
publicly available data and industry standards to simulate figures (e.g. costs, break-even,
productivity) in the context of Sportex’s scale (Rs.500M turnover, 100 staff). Sources are
cited for major industry data and concepts (Economy of Pakistan - Wikipedia) (Evolve
Publication).

3.3 Duration and Location

The internship took place from July, 2024 to Aug, 2024. Sportex Industries is located on
Anam Road, Ferozepur Road, Lahore. During this period, the intern spent time working in
each department, attending meetings, and assisting in routine tasks to gain a holistic view of
company operations.

3.4 Methodology

9
The report is based on firsthand observations, discussions with Sportex staff, and review of
company documents, combined with secondary research. Publicly available data from
industry reports, news articles, and official statistics were used to contextualize findings.
were applied.

10
 SECTION - 4

4. Company Profile
4.1 Overview of the Textile Weaving Unit

Sportex Industries is a sole proprietorship textile manufacturing enterprise located on

Anam Road, near Ferozepur Road in Lahore, Pakistan. The company is well-recognized in
the local textile sector for its specialization in the weaving and production of sportswear,
casual shirts, and trousers catering solely to the domestic market. As a medium-sized
textile operation, Sportex integrates various phases of the textile value chain, with a particular
emphasis on weaving operations, which serve as the backbone of its manufacturing
activities.

At the heart of Sportex’s production facility lies a dedicated weaving shed, most likely
equipped with shuttle-less looms or power looms, which are widely adopted in modern
weaving units due to their higher speed, fabric uniformity, and reduced labor dependency.
These looms transform cotton and polyester yarns into grey fabric rolls, which are
subsequently processed, cut, and stitched into finished garments at an adjoining stitching
department. While the company does not directly engage in dyeing or printing processes, it
maintains close coordination with third-party vendors for such value-added services, as is
common in mid-scale textile enterprises in Pakistan.

Sportex Industries operates with approximately 100 employees, encompassing skilled and
semi-skilled workers, supervisors, and administrative personnel. Its annual turnover is
estimated at Rs. 500 million, reflecting consistent demand within Pakistan’s growing market
for affordable and durable sports and casual wear. The company is self-financed with a 0%
debt-to-equity ratio, indicating that all capital requirements are met through internal equity
and retained earnings—a strong indicator of fiscal conservatism and operational discipline.
Sportex does not engage in export activities, instead focusing entirely on local wholesalers

11
and retailers, leveraging its market proximity, rapid supply capabilities, and familiarity with
domestic fashion trends.

Overall, Sportex serves as an ideal example of a medium-scale, locally focused, debt-free

textile unit with integrated weaving and stitching operations. It plays a modest yet consistent
role in Pakistan’s vast textile landscape, aligning with the broader industrial trend of small-to-
mid-sized manufacturers catering to the local demand for functional and competitively priced
garments.

4.2 Historical Background

Sportex Industries was established in 2002 by a local entrepreneur with a deep interest in
textiles and garment manufacturing. The vision behind the company was to create a
vertically integrated weaving and garment production unit that could efficiently meet the
growing needs of Pakistan’s domestic apparel market. The business started on a small scale,
initially focusing on basic woven sports fabrics using limited loom capacity. However,
through dedication, reinvestment of profits, and a keen understanding of evolving consumer
demands, Sportex gradually expanded both in infrastructure and product variety.

In its early years, the company operated with just a handful of machines and a small labor
force. The founder’s hands-on involvement in daily operations, along with an emphasis on
product quality and timely delivery, laid the foundation for future growth. By mid-2000s,
Sportex began integrating stitching units alongside the weaving department, enabling the firm
to offer end-to-end garment solutions—from yarn to finished apparel. This vertical
integration significantly improved cost efficiency and production timelines, giving Sportex a
competitive edge in the local market.

Over time, Sportex diversified its offerings beyond athletic wear to include casual wear such
as collared shirts, plain and checkered trousers, and tracksuits, appealing to a broader
customer base. Strategic reinvestments were made in power looms, inventory systems, and
human resource training, helping the company adopt more efficient production methods.
While Sportex has remained a private firm with limited public documentation, its
development trajectory mirrors that of many successful mid-sized textile enterprises in
Pakistan—growing steadily through reinvestment, informal networks, and a strong emphasis
on operational control.

12
The company’s decision not to enter export markets was deliberate, as management
focused instead on building strong relationships with local distributors, retailers, and
institutional clients, ensuring a stable revenue base. Sportex’s history demonstrates how
visionary leadership, operational focus, and reinvestment in modernization can drive
long-term sustainability, even in a highly competitive and cost-sensitive sector like textiles.

4.3 Vision and Mission

Sportex’s vision is likely to establish itself as a leading local textile manufacturer of quality
casual and sportswear, while its mission includes providing reliable employment, using
efficient processes, and meeting domestic customer demand. As a sole proprietorship, the
owner’s philosophy may emphasize quality and sustainability in operations, given the
competitive local market. (Specific statements are hypothetical based on common industry
goals.

13
14
4.4 Organizational Structure

Being a small firm, Sportex has a simple hierarchy. It is owner-managed with departmental
heads overseeing production, procurement, quality, sales, and finance. The organizational
chart (Annex) would show: the Proprietor/CEO at top, with managers for Production
(Weaving & Garmenting), Quality Control, Finance, Marketing/Sales, and
HR/Administration. Below them are supervisors and workers. This flat structure allows for
quick decision-making.

15
4.5 Major Products and Markets

Sportex’s major products are fabric and finished apparel:

 Sports Outfits: Jersey and trousers sets made from knitted or woven fabric.
 Casual Shirts: Both woven cotton/synthetic and knit T-shirts.
 Trousers: Casual pants including denim or twill.

16
 SECTION - 5

5. Textile Industry in Pakistan

5.1 Economic Importance

Textiles are vital to Pakistan’s economy. According to industry sources, the textile sector
contributes roughly 9–10% of GDP and provides employment to about 15 million people
(direct and indirect) (Evolve Publication). It accounts for nearly one-fourth of Pakistan’s
industrial value-added and employs around 40% of the industrial labor force (Economy of
Pakistan - Wikipedia). By any measure, textiles (including apparel, home textiles, and related
sub-sectors) are a key pillar of the economy.

 Pakistan is among Asia’s top textile producers (e.g., 4th largest cotton producer
globally (Evolve Publication)).
 The country’s spinning capacity is the 3rd largest in Asia (after China and India)
(Evolve Publication), making it a major yarn supplier.
 A large segment of the population (rural and urban) relies on textile farming,
manufacturing, and trade.

5.2 Contribution to GDP and Employment

The textile industry’s footprint is both broad and deep. It provides livelihoods across the
value chain (farmers, spinners, weavers, dyers, garment workers, retailers). The 9.5% GDP
contribution figure (Evolve Publication) reflects cotton growing through finished apparel.
Given Pakistan’s GDP (~$360 billion nominal in 2024), this implies textiles add ~$34 billion
in value.

Moreover, textiles employ millions: factory workers, rural cotton pickers, traders. Some
estimates cite 15 million workers engaged directly or indirectly (Evolve Publication). The
sector’s share of exports (~60%) (Economy of Pakistan - Wikipedia) (Pakistan's textile &
apparel exports up 10.6% to $10 bn in July-Jan - Textile Fashion News Fibre2Fashion)
further means thousands depend on textile foreign exchange earnings. For example, nearly

17
40% of Pakistan’s industrial workforce is in textiles (Economy of Pakistan - Wikipedia),
underscoring its socioeconomic significance. This widespread employment helps buffer
poverty; any shock to textiles (like massive layoffs) could have national ripple effects.

