FINAL REPORT

COMPANY: AL-HAJ FAW Company

For the fulfillment

Of the course

International Business

_____________________________

Submitted to

Shahzaib Khan

By

Shahnawaz Bhamani (8303)

Syed Rameez Gohar (8075)

Syed Wajahat Raza Jafri (7604)

Suleiman Salim (6116)

BBA-H

TABLE OF CONTENTS

1. Introduction of FAW China Motors............................................................................................

2. Introduction of Al-HAJ Group.....................................................................................................

3. AL-HAJ FAW Motors...................................................................................................................

4. Pattern of Expansion......................................................................................................................

Passive to Active Expansion………………………………………………………………………………………

External to Internal Handling………………………………………………………………………………………

Deepening Mode of Commitment………………………………………………………………………………………

Geographical Diversification………………………………………………………………………………………

Leapfrogging of Expansion………………………………………………………………………………………

FAW CHINA MOTORS

Introduction:

FAW (First Automotive Works) group is one of the biggest and oldest leaders in vehicle manufacturing industry more than 50 years of innovation. The company was initiate in 1953 and commonly known FAW and has its headquartered in Changchun, Jilin in China. However in 1992, the name was changed to China FAW Group Corporation. The company has more than 100,000 employees all over the world and operating in 70 countries with 7 million of total sales worldwide.

FAW has entered in to a market individually operating as a commercial truck vehicle manufacturer and gradually expands into light trucks and car sector. FAW has a dominant position in trucks market while their strategies have a great emphasis on car sector as well. Moreover, FAW China is also a biggest supplier to Chinese military. The company is diversified maker in quality vehicles and maintains the leading position in China and continuing to expand into new International Market with planned strategies to become global organization.

FAW Company has also a joint venture business with top leading brand of vehicles in the national and international market. Furthermore, FAW has 28 owned vehicles in which 18 are partially owned vehicles and joint venture with following sound companies.

FAW - Volkswagen FAW - Toyota FAW - Mazda FAW – General Motors

Following are the diversified vehicles on which FAW China focuses. Light Duty Trucks Medium Duty Trucks Heavy Duty Trucks Passenger Cars, SUVs & MPVs. Municipal Buses Luxury Tourist Coaches Custom Bus Chassis & Mini Vehicles

Al-HAJGroup:

The very first AL-HAJ company was launched at Jumrud Khyber Agency in District Peshawar, Khyber Pakhtunkhwa. The operation initially includes the process of importing and exporting of electronic products, clothes and tires. Later, the company expands their business and became the main dealer of Hino Pak by the name to AL-HAJ Motors. The proprietors of AL-HAJ group have maintained a very strong relationship with neighbor countries which includes China, Afghanistan, United Arab Emirates and throughout Pakistan as well. The Group has vast Strategic Business Unit (SBUs), which are working with these countries.

A. Al-HAJ Transport and Logistics

Al-HAJ Enterprises Al-HAJ Tankers Adnan Carriage Company Al-HAJ Ltd., Afghanistan

B. Al-HAJ Industrial Corporation (Pvt) Ltd.

Al-HAJ Textiles Al-HAJTyres

C. Al-HAJ FAW Motors (Pvt) Ltd.

D. Al-HAJ Metallic Industry & Al-HAJ Tex.

E. Al-HAJ Real Estate Solutions

AL-HAJ FAW Motors:

AL-HAJ FAW Motors (AHFM) is a joint venture between AL-HAJ group and FAW China was incorporated as a private limited Company in October 2006 and is a sole distributor and progressive manufacturer/ assembler of FAW heavy, light commercial vehicles and passenger car in Pakistan under the technical assistance and distribution agreement with FAW China which allow them to import, distribute and sell FAW products in Pakistan.

The Company first product line was launched in 2006 and since it has entered in automobile industry with long term plans to market and sale good quality, reliable, economical and well designed vehicles to the local customers.

The local production of FAW vehicles started in August, 2011 in their state of the art manufacturing facility located at Zulfiqarabad Main National Highway, Karachi.

The company has offered optimal automotive products to its customers who will serve the individual user, commercial entrepreneur and multinational organizations. The company’s prime mover vehicles has a capacity of 30 to 80 tons, whereas, FAW trucks has a capacity of 9.8 to 30 tons.

Pattern of Expansion:

1. Passive to active expansion: AL-HAJ FAW Company has initially entered into the commercial

market of Pakistan introducing heavy truck in 2006. The Company has quickly gain the market share and reputation and also stands with the market leader. Their further plan was to make such efforts to compete with Japanese dominants by introducing their new product line in light commercial vehicles and passenger car categories. Their products strategies in vehicles were Complete Built Units (CBUs) and in Semi knocked Down (SKD) which could suitable for high and low tariffs.

