STRATEGIC MANAGEMENT Presented To: Mr. Ghulam Ahmad Rana Presented By: Waqas Sattar Satta r Bilawal Shabbir Arham Javed Usman Ali Ch.Awais Ch.Awais Zahid Bilal Nawaz Hassan Imtiaz
1205 1210 1215 1220 1211 1201 1225
Pak Elektron Limited (PEL)
History of PEL •
•
•
•
•
Pak Elektron was setup in 1956 as a Public Limited Company with the object of initially producing transformers, transformers, switchgears, and electric motors. motors. After the conclusion of joint venture agreement with AEG Saigol Group acquired the PEL COMPANY in October 1978 The company floated its shares to the general public and was listed li sted on Karachi Stock Exchange (KSE) and Lahore Stock Exchange (LSE). In 1980, Appliances Division was established 1981 it started the production of Window Window Type Type Air Conditioners with the technical collaboration of General Corporation of Japan
1987 the production of Refrigerators and Deep Freezers was started. In 2006, the Company has started manufacturing of split type air conditioners of various capacities as the customer choice has shifted from window type to split type.
The product has been well received in the market. This encourages the company to multiply its production in the coming coming year. year.
Today, oday, PEL has become a household name. Its products are not only in great demand in the local market but the Company has started exporting its appliances division products PEL (Pak Elektron Limited) is the flag holder of the Saigol Group of Companies
KEY PEOPLE CHIEF EXECUTIVE
Mr. Mr. Mian Naseem Saigol BOARD OF DIRECTORS
Mr. M. Azam Saigol Mr. Shahid Sethi Mr. Mr. Haroon Ahmad Khan Mr. Mr. M. Murad Saigol Mr. Homaeer Waheed Mr. Gull Nawaz Mr. Mr. Masood Karim Sheikh Mr. Tajammal H. Bukharee
(Managing Director)
(NIT Nominee) (NBP Nominee U/S 182 of Ordinance) (NBP Nominee U/S 182 of Ordinance) Ordinanc e)
Business volume The “SAIGOL GROUP” GROUP” is one of the leading industrial groups in Pakistan. The Saigol Group belongs to the Saigol Family, which is an old business family and has contributed a lot towards Pakistan’s Pakistan’s industrial development. Saigol Group remains a leading and forward-looking group and believes in continuous development and growth. The result is a global business activity monitored through various offices worldwide. They are serving nation in diversified business activities in t he fields of
Textiles. Engineering. Banking and Finance. Fuel and Energy. Trading. Automobiles.
SAIGOL SAIGO L GROUP OF COMPANIE COMPANIES S Textile • Azam Textile Mills Ltd. • Saritow Spinning Mills Ltd. Fuel & Energy • Kohinoor Power Co. Ltd. • Kohinoor Energy Ltd. Engineering • Pak Elektron Ltd.1 • PEL 2 Banking & Finance • Union Bank Ltd. • Union Leasing Ltd. Trading • Saritow Pakistan Ltd. • Saigol Computer Ltd. Automobiles • Kohinoor Motor Works Ltd.
06-Egerton Road, Lahore 06-Egerton Road, Lahore Kohinoor Nagar, Faisalabad 06-Egerton Road, Lahore 14km, Ferozepur Road, Lahore 21 km, ferozepur road Qasoor
06-Egerton Road, Lahore 07-Egerton Road, Lahore 06-Egerton Road, Lahore 162-Shadman Colony, Colony, Lahore 07-Egerton Road, Lahore
GOALS OF PEL Non financial goal
To add a new product to its range in every third year for increasing the sales volume
To set on image as the best quality qualit y of local home appliances
To set an image the best quality of local power division product
Financial goal
To obtain a real (inflation (i nflation and adjusted) growth in earning per share 10%per year over time.
To increase the market share of split unit to at least 20%-25%by the end of 2009.
OBJECTIVES OF PEL The objectives and mission for which the company is established are as following:
• To carry on the business or businesses of manufacturing, selling, installing, maintaining designing and dealing in all kinds of electrical equipment. • To carry on any business whether manufacturing or otherwise which maybe found convenient to undertake in connection with or in addition to any of these objectives mentioned above. •
To do all such things that are incidental for the attainment of the above objectives or any of them.
•
To produce high quality and standard products.
•
To produce equipment to be used in numerous projects of national importance.
•
To secure a high share / quota of WAPDA’s demand for power products.
• To produce skilled workers and technicians through its apprenticeship schemes and training programs for engineers and technician
COMPANY COMPANY BELIEFS BELIEF S The belief of Pak Elektron Limited is the consistent attainment of quality in all facets of our operations so as to provide consultancy services with professionalism and to the satisfaction of our clients. clients.
