growth at atlas group: deliberate or an emergent strategy?

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2014 11: 119Asian Journal of Management CasesZafar I. Qureshi

Growth at Atlas Group: Deliberate or an Emergent Strategy?

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Editor’s Introduction 119


Zafar I. Qureshi

AbstractThe Atlas Group had expanded exponentially over the last ten years. Its Chairman, Mr. Yusuf H. Shirazi while drawing satisfaction from the performance of the Group had two key concerns: was launching Atlas Power, a company in the Energy & Power Sector the correct strategic decision and secondly given international market opportunities, at what pace should the Group expand its business outside of the country?

KeywordsDeliberate strategy, emergent strategy, strategic planning, parenting advantage, vertical versus horizontal growth, related or unrelated diversification, leadership transition, divestiture, BCG matrix, cultural inte-gration, growth through acquisitions, uncertainty, business environment.

Profit is عبادت-Worship: No Business—No employment, No employment—No Prosperity.–Chairman, Atlas Group

In mid-November 2012, sitting in his office in Karachi adorned by the several awards he had received over the years, Yusuf H. Shirazi, Chairman, Atlas Group Advisory Board, was musing over the growth of his Group. As an institution builder who had always been engaged in identifying new yet untapped opportunities in the market, the energy and power sector offered such an opportunity. The Group decided to enter into this sector by setting up a new company called Atlas Power. While reflecting upon the risks associated with this investment, the Chairman wondered whether or not expansion in the Group’s core businesses would have made more business sense. The core businesses of the Group comprised autos–motorcycles, batteries, parts making, financial services, such as, insurance, assets management and lifelong trading.

Concurrently, the Chairman was also exploring the possibilities of turning the Group into a global conglomerate. To test this hypothesis, Atlas World Wide and Atlas Ventures were established in the UAE along with an office in China. However, the question about internationalization being debated currently

Asian Journal of Management Cases 11(2) 119–137

© 2014 Lahore University of Management Sciences

SAGE PublicationsLos Angeles, London,

New Delhi, Singapore, Washington DC

DOI: 10.1177/0972820114538341http://ajc.sagepub.com

This case was written by Visiting Professor Zafar I. Qureshi ([email protected]) at the Lahore University of Management Sciences to serve as basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. This material may not be quoted, photocopied or reproduced in any form without the prior written consent of the Lahore University of Management Sciences.

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120 Zafar I. Qureshi

Asian Journal of Management Cases, 11, 2 (2014): 119–137

pertained to the pace at which it should be done: Should it be a gradual transition or should it be done at a faster pace?

Yusuf H. Shirazi, the Entrepreneur

According to Mr Yusuf Shirazi, he came from a rich lineage of a landed family. His forefathers had extensive land properties. For instance, if one were to measure the family land by riding a horse in the morning, the area would still not be covered by the evening. However, he lamented that since there was not much land left for the five brothers and three sisters in the tenth generation of the family, they had to fend for themselves.

Mr Shirazi’s ancestors were also spiritualists having three shrines that exist till today in the Districts of Jhelum, Faisalabad and Sahiwal. Ten generations back, there were no proper means of transportation and one head of the family (Khair Shah) performed pilgrimage to Mecca on foot—a feat very few had achieved at that time in the province of Punjab. He was acclaimed as a religious leader and many believers visited his shrine regularly.

During college, Mr Shirazi started writing for various newspapers to earn some money. He never wrote without being paid. For his first published article, he was paid PKR 8, which was a significant sum in those days. Additionally, he also received a scholarship of PKR 8 per month for his expenses. He continued to write for Urdu and English dailies and began to gradually earn as much as PKR 10,000 for an article. His advice to writers was not to write without compensation and his advice to newspapers was not to publish any article without payment as this practice improved the quality of the writing and reader-ship. In addition to several articles on socio-politico-economy, he wrote five books. His book on ‘Aid or Trade’—was adjudged best book of the year by the Writers Guild. Another book titled ‘Safeguarding Sovereignty’ was published in 2013.

While working for the newspapers as a freelancer, Mr Shirazi took the Competitive Examination to enter the Civil Service of Pakistan. He won the first position in law subjects and was selected for the Income Tax Group. After the completion of his training, he started his professional life as a civil servant. His first job was of an Income Tax Officer. As an Income Tax Officer with solid grounding in law education and proficiency in accounts, he was selected to lecture on Law and Accounts in the Finance Services Academy. In this position, he wrote many reports highlighting how businesses were carried on and how they evaded taxes. According to Mr Shirazi, it was a great experience for him. These reports, in particular, in the words of Yusuf ‘were highly acclaimed’. Based on these reports he got job offers both from local as well as multinational corporations. After due evaluation, he decided to join a textile group. The Shirazi family owned 21 per cent of the capital in this business. He wanted to experience how to run a business so that he could eventually start his own business. He left the textile group after two years but this experience helped him to develop as an entrepreneur.

