Sci.Int.(Lahore),28 (1),551-556,2016 ISSN 1013-5316; CODEN: SINTE 8 551 COST EFFICIENCY ANALYSIS OF SOCCER BALL PRODUCING FIRMS IN SIALKOT, PAKISTAN 1 Zahid Hussain 2M Abubakar Siddique 3 Umar Bilal 4 Muhammad Saeed Hashmi 1 Department of Economics, Lahore Leads University, Pakistan, [email protected], +923344345805, 2COMSATS Institute of Information Technology, [email protected], +923317698090, 3 Department of Economics, Lahore Leads University, [email protected], +923217103105, 4Department of Economics, Lahore Leads University, Pakistan, [email protected] , +923004535124 ABSTRACT: Sports have always been considered an important part of the society, but now, these are becoming an increasingly important part of the economy of all the nations. Soccer ball is arguably the most favorite game of the world, which has seen its 20 world cups. Pakistani soccer ball producing firms are well known for their high quality products. Accordingly, this research paper assessed the performance of five soccer ball producing firms in district Sialkot Pakistan. For this purpose, we applied linear programming based technique Data Envelopment Analysis (DEA) in order to obtain the technical and cost efficiency scores. The secondary data of five years have been taken from annual auditing reports of Nasir & Company. Suitable input and output variables are selected to calculate the technical and cost efficiency scores. The results allow finding the relative efficiency of soccer ball producing firms during last five years. This is a pioneering study of its kind and very helpful in improving the policy of the sports sector of Pakistan. Key Words: Technical Efficiency, Cost Efficiency, DEA, VRS, CRS, Sports, Soccer Ball INTRODUCTION: international repute when it produced “Tango Ball” used in The sports play a very important role in the economic the FIFA world cup of 1982, held in Spain, which led to development of any country. Sports have always been further growth of soccer ball industry in Sialkot. According to considered as an important part of the society, but now, these the Wikipedie.org, “The Per Capita Income of Sialkot in are becoming an increasingly important part of the economy 2012 is $2800, which was $2400 in 2010 and $2100 in 2008. of all the nations. So, the measurement of the impact of the Sialkot is the fourth largest economic hub in Punjab after sports on the economy is becoming an interesting topic for Lahore, Faisalabad and Gujranwala. It is commercially linked the economists. Football is almost the most favorite game of tothe Lahore Stock Exchange through its Sialkot branch, the world, which has seen its 20 world cups, out of which, the known as the Sialkot Trading Floor (STF). The State Bank of last has just ended in Brazil. This paper evaluates the Pakistan and the Export Promotion Bureau of Pakistan has performance of the sports firms. To do this, first of all we branch offices in Sialkot. After Karachi, Sialkot is Pakistan's analyze the impact of these mega events on the economies of second largest source of foreign exchange earnings through the host countries. There are different views of the its exports. For the past several decades, the manufacturers economists, that apart from national prestige, there are many and exporters of the city have been awarded the annual concrete economic benefits of hosting the world cups. The National Exports Award by the Federation of Pakistan evidences, in this regard, are mixed. Some studies suggest Chambers of Commerce and Industry. Sialkot has an that World Cup results in large gains in employment and a Industrial Estate and an Export Processing Zone. Another boost to the economic activities is the direct result for the Export Processing Zone is planned along the Sialkot Lahore hosting country, while some differ strongly. After assessing Motorway. The per capita income of Sialkot is ranked among the impacts of the FIFA world cups on the hosting country, the highest in Pakistan.” now we move on to the sports industry of Sialkot & “All over the world, football is regarded as the most popular performance of soccer ball producing firms of Sialkot. The sport. Soccer Balls; which are the main inputs for this, in official ball used for all the matches in the FIFA world cup 2008, it had a sale of $1.15 billion. According to Nadvi, there 2014 was produced by a firm of Sialkot, Pakistan. Sialkot is is a significant increase of 240% in the trade of the football known as the hub of the sports goods all over the world. industry from year 2001 to 2008. Various tournaments and Cricket, hockey, football, martial arts, swimming, motorbike live coverage of footballs have surged the popularity of this & car racing apparel, leather wears, musical instruments, game. However, a few brands are dominating in international sports wears, are the main sports industries of Sialkot. market such as Nike, Adidas, Puma, and some other brands. Besides above mentioned