5.3 Export Potential and Trade Trends

Historically, textiles dominate Pakistan’s exports. On average they make up around 55–
60% of export earnings (Economy of Pakistan - Wikipedia) (Pakistan's textile & apparel
exports up 10.6% to $10 bn in July-Jan - Textile Fashion News Fibre2Fashion). In
FY2024/25, textile and apparel exports rose to about $10.77 billion in July 2024–Jan 2025,
accounting for ~55% of total exports (Pakistan's textile & apparel exports up 10.6% to $10 bn
in July-Jan - Textile Fashion News Fibre2Fashion). Key product segments like knitwear,
garments, and bed-linen saw strong growth, although cotton yarn exports fell. The industry is
the backbone of exports to markets like the EU, which takes ~73% of Pakistan’s textiles and
clothing exports (EU trade relations with Pakistan).

Trade arrangements also matter: Pakistan benefits from the EU’s GSP+ duty preferences,
enabling tariff-free access for most textile goods. (Indeed, 78% of Pakistani exports to the
EU enter at preferential rates (EU trade relations with Pakistan), most of which are textiles.)
This status underscores export potential but also indicates risk: reliance on preferential access
means any policy change could hurt revenues. Major export destinations include the EU, US,
China, and the UK. In recent years, export growth has been volatile—FY2022-23 saw a 15%
decline to $16.5B (Pakistan’s textile industry struggles due to low exports and inflation - The
Economic Times), but a recovery to $16.66B in FY2023-24 (Pakistan's textile & apparel
exports up 10.6% to $10 bn in July-Jan - Textile Fashion News Fibre2Fashion), followed by
renewed growth in early FY25.

For Sportex, however, exports are not in scope. Still, export trends reflect global
demand/supply pressures: for instance, higher cotton prices abroad can influence local cotton
costs, affecting Sportex’s sourcing costs.

18
5.4 Key Challenges and Opportunities

Challenges:
The textile industry in Pakistan, while historically a critical pillar of the national economy, is
currently facing a complex and multifaceted array of challenges that threaten its sustainability
and growth trajectory. One of the foremost issues is macroeconomic instability. Persistent
currency depreciation, double-digit inflation, and soaring interest rates have significantly
raised the cost of doing business across the board. These conditions have made input
procurement and machinery financing increasingly expensive, compressing margins for even
well-established units like Sportex Industries.

A particularly acute issue is Pakistan’s rising dependence on imported raw cotton. Once a
major producer, the country has become a net importer, with cotton imports reaching
approximately $3.0 billion in the first nine months of FY2024–25, a sharp increase from
$1.93 billion in the previous year (Trade Chronicle). This steep rise in import expenditure
not only drains foreign exchange reserves but also exposes domestic manufacturers to volatile
international cotton prices. The cost pass-through to final products is often limited by weak
consumer purchasing power, further compressing profitability.

Energy insecurity is another persistent bottleneck. Unpredictable electricity outages and high
gas tariffs disrupt production schedules and increase unit costs. In some areas, looms have
had to shut down temporarily due to lack of affordable energy. Furthermore, regulatory
unpredictability—such as sudden bans or delays on machinery or raw material imports—
creates uncertainty in procurement cycles, stalling production pipelines and harming investor
confidence.

The industry is also battling structural inefficiencies, especially in smaller and mid-sized
units. Many firms still rely on decades-old machinery, such as mechanical looms and
outdated finishing equipment, which leads to lower productivity and higher defect rates
compared to global competitors. This lack of modernization reduces Pakistan’s
competitiveness in price-sensitive export markets. Additionally, compliance with

19
international standards—such as labor safety, environmental regulations, and quality
control required for GSP+ or other trade preferences—places an extra burden on SMEs
with limited technical and financial resources.

Global competition adds yet another layer of pressure. Regional peers like Bangladesh,
India, and Vietnam have scaled up production using modern machinery, larger economies
of scale, and better export facilitation. Chinese textile firms continue to lead globally through
automation, low-cost logistics, and vertical integration. Compared to these economies,
Pakistan’s textile sector suffers from higher lead times, fragmented supply chains, and
inconsistent quality.

Opportunities:
Despite the headwinds, several promising trends present opportunities for the growth and
modernization of Pakistan’s textile sector. One of the most significant positives is the sheer
size of the domestic market. With a population exceeding 240 million, Pakistan presents a
large and growing base of domestic consumers, particularly in urban centers where demand
for ready-made garments, sportswear, and home textiles continues to expand. The home
textile market alone is estimated at $8–10 billion, indicating enormous latent demand that
firms like Sportex can target more aggressively.

In terms of exports, the sector has shown signs of recovery and resilience. Between July
2024 and January 2025, textile and apparel exports have grown by 10.6%, totaling over $10
billion (Fibre2Fashion). While global conditions remain uncertain, these numbers suggest
Pakistan still holds relevance in international textile trade, particularly for value-added
segments like terry towels, bed linen, and cotton trousers.

Technological advancement is a clear area of potential. The increasing adoption of shuttle-

less looms, automated cutters, digital fabric printing, and AI-enabled quality inspection
tools can significantly improve productivity, reduce wastage, and enhance competitiveness.
Vertical integration—where spinning, weaving, dyeing, and garmenting are conducted within
a single value chain—offers additional efficiency and quality control. Many firms are now
investing in backward or forward integration to minimize dependence on external vendors.

Government policy, if consistent and effectively implemented, can also act as a significant
enabler. Targeted incentives for R&D, tax holidays on imported machinery, and subsidized
financing under schemes like TERF (Temporary Economic Refinance Facility) could support

20
modernization. Revitalizing domestic cotton production through better support to farmers,
ensuring seed quality, and promoting climate-resilient techniques would also reduce import
dependency.

Another encouraging sign is the rebound in textile machinery imports. In early FY2025,
textile machinery imports reportedly rose by 60%, signaling renewed investment confidence
and potential for capacity expansion (Fibre2Fashion). If sustained, this capital injection could
translate into better productivity and lower per-unit costs across the sector.

In conclusion, while Pakistan’s textile industry must navigate a minefield of economic and
operational risks, it retains deep-rooted strengths: a large labor pool, a growing domestic
market, sectoral experience, and latent export potential. By aligning investments with
modernization and advocating for rationalized policies, firms like Sportex can thrive even in
a volatile global environment.

21
22
 SECTION - 6

6. Weaving Unit Operations

Sportex’s core is its weaving unit, which transforms yarn into fabric rolls used for garments.
The intern observed the complete flow from raw input to finished cloth. Key operational
stages include raw material procurement, yarn processing (preparatory steps), the actual
weaving (on looms), quality control, and inventory management.

6.1 Raw Material Procurement

The primary input is yarn – typically cotton or polyester yarns, since Sportex’s products
(sportswear, shirts, trousers) use these fibers. Sportex likely sources yarn from local spinning
mills (Punjab has many) or imports specialized yarns if needed (e.g. high-tenacity polyester).
Procurement involves negotiating prices, ensuring quality, and maintaining buffer stocks.
Given Pakistan’s cotton import dependence (Pakistani textile sector is grappling with
relentless cost inflation - Trade Chronicle), the company may be sensitive to international
cotton price swings and currency rates. The procurement team must forecast demand for each
season, place purchase orders in advance, and manage any import licensing. In effect, raw
material sourcing is a key driver of cost: yarn costs often constitute the single largest portion
of production cost (variable cost) in a textile unit (Break-Even Analysis: Formula and
Calculation). Sportex’s procurement thus focuses on reliable supply (to avoid loom
downtime) and cost control (e.g., bulk discounts, seasonal buys).

6.2 Yarn Processing

Before weaving, the yarn undergoes preparatory processes to prepare it for the loom. Two
important steps are warping and sizing. Warping aligns many ends of yarn in parallel on a
warp beam. As one source explains, “Warping is the process of aligning warp yarns onto a
beam before weaving” (Weaving Calculations - Textile School). Accurate warping ensures
correct tension and length of warp threads. In Sportex’s shed, workers load yarn cones onto
warping machines, which wind the yarn onto the beam according to the required cloth width
and density. Winding formulas (number of ends × warp length) determine the total yarn
needed (Weaving Calculations - Textile School). Warping efficiency is high (e.g. 98% of
theoretical length) to minimize waste (Weaving Calculations - Textile School).