After leaving this private job, he set up a company called Shirazi Investment Private Limited (SIL) with three employees and PKR 0.5 million. To date SIL was the holding company of the Atlas Group. Since the inception of SIL in 1962, the Group had grown into sixteen companies (Annexure I) in Engineering, Financial Services, Energy & Power, and Service industries.



Growth at Atlas Group 121


Group’s Development

First Phase (1962–1971)

In 1962, Shirazi Investment Limited (SIL) entered into real estate, securities, and franchises. In 1963, Mr Shirazi set up another company named Atlas Autos Limited (AAL), which later became a public limited company and renamed it as Atlas Honda Ltd. Shortly thereafter, Mr Shirazi entered into a Technical Assistance Agreement with Honda Motor Company Limited to manufacture and market Honda Motorcycles in Pakistan.

In 1966, Mr Shirazi started Atlas Battery Limited (ABL) as a public limited company by entering into a technical collaboration with Japan Storage Battery Company Limited (JSB). ABL which started with an initial capital of PKR 3.0 million had equity of PKR 1.5 billion by 2013. It manufactured lead acid storage batteries using JSB technology. ABL adopted ‘AGS’ as a brand name for its products by adding an ‘A’ before ‘GS’—the brand name used by JSB. Atlas Group added one company after another leading to a total of 16 companies (Annexure I).

The Group was managed from the top with a Group Executive Committee (GEC) comprising four senior executives and three sponsors. The Group decided not to employ family members, friends and acquaintances, unless they were extraordinary and willing to work within the Group ethos. While recruit-ing, the criterion was to ascertain the basic value system of the individual. The Group preferred to educate their own employees and at the time of entry into service, they were provided opportunities to improve their academic standing by acquiring qualifications such as diplomas, graduation and post-graduation through the financial support of the Group.

The Group sent its managerial staff on foreign training to Universities like Harvard, Stanford and INSEAD. Additionally, workers were sent to ILO training facilities. The five sons of Mr Yusuf Shirazi had been educated at premier institutions like Aitchison, Eton, Radley, Harvard and Yale.

Second Phase (December 1971–1973)

In December 1971, when the Pakistan People’s Party came into power in East and West Pakistan, the country faced multifarious challenges: first, the country was broken into two parts and the Eastern Wing became an independent country called Bangladesh. Second, the devaluation of the rupee by about 53 per cent created serious problems for commerce, trade and industry. The Atlas Group was affected in its loan payments to Pakistan Industrial Credit and Investment Corporation (PICIC) and Investment Corporation of Pakistan (ICP). It had to pay PKR 13 million against a liability of PKR 2.2 million against the company—Epak—in the then East Pakistan. Whereas, other compatriots defaulted on their loan payments, the Atlas Group paid up to the last penny, which established the Group’s credibility within and outside Pakistan.

Third Phase (1973–2000)

By 1973, the Group again came under severe financial pressure due to the abolition of the managing agency system and nationalization of industry. It led to a reduction in orders and market share. Moreover,





the financial institutions started pressurizing the Group for outstanding loan payments. These conditions adversely affected the share prices of the companies listed on the stock exchange, such as Atlas Autos Limited (AAL) and Atlas Battery Limited (ABL), by three to four times of their par value.

Fourth Phase (2001–2012)

The Group President, Mr Aamir H. Shirazi, acknowledged that the Group continued to face many inter-nal and external challenges. Internally, the Group needed to continually assess its current stock of assets and resource base to match the capabilities required to meet the external threats for capturing the unreal-ized opportunities. The acquisition of these capabilities would help the Group in international negotia-tions and adopting best management systems to grow into a global conglomerate. The acquisition of these capabilities would determine the pace of internationalization of the Group’s businesses. The Group was pursuing its goal with caution and not in haste. ‘Caution rather than haste are the business principles that the Group follows’, stated Mr Aamir Shirazi.

Yusuf H. Shirazi optimistically added that Pakistan’s economy was viable. Globally Pakistan’s agri-culture was at No.6, textiles at No.5 while yarn exports were at No.4 in the world, all these were very positive indicators. These would put Pakistan’s growth on the fast track globally.

Additionally, Mr Yusuf H. Shirazi emphasized that Pakistan’s human resource was one of the best in the world, with hard working workers and highly professional managers. Talking about profitability, he reiterated that the country had one of the highest GDP growth rates at an average of about 5 per cent in the last 62 years despite many ups and downs (Annexure II).