Furthermore, when the Company starts introducing their products into market, it has quickly gain the positive response and reputation and their customers were quiet delight by adopting and utilizing their products especially in FAW Carrier because it has a best deal in market. This vehicle fulfill all their needs such as better loading capacity, better seating capacity, roomier, better and new design, availability of parts and professional service staff at dealership. In addition for reducing operational cost, the Company introduced the low RPM Deutz engines with heavy duty clutch and transmission of Eaton and to provide driver comfort, they also introduce the spacious and luxurious cabins in Pakistan. All these services have given a huge amount of value to its customer against their money and established the long term relationship with them. On the other hand, AL-HAJ FAW dealers have also shown a great interest for a long term commitment and they also feel immense pleasure in obtaining FAW products.Right now, dealership network of 3s (sales, service and spare parts) is working with 2 dealers in South region, 6 in Central region and 2 dealers in North region, More dealers are also added

with the time for providing best customer satisfaction and long term relationship. Moreover, Bank financing and leasing facilities are also available for such Company’s products in the market. Their long term plans is to produce in the market, sell good quality, reliable, economical, more environmental friendly and well designed vehicle to local market. The company has also faced the harsh time till they starts their production of heavy trucks locally. Trucks are the core product of the company by which FAW China has gained good reputation. However sales taxes were increased on truck which has ultimately increased the prices of trucks up to 25% which result in decreased in sales of truck in Pakistan. Reasons were political instability and economic policies of Pakistan that has changed rapidly and hits the truck industry with great negative impact. From 4000 trucks annual sales, it was decreased to 1500-1600 annually. This worst situation has also discourage their long term plan of opening an assembly plant so that they would able to assemble and produce trucks and other light and medium vehicles at low cost and better quality.

2. External to Internal Handling:AL-HAJ FAW Company has received a huge positive response

from their customers and dealers in different regions of Pakistan. It also become the dominant competitor in local market and achieved 2nd position after Hino Pak motors, which results in gaining 30 percent market share and make FAW Company to expand in the market of Pakistan through FDI. After gaining respectable impression in truck market of Pakistan, the Company has decided to start an assembly plant near Karachi at Bin Qasim port with 1 billion of investment with 100 percent equity financing from owners and has signed a technical license agreement with FAW, which allowing them to import parts and assemble locally which benefits company in reducing cost and selling more. However, taxes on CBUs ultimately decrease and cut off. It took a year for building the whole infrastructure and setting up plants and machinery they have are the best in Pakistan vehicle industry. However, it is the first automobile plant for assembling FAW products in Pakistan. The assembly plant is equipped with lasted machinery and equipments to manufacture FAW trucks, Prime Mover, Light Commercial and Passenger Vehicles. The Plant has capacity to produce 11,000 units per annum and can be extended according to requirement and demands. With their new plant in action, the Company is also looking to produce 1000 to 1500cc engine vehicles in near future.

On the other side, dealers of AL-HAJ FAW Company hold their hands tightly with the company and showed positive response in expansions. Moreover, dealers have enjoyed a good name and reputation with the Company and also tell the reasons for joining hand with them which are as follows.

Well known and financially sounds group. Investments by its own resources. Young and energetic management.

Quite old in Auto-industry with lot of experience in heavy commercial vehicles.

Modern plant equipped with latest machinery. Most popular, reliable and no.1 brand in China. Provide full backup support through 3s dealership nationwide. Believe in appointing professional and experienced staff of the

same trade.

With this assembly plant in action, the company is also planning and targeting to introduce new vehicles and passenger car in Pakistan with 1000 to 1500cc engines capacity which will be assembled locally.

3. Deepening mode of commitment:AL-HAJ FAW Company has become very successful with its first launched truck in Pakistan in 2006 and become active in automobile industry. When the Company entered in the market, huge responsibilities also come along with them for providing best after sell service to its customer, product safety and environmental friendly. Unfortunately FAW China had made a partnership with group in past. The group was very weak and did not have long term plans. This left a very bad image in Pakistani market among customers and they switch to other existing company’s product. It was not related to the quality of products but the image has created the problems. However, Chinese companies have now become smarter in choosing partners after such bad experience.

AL-HAJ FAW 3s strategy is the core thing that has completely changes the image of Chinese products in automobile industry in Pakistan. The Company does not focus on number of dealers; their core strategy of 3s remains same and committed. Initially, sales were low but it gradually increases by sticking to their policy and the results started to bear fruits. One of the biggest issues also occurs in Pakistani market that normally people focuses on resale value rather than adopting and focusing on features and technology that company has given.

Furthermore, buying pattern has also change and more commercial companies are now getting involved in buying and using truck. They are very happy with 3s facility under one roof and are interested in making and planning long term relationship with them. Currently, AL-HAJ FAW are providing biggest and best 3s facility in automobile industry all over Pakistan. It has provided 1500 job to the local people of Pakistan directly and indirectly which is ultimately increasing the job opportunities and plays the most important role for the development of Pakistan.

