pel pakistan

Marketing Plan for a New Product

1-EXECUTIVE SUMMARY

This project is based on the comprehensive study of the core subject of Strategic Marketing Management. The project contains a detailed industry analysis as per the teaching of course and detailed information about the present condition of Air Conditioners Market in Pakistan.

The project contains a comprehensive Marketing Plan (for External Audience) of a new product which is to be introduced as a pioneer product in the Pakistan’s market. The product belongs to the family of Split Air Conditioners and is called Mobile Air Conditioner. The selected name of the product is “MAC – Series” which contains two different models. The product is launched under the family brand name of PEL. Pak Elektron Limited (PEL) is the flag bearer of the Saigol Group of Companies and is the pioneer manufacturer of electrical goods in Pakistan. It was established in 1956 in technical collaboration with M/s AEG of Germany. PEL currently has a market share of 13% in the Split Air Conditioners market but has the strongest dealership network all over Pakistan which can help in the success of new product. PEL has recently exported 14,800 Split units to Afghanistan.

The unique product has some attractive features like changeable bodies, automatic excretion of air freshener and above all portability.

The project discusses a complete marketing strategy with respect to five P’s and also the three years income statements. Promotion of MAC – Series has a budget of Rs.15.04 Million which is further distributed in the electronic, print, outdoor media and direct marketing.

Please read the project for detailed information.

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2-DESCRIPTION OF THE COMPANY

Company Profile:

Pak Elektron Limited (PEL) is the flag bearer of the Saigol Group of Companies. Pak Elektron Limited (PEL) is the pioneer manufacturer of electrical goods in Pakistan. It was established in 1956 in technical collaboration with M/s AEG of Germany. In October 1978, the company was bought by the Saigol Group of Companies. Since its inception, the company has always been contributing towards the advancement and development of the engineering sector in Pakistan by introducing a range of quality home appliances and by producing hundreds of engineers, skilled workers and technicians through its apprenticeship schemes and training programs.

The company comprises of two divisions:

Appliances Division. Power Division.

2.1-Appliances DivisionPEL’s Appliances Division is the flag carrier of the Saigol Group. This Division of PEL consists of home appliances manufacturing.

PEL window-type air conditioners were introduced in 1981 in technical collaboration with General Corporation of Japan. Ever since their launch, PEL air conditioners have a leading position in the market. PEL air conditioners cooling performance has been tested and approved by Copeland and ITS USA and today PEL holds approximately 45% of air conditioners market share.

PEL recently launched its Cool life Split air-conditioner which is a technologically advanced model specially designed for Pakistan market. This masterpiece from PEL provides maximum cooling even at very high temperatures while minimizing your electricity consumption. Its salient features include:

Low power consumption Low Voltage startup Hydrophilic Aluminum Fins 3-bend heat exchanger Scientific Louver Rotation (SLR) Independent de-humidification function

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Anti-bacterial and anti-dust filters

PEL Air Conditioners have been specially designed for countries, having climatic conditions similar to Pakistan. The Air Conditioners have excellent cooling capabilities at extreme temperatures at varying levels of humidity; high air dust and uneven local power supply conditions.

2.2-Power DivisionPEL Power Division manufactures energy meters, transformers, switchgears, Kiosks, compact stations, shunt capacitor banks etc. All these electrical goods are assembled under strict quality control and in accordance with international standards. PEL is one of the major electrical equipment suppliers to Water and Power Development Authority (WAPDA) and Karachi Electrical Supply Corporation (KESC), which are the largest power companies in Pakistan.

Over the years, PEL electrical equipment has had been used in numerous power projects of national importance within Pakistan. PEL has the privilege of getting its equipment approved and certified from well-reputed international consultants such as:

Preece, Cardew and Rider, England Harza Engineering Company, USA Snam Progeti, Italy Societe Dumezm, France Miner & Miner International Inc. USA Ensa, France

In spite of stiff competition from emerging local and multinational brands, PEL Group's appliances and electrical equipments have remained in the spotlight due to constant innovation. Strategic partnerships with Copeland, Danfoss, Samsung and others have enabled the PEL Group to incorporate new technologies into existing product ranges, thus giving the Pakistani market access to innovative, affordable and quality products.

The products manufactured by PEL have always been of high standard and the name 'PEL' is synonymous with QUALITY all over Pakistan. Since its inception, the company has been working for the advancement and development of engineering know-how in Pakistan. The company has produced hundreds of engineers, skilled workers and technicians through its apprenticeship schemes & training programs.

PEL has been continuously adding new products to its range. As a result, PEL has registered a significant increase in its sales volume, during the last ten years.

PEL was 16th Company in Pakistan which got ISO 9002 Certification in 1997, since then PEL Management is applying this International Standard Practices for Effectively Managing Quality of Products and Services that Company Offers. The International Standard Practices in PEL have been Upgraded as per the Revised ISO 9001 Standards and its Scope of Application is expanding ever since and Top Management is Committed to make PEL a Total Quality Management (TQM) Company.

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3-STRATEGIC PLAN AND FOCUS

This section covers three aspects of corporate strategy that influence the marketing plan:

1. Mission/Vision.2. Goals.3. Core Competencies/sustainable competitive advantage.

3.1-Mission/Vision:The mission and vision of Pak Elektron Limited (PEL) is to market lines of high quality home appliances and power division products at affordable prices that satisfy consumers in the fast growing electronic and power segment while providing challenging career opportunities for employees.

3.2-Goals:Non-Financial Goals:

To add a new product to its range in every third year for increasing the sales volume.

To set an image as the best quality of local home appliances. To set an image as the best quality of local power division products.

Financial Goals: To obtain a real (inflation-adjusted) growth in earning per share of 10% per

year over time. To increase the market share of split unit to at least 20%-25% by the end of

2007.

3.3-Core Competencies/sustainable competitive advantage: Pak Elektron Limited (PEL) is the pioneer manufacturer of electrical goods in

Pakistan. PEL was 16th Company in Pakistan which got ISO 9002 Certification, ever

since and Top Management is Committed to make PEL a Total Quality Management (TQM) Company.

Huge distribution network all over Pakistan.

To translate these core competencies into a sustainable competitive advantage, the company will work closely with key suppliers and distributors to build the relationships and alliances necessary to satisfy the standards of customers.

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4-SITUATION ANALYSIS

4.1-General Environments:

4.1.1-General State of the economy:

On the back strong economic recovery of last year Pakistan’s economy is gathering even greater momentum during the current fiscal year (2005-06).

Privatization of Karachi Electric Supply Company (KESC) – the most difficult and complex public sector utility.

Growing interest of foreign investors in Pakistan as manifested by the visits of over 200 foreign investors’ delegation in the last 2 years.

Above are some of the events of significant nature which have taken place on domestic economic scene during the current fiscal year. GDP is targeted to grow by 8% in 2005-06, powered by a strong growth in manufacturing (10.2%) and continuing robust performance in services (15%) and agriculture (5.0%-6%).

At the back of stronger than expected performance of agriculture and manufacturing the GDP growth is likely to exceed the target and may end up at around 8.4% - the highest growth in the last 15 years. Pakistan is number 2 in the race of GDP growth after China.

The overall fiscal deficit that averaged nearly 7% of the GDP in the 1990s has decline to 3.2% in 2005-06.

The per capita income of Pakistan has reached up to $847 (Recent Economic Survey).

The literacy rate of Pakistan is estimated at 54% of both sexes.

4.1.2-Economic condition of the industry :

The industry is experiencing a phenomenal growth for last three to four years. Three years back the total demand for split units was 180,000 Units/year which rapidly increased to 280,000 Units/year in 2002-03, in 2004 demand reached 300,000 units in 2005 the demand for split units was 336,000 units and in 2006 the demand is approximately 350,000 units. The window type air conditioners are almost obsolete and companies are planning to shut their facilities of window type air conditioners in the coming year if the situation keeps same.

4.1.3-Condition of the company in industry:

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It is a very stable and an established company. They are in the market for almost 30 years and they are considered to be the pioneers in Window type Air Conditioners in Pakistan. They span almost all of the major cities of the country. They have a number

of renowned products in their credit. Their key product is Refrigerator and they are rated as number 2 Refrigerator Company in Pakistan. The company is dealing in two sub-divisions of the appliances division.

1. Manufacturing items.2. Trading items.

They are manufacturing Refrigerators locally and importing all other products from abroad and distributing these items with their label on them. The factory is producing 1200 refrigerators daily. Split unit is their trading item and they are importing it from China. Their Split Unit sales are not that good.