Iftikhar H. Shirazi, Chief Executive Officer, Shirazi Investment Limited (SIL), however, was of the view that as far as the international environment was concerned it had not much direct bearing on the country’s business environment. However, the macroeconomic policies of the country had certainly affected the corporate sector. For instance, the depreciation of Pak rupee directly influenced the import of auto parts and other raw materials, especially crude oil thus affecting the cost of doing business. The country also could not meet the demand for energy, which disrupted the general operations of industries especially the manufacturing sector.

Growth Strategy

Opportunistic Growth

In 1973, the Group decided to diversify its businesses by setting up Shirazi Trading Company (Pvt.) Limited (STC). In 1978, the Group established Panjdarya, a private limited company with an initial capi-tal of PKR 2.0 million near Lahore to manufacture Honda motorcycles in lieu of a project—Atlas Epak Limited—which they lost on secession of East Pakistan—now Bangladesh. That was a joint venture with equity participation from Honda Motors of Japan. The company was later merged with Atlas Honda Ltd. By 1980, STC represented several important manufacturing companies from throughout the world. It marketed products such as earth moving and construction equipment, forklifts, trucks, hydraulic tools and solar-powered navigational equipment. It had now secured the franchise of MAN Group and General Electric (GE). It was also establishing an association with TATA and Indian Steel Mills.





In the next two decades between 1981 and 2000, four new companies were established in the engi-neering and financial sectors known as Honda Atlas Cars Pakistan Ltd (1992), Honda Atlas Power Products (Pvt.) Ltd (1997), Atlas Lease Ltd (1989) and Atlas Investment Bank Ltd (1990). Since the Group already had the necessary resources and the capabilities, setting up of these companies was con-sidered to be in alignment with the existing strategic approach.

Acquisitions

In the late 1970s and early 1980s the Group acquired three companies. The first one was R.R. Industries (Pvt.) Limited (later on merged into Shirazi Trading Company (Pvt.) Ltd) that primarily traded in office equipment. At the time of its acquisition, the company was running into losses and, quite surprisingly, the Group took over its control along with its 100 employees. In 1979, the Group bought the controlling shares of Muslim Insurance Company Ltd (MIC), later renamed as Atlas Insurance Limited (AIL) with its head office in Lahore. In 1980, when the Government relinquished its administrative control of MIC, the Atlas Group also took over its management.

The insurance company at that time was not only insolvent but had 200 non-productive employees on its payroll. At the time of its takeover, the company had a paid up capital of PKR 0.930 million and an accumulated loss of PKR 1.6 million with meagre reserve funds. The company was successfully turned around in the first year of its acquisition. The company had now at cost, an equity of over PKR 1 billion, balance sheet footing of over PKR 2 billion and investment portfolio of over PKR 1.5 billion.

In 1981, Allwin Engineering Industries Limited (now named Atlas Engineering Limited) was the third company to be acquired by the Group. At the time of its acquisition, the company had a paid up capital of PKR 31.550 million and manpower strength of 1,100. It manufactured automotive components including pistons, radiators, fly wheels and clutch housing for trucks, tractors and cars and cylinder lin-ers for motorcycles. The company had serious tax and legal problems, which the Group successfully resolved. Both Allwin and MIC were listed on the Stock Exchange.

A senior management team member, Jawaid Iqbal Ahmed said that the reasons for acquisition of problem ridden businesses were:

Since the 70’s there was scarcity due to nationalization of industries and the external environment was highly volatile, this was the way to avoid stagnation. Also, obtaining a license to start a new business without ‘patron-age’ was impossible, the Group pursued growth through acquisition as a strategic choice. For the Group this was the proper course—a testament to the Group’s dynamism.

Multipronged Growth

The Group had followed a multipronged growth strategy comprising both integration and diversifica-tion. The diversified companies were at different locations as well as in different industries.

Atlas Power, a 215 MW plant, set up in 2009, was a joint venture with MAN of Germany. The Group had 51 per cent share in equity and the remainder 49 per cent was shared amongst MAN of Germany and the two local banks—National Bank of Pakistan and Allied Bank of Pakistan. The shortages in the sup-ply of electricity and their adverse impact on the operations and growth of the industrial sector along with the encouraging government policy provided the trigger to enter the industry (Annexure III).





The supply and demand gaps as well as the inefficiencies in the regulated energy sector motivated the private sector to invest. Pakistan’s demand in 2012 was 15,000 megawatts and only 6,000 megawatts was being produced. By the year 2015, the generation capacity would have to be doubled to meet the enhanced demand.

Unfortunately, the heavy government control of the energy sector had not allowed the market forces to have a level playing field which had exacerbated the energy situation prompting the private sector to venture into this area. Some of the private sector companies like Cheveron, Eni, Pakistan Petroleum Limited, SHELL, SHV Energy and Nishat Power Limited were already engaged in power generation.

