Review of Automotive Sector of Pakistan

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NUST BUSINESS SCHOOL

FINAL YEAR PROJECT

Submitted by:

Alishba Nazim BBA-2K15 B

Fazal Karim BBA-2K15 A

Fatimah Zeeshan Khan BBA-2K15 A

Mohammad Bin Bashir Bs ACF-2K15 A

Submitted to:

Nida Karim - Program Coordinator

Dr. Faisal Asghar Imam - FYP Supervisor

Date: 17th September, 2018

Problem Statement

Identifying gaps in local HR practices and contemporary global practices in the automotive parts manufacturing industry of Pakistan

Introduction

The automotive sector has always been the mainstay of any economy and thus it is often called the mother of all industries. The auto industry is distinctive as it includes practically all available engineering technologies. An automobile is a combined product created through the hard work of a host of auto part creators, who apply various technologies to create a synergistic whole. Glass working, EDM, machining, molding, textile, plastics and many other technologies are used to produce the finished automobile, using all kinds of materials that range from metals to rubbers, and then on from threads to plastics.

Pakistan Association of Automotive Parts & Accessories Manufacturers (PAAPAM) was initiated in 1988 to embody the industry and to provide technical & management support to its adherents. It is not an organization or a company or a firm it is an entire Association heading these automobile companies in Pakistan. PAAPAM is now over twenty years old and, over the years, this association has reached a certain level of ripeness by becoming a crucial and extremely effective link between the policy-making echelons in the government and the automobile parts manufacturing industry. The Association accomplished recognition from the Government of the Islamic Republic of Pakistan in 1999 and now it is represented on many Government and semi-government NGOs and committees as well as Private Institutions by its associates. PAAPAM is also a participant of the Federal of Pakistan Chamber of Commerce & Industry (FPCCI).

With a recorded membership base of over 278 “tier one” parts manufacturers out of over 1200 industries, PAAPAM has under its sections part makers of cars, motorcycles, tractors, trucks,vans and buses, which signify transnational companies of standing, counting Toyota, Honda, Suzuki, Hino, Nissan, Hyundai, etc. Investments in place in the industry now surpass US$ 1.5 billion (PAAPAM, 2018)

Justification for Selection

Globalization has brought in its wake significant extrinsic and mammoth intrinsic changes for transnational corporations with significant impact on all the facets of organization’s working inclusive of the fact that around 62 million people are productively linked with transnational Organizations worldwide (United Nations report, 2006). With growing significance of global economic integration and increased share of multinational firms in global economy, IHRM has gained center stage, in particular, dealing with human side of the organization in the global work management operations across various regions, and countries of the world to realize leading competitive edge (Dowling et al., 2013). Competing demands of global integration and local differentiation have highlighted the need to develop human resources as a source of competitive advantage (Caligiuri &Stroh 1995; Sehuler et at., 1993; Taylor et al., 1996), MNCs standardization and local practices. As MNCs and their international subsidiaries have become increasingly important players in the global economy, interest in, and research on the strategies and management practices of these firms have advanced apace.

With an investment of over Rs.370 billion, Pakistan auto industry contributes revenue of around Rs 110 billion per annum to the national kitty while this industry has achieved import substitution worth US$ 3.3 billion per annum besides generating foreign exchange of US$ 210 million per annum through exports. Pakistan Association of Automotive Parts & Accessories Manufacturers (PAAPAM) Chairman Iftikhar Ahmad said, “PAAPAM is committed to playing a key role as the binding force for the auto industry. Since its incorporation in the year 1999, PAAPAM has successfully grown to 319 registered members. The estimated number of parts-manufacturers in Pakistan includes: 770 units in Tier One, 900 units in Tier Two and 1400 units in Tier Three. This industry comprises of 500,000 skilled workers as direct employees and 2.4 million indirect employees (Total 2.9 million). The SVC of PAAPAM – Mr. Ashraf Sheikh stated that; “As the demand for automobiles is expected to rise continuously over the next 3-5 years, the big challenge for Pakistan is to nurture local assemblers & vendors and rapidly generate investments in capacity building to meet the sharply rising demand.”

Former Chairman PAAPAM – Mohammed Saleem stated that; “This industry has already achieved a high level of localization, whereby it boasts: 75% localization in Cars & HCVs, 96% in Tractors, 96% in Motorcycles and 80% in Three Wheelers. Its products are being exported to; The European Union, USA, African Countries and all over Asia. Production for (July 2017 – Dec 2017) six months figures reached; 107,000 cars, 941,000 motorcycles and three wheelers, 4514 Trucks, 409 Busses and32, 614tractor vehicles.”

To realize the true potential of automotive sector in the current theme of inclusive globalization, there is need to focus on systematic examination of IHRM practices surrounding automotive industry in the country; future research might provide invaluable theories and models, and validate the argument of (Sparrow et al., 2004; Legge, 2004) pointing that giving adequate importance to human resources in the organizations results in increased productivity and have a positive influence on the GDP of the country.

Problems identification:

The recruitment of employees within the auto mobile industry is based mostly on skills because they have to deal with the complex technical problems. Within the locomotive industry, human resources units are tasked with classifying, enrolling and developing the skills that arrays from cashiers to the leaders within the organization. They are facing following problems in this industry.

Lack of human resource strategic plan:

It is commonly observed that human resource planning techniques or strategies are not in symmetry within the auto mobile industry. Many motorized companies are lacking a "wide-ranging, step-by-step strategies to attract the employees. We can say that automotive businesses are struggling to follow the hiring and training part of the human resource strategies. As, they don’t have basic strategies they are not getting the right people at the right time for the specific job which in the long run can affect their efficiency.