4.2-Product Market:

4.2.1-Product Types, Varieties and Brands:

PEL is renowned for its refrigerators and they are rated as number 2 company, they only manufacture refrigerators and the split unit is their trading item. They import it and then distribute it all over Pakistan with their own label on it. They test launched the Split Unit in 2002 and then again in 2003 but the results were not favorable so they decided not to repeat the same in 2004. They have again launched the Split Units in 2005 and it is Available in 0.75, 1.0, 1.5 and 2 ton energy efficient models. PEL split models names are:

1. Silver Line2. E-63. Cool Life (Energy Saver)

DescriptionFunction

UnitModels

PS95K PS125K PS185K PS245K

Cooling Capacity BTU/hr. 9500 12500 18500 24000

Power Consumption

Kilowatts 0.880 1.300 1.960 2.550

Operating Current Amps 4.0 6.1 9.0 11.7

Sound Level Indoor

dB 37 39 43 45

Sound Level Outdoor

dB 48 48 55 58

Dehumidification Capacity

L/hr. 1.2 1.6 2.5 3.0

Voltage Frequency V/Hz 220/50 220/50 220/50 220/50

Indoor WxHxD mm 800x285x185 800x285x185 1020x315x180 1080x330x230

Outdoor WxHxDmm

830x500x310 830x500x310 800x685x300 860x900x330

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Ideal room sizeSq. ft.

90-120 120-150 150-225 225-300

4.2.2-Sales Volume and Trend:

PEL is selling the Window Air Conditioners for years but they are new to Split Units. They have test launched the product twice with minimal results and now they are looking to sell about 30,000 units this year. Their overall sales are increasing which can be seen as follows.

Audited financial statements and a review of the performance of the Company for the year ended June 30, 2005. (Available on internet)

Operating Results:

The gross sales of Rs. 8.075 Billion, from Rs. 6.077 Billion in the last year, have shown an increase of 33%. Profit after tax has also registered a corresponding increase of 25%. A list of key financial results is given below:

Financial Results (Rs. in Million) 2005 2004

Gross Sales 8,075 6,077

Gross Profit 1,489 1,070

Operating Profit 893 659

Profit Before Tax 442 280

Profit After Tax 347 277

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4.2.3. Growth Rate:

The industry is experiencing a phenomenal growth in last three to four years. Three years back the total demand for split units was 180000 Units/year which rapidly increased to 280000 Units/year in 2002-03, in 2004 the demand reached to 300,000 units, in 2005 it was 336000 units and in 2006 it is estimated to reach 350,000 units.

4.2.4. Market Share:

Because they have launched it recently and there are a lot of competitors in the market their market share for Split units is 13%. The market share of PEL refrigerator is 38% and the overall share of PEL in market is 18-19%.

Market Share of Window Type Air Conditioners:

The market share of companies when the air conditioner market was ruled by local competitors producing only window type air conditioners:

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Market Share of Split Air Conditioners:The market share of the companies at present after the entrance of cheap Chinese split units:

4.3-Customer Market:

4.3.1-Demographic Factors:

When we talk about splits we have two social classes who are the potential customers.

1. Higher end.2. Middle end.

The companies like LG and Mitsubishi are classified as higher end products and they are more costly.

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The companies like PEL, Haier, Dawlance and Waves etc are middle end brands. These are low price products with low electricity consumption. They are for price conscious people who belong to middle class of the society.

4.3.2-Life style and Patterns:

Due to high electricity rates and high consumption of electricity, through Window type Air Conditioners, the trend has now changed towards the Split Air Conditioners as they are more efficient in electricity consumption. There is also another factor that the prices of the land has increased dramatically and it is easier to install a Split Unit in a small house rather than a Window type Air conditioners which requires a proper place for outside unit at the exact point where the inner portion is installed.

4.3.3-Usage Patterns and Behaviors:

Air conditioning has now become an essential part of living. As it is becoming very

difficult to fight against the ever increasing heat in cities as well as in remote areas. People tend to use Air conditioners more and more day by day during summer seasons. In countries like Pakistan the Air Conditioning usage is maximum because of an extended summer season of nearly 8 months a year. In Pakistan the Air conditions are used by upper and middle class.

4.3.4-Preferences for Specific End Benefits:

PEL is providing 18000 BTU for 1.5 ton Air Conditioner in comparison with its competitors who are mostly providing 16000 BTU for 1.5 ton.

In most parts of Sindh there is a major problem of rust and PEL is providing extra copper coating on its outer units which prevent them from rusting.

4.4-Marketing Programs:

4.4.1-Advertising and promotional programs:

PEL is using two types of advertising programs i.e. Above the Line (ATL) and Below the Line (BTL).

ATL includes:

Print Media. News Papers. Media Vehicles. Electronics

BTL includes:

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Closed Circuit Television (CCTV). Radio. Magazines. Internet. Point on Sales Material (POS) & Point of purchase (POP) - Buntings,

Wobblers etc.

On television PEL covered the Pakistan Vs India series and Pakistan Vs West Indies during the matches PEL ads were running in almost every commercial brake on Ten Sports, ARY digital and other channels. Now they are planning to cover Pakistan Vs England series also and this is helping them in the promotion of their products.

PEL spent Rs.45million in the advertisement of Refrigerator and Rs.20million in advertisement of their split units.

4.4.2-Pricing Practices :

For PEL MAC – Series pricing practice is as follows:

Its PEL’s trading item so they are importing it from China in a complete packed form. Its cost includes import duty, custom charges, carriage charges, warehouse charges and dealer margins. The market selling price of PEL is

4.4.3-Relationships with Whole Sellers and Retailers :

They have a brand name which is worth for a lot of years; dealers wish to work with such giants. Their market reputation is very good and people are very much satisfied with the products. Company have strongest distribution network so the relationship with dealers and all the Retailers and whole sellers are very good and cooperative.

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5-SWOT ANALYSIS

5.1-SWOT ANALYSIS OF PEL:

Strengths:

Strong brand equity. Quality Product (ISO Certified). Large dealers’ network. Country wide availability.

Weaknesses:

Lack of marketing orientation. Lack of executive sport for marketing department.

Opportunities:

Range of products can be increased. Big area of home appliances like washing machines, vacuum cleaners, toasters etc.

Local assembling of the key products. Increase market share in growing market. Expansion of area because of brand equity.

Threats:

Cheap Chinese brands. Dealers’ personal product. Bigger incentive by bigger players. Bigger advertising budgets of others. Easy entry and exit in the industry.

5.2-SWOT ANALYSIS OF PEL SPLIT UNITS:

Strengths:

Brand equity. Quality product. Larger dealers’ network. Oldest group of companies at the back.

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Weaknesses:

Absent from the market in the past. Weak customer pull. Unplanned availability.

Opportunities:

Local assembling. Combination of push and pull strategy. Expansion in product range.

Threats:

Cheap Chinese brands. Dealers’ personal product. Bigger incentive by bigger players. Bigger advertising budgets of others. Easy entry and exit in the industry.

5.3-SWOT ANALYSIS OF AIR CONDITIONERS INDUSTRY:

Strength, weaknesses, opportunities and threat analysis show the industry’s current position and future prospects.

Strength

Fully modernized industry. Having internationally compatible products. Capacity to manufacture and assemble 400,000 units annually. Potential to produce the complete range for central air conditioning system of

textile industry.

Weaknesses

Under utilized capacity of manufacturing units. Shut down units into industry. High cost of production. Declining growth into the industry. Absence of Export in international market.

Opportunities

Opportunity to penetrate into the Middle East and African markets. Can convert from window type air conditioner towards split units and

centrally air conditioning systems.

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Threat

Imported air conditioner into local market (Cheap Chinese brands). Smuggled items in the market. New world trade order of open trade.

This analysis depicts that the industry has the potential to grow and can move towards a booming industry. Ultimately it is beneficial for Pakistan’s economy.

6-PEST ANALYSIS

6.1-POLITICAL ENVIRONMENT:

The political condition of Pakistan is highly uncertain and unstable but from few years we have seen some consistency in Government policies which encourage the foreign investors to invest in Pakistan.

There is no check on importers by the Government. Any dealer can import anything and can sell it with his own label on it. There is no quality check and brand authenticity. An example is the FAST home appliances.

There are very few incentives for the manufacturers in Pakistan by the Government as compare to the up coming giants like China. The cost of manufacturing is very high because of the electricity rates and other overheads so most of the time the manufacturers prefer to outsource

The said demand is met through imports from china, there is 15% subsidy given to the exporters in china.

For example, the government should reduce even abolish import duty on raw materials. This would make Pakistan made HVACR (heating, ventilation, air conditioning and refrigeration) products much more ‘purchasable’ than today.

Demand of split air conditioner emerged mainly because almost all the government departments were replacing window type air conditioner with split units.

6.2-ECONOMIC ENVIRONMENT:

There is a great boom in construction sector nowadays and more houses and other buildings are being constructed then ever before so there is a great demand for home appliances and above all are the split units.

GDP is targeted to grow by 8% in 2005-06, powered by a strong growth in manufacturing (10.2%) and continuing robust performance in services (15%) and agriculture (5.0%-6%).