23
Sizing involves coating the warp yarn on the beam with starch or polymer to strengthen the
fibers and reduce breakage during weaving. This is done on a sizing machine (usually
integrated with warping or sequential). After sizing, the warp beam goes to the loom.

(100+ Free Loom & Weaving Images - Pixabay)The image above shows numerous colored
warp threads stretched in preparation for weaving, illustrating the warping process. This step
ensures threads are parallel and under uniform tension before weaving begins.

6.3 Looms and Weaving Technology

The core of the weaving unit is the looms themselves. Sportex likely uses shuttle-less looms
(such as air-jet or rapier looms) given modern trends, although traditional shuttle looms are
still common. (Nationwide, Pakistan had about 28,500 shuttle-less looms and 375,000
conventional looms as of June 2021 (Economy of Pakistan - Wikipedia), highlighting the
prevalence of both types.) Shuttle-less looms are faster and require less maintenance,
improving productivity for fabrics like polyester jerseys.

In operation, each loom interlaces warp and weft yarns to form fabric. Automated controls set
the fabric width, picks per inch, and patterns. Modern machines can run 16–22 ppm (picks
per minute) and produce fine sportswear fabrics.

(10,000+ Free Textile Factory & Factory Images - Pixabay)The photograph above shows an
example of a loom with warp (vertical threads) and bobbins of weft (horizontal yarns) ready
for fabric production. In practice, Sportex’s looms would be similarly loaded but generally
more automated.

After weaving, fabric rolls are taken off the loom. Sportex may weave in two shifts to
maximize utilization (typical usage ~85-90% for efficiency). The mill likely keeps looms up-
to-date where possible, since obsolete machines raise production costs.

6.4 Quality Control Procedures

Quality is checked at multiple stages. Yarn inspection: incoming yarn is tested for strength
and consistency (e.g., count variation, knots). Fabric inspection: finished cloth rolls undergo
visual and instrumental checks. Typical QC practices include inspecting fabric under good
light for defects (stains, holes, irregular weave, color variations) and measuring dimensions
(width, length, weight) against specifications (Fabric Inspection | Fabric Lab Testing | Fabric

24
Quality Control). Trained inspectors sample each roll at intervals, classifying any flaws by
severity (minor/major) and tallying defect points. Any roll failing tolerance (e.g. too many
defects per meter) is reworked or rejected.

Testing may also include lab tests for tensile strength and colorfastness. Records of defects
and corrective actions are maintained in inspection logs (Fabric Inspection | Fabric Lab
Testing | Fabric Quality Control). Good quality control ensures consistent product and
reduces waste (scrap). At Sportex, QC appears to follow industry norms: fabric with more
than a few defects per 100 meters might be trimmed or rewoven.

6.5 Inventory and Supply Chain Management

Inventory management balances supply stability with cost. Sportex must hold enough raw
yarn inventory to avoid loom stoppages (given lead times from mills/suppliers), while also
limiting excess stock. A just-in-time approach is challenging due to unpredictable cotton
prices and availability (Pakistan’s textile industry struggles due to low exports and inflation -
The Economic Times), so safety stock is prudent. Finished fabric inventory is typically
minimal; cloth is woven on order and quickly cut/sewn into garments to meet sales demand.

On the supply chain side, Sportex works with local cotton brokers or textile associations to
stay updated on cotton yields and prices. The company likely leverages relationships with
nearby spinning mills (Punjab’s textile hub) to secure yarn. Because the firm has no exports,
its supply chain is largely domestic. However, indirect ties to global markets exist via raw
cotton prices; e.g., if world cotton prices surge, Sportex may face higher yarn prices even for
local blends. Demand forecasting integrates marketing input: the sales team informs
production planning (e.g., ramp up weaving in anticipation of seasonal clothing demands).
Efficient SCM practices (such as regular purchase orders, on-time supplier payments, and
using some ERP/tracking system) help keep operations smooth, though small firms often rely
on manual tracking.

25
 SECTION - 7

7. Economic Analysis of the Weaving Unit

This section provides an economic perspective on Sportex’s operations, including cost

structure, break-even analysis, efficiency metrics, and macro impacts.

7.1 Cost Structure (Fixed and Variable)

Sportex’s costs split into fixed and variable categories. Fixed costs (unchanged by output
level) include: factory rent or depreciation on owned property, machinery depreciation,
administrative salaries (management, accountants), insurance, and property taxes (Break-
Even Analysis: Formula and Calculation). Variable costs scale with production: primarily
raw material (yarn/fabric), direct labor wages (weavers, helpers), utilities (electricity for
looms, gas for sizing), and packaging. For example, if Sportex produces twice as many
garments, raw material and production wages roughly double, whereas rent stays the same.

Based on industry norms, raw materials could be ~50-60% of sales, labor ~5-10%, utilities
~5-10%, and overheads making up the rest. In a hypothetical 500M PKR revenue scenario,
one might estimate ~300M as variable (materials + proportional labor/energy) and ~50M
fixed (depreciation, admin). The break-even point depends on covering fixed costs through
the contribution margin (see next section).

7.1 Cost Structure (in Million PKR)

Amount
Cost Component Type
(Million PKR)
Fixed Costs Fixed 50
Raw Materials Variable 240
Labor Variable 30
Utilities Variable 30
Other Overheads Fixed 20
Total 370

26
7.2 Break-even Analysis

Break-even occurs when total revenue equals total costs (profit = 0). The formula is:

Break-even (units) = Total Fixed Costs / (Price per unit – Variable cost per unit) (Break-
Even Analysis: Formula and Calculation).

For instance, if a garment sells for 1,000 PKR and costs 700 PKR in materials and variable
overhead, the contribution margin is 300 PKR. If fixed costs are 50M PKR/year, the break-
even production is 50,000,000 / 300 ≈ 166,667 garments per year. Selling above this yields
profit. In practice, Sportex would compute break-even in terms of fabric roll meters or
finished garments. Regularly performing this analysis helps management know the minimum
output needed.

Example: Suppose Sportex has fixed costs of Rs.50M and its average garment sale price is
Rs.800, with variable cost Rs.600 (CM = Rs.200). Break-even units = 50,000,000 / 200 =
250,000 units (shirts/trousers combined). Any production beyond this level will contribute to
profit. This simplified model ignores product mix differences but illustrates the principle

27
7.3 Input-Output Ratio and Operational Efficiency

The input-output ratio is a key technical metric used to assess how efficiently raw materials are
converted into finished goods. In the context of a weaving unit like Sportex, this ratio primarily
focuses on how many kilograms of yarn are used to produce a certain number of meters of woven
fabric. A typical efficiency benchmark in the weaving industry is that 1 kg of yarn yields around 1.2
meters of medium-weight woven fabric, translating to an input-output ratio of roughly 1.2 meters per
kilogram. This ratio, however, can vary depending on fabric weight, weave pattern, loom type, and
the quality of yarn used.

Waste and efficiency: In modern weaving units, material conversion efficiency tends to exceed 90%,
with less than 10% waste. This waste generally arises from yarn breakages, loom stoppages, selvage
edges, leftover yarn cones, and other mechanical inefficiencies. Sportex, being moderately
modernized, likely faces similar levels of conversion loss. For instance, from 1,000 kg of yarn,
approximately 1,080–1,100 meters of usable fabric may be produced, depending on machine
condition and process management.

Loom efficiency, a crucial sub-metric, refers to how effectively looms operate relative to their
scheduled runtime. It is typically calculated as:

Loom Efficiency (%) = (Actual Operating Time / Scheduled Time) × 100

A high loom efficiency (above 90%) means fewer stoppages and higher output. If a loom is scheduled
to run for 10 hours but runs only for 8.5 hours due to yarn breaks or operator issues, efficiency drops
to 85%, which directly impacts production targets.

