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Table of Contents
Table of contents ………………………………………………………………….. 1
Executive Summary ………………………………………………………………. 3
Introduction ………………………………………………………………………...4
PEL profile ………………………………………………………………………….4PEL air conditioner ----------------------------------------------------------------------- 5
PEL refrigerator--------------------------------------------------------------------------- 5
PEL micro wave Owen------------------------------------------------------------------- 5
PEL television ----------------------------------------------------------------------------- 6
Power division ------------------------------------------------------------------------------ 6
Industrial Analysis ------------------------------------------------------------------------ 7
PEST analysis ------------------------------------------------------------ 7
Political environment---------------------------------------------------- 7
Economical environment ----------------------------------------------- 8
Social environment ------------------------------------------------------ 8Buying pattern ----------------------------------------- 9
Standard of living ------------------------------------- 9Technological environment -------------------------------------------
9
Cooling system ---------------------------------------- 9Testing and adding accessories -------------------- 9
Future Environmental Analysis -------------------------------------------10
Future Trend of Political environment ----------------10
Future look of economic environment ---------------10Future look of technology environment --------------11
Future look of social environment 11
Competitors Analysis
Competitors of PEL 12
DAWLANCE 12
The Vision 12
Corporate Belief 12
Corporate Responsibilities 12Business 13
Market Position 13
Customers 13
History 13
WAVES: 14
Reason for Growth: 14
SWOT analysis of PEL: 15
STRENGTHS: 15
WEAKNESSES: 16OPPORTUNITIES: 17
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THREATS: 17
Porter Model
Bargaining power of buyers 18
Concentration: 18
Product Differentiation: 19Switching Cost: 19
Profit. 19
Impact on Quality/Performance: 19Buyers Information 19
Supplier’s power 20
Suppliers 20
Concentration 20Presence of Substitute inputs 20
Importance relative to customer 20
Switching Cost 21
Rivals Industry Growth: 21
Fixed Cost: 21Product differentiation: 22
Concentration and Balance:22
Switch cost: 22
Exit Barriers 22 New entrance 22
Substitute:
Switching Cost: 23Price, Performance 23
Industrial Structure 23
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EXECUTIVE SUMMARY:
Pak Elektron Limited (PEL) is the flag bearer of the Saigol Group of Companies.
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.
The company comprises of two divisions:
• Appliances Division: This Division of PEL consists of home appliances
manufacturing particularly Refrigerators
• Power Division: PEL Power Division is one of the major electrical equipment
suppliers to WAPDA & KESC. The company manufactures transformers, energy
meters, switchgears, kiosks, compact stations and shunt capacitor banks
Other than this, the company has developed a very good repute in the world of credit due
to which most of the Financial Institutions like National Bank, Faysal Bank, PunjabModarba have provided especial credit limits to the Company in order to support its
operational activities. While working with PAK ELEKTRON LTD, I got very broader
visions about company financial and marketing activities more than those that I had
learned during my MBA program.
In 1956, the Saigol Group of Companies purchased major shares of PAK Elektron
Limited. At this junction, the company was only manufacturing transformers and
switchgears. With the Saigols in management, PEL expanded into Refrigerators & Air
Conditioner manufacturing and now it has become a Giant in the World of Appliances.
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INTRODUCTION:
Pak Elektron Limited (PEL) is the flag bearer of the Saigol Group of Companies. 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 PROFILE:
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 Saigol Group of Companies bought the company. 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.
.
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PEL AIR CONDITIONERS:
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 REFRIGRATORS:
The manufacturing of refrigerators started in 1986-87 in technical
collaboration with M/s IAR-SILTAL of Italy. Like the air conditioner, PEL's
refrigerators are also in great demand. Today, PEL Crystal has 30% market
share. Its cooling performance is tested and approved by Danfoss Germany
and its manufacturing facility is ISO 9002 certified by SGS Switzerland.