COMPANY BELIEFS:
~
Excellence in all we do.
~
Ethical and moral conduct at all times and in all our relationships.
~
Innovations in all areas of our Designs as a mean of attaining and
~
Sustaining leadership.
~
Pursuit of relevant knowledge
~
Commit ourselves to the highest standards of personal and professional integrity at all times.
Number of Total Employees
There are more than 7000 Workers who are currently working in PEL all over Pakistan.
Vision Statement
To excel in i n providing engineering goods and services through continuous improvement
Mission Statements
To provide quality products & services to the complete satisfaction of our customers and maximize returns for all stakeholders through optimal use of resources
To focus on personal development of our employees to meet future challenges
To promote good governance, corporate values and a safe working environment with a strong sense of social responsibility. responsibility.
Analysis of mission statement I.
Core competency
II. Technology III. III. Phil Philos osop ophy hy These are the three things which are not mansion in the mission statement of PEL.
PROPOSED MISSION STATEMENT
To provide quality products & services to the complete satisfaction of our customers all over the Pakistan and maximize returns for all stakeholders through optimal use of resources
To focus on personal development of our employees to meet future challenges
To promote good governance, corporate values and a safe working environment with a strong sense of social responsibility. responsibility.
Our philosophy is to give people energy efficient and reliable products in home appliances
Our all across distribution network make us dominant over our competitors
By using latest technology and providing innovative features in our Product
LOCATION
The head office is in Gulberg Lahore and the production unit is situated at 14-k.m. Ferozepur Road, Lahore
And is spread over an area of 242 kanals and 15 Marlas of leasehold land in industrial area of Kot Lakhpat, Lahore, and presently the total covered area comes to 232,883 square feet.
Factory is located on the main road where public transport is available round the clock cl ock helping in easy access to the labor and customers.
REGISTERED HEAD OFFICE 17-Aziz Avenue, Canal Bank, Gulberg-V, Lahore Office -14 Km, Ferozepur Road. Lahore-54760 GP.D. Box No. 1614, Lahore - Pakistan. Tel: (+92 42) 5811951-59 (9 Lines Fax: (+92 42) 5810156, 5822682 E-mail:
[email protected] Website Address: www.pel.com.pk
PATTERN OF SHARE HOLDING Name
Percentage
Saigol Family Financial Institutions Insurance Companies Joint-stock Companies Investment Companies Modaraba Companies Foreign Investors General Public
54.60 13.27 3.07 1.77 0.46 0.00 0.03 26.80
Organizational Structure Structure
PRODUCT HIERARCHY
PEL-LG Strategic Partnership
Pak Elektron Limited, held a press conference (April 21, 2009) to announce the strategic alliance between Pak Elektron Limited Limited & LG Electronics An agreement in this regards was signed at the ceremony by Mr. Murad Saigol, Director Operations, Pak Elektron Limited & Mr. E. D. Choi, General Manager, LG electronics, Pakistan Liaison Office. Mr. Mr. Saigol announced this to be the biggest partnership in the history of home appliances and air conditioners in Pakistan and this strategic alliance will expand in the times to come. PEL has been appointed the official distributor for LG Air Conditioners, Refrigerators, Microwave ovens, washing machines and vacuum cleaners from June 2009. The addition of LG for Pak Elektron El ektron will now mean Pak Elektron will have two leading brands,
Main Strategies Under Taken
At corporate level
The
main objective of firm to give customer’ customer ’s satisfaction with high customer satisfaction.
The
PEL use grow and build strategy
Two way
PEL
relationship with distributors
has Strategy for introducing product in every 3 years
Political environment
Pakistan is facing the situation of great political instability and uncertainty uncertainty since last couple of year.
According to the economist com survey Pakistan is at the 11th number of top most vulnerable countries of the world.
Due to this problem business activates in Pakistan are severely affected. The foreign direct investment also decreased dramatically due to current insecurity. insecurity.
The government decided to increase the minimum wage rate of workers from 6000Rs to 7000Rs which is increases the cost of production and inflation
There are few incentive to the manufacture of Pakistan by the government as compare to up coming giants of china.
The cost of manufacturing is high due to electricity rate and overhead.
So most of the time manufacture hesitate to do manufacturing in Pakistan and prefer to import finished goods are only assemble good in Pakistan
Economic environment
Due to global environment economic crises, Pakistan is also a lso facing a lot of problem.
Although Pakistan economy is not directly hit by the t he crises yet the economic situation sit uation in server in Pakistan
To resolve the power sector issue, removing subsidies and concurrent transfer of international oil price changes also likely to risk a further slow down in economic activities at least in the near future.
