Vice President ICI Soda Ash Qaim Hamid was sitting in the office on a fine morning in
2009 and he was informed by the works manager Shahid Khan that SNGPL has informed
them that there will be only 20% availability of gas during the winters.
Gas availability during winters particularly in the months of November, December and
January was a serious issue. This was shocking news for the Vice President as the cost of
manufacturing will increase five times as compared to gas if the production is executed
through other only available option, furnace oil. Not only would it hurt profitability, but
also the ability of the company to survive in the long run as well as sustaining competitive
edge in the market (See Figure #3). He knew he has to provide the soda ash in the market
and his prestigious industrial consumers without any delay and on the same hand has to
look after the cost of manufacturing as well. (See Table #8)
“Imports from China and Tata production in Kenya would get a competitive cost
advantage if we failed to deliver without gas” (See Figure #17) were the initial thoughts of
Vice President. “We need to come up with a viable plan to operate our plant at a full
capacity.”
So he called his Executive management team which included senior managers from all
departments, they decided that they would import the required quantity for meeting up the
demands during the current year however they were planning to have a concrete alternative
for the years to come.
“Mr. VP, we should consider using furnace oil to continue production of Soda Ash or else
we may lose our business.” Said, Mr. Akbar, the Head of Marketing Department of Soda
Ash. “Our analysis says that we cannot rely permanently on furnace oil as it would
increase our costs to no less than 5 to 6 times that of using gas (See Table #7). Hence we
need to come up with a plan that is more feasible than this,” shouted Mr. Rashid, the Vice
President of Corporate Finance. “We need to focus on a feasible plan that would allow us
to profitably produce Soda Ash persistently through a source of energy that we can rely on
without any problems”, added Mr. Rashid.
Hence there was a heated debate amongst the senior management and BOD at the Annual
2010 BOD meeting. Eventually the senior managers floated an idea of producing the