Explaining the Group’s motivation to enter into the energy and power sector, Mr Iftikhar H. Shirazi stated that the Group had a strong engineering base and the Power Plant offered a natural diversification opportunity. Second, Shirazi Trading Company Limited was a MAN franchise and had relevant business experience. Additionally, MAN had shown an interest in equity partnership.

Mr Iftikhar Shirazi clarified that there were risks involved in this business by way of the government being the sole purchaser. That entailed uncertainties relating to price negotiations and delayed payments in the event of change of government.

In answer to the above question, Frahim Ali Khan, Member Advisory Board explained further that private power projects were backed by sovereign guarantee and pricing based on cost plus formula. Capacity utilization and plant efficiency were supported by an incentive system. In spite of all these guarantees, the government was the sole customer and as a result there were issues of timely payment even though delayed payments were made with interest.

Mr Saquib Shirazi stated that the nuclear explosion in May 1999 led to the devaluation of Pakistan’s currency. As a result of that the Group only entered those businesses in which hedging was possible. Joint ventures and entry into the power sector illustrated this approach. The Group also entered into the power sector thinking it could create synergy with the existing businesses.

Mr Saquib H. Shirazi described the Group ‘core’ businesses as automotive manufacturing and parts making, power generation and trading. The Group trading dealt only in office equipment. This had become more professional and the Group was now engaged in imports and exports, local distribution for multinationals like Canon, MAN and GE, among others.

Disinvestment of Atlas Bank

In 2006, the Group entered into Commercial Banking by merging Atlas Lease Ltd and Atlas Investment Bank Limited in which the Group was already operating. Furthermore, getting commercial bank sanc-tion was not difficult. Mr Yusuf H. Shirazi elaborated that entry into commercial banking seemed a synergetic approach since the Group was already in the leasing and investment banking industry. The Group saw it as an opportunity and took the decision to recommend to the Family Council (FC) and Group Executive Committee (GEC) to enter into this business.

In response to a question, Yusuf H. Shirazi stated that the Group’s core competence was its culture and HR Systems. In the case of the Bank, the Group deviated from its core strength. Saquib H. Shirazi affirmed the preceding idea. He added that the fault line in the case of the Bank was due to the gap and inconsistencies among HR policies pursued in the recruitment, compensation of the Bank and the Group HR philosophy and culture. The recruitment policy at the bank was based on an aggressive expan-sion model and attracting manpower that was suitable to that strategy. The objective before the bank’s





management was to increase the market share. In hindsight, the Group’s traditional and successful conservative and step by step approach would have been more advisable.

Whether it was a divestment or not, according to Mr Saquib Shirazi, it was an evolution of the finan-cial services industry in which stringent regulations, frequent enhancement of equity requirements vis-à-vis new upcoming banks, already established banks and introduction of new regulations from time to time made small new banks untenable. Such measures were in contravention with the declared policy of encouraging the development of small and medium sized banks. The policy environment com-pelled the Group to exit from the banking sector and to focus on the already existing core businesses.

According to Iftikhar H. Shirazi, exiting from the banking business was a tough call. Diversifying into a non-core business was a risky decision in the first place. It was a cash hungry business. Borrowing from the capital market at higher rates and lending at lower rates created problems. Also, violation of the Group HR systems coupled with State Bank of Pakistan’s ever increasing stringent regulatory and equity requirements added to problems already being faced. Most of all, lax expense control and higher over-head costs by the bank’s management that had been delegated to manage it in accordance with the Group policy, added to the tribulations of managing the Bank.

Additionally, Frahim Ali Khan, Member Advisory Board explained that in 2008 there was a financial crisis all over the world. Pakistan’s capital market and banking sector was affected by that too. In particu-lar, the declining trend in value of rupee, people were converting rupee into dollar and there was massive flight of capital, resulting in decline of foreign exchange reserve. At the same time, smaller banks were faced with an increase in minimum capital requirement imposed by the State Bank of Pakistan. There was also a sharp increase in SBP policy rates.

The increase in lending rates, as a result of these events and policies, led to an increase in non-performing loan portfolio and withdrawal of deposits toward bigger banks. All that led to a liquidity crunch for smaller banks. The bank’s management, including the CEO had miscalculated the situation and had gone into the expansion phase, increasing the administrative cost along with high cost deposits.

Decision making was left to the CEO of the Bank as per the delegation policy of the Group. He was surprisingly borrowing from the market at 20–22 per cent while lending at 13–14 per cent. Moreover, lending was done on long term basis while deposits were on short term basis. The short term deposits could have led to a default since the money was borrowed from the market. The pursuit of those policies created difficulties in mitigating risks. Hence, the Group decided to sell the Bank in March 2009. Eventually, the majority shares of the Bank were sold to a consortium—Summit Bank.