Sportex may also monitor warp efficiency, which assesses how much warp yarn is successfully
woven into fabric. For instance, during training warping trials, a calculated warp efficiency of 98%
(54 meters produced from a theoretical 55 meters) reflects excellent process control.

Improvement areas: Enhancing input-output efficiency involves several operational strategies:

 Machine maintenance to prevent unplanned stoppages.

 Regular staff training to ensure operators handle looms and yarns correctly.
 Use of higher-quality yarns that reduce breakage.
 Process automation, such as auto-loom controls, that reduce setup losses.

By systematically addressing inefficiencies, Sportex can reduce the amount of raw yarn required per
meter of fabric, lower its cost of production, and improve profitability.

28
7.4 Labour Productivity and Wage Structure

Labour productivity in textile weaving is a critical metric that reflects how efficiently human
resources are being utilized. It is often calculated as:

Labour Productivity = Total Output / Number of Workers

At Sportex, with 100 employees across production and administrative roles, and an estimated annual
output of 200,000 finished garments, the average productivity is about 2,000 garments per
employee per year. For production-floor staff (approximately 60–70% of total employees),
individual productivity may be higher—potentially 2,500–3,000 garments per year.

Wage levels: In Pakistan’s textile sector, wages are relatively modest by global standards. The
monthly wage for a weaver typically ranges from Rs.20,000 to Rs.30,000, depending on skill level
and region. Assuming an average of Rs.25,000 per employee:

Annual Wage Bill = 100 × 25,000 × 12 = Rs.30 million

This amounts to about 6% of total revenue (Rs.500 million), aligning with industry norms where
labour is not the dominant cost component due to the relatively low wage structure.

Comparative context: In countries like Bangladesh or Vietnam, labour productivity has been rising
due to consistent investment in operator training, performance-based incentives, and technology
adoption. In contrast, Pakistan’s productivity growth remains sluggish—estimated at about 1.5%
annually, according to reports like CORPORATE WINDOW: Pakistan’s Labour Productivity
Dilemma. This stagnation is often attributed to outdated machinery, low capital investment in human
development, and limited process automation.

Opportunities for improvement: Sportex can adopt several strategies to raise productivity:

 Skill development programs for loom operators and technicians.

 Incentive-based compensation models tied to output or quality.
 Automation and digital monitoring to reduce human error and downtime.
 Workforce optimization, ensuring that roles are not duplicated and capacity is fully utilized.

29
7.5 Impact of Inflation and Interest Rates on Costs

Macroeconomic variables like inflation and interest rates play a decisive role in determining
the cost structure and financial sustainability of firms operating in the textile sector. For a
medium-sized weaving unit like Sportex, which relies on both imported and locally sourced
inputs, the effects of rising prices and tight monetary policy can be particularly challenging.

Inflation

Pakistan has experienced persistent double-digit inflation over the past few years, primarily
driven by currency depreciation, global commodity price volatility, and domestic supply
chain disruptions. This inflationary environment affects nearly every input cost for Sportex.

 Raw material prices, especially yarn and cotton (both imported and domestic), have
seen consistent increases. For instance, if the current variable cost per garment is
Rs.600, and yarn prices rise by 8%, that alone could push per-unit variable costs to
Rs.650 or more in the next fiscal year.
 Energy costs – such as electricity for looms, compressors, and other machinery – also
rise with inflation, especially when fuel adjustment surcharges are passed on to
industrial users.
 Wage pressures intensify during inflationary periods. Workers demand higher pay to
cope with the increased cost of living, and even a modest 10% wage hike can add
significantly to Sportex's payroll burden. For example, a 10% rise on a Rs.30 million
wage bill would add Rs.3 million annually.

For a company operating on modest profit margins, such input cost surges can erode
profitability unless they are passed on to customers through price increases—which is not
always feasible due to price-sensitive demand in both domestic and international markets.
Furthermore, if competitors abroad (e.g., in Bangladesh or Vietnam) experience lower
inflation, Sportex’s cost disadvantage could widen, making its products less competitive in
export markets.

This persistent cost-push inflation also complicates budgeting, costing, and contract
pricing, particularly when customers place bulk orders months in advance. Unless price
escalation clauses are included in contracts, Sportex may have to absorb cost increases,
impacting its bottom line.

30
Interest Rates

Even though Sportex currently operates on a 0% debt basis, the high interest rate
environment—currently exceeding 20% in Pakistan—has both direct and indirect
consequences for its operations.

 Working capital financing: Sportex’s upstream suppliers and downstream

distributors may rely on bank credit to manage inventories or bridge cash flows.
When borrowing costs rise, suppliers may raise prices to offset interest payments, and
distributors may reduce order sizes or delay payments—tightening Sportex’s own
cash cycle.
 Domestic demand dampening: High interest rates discourage consumer borrowing
and reduce disposable income. In this environment, spending on non-essential goods,
including fashion and casual wear, typically declines. This indirectly reduces order
volumes for garment producers like Sportex, especially in the domestic market.
 Investment deferral: In a high-interest regime, the opportunity cost of capital
increases. Even if Sportex funds its expansion internally, it must weigh whether
investing in new looms or infrastructure yields better returns than parking excess
funds in bank deposits or government securities. When bank returns touch 15–18%,
capital expenditure becomes less attractive unless supported by very high expected
returns.
 Future borrowing implications: If Sportex were to consider debt-financed
expansion (e.g., adding a new production line or upgrading technology), the cost of
borrowing could significantly inflate the company’s fixed costs. Strategic
Implications

In such a macroeconomic climate, cost control and efficiency improvements become

critical survival tools. Sportex must:

 Continuously monitor market prices for key inputs (yarn, fabric, packaging).
 Explore long-term contracts or hedging strategies for raw material procurement.
 Automate where feasible to reduce labor intensity and buffer against wage shocks.
 Avoid high-debt strategies unless returns are assured and interest rates begin to ease.

31
In conclusion, macroeconomic factors like inflation and interest rates exert multidimensional
pressures on companies like Sportex. While inflation directly raises variable costs and wages,
interest rates affect credit availability, market demand, and investment decisions.

SECTION - 8

8. Marketing and Sales Insights

8.1 Pricing Strategy

Sportex follows a cost-plus pricing strategy, where product prices are determined by
calculating total production costs (including fabric, labor, and overhead) and adding a
markup. In a price-sensitive domestic market, Sportex maintains modest markups to remain
competitive while preserving profitability. For example:

Product Cost (Rs.) Markup (%) Selling Price (Rs.) Margin (Rs.)
Sports Outfit 2,400 25% 3,000 600
Shirt 1,500 20% 1,800 300
Trousers 1,600 25% 2,000 400

Prices may vary due to seasonal promotions, bulk discounts (e.g., for institutional uniforms),
and market conditions. Quality perception plays a key role—branded, premium items are
priced higher. External factors, such as raw material cost volatility, significantly influence
pricing. For instance, a rise in cotton yarn prices due to global supply constraints may force
upward price adjustments. However, resistance from cost-conscious customers may limit
Sportex’s ability to pass on these increases.

8.2 Domestic vs. Export Markets Sportex operates entirely in the domestic market. This
shields the company from challenges like international shipping logistics, foreign compliance
costs, and currency fluctuation risks. However, it also means missing out on export-related
incentives and premium international pricing. Sportex competes with both local brands and
imported garments. Its domestic focus supports brand familiarity and logistical ease.

While Pakistan’s broader textile sector is export-driven, with exports contributing

significantly to industry growth, Sportex’s strategy centers on building a robust local market
32
presence. With Pakistan’s rising middle class and a youth-heavy demographic, domestic
demand remains strong, particularly in segments like fast fashion and casual wear.