At the back of stronger than expected performance of agriculture and manufacturing the GDP growth is likely to exceed the target and may end

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up at around 8.4% - the highest growth in the last 15 years. Pakistan is number 2 in the race of GDP growth after China.

The overall fiscal deficit that averaged nearly 7% of the GDP in the 1990s has decline to 3.2% in 2005-06.

The per capita income of Pakistan has reached up to $763.

The literacy rate of Pakistan is estimated at 54% of both sexes.

Cost of production and imported raw material are very high.

Growing interest of foreign investors in Pakistan as manifested by the visits of over 200 foreign investors’ delegation in the last 2 years.

According to the per capita income, Pakistan is included in the middle income group and the high rates of electricity at commercial and residential areas are point of huge concern for people. This is one big reason that people are shifting at a great speed from window type air conditioners to split units. A window type air conditioner (1.5 ton) consumes 11 Amperes/Approximately 3 units of electricity per hour and a split unit consumes 8.5 Amperes/Approximately 2 units of electricity per hour.

6.3-SOCIAL ENVIRONMENT:

Nowadays people are becoming more and more price conscious. That is why window type air conditioner is almost obsolete because of high cost of electricity bills and splits are becoming popular because of low electricity bills.

Consumers also prefer split units because “they are considered energy savers”. But the traders are fleecing consumers by selling to them low capacity splits as high capacity units. There are many chances that you get a 0.75 ton split if you go to the market to buy a one ton unit without your knowing it, so the consumers have to pay the same amount of power bill at the end of the day and live with less cooling.”

In countries like Pakistan the Air Conditioning usage is maximum because of an extended summer season of nearly 8 months a year. In Pakistan the Air conditions are used by upper and middle class.

The companies are becoming socially responsible these days as they have introduced Anti-bacterial and anti-dust filters.

Our society has started considering split units as a status symbol and feels disgraced if split units are not installed in every room of their houses .A sizable number of people prefers to buy air-conditioners on cash basis, there are many who want to procure A/Cs through banks and leasing companies on consumer financing packages. Besides, many dealers have initiated their own

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schemes of selling air-conditioners and other domestic appliances on easy installment basis.

Several hundred workers employed by three window air-conditioner manufacturers of the country may lose their jobs because of an increased influx of the low-cost Chinese split units that have almost wiped out the demand for the former.

6.4-TECHNOLOGICAL EVIRONMENT:

With the introduction of split units, this new technology has made air conditioning more affordable and easy to install & maintain.

Efficiency of an air conditioner depends on the outer part. If the outer part is bigger then the air conditioner will be more efficient in sense of cooling. Window type air conditioners have smaller outer part as compare to the split units; therefore they are less efficient as compare to the split units.

Another reason for being less efficient is that window type air conditioners have the cooling unit and heat discharging unit at the same place so sometimes hot air tends to cause the cool air loose its potential to work properly. Split on the other hand has two separate parts and the cooling unit is in no contact with the heat discharging unit which tends to improve the efficiency of a split unit.

Another technical aspect is that rotary compressors are used in split units which are soundless and do not heats up in extreme temperatures as compare to the window air conditioners.

Because of being more efficient in cooling the compressor of split unit drips at proper time and the set temperature is achieved at lesser time as compared to window type air conditioner. This is one of the reasons that split unit consumes approximately 2 units of electricity per hour and a window air conditioner consumes approximately 3 units of electricity per hour.

This is due to innovation in technology that now there is need to make a small whole anywhere you want to install a split as compare to a window type air conditioner which needs a big hole and a proper place to be installed.

In international market, non-CFC (Chloro-floro Carbons) are shifting in air conditioning industry and all large companies are trying to use non-CFC gasses. CFC gases are harmful for the ozone air. From 2005; no CFC gases item will be bought or sold into the international market, this is a deadline for Pakistan and to remain into international market it’s necessary to adopt new technology of non-CFC gases.

Another point with respect to technology is that in window type air conditioners uses more electricity at the time of being switched on as compare to split units.

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Split contains following latest technology as compare to the window type air conditioners:

1. Hydrophilic Aluminum Fins.2. 3-bend heat exchanger.3. Scientific Louver Rotation (SLR).4. Independent de-humidification function. 5. Anti-bacterial and anti-dust filters.6. Low power consumption.7. Low Voltage startup.

7-PORTER ANALYSIS

7.1-Bargaining power of Suppliers:

Bargaining Power of supplier is low because of availability of no. of Chinese brands in the market and the buyers can shift at any time from one brand to another brand.

Main suppliers of Raw Materials and sub-\components are Japan, U.S.A, Italy, Korea, Singapore and Thailand.

Main suppliers of whole Split unit are China, Japan and Korea. In near future the Chinese Government is expected to remove subsidies given

to their air conditioner industry, due to which prices may rise and only the suppliers who would have achieved the economies of scale will remain and ultimately result in increased bargaining power of suppliers.

The bargaining power of suppliers may rise if Chinese producers adopt the forward integration strategy by establishing their plants in Pakistan.

7.2-Bargaining power of Buyers:

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Bargaining power of Supplier

Current Competitors within the Industry

Threat of Substitutes

Threat of New Entrants

Bargaining power of Buyers


The bargaining power of buyers is high, because:

They have many options available regarding the purchase of various brands. There is a variety of different split units available with different prices in the

market- people are becoming more and more price conscious with respect to split units because they are aware of the fact that all splits are Chinese made and almost of same quality.

The buyers are very choosy among various brands because of;1. Very low switching cost.2. The air conditioners available at various prices; ranging from low price

A/Cs to high price A/Cs depending on the brand.

3. The facilities or value added features offered by the different sellers.4. The user friendly interface.5. The prestige a buyer feels regarding the purchase and use of a

particular brand.

7.3-Threat of Substitutes:

The major substitutes for the industry are: Room air coolers Fans

Room air coolers:

Room air coolers are further of two types:

Branded: Non-Branded:

1- National. 1- Hand assembled room air coolers.2- Super Asia.3- Atlas.

Room air coolers are available at a very low price starting from Rs.2,000 and goes up to Rs.5,000.

The room air coolers are effective for a particular period of two moths approximately but they increase the level of humidity a lot in the monsoon season and this factor is the main reason for excessive usage of air conditioners in that season.

On the other hand some coolers have terrible noise and some sensitive people do not prefer them.

Room air coolers are very dangerous for electric appliances like P.C etc because they raise the level of humidity which results in rusting the appliances and reduce their life.

Although they are cost effective but still they are not perfect replacement for an air conditioner especially in this part of the world where the climate is changing rapidly and the hot summer season is extending with ever passing year.

Fans:

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Ceiling fans Pedestal fans Bracket fans

Major Companies

G.F.C Fans Younas Fans Royal Fans Parwaz Fans

Pak Fan Climax Fans

Features

Economical to use Remote control feature Affordable Warranted

Although the features are very attractive but still they are not the perfect substitute for an air conditioner when the excessive heat season starts in Pakistan.

From above analysis it is very clear that the air conditioner industry of Pakistan is facing almost a negligible threat of substitute.

7.4-Threat of New Entrants:

The element of the new entrants is either a threat or an opportunity for industry. Opportunity in the sense that entrant can increase the market growth of the industry and by promoting that industry may raise the level of awareness of consumer and attract more and more customers. Threat is in a sense when increase in number of competitors reduces the SOM of the existing firms in the industry.

In order to restrict new entrants from entering in the industry, Entry Barriers are created and sometimes they emerge themselves.

Barriers to entry

High cost of production is one of the main barrier of entering the air conditioner industry

The huge advertisement cost. The far away Break Even point as it will take time to set an image in the eyes

of consumers and sell them their product. Establishing dealership network. High costs of raw materials and other inputs (costly electricity and custom

duties on imports of the said units or raw material).

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7.5-Current Competitors Jockeying within the Industry:

There is intense competition within the industry to capture the market in terms of SOM. Major Key players in the industry and their SOM are given below:

1. Mitsubishi.… 34%2. L.G. ……….. 20%3. PEL…………13%4. Waves……… 7%5. Dawlance…...7%

The remaining 19% lies with other brands.

Mitsubishi is Japanese made brand with the latest technology and L.G. is a Korean brand with latest technology. The rest of the companies use Chinese brand and technology.

The companies like LG and Mitsubishi are classified as higher end products and they are more costly.

The companies like PEL, Dawlance and Waves are middle end brands. These are low price products with low electricity consumption. They are for price conscious people who belong to middle class of the society.

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8-COMPETITORS ANALYSIS

The competitor analysis is of following key players in air conditioning industry.

8.1-L.G:

History:LG Electronics, Inc. was established in 1958 as the pioneer in the Korean consumer electronics market. The company is a global force in electronics, information and communications products with 2004 annual sales of US $38 billion (consolidated). With more than 66,000 employees working in 76 subsidiaries in 39 countries around the world, LG Electronics is comprised of four main business companies including Mobile Communications, Digital Appliance, Digital Display, and Digital Media. L.G is considered to be one of the biggest giants in the industry. They are offering a wide range of products including Air Conditioner, Refrigerator, Microwave Oven, Washing Machine, Vacuum Cleaner, Compressor for Air Conditioner, Compressor for Refrigerator, television and many more.