industries, there are many small Out of these, Nike and Adidas are the major rulers of market. industries related to the sports, which do not count much for Adidas has 34% market share and gets sale of $1.57 billion the whole lot. Our main concern is the football industry of from footballs related products-while Nike has $1.7 billion Sialkot. There was a time when 80% football of the world sale in international market. Both, Nike and Adidas are also was produced in Sialkot. But due to the negligence of the two biggest buyers of footballs Nadvi, 2010. The brands who successive governments, the industry kept shrinking and had have dominance in football market, actually they are not to bear losses for government. Again in 2014, the FIFA producers. They get footballs from various developing ordered the official footballs of the tournament to a firm of countries due to low cost of production. China, Pakistan, and Sialkot, and again Sialkot became the hub for the football Thailand are the major hubs for this and jointly contribute industry. According to a report of Pakistantoday.com.pk, 42 70% of total export of footballs. Nevertheless, it is evident million footballs were exported from Sialkot to the foreign from the last four to five years, that China is increasing its countries. In 1982 FIFA world cup, Sialkot also gained the dominance. China that was having 28.9% market share in Jan.-Feb 552 ISSN 1013-5316; CODEN: SINTE 8 Sci.Int.(Lahore),28 (1),551-556,2016 2004 has raised share up to 50.5% in 2009. While, there is a behind the larger European countries & this was affecting the substantial decline in the market share of Pakistan. In 2009, efficiency as well as the earnings of the smaller European Pakistan has just 13.2% as compared to 23% in 2006. countries. There are more than ten thousand registered firms working in The authors [5] applied the DEA technique to estimate the the city. Among them three industries are dominant, i.e. of technical efficiency of the football league. They claim that leather goods, surgical goods and sports goods. Sports Goods the sports efficiency of the football clubs depends on the exported from Sialkot are famous all over the word for their human capital, like, players, coaches etc. & staff cost. Many quality, based on impeccable craftsmanship. Total exports of large football clubs which took leading positions in the sports goods from Sialkot were amounted US $ 76,189 national championship that were found economically thousands in 2008-09, and its share in the total exports was inefficient because of providing too small return on big 1.46% [19]. The cluster supplies most of the leading branded investments. From this point of view small clubs had a Merchandisers in global sports goods industry – including significant advantage. Sports successes result in clubs’ higher Nike, Adidas/Reebok, Umbro, Pentland (Mitre), Puma, situation in a national rank that allowed to participate in the Decathlon, Select, and Mikasa. The total exports of soccer international tournaments and to get access to the new balls from the cluster came to US$146 million in 2005-06 markets of TV broadcasting rights, sponsors’ contracts, sales [19]. of clubs’ symbolic etc.” The above statistics show that the soccer industry of Sialkot According to their views, the investors of the football clubs is providing employment to a large number of raw handed evaluate the attraction in the investment on the club, keeping workers & precious foreign exchange to the government of in mind it’s current and expected future wins, because there Pakistan. This industry is also responsible for feeding the was a clear relationship between the indicators of sports & associated industries, through the multiplier effect. To the financial success. The authors [6] measured the franchise best of our knowledge, there were 135 manufacturing firms payroll efficiency of the National Football League (NFL) & producing soccer balls in Sialkot as of November 2011 [19]. Major League Baseball (MLB) between 1985 and 2000, The firms themselves employ approximately 12,000 workers, using the DEA. The results show that there was a significant and outsourced employment of stitches in stitching centers difference between the level of franchise efficiency of these and households is generally estimated to be more than twice two & its main reason was the difference in the financial that number. structure of these two leagues. The DEA pointed out the 2 LITRATURE REVIEW: inefficiencies between these two leagues. The MLB proved to A large number of studies have been conducted with be overspending because of absence of a salary cap while technical efficiency of the football league and sports NFLs efficiency, improved after introducing the salary cap. producing firms in the world. Authors [1] assessed the In this way, MLBs payroll appeared to be very high as technical efficiency of 49 manufacturing firms in Pakistan.