PEL MICROWAVE OWEN:
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.
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PEL TELEVISION:
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.
POWER DIVISION:
PEL 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 working 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
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
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enabled the PEL Group to incorporate new technologies into existing product
ranges, thus giving the Pakistani market access to innovative, affordable and quality
products.
Industrial Analysis:
Pest Analysis:
Political environment:
• The political condition of the Pakistan is not stable, mean when the government
changes the polices are also change the new comer in politics. He tries to run the
country with his own ways which are entirely different from the previous
government.
• From the previous some years we have seen that the Government of the Pakistan
encourages to import and export polices. And also encourage the foreign investors
to invest in Pakistan.
• There are no many difficult formalities to import or export, any dealer can import
in Pakistan and sell by the fulfilling the certain formalizes required by the law.
• Different countries provides to the different countries there services by the using
of labor of that country. As china is performing this job by the providing theservices to the Pakistan. In this case during the manufacturing of the product the
cost becomes reduce, like the electricity bills, government taxes, other factory
overheads etc, so that’s why Pakistan prefer to outsourcing mostly from China.
• The required demand is fulfilled in Pakistan by the importing from China.
Because 17% subsidies are given to the exporters in China.
• If the Government reduces the import duties on the raw materials the purchasing
power can be increased of HVACR (Heating, Ventilation, Air conditions and
Refrigerators).
• Eng. Abdul Rasheed Director General Pakistan National Accreditation Council
(PNAC) said we can save energy with quality management practice and by
evolving a national quality infrastructure based on technical regulation,
standardization and conformity assessment.
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Economic Environment
• Pakistan’s economy continued to perform impressively as it is experiencing
longest spell of growth in its history.
• The outcome of the fiscal year 2006-07 indicates that Pakistan’s economic
momentum remained on track.
• Economic growth accelerated to 7 percent in 2006-07 as a result of robust
growth in agriculture, manufacturing and services and has been notably stable
and resilient. Compared with other emerging economies in Asia, this puts
Pakistan as one of the fastest growing economies in the region.
• Growing per capita income coupled with fiscal revenues approaching a trillion
mark are resulting into increased consumer spending on one side and
increased investment in infrastructure by the government on the other side.
• These prime indicators are providing a healthy canvass for both of our
business divisions i.e. Appliances and Power.
• The per capita income of Pakistan has reached up to $763.
• Growing interest of foreign investors in Pakistan as manifested by the visits of
over 200 foreign investors’ delegation in the last 2 years.
Social Environment:
• Most of the population of Pakistan belongs to middle class who are the potential
buyers of PEL’ products. So the scope of product is high.
• Most of middle class people are price conscious and tend to save money so they
would prefer the products with low electricity consumption.
• In recent times joint family system is vanishing and a product such as
Refrigerator which was used by 5 people is now used by only 2 or 3 so the
demand is increasing day by day.
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Future Environmental Analysis:
Future Trend of Political environment.
By the study of the political environment we come to know that the formalities which
are fulfilled by the both Pak electron industry and the government are completed. And
according to the Eng. Abdul Rasheed Director General Pakistan National Accreditation
Council (PNAC) that the National Quality Policy is almost completed and would be
introduced soon. In future a legal framework is an urgent need for preventing supply of
unsafe products; evolve an effective certification system, rationalization of quality and
conformity system and raising awareness amongst the masses. He said the rules are being
framed so that in future every product is tested by the government agencies. “it will be aregular feature and findings of such testing will be made public. In future for the seek of
the environmental protection there must b rules and regulation by the government
especially the role of PSQCA and EPAs, while standards for home appliances should be
strictly enforced and the government, civil society groups and media should promote
responsible consumption attitudes.
Future Look of Economic Environment
The economy is expected to perform well in the next year however it is exposed to
certain challenges like current account deficit, lower exports, increased competition in the
international market and lack of technological advancement as compared to competing
nations. It is still hoped that national economy will continue to grow and rising prosperity
will bring expanding opportunities for the Engineering Industry and for your Company.
