Degree

Master of Business Administration Executive

Faculty / School

School of Business Studies (SBS)

Year of Award

2025

Advisor/Supervisor

Mr. Faisal Jalal, Adjunct Faculty, Department of Marketing

Project Type

MBA Executive Research Project

Access Type

Restricted Access

Keywords

Quality Assurance, KE, Diversification, Feasibility, Lab Testing

Executive Summary

History has witnessed two great financial crisis which shocked the roots of the world’s supply chain and financial system, one “The Great Depression of 1932” and other “The Great Recession of 2007”. It wouldn’t be misjudgment to call the Covid’19 as the third biggest crisis of the world. This not only halted the operations worldwide but disrupted the global Supply Chains. Developing countries like Pakistan, suffered the most during the Covid’19 era due to lack of contingencies and risk management system. This caused the major financial strain on both Government and private sectors. Some of the new entrants stepped back as they were unable to sustain their business due to hyper-inflation and suffocating economy. Restrictions were placed on International Trades to save precious national reserves. Energy sector which is considered as the backbone of the economy was affected the most from this situation. Energy sector is heavily regulated sector of Pakistan with regulators looking after almost the complete supply chain from the fuel import destination to price of electricity. This made K-Electric to look for diversification options to mitigate its business risk and ensure long term sustainability in the troubling environment. Diversification is a typical textbook approach for the risk dilution of business and is often adopted by many of the industry giants. This also helps industry to hedge its portfolio and ensure consistent returns all around the year. K-Electric itself is the symbol of diversified industry in Energy sector as there are very few players in the whole world who own the complete supply chain of Power Sector i.e. Generation, Transmission & Distribution. KElectric is the only private vertically integrated power company of Pakistan, dealing in power generation, transmission, and distribution of electricity, serving almost 3.4 million customers, and covering roughly 6500 sq. km area that includes residential, commercial, industrial, and agricultural areas. In short, K-Electric is already diversified in the energy domain. Thus, to achieve its strategic goal of business sustainability K-Electric first expanded its portfolio by adding K-Solar as its subsidiary, entering the new world of sustainable green energy. Now, KElectric is looking for options which not only increases its business but also increase the effective utilization of machinery & infrastructure. K-Electric Quality Assurance department performs inspection and testing of inbound material and as a result has developed an expert inspection team. It is already generating revenue for K- Electric through inspection and testing of power sector and allied industries material. NEPRA has allowed 2.5% of QA services charge on the purchase of electrical equipment by customers. This is the amount that customers pay for inspection and testing xii services by K-Electric QA department. Hence, KE QA Department is striving to establish itself as the revenue center within the organization. Hence, the QA LAB become the center of attention for K-Electric’s new venture. The proposed venture involves leveraging K-Electric's extensive Quality Assurance expertise and existing testing laboratory infrastructure, to transform QA department into profit center, offering services of material inspection and testing not only to K-Electric but also to other organizations and businesses. These testing and inspection services are being termed as QA services and will cover the scope of energy sector and allied materials. Below are some examples that make this venture a lucrative business opportunity for K-Electric: • Pakistan is a developing country with growing GDP. Apart from Covid crises and current economic crises, Pakistani economy has grown at commendable rate and will continue to do so, although Pakistan is facing acute shortage of foreign exchange. With growth in economy, Pakistan’s electricity need is also expected to increase. As per past trends, Pakistan’s electricity consumption has increased from 77 TWH in 2012 to 116 TWH in 2021 and the demand is expected to increase in coming years. This increasing demand will result in new power infrastructure, capital projects and increased materials for operation sustenance. It will also provide KE QA department with another area of opportunities as it can provide inspection services to the expanding power and energy sector through its existing expertise. • Due to increasing trade regulations worldwide, there is a growing demand for accredited inspection and testing body that can provide reliable QA services to local businesses as per their business requirements. This independent QA body can help businesses in reducing non-tariff barriers for exports, and it will also lead to increased confidence among businesses locally and globally. Therefore, it can play a vital role in growth of K-Electric in specific and ultimately benefiting Pakistan’s Economy. • K-Electric’s business is heavily import oriented. Currently, K-Electric six power plants are RLNG based which is imported. Second, energy and power sector major infrastructure are also imported due to lack of locally available reliable manufacturers and scarcity of latest technology in Pakistan. This causes several business challenges for K-Electric. First, Foreign reserves of Pakistan are limited and are historic low due to economic challenges and to save precious foreign reserves, Government have imposed restriction on imports. Second, as the outcome of these restriction K-Electric have no option but to look for revenue stream which have lesser dependency on imports hence hedging its business risk. xiii • With greater strategic emphasis on localization in Pakistan, there is a growing need for reliable QA body that can provide inspection and testing services for localized material that can help manufacturers in bringing quality at par with international standards. • Distribution companies in Pakistan are expected to be privatized in near future. Currently, the Material Inspection (MI) department of WAPDA performs inspection and testing of material for all the DISCOS. With privatization of DISCOS, there is potential opportunity for KE QA department to provide QA services to the DISCOS. Currently QA department is providing its services to K-Electric which is the only vertically integrated power utility company in Pakistan. • Currently, QA services sector in Pakistan is developing and some big names like SGS, BuVT and TUV Austria are dominating the market. This provides K-Electric with an opportunity to tap this relatively virgin market, considering K-Electrics market repute and strong financial outlook. This study comprises of techno-commercial feasibility of K-Electric’s entry into QA market of Pakistan and consist of primary as well as secondary data related to QA services sector. Mixed research methodology is employed in this study. A survey is conducted to administer mainly through purposive sampling technique. On the other hand, qualitative data is obtained through In-depth interviews with the key industry professionals using purposive sampling to understand the market structure, segmentation, positioning and pain points of industry. A simple three step approach is followed to assess the feasibility. Firstly, commercial analysis has been done to define the market size and potential of Pakistan’s QA services sector. Secondly, Technical Data pertaining to both K-Electric is collected, to assess the requirements of QA service industry and K-Electrics current capabilities. At last, both Commercial and Technical data and feasibility are translated into the financial model. Calculation of Revenue, Operating and CAPEX Costs, Financing Requirement and Net Present Value define the actual financial outcome of this new business venture. Commercial Feasibility portion consists of the demand forecasting of the Quality Inspection & Testing Sector. The data of market of key players is gathered through surveys & interviews. It has been estimated that in power and allied sectors of Pakistan, total Quality Testing & Inspection market for a new player is around 11bn PKR. Further, technical feasibility analyzes technical competencies of K-Electric QA lab and how it bodes in comparison to the existing market players. Lastly, financial feasibility identifies the OPEX and CAPEX requirements, Current market share and future growth forecast of 10 years. xiv In summary, Pakistan is a land of natural resources, developing economy and unsaturated market, which makes Pakistan an attractive place for new entrants. K-Electric has already embedded its roots in the Energy Landscape of Pakistan but for the Testing Sector, it may face the similar risks as of new market entrant. For today, PKR 11 Bn QA market has been estimated for K-Electric in its area of expertise, which is anticipated to grow with the forecasted GDP growth rate. The financial outcome of this study shows that this business venture has the potential to become K-Electric’s successful strategic move, but the decision to enter the QA market solely lies with K-Electric management, considering the lucrativeness of market size, return on investment versus K-Electric’s expectations. Keywords: Feasibility, Lab Testing, Material Inspection, Quality Assurance, KE, Diversification, Market Analysis

Pages

xiv, 94

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