In Pakistan there is a strong black economy due to the circulation of black money illegal il legal business like smuggling
Economist are expected better condition condition for Pakistan economy economy due to the loan of IMF. IMF.
The consumer in Pakistan is spending most of their income of food and basic needs of
Social Environment Now
a day’s day’s people are becoming more price conscious due to inflation and crises of Pakistan.
Their
primary focus on food and daily use good and thus people have lessened their interest in electronic good.
Now
consumer prefers prefers the split air conditioner over over window air conditioner because split ACs are considered as energy severs.
That
is why window ACs are almost obsolete because of high consumption and split ACs are becoming more popular because of low electricity.
In
countries like Pakistan the usage of air conditioner is great because of extended summer season of nearly 8 month. t hey have introduce The company are becoming more socially responsible these days as they
Technological echnologi cal environment With the
introduction of spilt air conditioner, conditioner, it made the air conditioner more affordable and easy to install and maintain.
The
efficiency of air conditioner depends upon its outer unit. The bigger is the outer unit the more efficient will its inner inner unit. c onditioner the rotator compressor are used which are soundless and do not heat In split air conditioner up in extreme situation. Companies
are introducing refrigerator with cool bank which remain working for 5 hours even after switch off.
The
multinational national companies are using information technology to coordinate and communicate with in companies as well as extreme parties. The electronic management system are used to reduce the t he cost of handling the inventory order.
Legal
Legal factors include description description law employment law, law, and earth and safety.
These
factors can affect how a company c ompany operates, its costs, and the demand for its products
Bargaining power of supplier
The bargaining power of supplier is low because of availability of a number of chine’s brand in the market.
Bargaining power of buyer The bargaining power of the buyer is high because
They have choice of different in the market
They have choice of models and features
They have choice of product in different prices
Threats of substitute Threats
of substitutes high because
The
gas generators and ups are the substitute of Pel’s diesel and petrol generator
The
major substitute of air conditioners are Room air cooler
The
room air coolers are available at are low price starting from 6000
Electric
fans are also very cost effective and its major company GFC fans ,Younas ,Younas fans Royal fans
Threats of new Entrants PEL has low level of threats of new entrants in the industry as the electronics industry has different barrier to entry
Requires huge capital to get entry in the industry
High manufacturing costs
High advertisement cost High cost of raw material
Rivalry among competitors c ompetitors
There is intense competition with in the industry to capture the market in term of share of market.
The companies are introducing product with new and advance technology to attract and capture the customers.
They are using advertisement and technology as a weapon to increase market share in related market.
Description Descri ption CRITICAL SUCCESS
PEL
Weights
Rates
FACTOR
Weighted
HAIER Rate
average
Weighted
DAWLANCE DAWLANCE Rate
average score
average
score
Strong brand
Weighted score
0.25
4
1
3
0.75
4
1
0.2
2
0.4
2
0.4
4
0.8
Product quality 0.12
3
0.36
3
0.36
3
0.36
Customer
0.14
4
0.56
3
0.42
3
0.56
0.09
2
0.18
3
0.27
2
0.18
0.2
4
0.8
2
0.4
3
0.6
name Strong dealers network
services Strong management Strong home appliances
strength
weight
rate
Average weight score
image Strong brand
0.15
4
0.6
Strong dealer network
0.12
3
0.36
Good product quality
0.14
4
0.56
Firm grip home appliances
0.10
4
0.4
Strong management management
0.11
3
0.33
Distribution of authority
0.07
3
0.21
Free customer services
0.09
3
0.27
Financial problem
0.03
1
0.03
Lack of advertisement
0.09
1
0.09
System variation
0.07
2
0.14
Lock of product range
0.02
1
0.02
Less utilization of capacity
0.01
1
0.01
weakness
Opportunities
weights
rates
Weighted average score
Exploration of market
0.25
3
0.75
Increase product range
0.15
3
0.45
Export opportunity opportunity
0.17
3
0.51
Tough competition
0.12
4
0.48
Slow growth rate
0.13
3
0.39
Instable government
0.08
2
0.16
High tax rate
0.10
3
0.3
Threats
Total
1
3.04
IFE = 3.04 EFE = 3.02 The strategy for PEL to
growth and build
STAR: Star is a business unit that has large market share in fast growing industry. industry. Such unit requires more investment to generate more cash. If due to more investment it will become successful and become cash cow and it will reach at maturity stage. Refrigerator
of PEL is the product having high market share and high annual growth rate.