The company will continue to focus on cost effectiveness, quality standards and best after
sales services to our valued customers. And the Pak electron expects to go farther, faster
and higher than they have ever been in serving the interests of their customers,
shareholders and employees.
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Future look of Technological environment
In terms of Freon, several intermediate steps have been taken to minimize CFC emission
as researchers attempt to identify safe coolant alternatives. Refrigerator designs have
been improved to reduce the amount of freon needed; leak detection systems have been
installed; maintenance has been limited to trained, authorized personnel; and refrigerant
is recovered and recycled whenever possible. Moreover, long-term replacements for
freon are being explored. Thus far, the most promising among them is HCFC-22, which,
although still a chlorofluorocarbon, contains an additional hydrogen atom that reduces the
molecule's ozone-depletion capacity by 95 percent. While its cost (three to five times
greater than that of freon) is problematic, HCFC-22 is presently undergoing tests to
determine its toxicity.
CFC-containing insulation may be replaced by the same kind of vacuum insulation that is
used in thermos bottles. Research indicates that vacuum insulation is more efficient in
terms of both space and energy, so, at present, it appears that insulation alternatives will
become viable well before freon substitutes.
Now the new refrigerators are introducing by the Hinoon lab. On the solar energy.
Because there is a problem of electricity in Pakistan which can be solved by the
introducing solar energy technology.
Future look of Social environment:
People will buy the refrigerators and other home appliance by the same previous pattern.
And people will mostly prefer to buy the new refrigerators which is introducing by High
noon lab by the solar energy. And with the change of seasons people buying pattern will
also change. The season of marriages is mostly between both two Eid’s. So the buying
power of people will increase in these days. And the people prefer to buy those
appliances which become match with their home settings and designing. This is called the
trend of fashion. People decorate their home according the changing of the trend of
fashion.
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Competitors Analysis
Competitors of PEL
Dawla nce:
• 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.
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• To reinforce value like harmony, solidarity, discipline and dedication.
Business:
Manufacturing and marketing of domestic appliances
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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WAVES :
Cool industries are basically deep freezers manufacturer that started its operations in late
80s and added refrigerators in their product line by mid 90’s. in the beginning they didn’t
get a good response for their refrigerators but as time passed, their market share position
is getting better. In year 2003-04, like all other brands, waves got a good growth inrefrigerator market.
They have successfully launched their split air conditioners. They are the pioneers of low
price split AC in Pakistan.
Waves in the beginning, considered to be a low price and low quality product,
were not very much accepted, but later with the re-launch of their refrigerators, got a
good response from the dealers. Currently WAVES is the third largest manufacturer of refrigerators and expected to sell 79,500 units in last year.
Reason for Growth:
There are the following reasons for growth of WAVES
• Improved quality product
• Strong distribution network
•Low prices
• Heavy advertising
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SWOT analysis of PEL:
STRENGTHS:
• As we all know PEL has been serving since 5 to 6 decades, it has captured almost
50% of the Appliances demand and near about 70% of the power products
demand with the passage of time. Due to its strong positioning, its Goodwill has
always been a threat for the new business arrivals and for the small-scale
businesses. And PEL holds a great part of the people trust.
• Technological improvements in the business environment always play a vital role
for the expansion of the Corporations. PEL has sensed the importance of
technology very earlier and has introduced latest equipments to all of its
departments along with the expertise to increase its staff technological know how
as well as their efficiency level. Now people working in PEL are ready to cope
with any of the internal and external threats easily. This technological
improvement has enhanced company’s productivity comparatively more than 60
percent from past and still the company is struggling for more improvements.