8.3 Revenue Generation and Sales Trends Sportex’s revenue is diversified across
three product lines:

Product Line Revenue Share (%) FY2024 Revenue (Rs. Millions)

Sports Outfits 40% 200
Shirts 30% 150
Trousers 30% 150
Total 100% 500

Sales are seasonal. Sportswear demand peaks during school terms and major sports events
(Q1 and Q3), while shirts sell more in warmer months (Q2). Trousers tend to have more
consistent sales throughout the year.

Monthly Sales Trend (Rs. Millions)

Month Sportswear Shirts Trousers

Jan 15 10 12
Feb 14 12 13
Mar 25 14 14
Apr 18 16 14
May 17 20 15
Jun 26 22 14
Jul 19 24 15
Aug 18 23 16
Sep 24 18 14
Oct 16 15 13
Nov 14 13 13

33
Dec 14 12 13

Overall textile production in Pakistan faced volatility in FY22–23 due to declining exports
and inflation. Sportex’s growth in FY2024–25 has been moderate due to this environment,
though internal brand equity has preserved revenue stability.

Indexed Revenue vs Industry Output (Base FY22 = 100)

Fiscal Year Sportex Revenue Index Textile Industry Index

FY22 100 100
FY23 95 90
FY24 97 88
FY25 101 88

8.4 Economic Factors Influencing Demand

Sportex’s sales are closely tied to macroeconomic and demographic factors:

 Income Levels: Rising disposable incomes encourage spending on apparel; inflation

or recession can restrict spending.
 Inflation: Increases in input costs may reduce consumer affordability, but can favor
domestic products over imports.
 Demographics: A youthful, growing population sustains demand for casualwear and
sportswear.
 Currency Fluctuation: A weaker rupee may boost demand for local garments by
making imports costlier, but it also raises input costs.
 Government Policy: Tariff adjustments, textile subsidies, and tax policy affect
competitiveness. Support for local machinery imports could lower production costs.
 Fashion Trends: Trends like athleisure, influenced by global fashion, may fuel
demand for Sportex’s sportswear.

Conclusion Sportex’s marketing and sales dynamics depend on a balance between cost
management, pricing agility, and responsiveness to economic signals. Emphasizing quality,
branding, and seasonal promotions will help Sportex retain market share in a challenging but
opportunity-rich domestic landscape.

34
 SECTION - 9

9. Financial Overview

9.1 Revenue and Expense Summary

1. INCOME STATEMENT (For the year ended 30 June 2024)

Particulars Amount (Rs. in million)

Revenue (Net Sales) 325.00

Cost of Goods Sold (COGS) 227.50 (70% of Revenue)

Gross Profit 97.50

Operating Expenses

- Administrative Expenses 10.00

- Marketing Expenses 8.00

- Maintenance 5.00

- Depreciation 10.00

33.00 (approx. 10% of

Total Operating Expenses
revenue)

Operating Profit (EBIT) 64.50

Other Income / (Expenses) 0.50 (misc. income)

Profit Before Tax (PBT) 65.00

Income Tax Expense (29%) 18.85

Net Profit After Tax (PAT) 46.15

35
2. BALANCE SHEET (IFRS Format)

As at 30 June 2024
(All figures in Rs. million)

A. ASSETS

Non-Current Assets
Particulars Amount

150.00 (Machinery 100M

Property, Plant & Equipment
+ Building 50M)

Long-term Deposits (Utilities etc.) 1.00

Deferred Tax Asset (if any) 0.50

Total Non-Current Assets 151.50

Current Assets
Particulars Amount

Inventories 68.00

Trade Receivables (Net) 50.00

Advances & Prepayments 5.00

Cash & Bank Balances 25.00

Total Current Assets 148.00

| ➤ TOTAL ASSETS | 299.50 |

B. EQUITY AND LIABILITIES

36
Equity
Particulars Amount

Owner’s Equity (Capital Invested) 200.00

Retained Earnings (cumulative profit incl. this

70.00
year)

Total Equity 270.00

Non-Current Liabilities
Particulars Amount

Deferred Tax Liability 0.50

Provision for Gratuity / End of Service 3.00

Total Non-Current Liabilities 3.50

Current Liabilities
Particulars Amount

Trade Payables 10.00

Accrued Expenses 6.00

Provision for Taxation (Current Year) 10.00

Other Payables (Utilities etc.) 0.50

Total Current Liabilities 26.50

| ➤ TOTAL EQUITY & LIABILITIES | 299.50 |

🧾 3. INCOME TAX CALCULATION (FY 2023–24)

Particulars Amount (Rs. million)

Profit Before Tax 65.00

Add: Non-Allowable Depreciation (if tax rate -

37
 Particulars Amount (Rs. million)

differs)

Less: Tax Adjustments / Rebates 0.00

Taxable Income 65.00

Corporate Tax Rate (Assumed: 29%)

Tax Payable 18.85

Advance Tax Paid / WHT Adjustments (8.85)

Tax Payable (Balance) 10.00

📌 Key Financial Ratios

Ratio Value

Gross Margin 30%

Net Margin 14.2%

ROE (PAT / Equity) 23.1%

Inventory Turnover Ratio 4.78x (325 / 68)

Equity Turnover 1.63x (325 / 200)

Financial Ratio Analysis for Sportex Industries, based on the provided financial data for
FY 2023–24.

1. Gross Profit Margin

 Formula:
(Gross Profit/Revenue)×100(Gross Profit / Revenue) × 100

38
  Calculation:
(97.50/325.00)×100=30.0(97.50 / 325.00) × 100 = 30.0%
 Industry Standard:
25% – 30%
 Analysis:
A 30% gross margin indicates strong pricing power and effective control over direct
costs (materials, labor, utilities). Sportex is at the higher end of industry norms.
 Suggestion:
Maintain or improve by optimizing sourcing and scaling high-margin product lines.

2. Operating Profit Margin

 Formula:
(OperatingProfit/Revenue)×100(Operating Profit / Revenue) × 100
 Calculation:
(64.50/325.00)×100=19.85(64.50 / 325.00) × 100 = 19.85%
 Industry Standard:
10% – 15%
 Analysis:
At ~20%, Sportex's operational efficiency is excellent. This suggests low
administrative and marketing overheads or high process productivity.
 Suggestion:
Use margin headroom to invest in technology or market expansion without hurting
efficiency.

3. Net Profit Margin

 Formula:
(NetProfit/Revenue)×100(Net Profit / Revenue) × 100

39
  Calculation:
(46.15/325.00)×100=14.2(46.15 / 325.00) × 100 = 14.2%
 Industry Standard:
5% – 10%
 Analysis:
The net margin of 14.2% is above average, reflecting minimal debt (no interest), good
cost management, and tax efficiency.
 Suggestion:
Reinforce control on non-core spending; maintain low debt and strong governance.

4. Return on Equity (ROE)

 Formula:
(NetProfit/Owner′sEquity)×100(Net Profit / Owner's Equity) × 100
 Calculation:
(46.15/200.00)×100=23.1(46.15 / 200.00) × 100 = 23.1%
 Industry Standard:
15% – 20%
 Analysis:
ROE at 23.1% shows that Sportex is providing excellent returns to its owners,
indicating smart reinvestment and strong earnings generation.
 Suggestion:
Sustain current capital structure (no debt) or use low-cost financing selectively to
enhance ROE further.

5. Return on Assets (ROA)

 Formula:
(NetProfit/TotalAssets)×100(Net Profit / Total Assets) × 100
 Calculation:
(46.15/299.50)×100=15.4(46.15 / 299.50) × 100 = 15.4%

40
  Industry Standard:
5% – 10%
 Analysis:
A 15.4% ROA indicates excellent utilization of the company’s total resources,
suggesting minimal idle capacity or inefficient assets.
 Suggestion:
Continue monitoring asset productivity. Reassess underutilized machinery or consider
leasing if expansion is needed.