Cash Cow: It is the business unit sometimes known as problem child. It has a large market share and low annual growth. Each cash cow requires little investment and it generates more cash that can be used for investment purpose in other business units. For cash cash cow the strategy is called HOLD, you must preserve market
Split air conditioners is the product of PEL having high market share and low annual growth rate.
Question Mark: It is the business unit that has a low market share and high annual growth. gr owth. These business unit requires resources to grow market share but if they th ey succeeded that will become STAR. STAR. For question mark the strategy is called BUILD, you try to make up the market share.
Washing machine and microwave oven are the products of PEL having low market share but high annual growth
Dog: Dog is the business unit that has small market share as well as low annual market growth gr owth rate. A company normally would be unwise to invest substantial funds in SBUs in this category. Marketing strategies for dogs are intended to maximize any potential profits by minimizing expenditures or to promote a differential advantage to build market share and the company can diverts or liquidate the dog product
SPACE MATRIX Financial stability
Return on investment
+4
High working capital
+5
Profitability
+4/3
.
4.25
Industry stability
Growth rate
+5
Increase in demand
+5/2
.
5
Competitor advantage
Quality product
-4
Market share
-3/2
.
-3.5
Environment stability
Unemployment
-2
Advance technology
-5/2
. IS+CA 5+ (-3.5) =1.5 FS+CS
-3.5
STRENGTHS – STRENGTHS – S S PEL PEL
1. 2. 3. 4. 5.
OPPORTUNITIES – OPPORTUNITIES – O O 1.
Expl Explora orati tion on of of mark market et in Paki Pakist stan an
1.
Incr Increas easee in in prod produc uctt range range
1.
1.
Start Start a campai campaign gn to incre increase ase the the prod product uct range ( s1,s3,o2)
1.
Firm should should focus focus on inte internat rnation ional al mark market et (s1,s2, s3,o3)
Expo Export rt oppo opport rtun unit ity y
3. 4. 5.
PEL PEL fac facing ing toug tough h comp compet etiti ition on.. Mostly Mostly comp companie aniess Give Give High High Credi Creditt in mark market et and get current market Slow Slow grow growth th rate rate in in Pak Pakist istan an Inst Instab abili ility ty of gove govern rnme ment nt Tax depa depart rtm ment ent
1.
Fina Financ ncia iall Prob Proble lems ms
1.
Lack Lack of adve advert rtis isem emen entt
1.
Syste ystem m vari variat atio ions ns
1.
Lack Lack of Prod Produc uctt ran range ge
1.
Less Less Utili Utiliza zatio tion n of of cap capac acity ity
SO STRATEGIES STRATEGIES
THREATS – THREATS – T T 1. 2.
Stro Strong ng bran brand d imag imagee Stro Strong ng deal dealer er netw networ ork k Good Good pro produ duct ct qua qualit lity y and and servi service ce Number Number 2 in in refri refrigera gerators tors in Pakist Pakistan an Firm Firm grip grip in home home appli applian ance cess
WEAKNESSES – W WEAKNESSES – W
WO STRATEGIES STRATEGIES 1.
Increa Increase se advert advertisi ising ng for for gaini gaining ng new new marke markets ts (w2,o1)
1.
Produc Productt range range to be be increa increased sed with variety variety (w4,w5,o1,02,03)
ST STRATEGIES 1.
Let customers know company’s Product Quality and Achievements. (s3,o1)
2.
Provide Provide the produc productt in market market at at credit credit to enhance the market share (S2, S4, S5, T2,)
WT STRATEGIES 1.
Use the the adver advertise tisemen mentt and by incre increasi asing ng produ product ct
2.
range range remov removee some some pressu pressure re of comp competit etition ion.. (W2, (W2, W4, T1)
QUANTITATIVE STRATEGIC POSITION MATRIX Marketing penetration
Marketing Development strengths
weights
Attractive
Total attractive
score
score
Attractive score
Total attractive score
Product quality Strong brand name
0.15 0.13
4 3
0.6 0.39
2 2
0.3 0.26
Strong brand image
0.19
2
0.38
3
0.57
Financial problem Lack of advertisement
0.06 0.04
2 1
0.12 0.04
3 1
0.18 0.04
Less utilize of capacity
0.05
2
0.10
2
0.1
Explore market
0.18
3
0.54
3
0.54
Increase product range
0.15
4
0.6
3
0.45
Tough competition
0.02
2
0.04
1
0.02
Slow growth
0.03
2
0.06
2
0.06
weaknesses
opportunities
threats
COMPETITOR ANALYSIS In this modern word, it is very hard to survive in the market due to swear competition between the companies. Every existing product in the market has its substitute or similar product. “Competitors are the companies that satisfy the same customer needs and wants.” To explain the competition we can classify the competitors in two ways which are given below: •
•
Direct competitors Indirect competitors
DIRECT COMPETITORS The direct competitors of PEL are Dawlance, Waves, Waves, LG, and a nd Haier etc. The Dawlance is market leader in the refrigerator and PEL is still on second number. number. But in window room air conditioner (WRAC) the PEL is market leader
REFRIGERATORS:
Total market sale of refrigerator in 2006 is 2924905 units. Last year sale was 2091779 units. These figures show 30% market growth. But this is not the exact figure of growth rate it varies from year to year. DAWLANCE DAWLANCE is a market leader in refrigerator with 46% share. PEL has 38% market share Waves has 10% market share.