Vision:

Global Top 3 By 2010 LG Electronics pursues its 21st century vision of becoming a true global digital leader who can make its customers worldwide happy through its innovative digital products and services.

LG Electronics sets its mid-term and long-term vision anew to rank among the top 3 electronics, information, and telecommunication firms in the world by 2010.

As such, we embrace the philosophy of "Great Company, Great People," whereby only great people can create a great company, and pursue two growth strategies

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involving "fast innovation" and "fast growth." Likewise, we seek to secure three core capabilities: product leadership, market leadership, and people-centered leadership.

Growth Strategy:

Fast GrowthFast growth is the result of strategies designed to expand the market size and earnings quickly, in the process improving the growth rate in terms of monetary value rather than quantity.

Fast InnovationFast innovation involves setting extremely high innovation goals and securing a competitive edge, aiming for a target of 30% more than what our competitors can do. Fast innovation also means 30% more sales and improvement in our market share, new product development and unveiling these 30% faster, technology development and establishment of corporate value three years ahead of competitors.

Core Capabilities:

Product LeadershipRefers to the ability to develop creative, premium products through specialized new technologies.

Market LeadershipRefers to the ability to achieve the "LG brand is No. 1" goal backed by its formidable market presence worldwide.

People LeadershipRefers to talented people who perform excellently by internalizing and practicing innovations.

Corporate Culture:Though a company implements perfect management strategies and boasts of outstanding and talented people, it should have an appropriate corporate culture to unleash the power of these capabilities.

No Excuses : We foster a corporate culture whereby we suggest an alternative before saying "no" and aggressively work towards fulfilling our goal.

'We' not ‘I’: We pursue a corporate culture whereby we embrace a strong teamwork.

Fun Workplace: We create a workplace where individuals' creativity and freedom are respected and working is made fun.

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8.2-Dawlance:

Dawlance is the Leader in household appliances in Pakistan. It’s the largest company engaged in appliances business. It is rated no.1 in refrigerators and has the market share of 40%.

Dawlance has 23 service centers in Pakistan. Sales network has reached 850 dealers nationwide.

The Vision:

"We are committed. Above everything else, Dawlance places its top priority on the satisfaction of human beings the satisfaction of its customers, partners and employees. All our policies and approach towards work revolve around our corporate belief." Corporate Belief:

Individual must be respected. The customer must be given the best possible products and services. Excellence and superior performance must be pursued.

Corporate Responsibilities:

Advancing the standard of living in Pakistan by manufacturing reliable and affordable electrical products.

Implementation of first class production engineering. Development of our employee not only for the firm's benefit but to contribute

to each employee personal growth. Major contributor in restoring Pakistani status and prestige. To reinforce value like harmony, solidarity, discipline and dedication.

Business:

Manufacturing and marketing of domestic appliances

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Market Position:

Leader in household appliances in Pakistan Largest company engaged in appliances business

Customers:

Up to Middle Upper Class of Pakistan

History:

Established 1980 Refrigerator Production 1981 Deep Freezer Production 1988 Deep Freezer Manufacturing Unit 1992 Launched RAC and No-Frost Ref. 1992 Launched WM and MWO 1995 Production of No-Frost Refrigerator 1996 Production of Aero-Design Series 1996 Production of Up-Right Freezer 1997 ISO 9001 Certification 1999 Production of Washing Machine 2000 ISO 14000 Certification 2001 USL Shops 2001 Electric city # 1 2001 Signature series USL Shops 2002

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8.3-Waves (Cool Industries Pvt. Limited):

History:

Cool Industries (Pvt.) Ltd. established in 1973, is a leading manufacturer of Home Appliances, including Deep Freezers, Refrigerators, Air conditioners, Vacuum cleaners, Food processors, Washing machines and other wide range of appliances waiting to launch in a market very soon.

Position in Market:

Our brand name Waves is undisputed leader in the market, both in residential and commercial sector in Pakistan. Waves is also exporting its products to Middle East and Central Asian States including Afghanistan.

Our company is known for its commitment to the latest technological advancements in design & manufacture. Owing to the engineering experience and skills available, the identification and adaptation of new techniques, materials and know-how, our production processes and products requires a minimal lead-time. This flexibility in our production has given us distinguished edge over our competitors in the market. We have brought into the market a 100% indigenously designed and manufactured split air conditioning system with different innovations and choices, which has attracted a large customer base.

The company is fully committed to protecting the environment and has been awarded a substantial grant by the World Bank to phase out ODS (Ozone Depleting Substances) its production processes. This is an ongoing activity and is being given all the importance it deserves for a timely and successful competition.

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Waves have introduced complete new range of Digital micro wave ovens equipped with CRS technology, Fashion Color electric Iron, easy & quick toaster, fine & fast blender, twin Tub turbo contract Jet washing machine with Dryer. Its specific design and jet flow system provides extra ordinary cleanliness by using minimum quantity of washing powder.

Waves split AC:

Are energy savers and provide strong cooling because of its T4 compressor. Waves have announced ‘One year free Replacement Warranty of complete unit with in one year’ for its split AC. It is undoubtedly height of confidence and such an offer is for the first time for any of the air conditioning company in Pakistan.

Another sizzling entry is the latest technology curved sliding Glass Door Freezers whose tapered shape provides extra visibility to the products.

Though WTO regime is in the offing and national companies all over the world are feeling threat from multinationals. Waves Home Appliances claim affinity with the Homeland more than any of foreign company as it provides easy and efficient after sale services and parts availability throughout Pakistan.

Waves Split Type Air Conditioners are perfect for those that do not have central air conditioning, and do not want to settle for the noise and inefficiency of window units. Waves Split systems offer higher efficiency and reduced noise without a large hole in the wall or an open window. By separating the compressor and condenser coil from the fan and evaporator coil, the noisiest component is away from the room. The indoor unit will usually have remote control capabilities and a timer to cycle the system only when needed. WAVES Air Conditioners are built to the highest international standards, ensuring maximum efficiency, performance and reliability.

After sale services:

Who We Are?

To provide customer a prompt, quality and reliable services at their doorstep Waves has a largest after sales service network through out the country. By having seventeen (17) own service centers in all major cities and one hundred and fifty-seven franchised workshops.

To take care of customer appliances all service centers have latest tools, equipments and machineries.

After sales service team consist of Engineers and highly qualified staff with great professional approach due to this reason customer feels confident, once their appliance are being maintained.

Waves after sales service is the only service who provide the facility to customers by meeting complaints same day on just one phone call.

Waves after sale service also provide the facility to customer of lifting their units from residence to service center and delivering within 48 hours.

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Waves after sales service give services warranty with replacement of one year of Indoor and Outdoor of Split Air-conditioner.

We take care of our customers by remaining in contact with them so that they should not face any type of problem.

What We Do?

We care our customer. We do repair all kind of Refrigerator (Direct cool, No frost etc.). We do repair all kind of freezers (Deep Freezer, Vertical freezers, Triplets

etc.).

We do repair all kind of Air-conditioner (Wall mounted Split AC, Window AC,

Floor standing, Ceiling hanging, Gas fired chillers etc.). We do repair all home appliances and kitchen appliances.

How We Do?

We have the best team of Air-conditioning repairing of Pakistan. We have the best team of Air-conditioning repairing of Pakistan. We give the prompt response to our customer and met the complaints on same

day exclusively. We have the mobile service centers in all big cities. We have the best and biggest network of services in country with having

seventeen own service centers and 154 contract workshops in each town. Customer Care We go after our every customer within the warranty period and after the warranty period, we get the feedback from our end users by call them, by visiting them, by off season free checkup scheme. We take the feedback of customer very seriously. Capabilities

Repairing of Refrigerator, DF & A/C. Repairing of Washing Machine, Microwave oven.

Repairing of Internal leak units all kinds. Sturdily analyzing the manufacturing faults. Compressor replacement, gas

charging, repairing of PCB kits. Unit cleaning.

Our Team We have highly qualified Engineers and technical staff always ready to give you prompt services through all over the country with Proudly having Pakistan largest Service network. Seventeen service centers in all major cities and 154 franchise Workshops.

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We have also having the biggest network of Split Air-conditioner installation and after sales, and a very well qualified staff at our factory for Designing and improvements.

Cool Advertising:

Cool Industries (Pvt.) Ltd. has its own dedicated marketing and professional teams capable of analyzing the market trends, envisioning the opportunities, meeting the assigned challenges, develop efficient policies and strategies as well as effective promotional plans. Owing to the training provided, the marketing professionals are fully competent to meet targets and capture new markets by adopting ongoing market evaluation techniques.