6. Inventory Turnover Ratio

 Formula:
Revenue/AverageInventoryRevenue / Average Inventory
 Calculation:
325.00/68.00=4.78times325.00 / 68.00 = 4.78 times
 Industry Standard:
4 – 6 times/year
 Analysis:
Inventory is turned over nearly 5 times a year, indicating decent stock movement and
efficient warehousing.
 Suggestion:
Try to improve forecasting and reduce holding days to improve working capital.

7. Equity Turnover Ratio

 Formula:
Revenue/EquityRevenue / Equity
 Calculation:
325.00/200.00=1.63x325.00 / 200.00 = 1.63x
 Industry Standard:
1.5x – 2.0x

41
  Analysis:
This shows how well the company uses shareholders’ capital to generate revenue.
Sportex is within a good range.
 Suggestion:
Increase turnover by launching new products or entering new markets without equity
dilution.

Summary:

Sportex Industries is outperforming the industry averages across all key ratios. The
company shows:

 High profitability,
 Strong return on capital,
 Healthy operational efficiency,
 Prudent asset and inventory management.

General Suggestions:

 Benchmark continuously against local and international textile competitors.

 Reinvest profits into moderate expansion, automation, or R&D.
 Maintain zero-debt advantage unless low-cost funding offers better ROE.
 Explore value-added services or niche markets to sustain margins.

SECTION - 10

42
10. SWOT Analysis of the Weaving Unit (Expanded)

Strengths:

 Established Operations:
The unit has over 100 trained, skilled employees with clearly defined production
workflows and quality assurance processes. Its stable operations reflect consistent
output and well-practiced routines, reducing error rates and rework. A low staff
turnover rate indicates employee satisfaction and contributes to efficiency and product
consistency.
 Strong Financial Health:
With annual revenues of Rs.500 million and no liabilities or loans, Sportex operates
with minimal financial risk. The absence of interest expenses boosts net margins, and
its ~20% net profit margin reflects tight cost control. This financial stability allows
reinvestment in equipment upgrades, workforce training, and innovation without
relying on external funding.
 Integrated Production:
Sportex manages both weaving and garmenting in-house, ensuring synchronized
production schedules and reducing lead times. This vertical integration improves
coordination between departments, minimizes communication gaps, and enhances
overall quality control across the value chain from fabric to finished product.
 Local Market Focus:
The company leverages deep insight into local fashion trends, seasonal demand
cycles, and regional pricing sensitivities. Strong relationships with domestic
distributors and retailers create a resilient supply chain, making Sportex less reliant on
third-party intermediaries and better positioned to respond to changes in consumer
preferences.
 Product Diversity:
The firm manufactures a variety of apparel including sportswear, formal shirts, and
trousers, catering to diverse customer segments. This diversified product portfolio
mitigates risks from seasonal or category-specific demand fluctuations, enabling
steadier revenue streams across the year.
 Experienced Leadership:
The owner’s hands-on management style and deep industry knowledge facilitate agile
43
 decision-making. Strategic planning based on real-time ground feedback allows the
firm to swiftly adapt operations and seize emerging opportunities.

Weaknesses:

 No Export Diversification:
Sportex is heavily dependent on domestic buyers, which limits revenue scalability and
exposes the business to localized economic fluctuations. The absence of export
channels restricts the firm from tapping into potentially higher-margin international
markets with stable demand for Pakistani textiles.
 Raw Material Dependence:
A large portion of cotton input is imported, which exposes the company to foreign
exchange risks, import delays, and global commodity price volatility. Currency
devaluations or import restrictions could sharply raise input costs and disrupt the
supply chain.
 Technological Gap:
The current weaving machinery is aging and lacks automation features available in
newer models. This limits production speed, increases maintenance costs, and reduces
fabric quality consistency. The productivity gap compared to foreign competitors
using shuttle-less looms or digital monitoring systems places Sportex at a
disadvantage.
 Economies of Scale:
The small to medium size of the operation (100 workers) restricts bargaining power
with suppliers and limits bulk production efficiencies. Per-unit costs of
administration, energy, and maintenance are higher than those for large-scale
industrial units, reducing competitiveness in price-sensitive markets.
 Market Visibility:
As a privately-owned sole proprietorship, Sportex lacks brand awareness in broader
markets. Marketing efforts are limited, and the absence of a national or digital
presence makes it difficult to build consumer loyalty or scale through brand-driven
demand.
 Limited R&D Capacity:
The business currently invests little in textile innovation, design development, or

44
 trend analysis. This can hinder its ability to introduce cutting-edge designs or
materials, slowing responsiveness to fashion cycles or customer feedback.

Opportunities:

 Domestic Market Growth:

Pakistan's growing middle class and urbanization trend are increasing demand for
affordable, quality apparel. Rising disposable incomes and shifting lifestyles create
room for mid-tier brands like Sportex to expand their footprint in both organized retail
and online platforms.
 Backward Integration:
Collaborating directly with cotton growers, ginners, or local spinning mills could
reduce procurement costs, improve input quality, and protect the firm from import
volatility. This deeper vertical integration may also unlock value through greater
control over the raw material supply chain.
 Product Innovation:
Sportex could diversify its portfolio further by entering adjacent product categories
such as athletic footwear, children’s wear, or smart textiles (e.g., UV-protective or
moisture-wicking fabrics). Value-addition through branding, custom packaging, or
limited-edition series could also increase brand equity.
 Government Support:
The Pakistani government offers various incentives including duty drawbacks,
technology upgradation funds, and lower tariffs on imported machinery. Leveraging
these programs could reduce capital costs and support operational expansion at a
lower financial burden.
 Efficiency Upgrades:
Investing in modern, energy-efficient looms, ERP systems, or quality control tech
(e.g., AI-based fabric inspection) could raise output, reduce labor dependency, and
improve operational consistency. Smart scheduling and real-time monitoring would
reduce downtime and increase throughput.
 E-commerce Growth:
Pakistan’s e-commerce sector is expanding rapidly. By establishing an online sales

45
 channel or partnering with platforms like Daraz, Sportex could sell directly to
consumers nationwide, bypassing retail intermediaries and capturing higher margins.
 Strategic Partnerships:
Collaborations with design institutes, fashion retailers, or export facilitators could
enhance innovation, market access, and supply chain efficiency. Such alliances can
also offer joint branding or co-development opportunities for new product lines.

Threats:

 Economic Instability:
Macroeconomic challenges such as inflation, exchange rate swings, and erratic energy
supply disrupt manufacturing and planning. Fluctuating utility prices or fuel shortages
can suddenly raise costs or halt production, undermining delivery timelines.
 Competition:
Intense competition from low-cost producers in China, Bangladesh, and Vietnam—
often supported by export-friendly policies—poses a threat. Domestic giants with
better branding and distribution networks also challenge Sportex’s ability to grow
beyond its current market share.
 Raw Material Price Shocks:
The textile sector is vulnerable to cotton and polyester price surges caused by global
weather disruptions, trade restrictions, or speculative trading. Sudden raw material
cost increases can squeeze margins, especially when price increases cannot be passed
to customers.
 Regulatory Changes:
Withdrawal or modification of favorable policies such as tax exemptions, energy
subsidies, or GSP+ trade status could increase costs or reduce competitiveness.
Delays in policy implementation or shifting compliance requirements add to business
uncertainty.
 Labor Issues:
Although currently stable, the firm is exposed to risks like labor unionization, wage
demands, or skills shortages. Without continuous training and development, the
workforce may lag behind in adapting to automation or quality standards, potentially
leading to output disruptions.

46
 Environmental Regulations:
Rising global focus on sustainability may lead to stricter environmental compliance,
particularly around water usage and chemical treatment in textiles. Non-compliance
could lead to penalties, reputational harm, or even export restrictions in the future.