WINDOW
AIR CONDITIONERS:
PEL is a market leader with a market share of about 60% in local manufacturing industry. industry. And overall has 35% market shares for this product. LG has about 32% market share and stands on number two. And rest of the manufacturers have 23% marker share. SPLIT
AIR CONDITIONERS:
The main competitor of PEL in Split air conditioner is DAWLANCE. DAWLANCE. Other competitors are MITSUBISHI and HAIER MICROWAVE
OVEN:
In case of Microwave Oven DAWLANCE DAWLANCE is the main competitor of PEL. But the company claims to be the leader in this product line.
INDIRECT COMPETITORS
The indirect competitors for PEL in this industry are Samsung, Orient, Mitsubishi, Sabro, Nobel and others Chinese brands available in the market. The PEL has no big threat from all these companies. But the Sabro pioneer for introducing the split air conditioner in Pakistan.
BUSINESS DIVISIONS PEL is organized in two business divisions:
1. 2.
Appl Applia ianc nces es Divi Divisi sion on Power Divisi ision
APPLIANCES DIVISION: PEL’s Appliances Division is the flag carrier of the Saigol Group involved in home appliances manufacturing. Air conditioners. Refrigerator Deep
freezers
Microwave oven Washing
machine
Generators.
PEL Air Conditioners: PEL window-type 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. With With the shift of users preference from window type to split type air conditioners, PEL has started manufacturing split type air conditioners. PEL Refrigerators: 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, oday, PEL Crystal has 30% market share. Its It s cooling performance is tested t ested and approved by Danfoss, Germany and its manufacturing facility is ISO 9002 certified ce rtified by SGS Switzerland
POWER DIVISION PEL Power Division manufactures
Energy meters
Transformers
Switchgears
Kiosks
Compact stations
Shunt capacitor banks
Energy meters
1. All these these electrical electrical goods goods are manuf manufacture actured d under under strict strict quality quality control control and and in accordan accordance ce with international standards. 2. PEL is is one of the major major electrical electrical equipm equipment ent suppliers suppliers to Water and Power Power Developm Development ent Authority (WAPDA) (WAPDA) and Karachi Electrical Supply Corporation (KESC), which are the largest power utilities in Pakistan. 3. Over the the years, years, PEL electrical electrical equipm equipment ent has had had been used used in numer numerous ous power power projects projects of of national importance within Pakistan.
4. In spite of stiff stiff competi competition tion from from emerging emerging local local and multinatio multinational nal brands, brands, PEL PEL Group' Group'ss appliances and electrical equipment's have remained in the spotlight due to constant innovation. 5. Strategic Strategic partnersh partnership ip with multina multinational tionalss of repute repute have have enabled enabled the the PEL Group Group to incorporate new technologies into existing product ranges, thus giving the Pakistani market
Brand Name
Strong Dealer Network
Quality Products
Best Sales Services
Market leader in WRAC
Number
Strengths
2 in Refrigerators in Pakistan
Strong Management Team
Distribution of Authority
Research and Development Department
Brand Name: PEL has created a strong brand image in the mind of the customers through higher quality and low prices. The customers of PEL always prefer its home appliances like Window Window AC, split AC and refrigerators, during the time of purchase. PEL is a popular company in Pakistan and every one knows about the PEL products and its brand name. That’s That’s why PEL is a market leader when it comes to Window AC. Strong Dealer Network: It is also the plus point for PEL that it has developed a strong dealer network in the market. The dealers always try to sell sel l the PEL products to the customers because, the company for its products, gives them a high margin. The The management of PEL also provides more incentives to their dealers than their competitors. Dealers are very conscious about the PEL products and always guide the customer in buying the PEL products. products. Quality Products: PEL is also in a strong st rong position because it provides superior quality products to customers. So it gives an edge to company over its competitors. Due to best quality, guarantee of products products of PEL
Best Sales Services: PEL provides the after sale service to customers which increases i ncreases the customers satisfaction. The biggest strength of services department is that it handles a complaint complaint within 24 hours in any part of the country, country, that helps in increasing the satisfaction level of customers. Market leader in WRAC (Window Room Air Conditioner): It is also strength of PEL that it is a market leader in WRAC. Costumer always gives preference to PEL in window AC market because of low price, high quality and durability. durability. Number Two Two in Refrigerators in Pakistan: After the Dawlance refrigerators, PEL has the second position in the refrigerators market. PEL is gradually coming up up in refrigerator market and and increasing its market share. Due to improved quality, quality, innovative features and good sales services PEL is becoming the first choice for customers.