Financial Services

In the financial services industry, Atlas Group had a stake in insurance and asset management. Atlas Insurance was ranked No. 5 in terms of premium. Earnings per Share (EPS), Return on Equity (ROE) and underwriting profits being in the top 3 with overall rating of ‘A+’. What rule(s) underlay the decision to stay in a business? Yusuf H. Shirazi stated, that business scope, industry growth, government priorities and returns not less than the prevailing interest rate determined whether ‘to be or not to be’ in a particular business.

Atlas Asset Management Company, a company formed in 2002, witnessed tough times during the 2007 financial crisis. However, it had now turned the corner and stood on a stable footing. Its current assets under management were PKR 9 billion and the management company rating had been





upgraded. While many assets/investment companies had been performing poorly, Atlas Asset Manage-ment had managed to survive even in difficult times due to an excellent team headed by Habib- ur-Rahman. He had solid experience in the mutual funds industry and was also familiar with the Group. He worked in collaboration with Ali H. Shirazi, the youngest son of Mr Shirazi who was a graduate of Yale University. Ali Shirazi had gained necessary expertise in capital markets through his work abroad.

Atlas Asset Management was amongst the four initial companies to be given pension fund manager license under VPS Rules. Three of the funds of the company out of fourteen similar funds in Pakistan had been adjudged among the top 100 funds of the world.

Internationalization

To internationalize its scope, Atlas Honda Limited, Flagship Company of the Group commanded a major market share—over 50 per cent in the local market. The Group was already exporting locally made motorcycles to Sri Lanka, Nepal, Bangladesh, Africa and Middle Eastern countries.

As stated earlier, the Group had also setup companies in Dubai such as Atlas Worldwide and Atlas Ventures and an office in China. Thus, efforts were underway to accomplish full-fledged international-ization. Was this an indication that the Group was now flexing its muscles to become a global player? To this question, Mr Yusuf H. Shirazi responded that the Group’s internationalization strategy was based on gradualism rather than a fast track principle.

Shirazi Trading had negotiated franchises with General Electric of the USA and was considering entering into India where negotiations were underway with TATA and India Steel, among others.

Future Direction

In describing their strategic approach, Saquib H. Shirazi stated that at present the Group had adopted a focus on the core businesses and their gradual internationalization as their strategic approach. The Group, however, was opposed to the idea of ‘over diversification of a business’ especially where there was a lack of compatibility with the Group’s indigenous culture and expertise.

Iftikhar H. Shirazi was also of the view that the Group’s future growth ought to be within its core business area. Atlas Group’s core business was primarily in the engineering industry as was clear from its performance in the automotive industry. Also, the launching of another automotive venture—Atlas Hitech (Pvt.) Limited a joint venture with DENSO (a parts manufacturing concern), a Japanese company was consistent with the future growth direction. Atlas Metals (Pvt.) Limited was another recent venture in line with the Group’s growth trajectory.

Business bubbles always burst. Therefore, according to Iftikhar H. Shirazi, the Group must maintain sustainability in its growth. Iftikhar H. Shirazi highlighted the importance of cash for a debt free busi-ness. Freedom from any encumbrances, in his opinion, gave a business group undoubtedly greater leeway for action.

The Group based the strategic planning process on a three-pronged approach. First, a business idea was generated which was then debated in the FC consisting of Yusuf H. Shirazi and his four sons. Once the business idea was cleared by the FC it was discussed threadbare in the Group Executive Committee





(GEC), comprising professionals, the formal strategy making forum of the group, which then gave the final approval.

Corporate Office

Atlas Group Holding Company; SIL and the GEC had maintained a lean corporate office which currently consisted of about 20 personnel. A Group Advisory Board and the GEC along with Shirazi Investment Private Ltd (SIL) and a small IT unit for the core functional activities (Annexure IV). With this lean corporate office, the Group was managed through a holding company (SIL) with sixteen companies in four different industries under its umbrella.

HR Philosophy

A centralized HR system underpinned by commitment, values and loyalty were the brand identity of Atlas. Encouraging and mentoring associates instead of reprimanding was the guiding principle in man-aging people. Atlas Way, which defined the Group culture and Atlas Systems, served as the unifying culture across all the companies (Annexure V).

Atlas Way and Atlas Systems, among others, aimed at the fact that all human beings were equal in spite of whatever status one enjoyed in the Group. The Group therefore practiced this holistic system in order to set objectives and fulfil them through top-down and bottom-up approach from the highest level to the lowest—the executives and the workers.