Advertising & publicity:

Media always plays a master role in the promotion of products, keeping this in mind, Cool Industries (Pvt.) Ltd. has its own Advertisement and Publicity department, where all the advertisements are designed and developed by highly professional and creative minds. Every advertisement is designed and released after the careful analysis of the targeted market and audience. These Advertisements and Publicities are then monitored and analyzed by the team of senior members to fill any gray areas and to bring further betterment if any.

After sales service:

Products of Waves are fully supported by the strong network of After Sales services. With branches all over Pakistan, highly qualified engineers and technicians, with all the equipment ensure that our after sales support is second to none.

Quality:

Cool Industries is heading towards quality documentation and other groundwork is being done to achieve this milestone.

Quality systems department:

The Company achieved ISO 9001: Certificate by June 2000.

After sales department:

Resolves 100% customer complaints within 48 hours.

Sales department:

Maintains 75% ~ 80% share of Deep Freezer sold in the market. Increased the sale of refrigerators by 40% ~ 45%. Launch our new products split Air Conditioners, Washing Machines, Microwave Ovens and other domestic appliances with aggressive

advertising support.

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Production department:

It aims to Reduce Wastage by 2% in Production Sections.

Company quality policy:

We believe in timely provision of cost effective & quality products to achieve complete satisfaction of our valued customers while maintaining our efforts for constant improvement of our quality and services through research and development as per customer need.We are committed to improve our skills in all areas to achieve excel by providing the best working environment and training for the development of our Human Resources.

Quality in product:

Product quality and reliability are the hallmark of all WAVES products manufactured and marketed by Cool Industries (Pvt.) Limited. The company has earned the reputation of a professional enterprise engaged in the manufacture of quality products by understanding specific customer needs and obtaining their satisfaction.

Quality in people:

The whole management, staff and workers are fully committed to achieve the best quality, both in appliances and After Sale services under the guidance of CE, Mr. Javed Butt. Our engineering and supervision staff includes highly qualified engineers and polytechnic operators ensuring quality in the manufacturing of the appliances at all levels and all the sales staff is vastly qualified and trained to perform special tasks.

Quality in service and commitment to our customers:

Keeping in mind our over-riding commitment to our valued customers, we pay special attention to the quality of after sales support to dealers, and service to the valued customers. A comprehensive network of over 500 authorized WAVES dealers and service centers are fully geared up to meet all customers’ needs.

Cool Customers:

While a vast network of authorized dealers is spread all over Pakistan. Our major institutional customers are:

Pepsi Cola International (Pvt.) Ltd. Canteen Stores Department, (CSD) Pakistan Army, Rawalpindi. Coca-Cola (Export) Pakistan. Be Be Jan Protein Farms Ltd. Pakistan Fruit Juice Co. (Pvt.) Ltd. Hico Ice Cream. Departmental Stores.

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8.4-Mitsubishi Electric:

History:

Mitsubishi Electric entered the air conditioning and refrigeration business in 1932, more than 65 years ago. Their very first product met the need for an efficient and hi-fi device to create a comfortable and cool home environment. With this end in view, they developed the new Mr. Slim Series of air-conditioners.

What we offer?

Advanced technology and the latest in convenience features allow you to maintain air quality and temperature at optimum levels. Best of all, the compact and lightweight design of their units not only helps to make installation easier but also lets them blend in beautifully to any interior. It's the world's most widely used air-conditioner. Annual sales of Mitsubishi room air conditioners are estimated to be approximately 25 million units. The world benefits from their lasting commitment to innovation, quality manufacturing and customer service.

Balanced Corporate Management: The Mitsubishi Electric Group promotes a philosophy of maintaining a "balanced corporate management" structure, comprising three particular areas of focus: growth potential, profitability and efficiency, and soundness. This has lead to the establishment of a robust managerial basis for ensuring sustainable growth, allowing the further improvement of corporate value.

We are advancing restructuring, which includes business reinforcement and streamlining, focusing on the concentration of operations, reinforcement of production systems in Japan and overseas, as well as partnerships with other companies. In addition, to strengthen the management structure, we are promoting

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continuous efforts to strengthen marketing capabilities, improve productivity and quality, bolster development capabilities, invigorate intellectual property activities, improve material procurement, reinforce the financial structure, and apply growth strategies, presented as follows.

Management Policy:

Fundamental CSR Policy: Looking to contribute to society as a whole since its founding, the Mitsubishi Electric Group’s approach to Corporate Social Responsibility (CSR) is based on its Corporate Philosophy and the Seven Guiding Principles of the Group. The Essence of Management, a doctrine created when Mitsubishi Electric was established in 1921, stated the corporate objectives of contributing to the prosperity of society, improving quality, and pursuing customer satisfaction. Carrying on this founding spirit, our current philosophy and policies, followed by every one of our employees, is embodied in the Corporate Philosophy, in which we aim to contribute to a vibrant and abundant society through the continuous improvement of our technologies, services, and ability to innovate. They are also found in the Seven Guiding Principles of trust, quality, technology, citizenship, compliance, environment, and growth, to fulfill our responsibilities as a member of society.

Growth Strategies

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The Mitsubishi Electric Group is advancing the VI Strategy and the AD Strategy as concrete measures to realize sustainable growth. The VI Strategy is a means to ensure growth potential by making strong businesses stronger. The Mitsubishi Electric Group aims to use its strengths in elevators and escalators, industrial automation equipment, automotive products, satellites, air conditioners, and other fields to further strengthen the strategies of all its individual businesses. While reinforcing cross-sectional corporate support for development, manufacturing technologies, and materials procurement, we intend to efficiently apply our key technologies and expertise as we increase synergistic effects to further strengthen our operations.

The AD Strategy aims to bolster the solutions business by centering on strong businesses. We are making every effort to provide one-stop solutions that fulfill customer needs in environmental/energy-saving solutions, total security solutions, and v sual information solutions by combining all of our technologies, experience, and knowledge gained through developing, manufacturing, and selling competitive products and services.

The Mitsubishi Electric Group is concentrating its efforts on business expansion from a global perspective in an aim to foster and strengthen operations that will prosper on the world stage. We aim to further bolster our business structure through greater global integration and by tying together our worldwide management infrastructure. Specifically, we will foster manufacturing collaboration between mother factories and local plants, as well as implement ideas coming from a variety of perspectives, including those from marketing, research and development, and financial support.

In this way, the Mitsubishi Electric Group is combining its technologies and expertise to cooperatively promote its growth strategies and attain greater performance in the future.

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Challenges Related to Climate Change: The Mitsubishi Electric Group is advancing specific action plans, such as the installation of ultra energy-efficient equipment and cogeneration systems, to meet its goal for a 25% reduction, from fiscal 1991 levels, in carbon equivalent energy consumption per net sales (i.e., a fundamental sales unit) by fiscal 2011. Among these

initiatives, our unique Energy Loss Minimum (EM) activities use the Eco-Monitor and other equipment that support energy savings to find and eliminate energy loss by closely measuring the energy consumption of facilities and production lines in units down to the second to evaluate electricity usage in manufacturing processes at plants and in buildings. In addition, to reduce the environmental impact of logistics systems, we are promoting ecological logistics activities through the construction of a transportation system that uses the 12-foot dimensions of international containers with flat racks between China and Japan. Mitsubishi Electric Group’s Carbon Dioxide Reduction Plan

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9-KEY PRODUCTS OF PEL IN THE MARKET

9.1-Refrigerator:

The key product of PEL in the market is ‘Refrigerator’. PEL is assembling refrigerators locally and it is rated as a very high quality product. They have 38% share of the whole market of refrigerators which is 2nd highest. They are producing nearly 1200 units of refrigerators per day.

PEL has launched its Crystal Classic Series - a new range of Refrigerators with great storage capacity and impressive outlook. PEL as always has introduced more efficient and technologically advanced product that promises to take care of your refrigeration needs and guarantees freshness of food when you rely on us.

PEL Crystal Classic is a step ahead towards the achievement of our goal of satisfying customers today and in time to come

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Other products include:

9.2-Deep Freezers:

Single Door Deep Freezers are available in three sizes with capacities from 175 liters to 370 liters.

Twin Freezer is a unique product, with one compartment working as a refrigerator and the other as a freezer.

The product is available in two sizes i.e. 370 & 410 liters. The high quality of PEL Deep Freezers was recognized equally well by the customers and multinational companies. Lever Brothers Pakistan Limited asked PEL to manufacture a special freezer for them when they launched their world famous "Walls" ice cream in Pakistan. Today PEL is the preferred source of freezers for the major multinational ice cream companies in Pakistan.

9.3-Window Type Air Conditioners:

PEL is considered to be the pioneers in Window Type Air Conditioners. They are energy efficient and good quality product. They are available with 5 years compressor warranty.