Strong Management Team: It is another plus point that PEL has a strong management. Its employees are competent, efficient, skilled and knowledge. They always cooperate with the top management in achieving of goals that are assigned to them. Distribution of Authority: Top management of PEL delegates the power to the subordinates for achieving the marketing objectives in a specified time ti me period. So every manager has an authority to take decisions to achieve the goals of company. company. In this t his way they save the time ti me and react quickly. quickly. Research and Development Department: PEL has a strong research and development department that is continuously trying to develop new features for the products. R&D department spends huge amount of money for the development of new products. Free Customer Service: PEL provides free customer service for one year to its customers. The customers who buy the PEL
Weaknesses of PEL: Like other companies PEL has some weaknesses. If PEL overcomes these weaknesses then it can become a market leader in home appliances. PEL looses some competitive edge in the following areas:
Financial Problems
Lack of advertisement
System variations
Lack of Product range
Less Utilization of capacity
Financial problems: Sometimes PEL faces the financial problems because its stocks are so much piled up in the stores that creates problem of cash flow because when the stocks are not sold and the production is in process for 24 hours a day then the company faces such problems.
Lack of advertisement: advertisement: It is a second major weakness of PEL that it is not a vigorous advertiser. Only recently has PEL invested a considerable amount in advertisement, but when we look at its competitors, PEL still has to do a lot in this sector. System variations: It is also the main weakness of PEL that there is a rapid change in polices of selling the products. That creates problems for the selling team to sell the products to the dealers because the top management requires urgent amount of money. Thus the products are sometimes sold on hard cash that reduces the prices of products products that creates problems problems for the management. management.
Lack of Product Range: PEL has introduced more products of consumer items but there are more needs to develop new consumer items like PEL washing Machines, Vacuum Vacuum cleaner and other items. Less utilization of capacity: Due to lack of finance a company cannot utilize all its i ts resources on its full capacity. capacity. It increases the cost of products per unit that decreases the profit margin of each consumer item. Sometimes, the company cannot allocate the resources according to the requirements of the production department, which later on becomes a problem for the complete utilization of resources
Opportunities for PEL: For PEL, there are more opportunities for expansion in business. Following are the opportunities for the PEL.
Exploration of market in Pakistan
Increase in product range
Export opportunity
Increase in production capacity
Exploration of market in Pakistan: PEL has the opportunity to explore the market in all over the Pakistan. Even though PEL has introduced its products in many cities of Pakistan but there are so many places that are yet to be exploited. Increase in Product Range: PEL can increase its product range that will be more profitable for the company. company. There are more needs to develop new consumer items like PEL washing Machines, Vacuum Vacuum cleaner and other items. Export opportunity: PEL has also the opportunity to export their products in other international countries like UAE, SAUDI ARABIA, and other Arabic and African countries. Increase in production Line: Company can also increase its production line at the maximum level that will increase the efficiency of the employees and will also reduce the total cost.
Threats for PEL
Following are the main threats for the PEL: Strong competition
China’s product China’s product introduction in the market
Price war
Slow growth rate in Pakistan
Instability of government
Tax department
World Trade Organization
Strong competition: There is very strong competition in the home appliance division. Every company adopts different strategies for selling of the products. It reduces the profit margin of each company and increases the bargaining power of the buyers who will demand higher quality of products at lower cost. China’s product: China’s China’s products are another threat for the Pakistani companies because these products are cheaper than the Pakistani products. China products stress the indigenous companies to lower the quality and prices that will not be profitable in the long l ong run. Price war: As there is stiff competition in the home appliance market that will cause the price war. Slow growth rate in Pakistan: There is also slow growth rate of home appliance in Pakistan that will increase the stocks of the company. company. Although, Although, this industry is in the growth phase, but the speed of the growth is very slow
Instability of Government: The rapid changes in governments will become a threat t hreat for the companies because every government adopts new policies for the industries. So it increasesthe uncertainty for the investors who want to invest heavy amounts in their new projects. Tax department: Tax department is another major threat for the company that will restrain the business expansion. There is a most complicated tax procedure operating in the country that c reates hurdle in the production and smooth functioning of different companies in Pakistan. World trade organization: World trade organization will give the permission in 2005 to each company c ompany of home appliance to export their products after paying less duties or duty free products. That will increase the pressures for the indigenous companies to reduce the prices and increase the quality. quality. It will increase the competition among the foreign companies and indigenous companies.