The continuous modification and transmission in technology has supported AL-HAJ FAW Company and make their customers more encourage with their products. Related to the innovation, the new addition have EFI and Euro 4 technology, which are still not available in other dominants products. However, these new technology has been added to provide comfort and affordable transport to its customers. New Chinese

technology is also transferred to Pakistan for the advancement of locally produced and assembled automobile. This step will enhance the efficiency and offer cheapest form of transportation. Furthermore, Bank Alfalah has also signed a contract with AL-HAJ FAW for providing auto financing loan to their customers for FAW vehicles. The company believes that this will provide people more choices with better financing solutions. For them, customer satisfaction is the major concern and they always look for the betterment for their customers. In addition, Chinese automobile in Pakistani market for providing them best quality, durability, after sale service and best customer value against their money. The Company also received Green supply Chain Strategy award for being environmental friendly in Pakistan.

4. Geographical Diversification:Initially, AL-HAJ FAW Company has completely importing CBUs vehicles from China. Though it has spread its whole networks in also other cities of Pakistan as a dealership for vehicles and offering 3s service (Sale, Service and Spare parts). The Company has its start from Karachi and with the passage of time, company spread their dealers in different major cities of Pakistan which includes, Sadiqabad, Bahawalpur, Multan, Sahiwal, Faisalabad, Lahore, Sargodha, Gujranwala, Rawalpindi, Islamabad, Peshawar and Mirpur with their best 3s service. This Al-HAJ FAW Company’s expansion has helped them to gain a huge amount of share and capture the market with their best possible vehicles. Moreover, the expansion has also lower and diversify the risk and focusing on other cities as well to serve and capture all possible market where its demand exists. FAW China Vehicle especially their core heavy trucks and prime movers has earned a great impression in Pakistani market having new features and technology in it. The company is at 2nd place after Hinopak motors and offering the best 3s services in Pakistan.

Furthermore, the Company is actively involved in heavy commercial vehicles since 2006 and was also looking to expand their business in Karachi with introducing first FAW assembling plant in Pakistan, which allows them to produce heavy, medium and light vehicles and distribute them locally all over Pakistan to all their dealers in different cities. Producing FAW vehicles in Pakistan can cost the Company low and thus increases their sales in their core vehicles. The Company has invested 1 billion Rupees for opening assembling plant in Karachi near Bin Qasim Port with the capacity of producing 6000 trucks and 12000 light and medium vehicles every year. The biggest advantage for opening plant in Karachi is the Sea port from which AL-HAJ FAW Company can import large amount to plant, machineries and parts to assemble them locally.Other advantage could be availability of electricity in Karachi, whereas, other cities have a huge hours of load shedding which may disrupt the company operations and lead them to bear losses. In addition, Karachi is the metropolitan and one of the biggest cities in world having more and

core advantages than other cities. Business can easily expand and grows and AL-HAJ FAW Company has done the same job for expanding and growing in Karachi. The Company has enjoyed great benefits from having monopoly in the market with other brands.

Automobile industry in Pakistan contributes 30 billion in its GDP and pays around 8 billion taxes to the government which is the biggest contribution than other industries exist in Pakistan. Company’s geographical diversification has also improved the communication system through their dealers available in different cities and efficiently improving their services in existing areas, whereas, the Company is also looking for new opportunities available in different areas of Pakistan.

5. Leapfrogging of expansion:In past, FAW China entered in Pakistani market but left with a bad image, not in quality of products but the partnered group was very weak and does not have long term plans. After such bad experience, now FAW China is become smarter in choosing partner. In 2006, when FAW China become partner with AL-HAJ Group the Company initially was importing vehicles and distributes them locally under license. However, they further plans to open an assembly plant in Karachi and plan to produce vehicles locally without compromising on quality. This can ultimately lower their cost and present their products in market with best possible and competitive price. Heavy duty on CBUs vehicles and taxes on sale increases the price up to 25 % but now producing and assembling locally can reduce the prices and encourage more customers to buy their vehicles. Providing quality features in engine, innovative design, luxury cabin, air bags, Euro 2 and Euro 4 technology and the most important environmental friendly has its core value in Chinese vehicles and make them different from other dominants exist in the market.

It has created a huge impact not only on customers but also provides the biggest job opportunity in the market. Around 1500 to 2000 people get employed directly and indirectly with AL-HAJ FAW Company. Moreover, dealers have also got a new opportunity in market to expand and earn good name and return. After sales service shows the quality of the Company which they are providing under one roof in all cities where they exist. Producing trucks locally has also encouraged suppliers to produce best quality material to build a long term relationship with AL-HAJ FAW Company as well. Directly or indirectly, the expansion of FAW China in Pakistan has made a huge impact of economy as well as on public to provide new options in the market with best possible services. Thus, it has also encouraged the company to launch and expands into light commercial vehicles which are also assembled locally and presented in market efficiently. The company’s main focus is on changing the people’s mindset about Chinese products and provide them quality, durability and after sale 3s support against their money.