The Chairman sometimes took them for a morning ‘walk and talk’, which was a great motivational factor for all ranks of employees, especially for the workers. He would invite them either to break ‘Fast’ during the month of Ramadan or for lunches or dinners. During his periodic visits to the plants he addressed all ranks. These talks were not one sided. People were encouraged to make comments, ask questions and make recommendations on different matters relating to the plants or about the Group businesses.

This had been the hallmark of the Human Resource Development in the Group with the result that objective setting, appraisal and achievement of the objectives were optimal. The present staff turnover rate with 3.5 per cent was one of the lowest in the world. Normally, people were recruited, retained and retired from the Group.

In its recruitment philosophy, individual values and commitment were judged first and academic qualifications later. The Group valued those who had stayed with it through thick and thin without wavering in their commitment. Loyalty was the acid test and the Group continued to develop its talent pool by sending associates for training abroad to places like Harvard, Stanford and INSEAD.

In response to a question regarding the evolution of the ATLAS Group, Mr Saquib H. Shirazi stated that The Group had gone through four evolutionary stages: the Entrepreneurial stage, Entrepreneurial plus Professional Management stage, from Family Business to Business Family stage in which a balance was struck between the owners and professional management, and institutionalization stage in which an FC and a GEC had been set up to tackle business and succession challenges. In fact, the period between the years 2000 and 2005 could be called the consolidation stage of the Group.

Elaborating further on the challenges the Group faced in the evolutionary process, Mr Saquib H. Shirazi said that the Group’s decisions in the FC were not based on emotions rather these were based





on pragmatism. In any challenging and crisis ridden situation, the FC followed three cardinal principles: unity, patience and dynamic decision making which was further objectively scrutinized in the GEC.

Financial Policy and Performance Cycle

The Group and its associates followed a three year target setting cycle. A bottom up approach was adopted for target setting. Evaluation of performance was, however, done on monthly as well as quar-terly basis. Multiple criteria were used to measure individual entities’ performance and to evaluate the aggregate performance of the Group (Annexure VI). Those primarily included: Return on Equity, Earning per Share, Market Share, Underwriting Profits and Assets under Management (AUM) in the case of Assets Management Company.

As far as capital expenditure was concerned, the Group was moving toward debt free approach. Already, majority of the companies had achieved a debt free status. According to Ali H. Shirazi, CEO Atlas Battery, the battery business was one of the key businesses for the Group. According to him, The Group was unable to meet the market demand at present. Therefore, it needed to invest in further expansion.

The extent and timing of the expansion had been under serious consideration of the GEC. Atlas Battery had two main competitors; Exide in Karachi and Volta in Rawalpindi. Atlas Battery currently enjoyed about 33 per cent of the market share. Due to quality of manpower, product and service, the hallmark of the Group, AGS (brand name for Atlas Battery) was sold on cash while competitors sold on credit.

Leadership Succession

Historically, Yusuf H. Shirazi stated that delegation and professional management was integral to any leadership succession in the Group. The Group was implementing that principal through the GEC which mainly consisted of professionals. In order to avoid over-independence, maturity and responsible exer-cise of delegated power was of primary importance for effective and successful delegation.

Mr Saquib H. Shirazi stated that the Group’s experience while delegating power did not mean abdica-tion of owners’ responsibility as a business family. A balance needed to be struck between owner manag-ers and the professional managers based on the evolutionary stage of a business group.

Explaining the succession system in the Group, Yusuf H. Shirazi stated that when the former CEO of Atlas Autos Limited (AAL) resigned, Aamir H. Shirazi, was duly assessed before deciding to elevate him to that position. At that time there was a viewpoint that perhaps he was not yet ready for this senior position. After due deliberations and consideration of all pros and cons by FC, GEC and general feed-back, Aamir H. Shirazi was made CEO of Atlas Honda Limited (AHL). Through his performance he proved worthy of the trust reposed in him to all intents and purposes.

None of the four sons of Yusuf H. Shirazi who attended top class academic institutions both within and outside of Pakistan were given higher managerial responsibilities without going through the opera-tional experience from the baseline—be it manufacturing, production, HR or marketing.

When Yusuf H. Shirazi thought of shedding the operational responsibility of the Group leadership, the eldest son, Iftikhar H. Shirazi, a specialist in finance and securities was formalized as head of the family and CEO of the holding company and Atlas Foundation. Aamir H. Shirazi a ‘generalist’ was acclaimed





as the Group President for Group Operations. Saquib H. Shirazi became the Group Director Strategy and CEO of the flagship company Atlas Honda. Ali H. Shirazi headed ABL in addition to being the Executive Director of Asset Management Limited and Head of the Investment Committee, for which he had accu-mulated expertise in and outside Pakistan.