Balance Sheet as at December 31, 2012
Note
December 31, 2012
December 31, 2011
(Rupees in thousand) EQUITY AND LIABILITIES SHARE CAPITAL & RESERVES
Authorized capital
4
2,500,000
2,500,000
Issued, subscribed and paid up capital
5
1,668,264
1,668,264
Reserves
6
164,134
164,134
2,075,931
1,770,706
3,908,329
3,603,104
7
3,873,505
3,962,040
Long-term financing - secured
8
5,587,486
4,548,852
Liabilities against assets subject to finance lease
9
33,555
21,841
Un-appropriated profits
SURPLUS ON REVALUATION OF PROPERTY, PLANT AND EQUIPMENT
NON CURRENT LIABILITIES
Deferred taxation
10
1,930,107
1,973,350
Deferred income
11
50,037
56,069
7,601,185
6,600,112
CURRENT LIABILITIES
Trade and other payables
12
1,692,148
1,485,002
Interest / mark-up accrued on loans and other payables
13
1,245,589
823,896
Short-term borrowings
14
6,815,091
6,174,860
40,729
1,106,375
Current portion of: - long-term financing - liabilities against assets subject to
8
CONTINGENCIES AND COMMITMENTS
15
Note
25,214,784
23,793,782
December 31, 2012
December 31, 2011
ASSETS O
-CURRE
T ASSETS
Property, plant and equipment
16
13,811,250
14,089,185
Intangible assets
17
310,969
314,874
14,122,219
14,404,059
Long term investments
18
10,216
4,393
Long-term deposits
19
65,898
54,636
CURRENT ASSETS
Stores, spares and loose tools
20
126,792
109,582
Stock-in-trade
21
3,789,580
4,247,023
Trade debts - unsecured
22
5,775,681
3,746,881
Advances
23
527,751
625,559
24
290,799
227,555
19,662
17,241
25
11,663
7,491
258,174
187,496
26
216,349
161,866
11,016,451
9,330,694
Trade deposits and short-term prepayments prepayments Other receivables Other financial assets Income tax refundable Cash and bank balances
Profit & Loss Account Note
year ended December 31, 2012
year ended December 31, 2011
(Rupees in Thousand) Revenue Sales-tax and discount
27 28
Revenue - net Cost of sales
29
Gross profit Other operating income
30
20,293,973
13,723,169
2,524,084
2,380,339
17,769,888
11,342,830
14,126,276
10,277,948
3,643,612
1,064,882
36,269
37,140
3,679,881
1,102,022
Distribution cost
31
827,192
792,803
Administrative expenses
32
624,338
683,115
Other operating expenses
33
4,648
4,838
Finance cost
34
2,050,054
1,413,264
3,506,232
2,894,020
173,649
(1,791,998)
(12,729)
(10,162)
160,920
(1,802,160)
46,245
(638,698)
114,665
(1,163,242)
Share of Loss of Associate
18
(Loss)/ Profit before taxation Provision for taxation (Loss)/ Profit for the year
35
2012
2011
Sales Gross
20,294
13,548
Net Sales
17,770
11,237
Gross Profit
3,646
849
EBITDA
2,917
333
Financial Charges
2,051
1,413
Profit before Tax
161
(1,918)
Profit after Tax
115
(1,269)
EPS - Basic
0.59
(10.95)
1,219
1,219
450
450
Share Holders' Equity
3,908
3,498
Long Term Loans
5,621
4,571
Current Liabilities
9,832
9,622
Non-current Assets
14,198
14,463
Current Assets
11,016
9,219
Financial
Share Capital - Ordinary Share Capital - Preference
Production Data
2012
2011
Transformers - MVA
3,967
2,029
Switchgear - Nos
1,780
1,490
Energy Meter - Nos
264,148
349,611
Air Conditioners - Tons
919
39,565
Refrigerators/Deep freezers 3,042,064 Cfts
2,660,387
Segmentation
Geographic
Demographic
Psychographi c
Behavioral
Geographic Segmentation: PEL is doing mass market market which is not limited to one county but all over the world. The main target of PEL is Pakistani market.In Pakistan,PEL is available at every city because its very famous and good product of market. Demographic Segmentation: PEL divide its market on the basis of following characteristics of population Age group: Earlier PEL used to segments its market among among people age ranges from 35-----45years.But Now PEL focus between the age group ranges from 25----35 years. Gender group: For the segmentation, the company is recently focusing fo cusing on young graduate girls and the latest ad of PEL reveals the
Psychographic Segmentation:
Income group: PEL is offering its several products to different income groups of society • In case of Generators, company focuses on elite elit e class. • In case of refrigerators, split air ai r conditioners, washing machines, deep freezer. freezer. • Televisions Company focus on middle class. cl ass. • In case of Microwave oven, the company focuses on elite and middle class. Behavioral Segmentation:
We provide a quality product for our customers. c ustomers. It is purely base on local demands and needs, and we sure that our product will be appreciated by that people who are quality conscious.