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9.4-Microwave Oven:

PEL the trustful company name in home appliances all over the country, now introduced all new models of "PEL Power Wave" Microwave Ovens. Now PEL customers can have four models of PEL Power Wave in which they can enjoy the grilling feature as well. PEL Microwave Ovens are available in different sizes, inner cavities (steel & painted) and features.

9.5-PEL Television (Newly Launched):

PEL introduced Color Television under the brand name of "PEL DIGITAL LIFE". PEL has introduced four models (flat & semi flat).

Now PEL customers can enjoy a Multi System, Multi Sound, DVD Input, AV In/Out, Clock, Timer and Auto Degauss Technology all in PEL Digital Life Color Television. PEL provides strong back up of customer services all over Pakistan with 5 years picture tube and 1 year parts warranty.

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9.6-PEL Cool Life Split Air Conditioners:

PEL recently launched its Cool life Split Air Conditioner which is a technologically advanced model specially designed for Pakistan market. This masterpiece from PEL provides maximum cooling even at very high temperatures while minimizing your electricity consumption. Its salient features include: • Low power consumption.• Low Voltage startup.• Hydrophilic Aluminum Fins.• 3-bend heat exchanger.• Scientific Louver Rotation (SLR).• Independent de-humidification function. • Anti-bacterial and anti-dust filters.

PEL Air Conditioners have been specially designed for countries, having climatic conditions similar to Pakistan. The Air Conditioners have excellent cooling capabilities at extreme temperatures at varying levels of humidity; high air dust and uneven local power supply conditions.

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10-STRENGTHS AND WEAKNESSES OF THE COMPANY (REGARDING SPLIT UNITS) WITH RESPECT TO 5 P’S

10.1-Product:

Strengths:

PEL is an ISO certified company therefore their products are quality products. Brand equity. Oldest group of companies at the back. Low electricity consumption. Latest design. Rust proof external unit.

Weaknesses:

Newly launched product. Weak customer pull.

10.2-Placement:

Strengths:

Large dealer network. Sales offices all over Pakistan.

PEL Head Office

Mr. Yousaf H. IshaqueGeneral Manager Marketing(Appliances Division)

: 14-Km, Ferozepur Road, LahoreMobile: 0300-4004382Tel: 5812015 Fax: 5810156

Mr. Tariq IraniSr. Manager Distribution & Credit Control(Appliances Division)

: 14-Km, Ferozepur Road, LahoreMobile: 0300-4004383Tel: 5822849

Other Regions

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NWFP:

Peshawar

PUNJAB:

Lahore Rawalpindi Gujranwala Sargodha Faisalabad Sahiwal Multan Bahawalpur

SIND:

Sukkur Hyderabad Karachi

Weaknesses:

PEL is not an international brand.

10.3-Promotion:

Strengths:

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ATL:

Print Media. News Papers. Media Vehicles. Electronics

BTL:

Closed Circuit Television (CCTV). Radio. Magazines. Internet.

Point on Sales Material (POS) & Point of purchase (POP) - Buntings, Wobblers etc.

Weaknesses:

Low marketing budget as compare to other competitors like L.G. Lack of executive support for marketing department.

10.4-Price:

Strengths:

Available on installment through Soneri Bank. Weaknesses:

Comparatively high price.

10.5-Positioning:

Strengths:

Brand equity. Middle class is the target market. (Most of the population comprises of middle

class). Positioned as reliable and durable. (AAJ BHI KAL BHI).

Weaknesses:

Not positioned for high class.

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11-PERCEPTUAL MAP OF KEY PLAYERS WITH RESPECT TO SPLIT UNITS

Following is the perceptual map of the key players of the air conditioning industry with respect to split units. Variable taken are Reliability and Price.

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High Reliability

Low Reliability

High PriceLow Price

Mitsubishi

L.G.

WavesDawlance

PEL


12-TREDS OF THE INDUSTRY

Consumers prefer split units as compare to window type air conditioner; therefore industry is changing its technology at a very quick pace.

The advancement of technology is making splits more value added. Major share of market lies with the imported brands like Mitsubishi and L.G. The growth rate of demand of split units is increasing with every passing year

because in countries like Pakistan the Air Conditioning usage is maximum due to an extended summer season of nearly 8 months a year. In Pakistan the Air conditions are used by upper and middle class.

Companies who are using Chinese brands, which are very much alike in technology and other aspects, tend to compete on low price strategy.

The companies are becoming socially responsible these days as they have introduced Anti-bacterial and anti-dust filters.

Companies are giving more incentives to the consumers to make their brands more and more popular.

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13-FUTURE OUTLOOK OF THE COMPANY

The company wants to be No.1 in the coming five years. Moreover it was a sales oriented company previously and now it is going

towards the Marketing concept. In addition to that, company wants to set plants for local assembling of the key

products, which are becoming popular day by day in the market, such as Split Unit.

The company may target another segment of lower income by producing cheaper split units. Their current target market is upper class and middle class.

Because of WTO this world will become a global market and only those firms will survive who will offer compatible price with good quality standard products. China also has signed WTO. There is need to set our industries on reasonable prices which is not possible without mutual consent of all companies.

In future Chinese government has a plan to remove 15% subsidies from their air conditioner industry so local producers of our country can take advantage of that because naturally prices of Chinese splits will rise a little bit.

Because of WTO Pakistan can export their local brands to fulfill the increasing demand of air conditioners in the globe especially Middle East.

The companies who lack innovations in split units like Dawlance and waves (only 7 % SOM of each company) will automatically be left out far behind and will be forced to close their Split Business unit.

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14-CONSUMER RESEARCH

PEL continuously conduct direct research programs to see the consumer behavior towards the products that they are offering. They have recently conducted two Focus groups. They used projective techniques to question the participants of the focus group. Some of the questions they asked and their answer are given as follows:

To see where their Split AC stands they asked the participants to recall the names of three companies with respect to split AC’s and the result was:

1. Waves.2. Dawlance.3. Haier.

They asked the participants to associate the name of the company with the product and the result was:

1. PEL ………… AC.2. Waves …….... Deep Freezers.3. Dawlance….... Refrigerator.

They are also planning to conduct a research on PRE and POST campaign analysis.

Findings from the focus group held by gathering 8 people from different fields of community:

1. Most of the participants believe that AC is a basic need in summer, especially for the hostel students.

2. The window AC consumes more electricity than the split.3. The demand of split is rising in spite of the fact that it is expensive.4. The people want AC at low price.5. People think that most of the AC’s are Chinese assembled, so mostly they are

similar.6. Air conditioners are very necessary for the patients and small children.7. AC is a very necessary thing but the problem is nobody can afford AC in

every single room of his house or office, because of the following reasons:

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Expensive. Cannot get/ receive enough electricity to run all AC’s simultaneously. Not all the places have sufficient facilities to install an air conditioner.

In order to cater the requirements and needs of the people we have following suggestions to improve an AC or if we have to launch a new AC it should have following features.

Ac should be at an affordable price.Ac should consume less electricity.It should be easy to move from one place to another i.e. mobile AC easy to install.

15-MARKET-PRODUCT FOCUS

This section describes the three year marketing and product objectives for PEL and the target markets, points of difference & positioning of the new product.

15.1-Marketing and Product Objectives:

Mobile Air Conditioner’s marketing intent is to take full advantage of its family brand potential while building a base from which other revenue sources can be mined.

Current Markets:Current markets will be grown by the introduction of a new brand under the label of family brand. In addition to the retail outlet sales will be increased by the addition of the new product.

New Markets:By the end of the year three PEL’s new product will be distributed in all the major cities of Pakistan to grab a big chunk of share in the unique new market.

New Products:The new Mobile Air Conditioner’s presence will lead to further innovations in the product line which will be accomplished through the potential of the new technology.

Air Conditioners Industry:The introduction of a totally new idea will increase the size of pie of profit in the Air Conditioners Industry and will open the gate way to enter the new era of latest technology which will be of great help to compete with the international market.

15.2-Target Markets:

The target markets of Mobile Air Conditioner will include the middle class, upper middle class and the elite class. If you want to further classify these target groups then families, business community and hostilities will be the primary users.

15.3-Points of Difference:

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The “points of difference” – characteristics that makes the Mobile Air Conditioners unique relative to competitors ordinary split units – fall into following important areas:

Capacity:Mobile Air Conditioners will be having standard BTU’s in launched capacities. For e.g. 18,000 BTU for a 1.5 ton split and not like competitors who are providing 16,000 BTU for a 1.5 ton split.

Unique Model:It will be a unique model of split as Mobile Air Conditioners are not yet launched in the Pakistani market.

Changeable Bodies with Cartoon Characters Available:No other split had yet offered changeable bodies with cartoon characters to attract kids.

15.4-Positioning:

In the past split air conditioners, in reality, had either been durable or economical and not both but this unique split will be positioned as a high quality and economical product.

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16-MARKETING PROGRAM

16.1-Target Market:

The target markets of Mobile Air Conditioner will include the middle class, upper middle class and the elite class. If you want to further classify these target groups then families, business community and hostilities will be the primary users.