Iftikhar H. Shirazi stated that his father had discussions with all the four sons individually, before reaching a succession decision. The strengths and weaknesses of each son were evaluated to arrive at the right succession decision. However, in the wake of social tradition of passing on the mantle to the eldest son, it was a tough decision. However, he was quick to say, that once the decision had been taken it was accepted as a collective decision. The functional responsibility of each of the four sons is described in Annexure VII.

According to Iftikhar H. Shirazi, his participation in Management Development Programs at Harvard Business School prepared him on how to ensure smooth transition of the family business from genera-tion to generation. Based on his learnings, he had prepared a family constitution for family decisions relating to both succession as well as business. All important issues and strategies were discussed in the Family Council Forum.

According to Saquib H. Shirazi, Iftikhar made a good leader of the family, group’s holding company and the IT area as well. Additionally, he was also leading the Group’s corporate social responsibility function. However, according to one senior leader of the Group, the succession tilt was toward the family and not toward professional managers. To this, Saquib H. Shirazi stated that one needed to dif-ferentiate between the family business and the business family. In fact there were four professionals out of seven members of the GEC and ten professional GEC members and CEOs out of total fourteen in the Group.

The family business was exclusively controlled by the family members, disregarding the need for professional management. In contrast, the business family would strike a balance between the involve-ment of the entrepreneurial family and the professional management. Given the present stage of growth, the Atlas Group had adopted the business family approach.

Atlas Foundation

The Group considered social service and paying back to the society as an integral part of its business. Therefore, it had set up a Foundation as a charitable institution funded by its own resources. While assessing the areas of the Group’s charitable work, two sectors important to the society were initially considered, Health and Education.

Mr Iftikhar H. Shirazi was in charge of this charitable function. The Foundation was started by Mr Yusuf H. Shirazi, who himself was a scholarship holder having stood first in most educational institu-tions in the Province. In addition, he also received aid from his elder brother as and when necessary. As soon as he was on his own feet he started these scholarships individually through the aid of one of his teachers—Zahoor ul Haq. Subsequently it was institutionalized through a Foundation which had set up scholarship endowments in various universities.

Having financed several hospitals and educational institutions such as Al-Shifa Hospital, Lahore University of Management Sciences, Ghulam Ishaq Khan Institute of Engineering Sciences and Technology, Agha Khan University, Forman Christian College and others from time to time, the Group turned its focus on scholarship endowment in several educational institutions; Shirazi Auditorium at





Hamdard University, Shirazi Board Room at Shalamar Medical and Dental College, Shirazi Room at National University of Sciences and Technology, Shirazi Endowment at Agha Khan University on the Donors Wall, Student Centre Wall at Institute of Business Administration and a ‘Shirazi Hall’ (girls hostel) at Forman Christian College to name a few.

In addition, the Foundation had set up low fee schools; The Citizen’s Foundation Atlas Campus and another named after Mr Shirazi’s brother—Zakir Shirazi called Zakir Shirazi Daula Bala School. A scholarship in his name had also been set up at Lahore University of Management Sciences under the Zakir Shirazi Scholarship Trust.

Conclusion

Should the Group invest in expanding its original core businesses of auto and parts manufacturing, finan-cial services; insurance and asset management and trading versus entry into new lines of business? If new business, then what strategy should the Group adopt?

The Group while having taken the first step toward internationalization of its business was cautious not to move in that direction at a fast pace. What might be the consequences of the decision on exploiting opportunities in foreign markets? These were the questions that Mr Yusuf H. Shirazi continued to ponder upon.

Annexure I

Table A1. Atlas Group of Companies Year of Establishment

Atlas Group of Companies Year of Establishment/Acquisition*

Shirazi Investments 1962Atlas Honda 1963Atlas Battery 1966Shirazi Trading 1975Atlas Insurance 1980*Atlas Engineering 1981*Honda Atlas Cars 1992Honda Atlas Power Product 1997Atlas Assert Management 2002Shirazi Capital 2005Atlas Power 2007Atlas World Wide 2007Atlas Venture 2008Atlas Auto Parts 2011Atlas Hitech 2012Atlas Metals 2013

Source: Company Documents.





Annexure II

Figure A1. Pakistan’s GDP Growth Rate: Pakistan Political and Economic Development


Annexure III


Energy Needs

Figure A2. Pakistan’s Primary Energy Consumption 2009–10 (61 Million Tons)






Annexure IVFigure A3. Atlas Organizational Structure






Annexure V

Atlas Way

Vision

A leading group in all respects through effective use of resources, technology and good business prac-tices, attaching and retraining high quality associates and developing them to their fullest potential, keepings customers in the highest esteem and giving sustained returns to shareholders.