• In a competitive environment, where every producer tries to maximize its market
share and profitability, requires a very strong financial backup. Pak Electron
Appliance division has large number of competitors in the market including
National and International firms and they are continuously trying to break PEL’s
market share but due to strong financial backup from its own POWER
DIVISION, from Top class financial institutions and its exclusive distributionnetwork all those companies have become un-able to change its position.
• One another Strength would be the environment, PEL ensures a very neat, clean
environment to its staff which keeps them motivated and committed to their jobs
and that’s why they usually resist to jump for external opportunities.
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• Due to PEL’s reputation and Goodwill many financial institutions have increased
its credit facility limits due to which it has started expanding its businesses into
those areas where access was a bit tough or where it wanted to participate.
Similarly due to this advantage it has started increasing its product’s National and
International Material Supply to achieve production scale as well as the annual
Sales.
WEAKNESSES:
• Other than strengths the internal weaknesses of PEL includes low morale of the
employees due to OLD and RIGID ideologies of the top-level staff. Top level
staff at PEL dislike middle or lower level employees participation in the decision
making, exert excessive, un-necessary pressures, work loads and discourage them
a lot, this significantly reduces employees interests in their work and respect for
the Top-level staff.
• Another weaknesses of the PAK Elektron lies in its marketing strategy where its
continuously trying to rely on the Distribution Network for its Appliances
specially for its microwaves and splits with out proper Advertisement and
promotions. Due to which people un-awareness remains there as it is and they
bother to go for its products.
• As it was mentioned earlier that due to certain reasons PEL’s Cost of Production
fluctuates it simultaneously effect over the sales price level due to which it does
not remain stable through out the year. And if the company does not have a tight
control over cost of production, customer who comes to buy any product after
estimating its own budget when finds a different price from the prior visit or
information faces decisional problems and in this way Company looses its
customer. It is happening with Pak Elektron
• Another weaknesses of PAK ELEKTRON, is its delivery system. Retailers of
PEL use to complain about its delivery patterns and they are un-happy and
moving towards other company’s products.
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OPPORTUNITIES:
Following are the opportunities on the way, which the company can avail in future.
• SAFTA, a free trade agreement between South Asian Countries, is hopefully
going to bring large number of penetration opportunities for the companies like
PEL in January 2006. This will help PEL in achieving Economies of Scale and
further help it in bringing technological enhancements in it all facilities. This will
also make its name stronger in the market.
• Another opportunity is the Sales Tax exemption by the Government over the
Production material and Sales of transformers, switchgears, electric meters, etc by
this year. Due to this PEL soon will enjoy huge profits than before.
THREATS:
• As SAFTA, an agreement between south Asian Countries is on its way so sooner
we will be having all Asian Products and producers such as Chinese, Hong kong,
etc. Competition in all Asian Countries will be so tight we can’t even imagine.
Where it is going to bring large number of opportunities it will also create threats
for the domestic producers like PEL because of their Advance Factors of
production such as technology and because of their Basic Factors of Production
such as cheep labor etc. Further, these factors will give those producers a chance
to charge lower prices than domestic producers for their products and they will
soon be having a competitive edge over companies like PEL due to which its
survival would become difficult.
• Similarly, another threat for PAK Elektron is the increasing preferences of
customers towards other companies’ products like Dawlence, which is speedilyexploring un-identified markets in Pakistan and engage in heavy advertisement of
its products. This has been increasing its brand loyal day by day. It seems that
PEL will be no more dealing in Appliances if it does not take any precautionary
measures for future.
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• Distributors of any product always look forward for the higher
margins. Companies have started offering sufficient amount more than PEL, as
incentives to the distributors soon will take over PEL’s Exclusive Distribution
Network and this will be the huge loss for PAK ELEKTRON.
Porter -5 Model:
Bargaining power of buyers:
Concentration:
In the market of home appliances the buyers are fragmented. Because when people go to purchase the refrigerators and mostly no try to bargain because mostly
people know about the price and quality of the product and they themselves make the
competitive study and decide to buy or not buy the products. So the buyers bargaining
power is not high.