MARKETING MIX
I. PRODUCT II. PRICE III. III. PLAC PLACE E IV. IV. PROM PROMOT OTIO ION N
Product roduct is a thing that satisfies customer demands. demands. Pel Company is very much conscious to make the products hich satisfy the customer needs. ompany makes the product: According to the needs of the customer. What kind of size and model they want. What kind of features and functions they want. What kind of packaging they want.
Price rice is very much important because its attracts the customer in first look.Pel company is very much conscious bout price. ompany sets the prices of the products by Analyzing the market situation. Actual cost of the product Marketing expenses of the product. Profit margin of the company.
Place Place plays a very important i mportant role for any company’s company’s product. If the product is not rightly placed, company will suffer from loss. Company places its product: • According to the requirement of customer and market. • In more populated area of the city. • Against competitors products. • More convenient to the customers.
Promotion Once company makes the product, it needs promotion for the awareness of the customers. Unless a company will not arrange for promotion a products can’t succeed. Pel Company promotes its product through: • Bill boards • Internet • News paper • Brushers
Department Control Finance department:
Finance department provide money for the working of the organization. Pel Company’s Company’s department borrows loan mainly from national bank and settle terms and conditioned of the interest and time period of returning the load with it. When the sale is made the company firstly return the loan with interest.
Human resource department: Human resource department of the Pel Company is very much conscious of hiring the employees for the company. company. The standards he set for hiring the new people. HRM department of the company mainly makes the external recruitment .this is usually done through news paper web sites sit es extra.HRM department also set salaries, packages and TA, DA allowances.
Marketing department:
Marketing department is the back bone of any firm. marketing department generally analyze the needs and wants of the customer. customer. Then this department tells about the customer needs to the company which in tern launches the products according to the needs of the customers. Marketing department is responsible for making strong advertisement for the products. Sales department:
Sales department is responsible for making sales of the product. This department generally takes orders from the market, gives information to the credit c ontrol department. Area credit control department gives information to the head office. Head office discuss situation with the finance department and then at last finance department gives authority to area credit control department to settle settl e term and conditions with dealers.
Customer service center department:
This department is very much important for the company because its makes the good will of of the company. company. Its provide services to the customers customers who have their clams and makes the customer loyal. Its also gives the feed back to the head office to provide the required spare parts.
Production department:
Production department is involved only producing the products. This department purchases raw material from the suppliers. Then passes the raw material from various dyes machines. Modeling machines etc…from the assembly line according to the required shapes of the products.
In Future What Should
PEL To Do
Increase Utilization of capacity: PEL could not make the freezer as they target. They have enough capacity to make but the less or lack of utilization of capacity they fail to meet their targets. •
• Lack of advertisement: Other competitor companies have good marketing and advertising campaigns as I observed that near the PEL there is a great sign board of Waves.
• System variations PEL should have to adopt the one system. As they are changing the system t o ERP which is very good but they have to train trai n their employee as well. Training procedure must be change. There should be the presentation to all workers.
Lack of Product range: They should have to increase their product range as their new competitor SAMSANG in appliances has a lot of product range so they also have to increase their products. • To gain more competitive advantage over their competitors, PEL has to work on their distribution network • The company must give more incentives to the dealers so that they remain loyal l oyal to the company and promote the products. • PEL should open its internship programs on frequent basis so more and more students can get the chance to work as an internee in such a huge institute and get their relevant work experience. • Introduction of seasonal schemes can help to boost sales
Too much favoritism in PEL so there should be control c ontrol and merit should be followed.
There is no rotation of job work so one person is limited to his work.
PEL more focus should be on electronic media to get competitive advantage over the competitors.
They have to increase their advertising expenditures