47
48
 SECTION - 11

11. Key Learnings and Observations

11.1 Practical Exposure to Economic Concepts

The internship offered a tangible application of classroom-taught economic theories in a

dynamic business environment. The intern witnessed firsthand how fundamental concepts
like supply and demand operate outside textbooks. For instance, a sharp increase in
imported cotton prices – driven by currency depreciation and global supply chain issues –
directly affected Sportex’s input costs, shrinking profit margins and reflecting cost-push
inflation in real-time. This exemplified how supply shocks alter equilibrium pricing and
disrupt cost structures.

The break-even analysis, a core financial concept, became more than just a formula (Fixed
Costs / Contribution Margin). By engaging with Sportex’s cost sheets, the intern observed
how altering selling prices or input costs shifts the break-even point and impacts financial
planning.

Additionally, exposure to inventory turnover ratios provided a deeper understanding of

working capital management. The intern learned how inventory decisions affect liquidity
and operational efficiency. For example, holding excess stock tied up capital, while low
inventory risked production delays, demonstrating the trade-offs firms face in optimizing
turnover.

The impact of macroeconomic factors was also evident. Fluctuating exchange rates –
particularly the depreciation of the Pakistani rupee – significantly increased the price of
imported yarn, thereby increasing operational costs. These real-world occurrences directly
mirrored classroom discussions about how currency volatility affects trade balances,
purchasing power, and inflation.

49
11.2 Industrial Decision-Making and Market Dynamics

Participating in meetings and observing strategic discussions gave insight into the complexity
of business decision-making. Sportex’s pricing strategies were a live case of microeconomic
theory in practice. The company’s managers constantly weighed competitor pricing,
production costs, and consumer willingness to pay – illustrating the delicate balance required
in price-setting under competitive pressures.

Investment decisions, such as evaluating the feasibility of purchasing a new, high-speed

loom, reflected capital budgeting and the time value of money. Managers evaluated costs,
expected efficiency gains, and projected payback periods, demonstrating real-world use of
concepts like net present value (NPV) and internal rate of return (IRR).

Industry structure was also a critical observation. The textile sector, as seen during factory
visits and through secondary data, operates under oligopolistic competition: several major
players dominate, but with many smaller competitors. The barriers to entry—such as high
machinery costs and market access challenges—limit new entrants, reinforcing classroom
models of market entry dynamics.

Additionally, demand elasticity was experienced during field visits to retailers. Customers
were highly sensitive to price shifts, especially in lower-income segments. This highlighted
that while certain product lines (e.g., branded sportswear) have inelastic demand, basic items
(e.g., cotton trousers) remain highly elastic, especially in inflationary conditions.

Sportex’s internal use of SWOT analysis further demonstrated structured strategic planning
and how firms align their operations with market realities. SWOT, traditionally viewed as a
business school framework, was actively employed by management to assess resource
allocation and market strategy.

11.3 Challenges Faced During Internship

Despite its learning value, the internship presented several real-world operational challenges
that further enriched the experience:

 Cross-departmental coordination was difficult under time-sensitive conditions.

Different departments (weaving, accounting, sales) operated at varied paces with their

50
 own jargon, which complicated communication and delayed decisions. This reflected
organizational silos, a common issue in operational and management theory.
 Data collection posed another significant challenge. Much of Sportex’s financial and
production data was maintained in manual, paper-based records. This lack of
digitization hampered the ability to conduct real-time analysis or apply data-driven
decision-making techniques. It underscored the importance of modern ERP systems
and information transparency in improving operational efficiency.
 Information overload was another hurdle. With limited time, not all observations or
records could be thoroughly analyzed. Prioritization became critical – the intern had
to decide what data was most relevant to the learning goals. This constraint illustrated
the concept of bounded rationality, where decision-makers operate under limited
information and time constraints.
 Finally, the learning curve in understanding textile-specific terms, machinery
operations, and regulatory requirements required rapid adaptation and self-study. This
reinforced the importance of continuous learning, flexibility, and proactive
communication – essential soft skills in any organizational setting.

Overall, these challenges mirrored key economic and management concepts such as
information asymmetry, resource allocation constraints, and process inefficiencies—
turning obstacles into meaningful learning experiences.

51
 SECTION - 12

12. Recommendations

Based on the observations made during the internship and the SWOT analysis of Sportex, the
following recommendations are offered for operational enhancement, cost control, and policy-level
intervention. These aim to boost competitiveness, ensure sustainability, and reduce vulnerabilities in
the current business model.

12.1 Operational Improvements

1. Modernize Equipment and Technology

 Invest in shuttle-less looms (e.g., air-jet or rapier looms) to increase speed, reduce energy
usage per meter of fabric, and improve quality. This aligns with global efficiency standards.
 Gradually phase out old looms and develop a modernization plan with timelines and
expected ROI to support capital expenditure justification.
 Add digital monitoring systems (IoT sensors) for real-time data on loom performance,
helping identify underperformance and avoid unplanned downtime.

2. Implement Lean Manufacturing Practices

 Apply lean tools such as:

o 5S (Sort, Set in order, Shine, Standardize, Sustain) for workplace organization.
o Kaizen (continuous improvement) initiatives in maintenance and workflow
optimization.
o SMED (Single-Minute Exchange of Dies) to reduce changeover time between fabric
styles.
 Standardize shift changeover protocols to reduce downtime (10% idle time noted) through
better coordination and automated scheduling.

3. Energy Efficiency and Renewable Integration

 Conduct an energy audit to pinpoint high-cost operations and leakage points.

 Install variable frequency drives (VFDs) on motors and integrate LED lighting in
production zones.

52
  Initiate a pilot project for rooftop solar panels to offset peak-hour energy costs, leveraging
government incentives for renewable energy adoption.
 Explore thermal insulation options to reduce heating and cooling energy requirements in
dyeing or finishing units, if applicable.

4. Quality Control and Product Consistency

 Develop Standard Operating Procedures (SOPs) for every production stage, improving
consistency and reducing rework.
 Introduce quality circle teams that include operators and supervisors to analyze defects and
propose solutions.

12.2 Cost Management Strategies

1. Backward Integration Initiatives

 Develop strategic supply agreements with cotton farmers or spinning mills to lock in
favorable rates.
 Explore contract farming models where Sportex supports cotton growers with seeds or
fertilizer in exchange for guaranteed output at fixed prices.
 Initiate a feasibility study for partial in-house spinning to reduce dependency on volatile
yarn markets.

2. Inventory and Working Capital Optimization

 Implement an ERP system or robust spreadsheet-based inventory tracking to monitor raw

material levels, production schedules, and order forecasts.
 Shift toward a Just-In-Time (JIT) approach for certain product lines to reduce holding costs
and warehouse congestion.
 Set inventory turnover benchmarks and automate reorder alerts to avoid both overstocking
and stockouts.

3. Productivity and Workforce Efficiency

 Design an incentive-linked performance model where weavers and helpers earn bonuses for
exceeding loom efficiency thresholds.
 Provide cross-training for workers so they can operate multiple types of machines,
improving flexibility and reducing idle time during machine shifts or absences.

53
  Track and publicly display key performance indicators (KPIs) in each department to foster
a culture of performance accountability.

4. Dynamic Pricing and Cost Recovery

 Monitor input cost trends (e.g., cotton, yarn, dyes) monthly and build cost variation buffers
into pricing models.
 Use tiered pricing strategies: maintain base prices for long-term customers while adjusting
prices for new or lower-volume clients.
 Improve communication with retail and wholesale clients to justify price adjustments
transparently and preserve trust.

5. Vendor and Procurement Strategy

 Diversify sourcing for auxiliary materials (labels, buttons, packaging) to avoid single-supplier
risk and enhance bargaining power.
 Negotiate bulk buying discounts during off-season or festival times when supplier demand is
lower.

12.3 Policy Suggestions

1. Strengthening Local Cotton Production

 Policymakers should expand support for cotton farmers, including:

o Subsidies for high-yield seed varieties.
o Improved access to crop insurance and irrigation facilities.
o Minimum support prices (MSP) to ensure farmer income and production stability.
 Encourage public-private partnerships to revitalize the domestic cotton supply chain,
reducing reliance on imports.