Atlas Culture

1. Corporate Governance 2. Respect, Recognition, Reward 3. Value of time 4. Recruitment and career development based on integrity, merit, experience and skills 5. Education and training of staff and descendants 6. Self-Reliance 7. Leading by Example 8. Humility and Excellence 9. Living within one’s means, saving for future and donating for good cause10. To be happy and healthy

The Atlas System

1. Management by objectives (MBO) 2. 7S Framework (Strategy, Structure, Style, Staff, Skills and Shared Values) 3. Right Man for the Right Job 4. Using BCG Model of Strategic Direction 5. Creating value through implementation of internal controls (SOPs and Policy Manuals) 6. Management development to produce performers, organization builders and strategists 7. Active participation in managerial meetings for continuous performance improvement 8. Ensuring accuracy and control of information/data through efficient IMS 9. Judicious sharing of profitability between employees bonuses, dividend payout and profit

retention



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Annexure VII

Growth at Atlas Group: The Core Functional Responsibilities of the Four Brothers

(A) Iftikhar H. Shirazi

Work History

Atlas Group

• Member,GroupExecutiveCommittee January1991–Present• GroupDirectorHoldingCompanies March2013–Present• GroupDirectorFinance&Investments January1991–February2013• ChiefExecutiveOfficer—Shirazi(Pvt.)Limited August2011–Present• ChiefExecutiveOfficer—ShiraziCapital(Pvt.)Limited December2005–Present• ChiefExecutiveOfficer—AtlasFoundation February1995–Present• ChiefExecutiveOfficer—ShiraziInvestments(Pvt.)Limited December1989–Present• ManagerFinance—ShiraziInvestments(Pvt.)Limited January1989–November1989• AssistantManagerFinance—ShiraziInvestments(Pvt.)Limited April1988–December1988

Director

• ShiraziTradingCompany(Pvt.)Limited• AtlasMetals(Pvt.)Limited• AtlasWorldWideGeneralTradingLLC

(B) Aamir H. Shirazi

Work History

Atlas Group

• GroupPresident September2001Present• GroupDirectorResident September2000–August2001• MemberGroupExecutiveCommittee January2006–Present• ChiefExecutiveOfficer—AtlasHondaLimited January1993–August2000• ManagingDirector—AtlasHondaLimited January1991–December1992• Manager,Marketing—AtlasHondaLimited January1989–December1990• AssistantManager,Marketing—AtlasHondaLimited June1987–December1988

Member Board of Director of

• TotalParco(Pakistan)Limited• MurreeBreweryCompanyLimited• HondaAtlasCars(Pakistan)Limited• MadianHydroPowerLimited





• ShiraziTradingCompany(Pvt.)Limited• AtlasAutos(Pvt.)Limited• AtlasMetals(Pvt.)Limited• ShiraziInvestments(Pvt.)Limited• ShiraziCapital(Pvt.)Limited• Shirazi(Pvt.)Limited

(C) Saquib H. Shirazi

Work History

Atlas Group

• ChiefExecutiveOfficer—AtlasHondaLimited September2001–Present• Member,GroupExecutiveCommittee September2000–Present• DirectorStrategicPlanning September2000–Present• ChiefExecutiveOfficer—AtlasInvestmentBank October1997–August2000• SeniorVicePresident,AtlasInvestmentBank August1995–September1997

Directorships

• AtlasAutos(Pvt.)Limited• AtlasVentureLimited• PakistanCablesLimited• Shirazi(Pvt.)Limited• ShiraziInvestments(Pvt.)Limited• AtlasHitec(Pvt.)Limited

• AtlasPowerLimited• CheratCementLimited• PakistanPetroleumLimited• ShiraziCapital(Pvt.)Limited• ShiraziTradingCompany(Pvt.)Limited

(D) Ali H. Shirazi

Work History

Atlas Group

• MemberGroupExecutiveCommittee March2013–Present• AtlasBatteryLimited:CEO/President August2010–Present• AtlasAssetManagementLimited:ExecutiveDirector March2006–July2010• Chairman,InvestmentCommittee,AtlasInsurance• Member,InvestmentCommittee,AtlasAssetManagement• Member,InvestmentCommittee,ShiraziInvestments

Directorships

• AtlasAssetManagementLimited• AtlasBatteryLimited• AtlasEngineeringLimited• AtlasInsuranceLimited





• AtlasMetals(Pvt.)Limited• AtlasVentureLimited• NationalClearingCompanyofPakistanLimited(NCCPL)• Shirazi(Pvt.)Limited• ShiraziCapital(Pvt.)Limited• ShiraziInvestments(Pvt.)Limited• ShiraziTradingCompany(Pvt.)Limited• TechlogixInternationalLimited