Suppliers Competition
Substitutes
New
Entrants
Buyers
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The buyers have sufficient information mostly those having the
research. Because the customer who invest the money can not take any risk. So that’s
why nobody can spend the money by closing their eyes. And here also the buyers have
the high bargaining power.
Supplier’s power:
Suppliers:
Major suppliers of raw material and sub-components/components are Japan, U.S.A, Italy,
South Korea, Singapore and Thailand.
Concentration:
• As concentrate on the quality on the PEL with the comparing to the DAWLANCE
is low because PEL is not compromising with the price to suppliers. So that’s why
the suppliers who give the material to PEL and DAWLANCE and WAVES are
concentrated because if the suppliers don’t want to supply the material to PEL
they are not conscious because they have the good opportunist to sell their raw
material to the concentrated firm in market which is DAWLANCE having 45%
shares of refrigerators in market.
Presence of Substitute inputs:
There is a substitute of refrigerators that is deep freezers which are
offering by the both firms under the electronic product lines. So the suppliers power is
not high.
Importance relative to customer.:
There are different suppliers for one product, and PEL is important for the
suppliers because the PEL is also improving gradually. In this case we are getting the raw
material of refrigerator’s door and structure, which can import from different
international suppliers. But for the specifying PEL is getting the raw material from china
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and that is important for the china. After the DAWLANCE the PEL is a big
firm which is getting the huge material. So in this case the suppliers are not powerful.
Switching Cost:
The switching cost is low so that’s why PEL is getting the material form china
because the chinease firms are providing the material according to the requirement of the
Pak Electron limited. The supplier’s power is low.
Rivals
Industry Growth:According to the annual financial report this industry is growing quickly,
by the quickly growing there are less chances for the more rivalry.
Gross Sale. And the gross profit is also 442 to 582 from the year 2005-06 to 2006-7
Fixed Cost:
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The Fixed cost of this industry is very high, the installation of
machinery to produce the raw material, development cost for dies and mould, assembly
line machine, distribution cost, transportation cost, R&D cost etc. Its high fixed cost is
threat for the new entrance.
Product differentiation:
The products and services are commodity of the home appliances industry and
have closer the product. So that’s why this industry is buying the products form the china.
Concentration and Balance:
There are many firms making the home appliances but form those there are few
firms which have the maximum market share in the market nominated by DAWLANCE
and PEL. Which have the 45% and 37% market shares respectively in refrigerators.
Switch cost:
The switching cost is not high because the industry is getting the affective price
form the china than other suppliers as japan, Malyasia at the same quality and less price.
And if the china starts the implementation on installing the plants in Pakistan then the
cost will reduce more.
Exit Barriers
There can be two main exit barriers which the fixed installed machinery which are very
expensive. And the inventory is also a big exit barriers for any firm because it is most
difficult to get ride or sale out, because the positioning of the firm becomes poor in the
mind of the consumers and they are no ready to buy that product which may b a big loss
for the firm.
New Entrance
• High cost of production is one of the main barrier of entering the refrigerators
industry
• The huge advertisement cost.
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• 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).
• Government polices are involved if the existing firm approve the patent from the
government then the new entrance can b stopped.
• Brand identity is also a threat for the new entrance because it takes time for the
positioning in the mind.
Substitute:
Switching Cost:
The substitutes are the waves triplet, deep freezer of dalliance if the
switching cost is high then the people will not get it and if the switch cost is low then
people will get it. The deep freezers are expensive than refrigerators and need more place
to stay the freezer. Which is considered a high switching cost.
Price , Performance:
The substitute offer a better price in sense of performance, performance wise thedeepfreezes are better but those which are technology wise differ giving the facility of
both refrigerator and freezer which is available in double door freezer.
Industrial Structure
The structure of the industry is falling under the category of oligopoly because there
are 5-6 firms but the major firms are 3-4 which have a good place in the market.
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