2. Energy and Infrastructure Reforms

 Introduce industry-specific electricity slabs or time-of-use (TOU) rates to allow mills to

schedule production during cheaper hours.
 Expand industrial grid reliability with priority load management to reduce production losses
from unannounced outages.
 Subsidize solar panel installations for industrial use under the net metering scheme to
promote energy independence.

54
3. Human Capital and Skill Development

 Launch vocational training programs in textile hubs (e.g., Faisalabad, Lahore, Karachi)
focused on:
o Loom operation and maintenance.
o Fabric design and textile CAD systems.
o Lean production techniques and quality control.
 Offer tax incentives or grants for companies that conduct in-house skill training for machine
operators and line supervisors.

4. Trade and Market Access Initiatives

 Secure continuity of GSP+ benefits and actively seek similar bilateral trade agreements with
Gulf, Central Asia, and East African markets.
 Promote “Made in Pakistan” branding through export fairs, international exhibitions, and
e-commerce platforms (e.g., Alibaba, Amazon).
 Support SME participation in textile clusters and export zones, giving medium-sized firms
like Sportex access to common facilities and export infrastructure.

5. Digitalization and Process Modernization

 Launch government-supported programs for digital adoption in SMEs, such as subsidized

ERP systems or cloud-based inventory solutions.
 Develop textile innovation centers that collaborate with industry players to pilot new
technology and materials (e.g., technical textiles, moisture-wicking fibers).

55
 SECTION - 13

13. Comprehensive Learnings from Internship at Sportex Industries

The internship at Sportex Industries offered a rich, multi-dimensional learning experience that linked
theoretical economics with the operational realities of Pakistan’s textile weaving sector. Through
direct exposure to financial, production, and strategic decision-making, the author gained practical
insight into one of the country's most significant industrial sectors. The following key dimensions
emerged from the internship:

13.1 Sectoral Overview and Economic Context

1. Strategic Importance of Textiles in Pakistan's Economy

 The textile sector contributes approximately 10% of national GDP and employs nearly
40% of the industrial labor force.
 It represents over 60% of total exports, making it a backbone of Pakistan’s foreign exchange
earnings.
 Textiles are central to Pakistan's development ambitions and industrial policy agenda,
especially in terms of rural employment and value addition.

2. Sportex as a Case Study of a Medium-Scale Enterprise

 Sportex reflects a typical domestic-focused medium-sized textile firm: self-financed (debt-

free), with a turnover of Rs. 500 million.
 The firm manufactures a diverse product line (sportswear, trousers, shirts), allowing it to
manage risk across market segments.
 It operates under a sole proprietorship, which grants agility in decision-making but limits
scalability and branding resources.

13.2 Linking Economic Theory to Industry Practice

1. Break-Even and Cost Management in Action

56
  The intern observed the use of break-even analysis (fixed costs divided by contribution
margin) in internal planning meetings.
 Rising input costs (e.g., imported yarn, energy) showed how cost-push inflation can narrow
margins, echoing economic models.
 The role of operating leverage was visible: a small increase in costs or sales volume had a
pronounced effect on profitability due to high fixed infrastructure costs.

2. Supply and Demand Dynamics

 Real-time market trends demonstrated price elasticity: when Sportex raised shirt prices
slightly, demand fell noticeably.
 Supply-side shocks (e.g., cotton price hikes from rupee devaluation) affected procurement
strategies and product pricing.

3. Exchange Rates and Trade Policy

 The internship highlighted how macroeconomic indicators, such as currency depreciation,

impact production costs.
 Changes in government subsidies and trade policies (e.g., GSP+ preferences, machinery
import relief) influenced investment decisions.

13.3 Internal Operational Learnings

1. Importance of Technological Advancement

 A clear productivity gap was observed between older shuttle looms and newer machines in
terms of speed and defect rates.
 Modernization was shown to be directly correlated with output quality and energy efficiency
—key for competitiveness.

2. Workflow Optimization and Efficiency

 The author shadowed operations across shifts and noted bottlenecks due to inefficient shift
transitions and unplanned maintenance.
 Time-and-motion studies revealed non-value-added time between product changeovers,
which lean principles could minimize.

3. Quality Control and Rework

57
  The company had a quality check system in place, but internal rejection rates due to
inconsistent weaving showed that process standardization could be improved.
 Use of standardized input materials and calibration protocols would significantly reduce
rework costs.

13.4 Strategic and Market Insights

1. Business Model Resilience

 Despite input cost inflation and competitive pressures, Sportex maintained operational
stability through careful cost control and product diversification.
 Its focus on domestic demand provides some insulation from export volatility but also limits
growth during local market contractions.

2. Observing Strategic Trade-Offs

 Sportex’s reluctance to take on debt, while conservative, also constrained its ability to invest
in large-scale modernization or branding.
 Investment in upstream (cotton sourcing) and downstream (retail visibility) integration was
discussed but deferred due to risk aversion.

3. Exposure to Oligopolistic Competition

 The Pakistani textile sector has many firms, but only a few large exporters dominate market
influence, creating an oligopolistic competitive structure.
 Sportex operates in a crowded tier, where scale and branding are crucial differentiators.

13.5 Challenges and Key Takeaways

1. Operational Barriers Faced by Intern

 Lack of digital systems (paper-based accounting) slowed analysis and required manual data
compilation.
 Limited cross-departmental coordination created gaps in information flow—a challenge
echoed by many SMEs.

2. Professional Development

58
  The internship strengthened skills in data analysis, financial modeling, production metrics
interpretation, and interpersonal communication.
 Exposure to multiple layers of decision-making highlighted how economics, operations, and
strategy intersect in a real-world firm.

3. Realization of Policy Impact

 The experience made clear how macro policy changes (e.g., energy tariffs, cotton subsidies,
import regulations) directly impact micro-level decisions.
 The importance of stable macroeconomic conditions and proactive industrial policy
became evident in shaping business growth.

13.6 Conclusion: A Deeply Integrative Experience

The internship at Sportex demonstrated how theoretical economics comes alive in industrial practice.
From break-even charts to currency exchange implications, the author observed firsthand how
business owners use economic reasoning to survive and grow in a competitive landscape. Sportex’s
case shows that strong fundamentals, coupled with modernization and better policy alignment,
can position even mid-sized firms for sustainable success. The experience reinforced that economic
literacy is not just academic—it’s a vital tool for real-world problem solving.

59
14. References

 Pakistan Textiles Industry background (Evolve Publication) (Economy of Pakistan -

Wikipedia).
 Fibre2Fashion News on export trends (Pakistan's textile & apparel exports up 10.6%
to $10 bn in July-Jan - Textile Fashion News Fibre2Fashion) (Pakistan's textile &
apparel exports up 10.6% to $10 bn in July-Jan - Textile Fashion News
Fibre2Fashion).
 EU Trade Report on Pakistan (EU trade relations with Pakistan).
 The Economic Times (India) article on Pakistan textiles (Pakistan’s textile industry
struggles due to low exports and inflation - The Economic Times).
 Trade Chronicle (Apr 2025) on textile costs and exports (Pakistani textile sector is
grappling with relentless cost inflation - Trade Chronicle) (Pakistani textile sector is
grappling with relentless cost inflation - Trade Chronicle).
 Pakistan Textile Challenges (woolwise.edu.sa).
 Investopedia: Break-even analysis (Break-Even Analysis: Formula and Calculation).
 Tetra Inspection: Fabric quality control processes (Fabric Inspection | Fabric Lab
Testing | Fabric Quality Control).
 Textile School: Warping process description (Weaving Calculations - Textile School).
 Market research: Pakistan home textiles market projection (Home Textile Market in
Pakistan - Trends, Statistics & Growth).
 Additional economic data and analysis as cited above.

60