16.2-Marketing Mix:

16.2.1-Product:The name of the new Split Series will be “MAC Series”. There shall be two models initially:

1. MAC-12. MAC-1.5

MAC-1:It will be of 1 ton exactly, i.e. 12,000 BTU.

MAC-1.5:It will be of 1.5 ton exactly, i.e. 18,000 BTU.

Product should be available in different colors. Casing of the main unit should be changeable and should be available in the market. Product pack should include stylish remote control, user manual and a good quality assembling kit with a small stuff toy in the introduction period of three months to attract children. Special casings should be there for children room having some cartoon characters on it like bugs bunny.

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Transparent bodies with a very dim light should be available. Automatic excretion of air freshener will also be a unique feature. Alarming signal should be there when the filter needs to cleaned. Clock alarm and timer will be some of the other features. Product should be smarter, slimmer and stylish in look. Product should be available in different capacities.

Mobile Air ConditionersThese are the easiest route to true air conditioning in the office or home. They can be installed easily, connecting into a 13amp socket and are ready to use immediately.

Mobile air conditioning units work by taking heat from a room and expelling it to the outside. Air inside the room is chilled and re-circulated. For larger rooms or rooms

that have bigger heat loads, split systems are normally required. They are easily recognized by the separate (condenser) box that needs to be placed outside the room.

16.2.2-Price:

Prices would be as follows: MAC-1: Rs.17,000 MAC-1.5: Rs.23,000

The main focus should be on quality. The quality and unique features will automatically justify the price.

16.2.3-Placement (Distribution):

Company is doing well with the placement and no improvement is required in this regard. But the product will be pilot tested in one city in the introductory first year. The city selected for the first year is Lahore. In the second year MAC will be launched in three other major cities i.e. Karachi, Islamabad/Rawalpindi and Multan. In the third year MAC will be launched nationwide.

16.2.4-Promotion:

The product, in the introductory stage requires high budget allocation for promotion. The budget for MAC promotion should be 15 million. (PEL spend 50 million on promotion in one year out of which 30.04 million is for Air Conditioners, PEL should convert half of the amount i.e. 15.02 million on the advertisement of MAC series).

Advertising:

80% of total promotion budget (Rs.12,016,000) should be allocated to advertisement.

Electronic Media:50% of advertisement budget (Rs.6,008,000) should be allocated to electronic media should. Cricket series and other important programs of different channels should be covered.

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Rs.Geo T.V 1,479,000 (17 days package)PTV 1,280,000 (10 days packages)Sun Multimedia cable network 1,080,000 (6 months package)NBC cable network 1,080,000 (6 months package)World Call cable network 1,080,000 (6 months package)Total 5,999,000

NOTE:Advertisement expenses of Lahore city are attached ahead.

Outdoor Media:13.5% of the total advertisement budget (Rs.1,622,160) should be allocated to the outdoor.

Rs.Liberty Round About 600,000Kalma Chowk 225,000Season Chowk 225,000Scheme More 185,000Lower Mall (G.C college) 180,000Minar-e-Pakistan (Yadgar) 165,000Total 1,580,000


Print Media:36.5% of the total advertisement budget (Rs.4,385,840 should be allocated to the print media.

Rs.Daily Jung - Half Page (Front):748,000 * 4

2992000

Daily Din – (20 *3 – front page):117,000 * 3

351,000

Daily News - (20 * 3 – front page):128,700 * 4

514,800

Daily Dawn – (18 * 6 – front page):129,600 * 4

518,400

Total 4,376,200


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Direct Marketing: Stalls in different exhibitions etc, 20% of total budget (Rs.3,004,000) should be allocated to direct marketing. Dealers should be given special incentives and margin for dealer should be an impressive one because dealer can make the customer’s mind to buy any Split Air Conditioner.

16.2.5-Positioning:

Positioning of the product is low electricity consumption, high cooling and unique movable split air conditioner. High cooling aspect and portability will be more prominent. One of the reasons behind it is during our research work we went to different shop keepers and ask them which Split Air Conditioner has the lowest

electricity consumption and every body said they all are same in electricity consumption.

Positioning Sentences:

Simply the coolest one.

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17-FINANCIAL DATA AND PROJECTIONS

17.1-RAW MATERIAL AND PARTS

Main raw materials for air conditioner are:

Compressor Capacitor Over loaded relays Thermostats Copper tubing Magnetic gas kits Aluminum sheets Electrical controls and switches

17.2-COST OF PRODUCTION

Cost of production varies from unit to unit. Average figures provided by the industry for split units are:

Rs. Rs. Rs.Selling Price 20,000

Direct CostMaterials 14,000Labor & Factory Overhead 1,975 15,975 (15,975)

Gross Profit 4,025Indirect CostAdmin & Selling CostAdmin expenses 375Selling Cost Fixed 1,200Selling Cost Variable 450 2,025 (2,025)

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Operating Profit 2,000Financial Charges Varies from

unit to unit

17.3-AVERAGE COST DIFFERENCE OF ORDINARY SPLIT AND MOBILE SPLIT FOR THE CONSUMER

17.3.1-For Households:

Rs. Rs.Average Selling Price of Ordinary Split Unit

18,174Average Selling Price of Mobile Split Unit

20,000

Average Fixation Charges plus iron stand for external unit and pipe

2,200


0

Total 20,374 20,000

So the benefit for the end user will be of Rs.374

17.3.2-For Business Sector:

Rs. Rs.Average Selling Price of Ordinary Split Unit

18,174Average Selling Price of Mobile Split Unit

20,000


3,500


0

Total 21,674 20,000

So the benefit for the end user will be of Rs.1,674

17.4-MAJOR SUPPLIERS

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Major suppliers of raw material and sub-components/components are Japan, U.S.A, Italy, South Korea, Singapore and Thailand.

17.5-EXPORT POTENTIAL OF SPLIT TYPE AIR-CONDITIONERS

The air conditioning world market is expanding rapidly and the existing demand is estimated at around U.S $ 60B, ranging from split units to packaged units and central air-conditioning systems. The market size of split in the world is given in the table:

Region Million UnitsU.S.A 10.6China 9.5Japan 6.1Europe 3.5Middle East 3.0Africa 1.0Central Asia 0.5Other Asian 4.5Australia 1.5South America 1.5Total 41.7

17.6-RETAIL PRICES OF DIFFERENT SPLIT UNITS AVAILABLE IN MARKET

Brand Name Prices of 1 Ton (Rs.)

Prices of 1.5 Ton (Rs.)

Sabro 15,000 19,000Haier 15,500 22,500Daiken 17,500 23,000Orient 14,500 23,500Mitsubishi 25,900 36,900Dawlance 15,900 21,500L.G. 20,100 30,000Super Asia 15,000 22,000

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Fast 16,500 24,000Kenwood 16,500 25,900PEL 15,900 22,000Waves 16,000 23,000Samsung 25,000 33,400Thompson 14,500 22,500Gree 16,000 22,500

17.7-PROJECTED INCOME STATEMENT FOR THE YEAR ONE

It is assumed that 150 units, out of 160 units imported, of both capacities will be sold in the first year.

Pak Elektron Limited (PEL) – For MAC Series OnlyIncome StatementFor the Year Ending December 31, 2006

Rs. Rs.Sales (W-1) 3,000,000Cost of Goods Sold (W-2) (2,196,250)

Gross Profit 803,750

Operating ExpensesSelling and Admin (W-3) 324,000General Expenses (W-4) 40,000 (364,000)

Operating Profit 439,750

Financial Charges (0)

Profit Before Taxation 439,750

Provision for Taxation (75,000)

Profit After Taxation 364,750

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17.8-WORKING FOR YEAR ONE

W-1:Rs.20,000 * 150 units = Rs.3,000,000 (Refer 17.2 Heading)

W-2:Cost of Goods Sold:

Rs. Rs.Raw Material: Rs.14,000 * 160 units (Refer 17.2 Heading)

2,240,000

Direct Labor & FOH: Rs.1,975 * 160 units (Refer 17.2 Heading)

316,000

Manufacturing Cost 2,556,000Add: Opening work in process

0

Cost of Goods to be Manufactured

2,556,000

Less: Closing work in process

(200,000)

Cost of Goods Manufactured

2,356,000

Add: Opening inventory 0Cost of Goods to be Sold 2,356,000Less: Closing inventory (1,4000 + 1,975) * 10 (159,750)Cost of Goods Sold 2,196,250

W-3:Rs.2,025 * 160 = Rs.324,000 (Refer 17.2 Heading)

W-4:General Expenses:

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Rs. Rs.Fax 2,000Telephone 5,000Electricity 6,000Stationary 1,000Printing 2,000Legal Charges 20,000Postage 2,000Entertainment 2,000 40,000

17.9-PROJECTED INCOME STATEMENT FOR THE YEAR TWO

It is assumed that 250 units, out of 260 units held, of both capacities will be sold in the second year.



Gross Profit 1,106,250







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17.10-WORKING FOR YEAR TWO




3,500,000


493,750


200,000


4,193,750


(300,000)


3,893,750

Add: Opening inventory 159,750Cost of Goods to be Sold 4,053,500Less: Closing inventory (1,4000 + 1,975) * 10 (159,750)Cost of Goods Sold 3,893,750



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Rs. Rs.Fax 2,000Telephone 5,000Electricity 6,000Stationary 1,000Printing 2,000Legal Charges 10,000Postage 2,000Entertainment 2,000 30,000

17.11-PROJECTED INCOME STATEMENT FOR THE YEAR THREE

It is assumed that 450 units, out of 470 units held, of both capacities will be sold in the third year.



Gross Profit 1,811,250







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17.12-WORKING FOR YEAR THREE:




6,440,000


908,500


300,000


7,648,500


(300,000)


7,348,500

Add: Opening inventory 159,750Cost of Goods to be Sold 7,508,250Less: Closing inventory (1,4000 + 1,975) * 20 (319,500)Cost of Goods Sold 7,188,750



Rs. Rs.

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Fax 2,000Telephone 5,000Electricity 6,000Stationary 1,000Printing 2,000Legal Charges 10,000Postage 2,000Entertainment 2,000 30,000

17.13-BREAK EVEN UNITS:

Rs.Sales: 20000 * 200 4,000,000Variable Cost: 16800 * 200 3,360,000Contribution Margin 640,000Fixed Cost 640,000Net income 0

(Break Even Point)Note: (Refer 17.2 Heading)

Break Even Units = Fixed Cost/price per unit – variable cost per unit= 640,000/20,000 – 16,800= 640,000/3,200= 200 units.

Therefore Break Even is possible in the second year after the product is launched.

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18-BIBLIOGRAPHY

Research Report on air conditioning industry published by Lahore Chamber of Commerce and Industry.

Marketing 6th Edition by Berkowitz Kerin Hartley Ruderlius.

www.pel.com.pk

www.waves.net.pk

www.global.mitsubishielectric.com

www.lge.com

www.dawlance.com.pk

www.pakstat.gov.pk

www.finance.gov.pk

www.yahoo.com

www.msn.com

www.ask.com

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http://www.ask.com/

http://www.msn.com/

http://www.yahoo.com/

http://www.finance.gov.pk/

http://www.pakstat.gov.pk/

http://www.dawlance.com.pk/

http://www.lge.com/

http://www.global.mitsubishielectric.com/

http://www.waves.net.pk/

http://www.pel.com.pk/


STRATEGIC MARKETING MANAGEMENT(MK-585)

Final ProjectMarketing Plan of a New Product

“MAC – Series”The Only Mobile Air Conditioner in Pakistan

Resource Person:Mr.Mobin-Ul-Haque

Submitted By:

Wasil HameedI.D # 043532-024

Rabia TahirI.D # 043532-065

Mohammad Shoaib BashirI.D # 043532-054

Owais SohailI.D # 043432-023

Submission Date:

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June 5, 2006

UNIVERSITY OF MANAGEMENT AND TECHNOLOGY

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ACKNOWLEDGEMENT

First of all we are thankful to ALLAH Almighty who has created us, gave us the power to understand and the power to gain knowledge. Without HIS kind guidance we would have not been able to complete any task given to us.

Secondly we would like thank our resource person Mr.Mobin-Ul-Haque who guided us in the lay out of our project.

We would also like to thank Mr.Ibad Jamal (Senior Brand Manager PEL), Mr.Umer Saud (Brand Manager PEL) and Mr.Khizar Zafar (Sales Person Patyala Ground PEL Sales Office) who were always there to guide us, to give us the required information and to encourage us in every possible way. They went out of the way to help us and thus deserve a special thanks and credit. May ALLAH help them and be kind on them.

Lastly we are thankful to all others who helped us directly or indirectly in completing our project.

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TABLE OF CONTENTS

Title Page No.

1-Executive Summary……………………………………………………. 12-Description of the Company…………………………………………… 2

2.1-Appliances Division…………………………………………… 22.2-Power Division………………………………………………… 3

3-Strategic Plan and Focus………………………………………………. 43.1-Mission/Vision………………………………………………… 43.2-Goals……………………………………………………………43.3-Core Competencies/Sustainable Competitive Advantage……... 4

4-Situation Analysis………………………………………………………. 54.1-General Environment…………………………………………...5

4.1.1-General State of Economy……………………………54.1.2-Economic Condition of the Industry………………… 54.1.3-Condition of the Company in Industry……………….5

4.2-Product Market………………………………………………… 64.2.1-Product Type, Varieties and Brands…………………. 64.2.2-Sales Volume and Trend……………………………...74.2.3-Growth Rate…………………………………………..74.2.4-Market Share…………………………………………. 8

4.3-Customer Market………………………………………………. 94.3.1-Demographic Factors…………………………………94.3.2-Life Styles and Patterns……………………………… 104.3.3-Usage Patterns and Behaviors……………………….. 104.3.4-Preferences for Specific End Benefits……………….. 10

4.4-Marketing Programs………………………………………….... 104.4.1-Advertising and Promotional Programs……………... 104.4.2-Pricing Practices……………………………………... 114.4.3-Relationships with Whole Sellers and Retailers…….. 11

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5-SWOT Analysis………………………………………………………….125.1-SWOT Analysis of PEL……………………………………….. 125.2-SWOT Analysis of PEL Split units……………………………. 125.3-SWOT Analysis of Air Conditioners Industry………………… 13

6-PEST Analysis………………………………………………………….. 146.1-Political Environment…………………………………………..146.2-Economic Environment………………………………………... 146.3-Social Environment……………………………………………. 156.4-Technological Environment…………………………………… 16

7-Porter Analysis…………………………………………………………. 177.1-Bargaining Power of Suppliers…………………………………177.2-Bargaining Power of Buyers…………………………………… 177.3-Threats of Substitutes………………………………………….. 187.4-Threat of New Entrants…………………………………………197.5-Current Competitors Jockeying within the Industry……………19

TABLE OF CONTENTS

Title Page No.

8-Competitors Analysis………………………………………………….. 218.1-L.G…………………………………………………………….. 218.2-Dawlance………………………………………………………. 238.3-Waves (Cool Industry Pvt. Limited)…………………………… 258.4-Mitsubishi Electric……………………………………………...30

9-Key Products of PEL in the Market…………………………………... 349.1-Refrigerator……………………………………………………..349.2-Deep Freezers………………………………………………….. 359.3-Window Type Air Conditioners…..…………………………… 359.4-Microwave Oven………………………………………………. 369.5-PEL Television………………………………………………… 369.6-PEL Cool Life Split Air Conditioners…………………………. 37

10-Strengths and Weaknesses of the Company W.R.T Five P’s………. 3810.1-Product………………………………………………………...3810.2-Placement……………………………………………………... 3810.3-Promotion…………………………………………………….. 3910.4-Price…………………………………………………………...4010.5-Positioning…………………………………………………….40

11-Perceptual Map of Key Players W.R.T Split Units…………………. 4112-Trends of the Industry………………………………………………... 4213-Future Outlook of the Company……………………………………... 4314-Consumer Research……………………………………………………4415-Market Product Focus………………………………………………… 45

15.1-Marketing and Product Objectives…………………………… 4515.2-Target Markets……………………………………………….. 4515.3-Points of Difference………………………………………….. 4515.4-Positioning…………………………………………………….46

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16-Marketing Program……………………………………………………4716.1-Target Market………………………………………………… 4716.2-Marketing Mix……………………………………………….. 47

16.2.1-Product………………………………………………4716.2.2-Price…………………………………………………4816.2.3-Placement (Distribution)……………………………. 4816.2.4-Promotion…………………………………………... 4816.2.5-Positioning…………………………………………..49

17-Financial Data and Projections………………………………………. 5117.1-Raw Material and Parts………………………………………..5117.2-Cost of Production…………………………………………….5117.3-Average Cost Difference of Ordinary Split and Mobile Split... 52

17.3.1-For Households……………………………………...5217.3.2-For Business Sector………………………………… 52

17.4-Major Suppliers………………………………………………. 52

TABLE OF CONTENTS

Title Page No.

17.5-Export Potential of Split Air Conditioners…………………… 5317.6-Retail Prices of Different Split Units Available in Market…... 5317.7-Projected Income Statement for the Year One……………….. 5417.8-Working for Year One………………………………………...5517.9- Projected Income Statement for the Year Two……………… 5617.10-Working for Year Two……………………………………….5717.11-Projected Income Statement for the Year Three……………. 5817.12-Working for year Three……………………………………... 5917.13-Break Even Units…………………………………………….60

18-Bibliography……………………………………………………………61

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