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A Comparative Study.

By ANNIE IDREES MEMON (MITM)
Department of Management Sciences
Isra University Hyderabad.

June 10 - 16, 2002

The study is based on the comparison of marketing strategies applied in LG. and Dawlance. In this study, the main focus to see the effectiveness of the marketing strategies applied by both the companies Dawlance and LG, for selling their products particularly Refrigerators.

Just to understand the marketing strategies in general and refrigeration market in particular, one should know that what marketing strategies ought to be? Who are the main players in the market? What kind of other products do they produce? How do they promote and supply their products? What type of competition is going on in the market? And finally what are the marketing strategies being applied by both the companies? These are the questions to be addressed, but the main theme is the marketing strategies of Dawlance and LG Refrigerators. This paper is mainly divided in to four sections.

The first section deals with the marketing strategies in general. The second section focuses on the main players of Refrigerators in the Pakistan market. The third section sheds light upon the marketing strategies of Dawlance and L.G. Though the marketing strategies of all the products may be the same. But mainly it has been focused on the refrigerator marketing strategies here. Finally, the paper is concluded in the last section.

All the information that is presented in this paper has been acquired and extracted from various primary and secondary sources. In this study, best possible efforts have been made to collect the correct and uncovered information. For this, the information has been collected by both primary and secondary sources. Primary data is based on the interviews from the top officials of both the companies based on the semi-structured questionnaire. The secondary data is based on the published reports and Internet.

1. MARKETING STRATEGIES IN GENERAL

Fluctuating customer requirements and competitive forces are putting more pressure on marketing and are demanding superior marketing strategy and tactical execution. The cycle time from product creation, to product launch, for a winning go-to-market strategy, leaves no margin for error.

Marketing puts the customer at the center of the organization. The organizations, which do so, reap the profits. The idle marketing ought to be or the key steps to a successful strategy can be summarized as:

1.1 BE CLEAR ABOUT MISSION

The common, customer-orientated thread running through all the activities of the organization and how we define the kind of market oriented organization we want to be.

1.2 MARKETING RESEARCH

In marketing strategy some one should do know about the marketing potential for his the product and should find out through research that:

WHO ARE OUR CUSTOMERS?

  • What do we really know about their needs, preferences, behavior and their life styles?

  • What can we offer them... at a price... that other companies do not?

  • How do we perform in comparison to our competitors?

  • How are we currently performing for our customers?

  • Where are the gaps, the weak points, the fudges, and the point of excellence... the USPs (Unique Selling points)?

  • How are we different?

  • Why are we different?

  • How can we better delight?

  • How do we change?

  • What do we change?

  • How clever are we with our market intelligence?

  • How well is our market research working?

 

  • 1.3 Set Strategic Aims

  • Market Penetration

  • Market Development

  • Product Development

  • Entering new Market

  • 1.4 Segment the Customers

Consider groups who share a similar need and who will respond in a similar way.

  • 1.5 Design a Marketing Strategy

  • To achieve specific marketing objectives, based (e.g.) on the Marketing mix.

  • 1.6 Set Tactical Plans, Budgets, Programs

  • Assign individual responsibilities to achieve the objectives.

  • 1.7 Monitor Progress

MEASURE AGAINST STANDARDS AND CONTROL.

2. Main Players of the Refrigerators in Pakistan Market

Just to understand the refrigeration market, first of all we should know who the main players in the market are? Actually there are two types of marketers: those who manufacture refrigerators locally and those who import and market the same in Pakistan.

Local Manufacturers of Refrigerators are: Dawlance, Waves, Pel and Singer. These manufacturers roughly cater 80% need of the market.

Imported Manufacturers of Refrigerators are: LG, Super, General, Hair, Sam Sung, Indesit, Semins,

Parties import refrigerators from their principal and market the same in Pakistan. In-fact these all parties contribute only 20% of the market requirement. The above all are direct competitors of Dawlance and LG. electronics.

3. "Marketing Strategies of Dawlance and L.G Refrigerator"

Before discussing the marketing strategies of Dawlance and L.G, first we will go through the profiles of the companies in brief.

DAWLANCE:

Dawlance United Refrigeration Industries Ltd. was established in 1980. It is the Largest Company in Pakistan engaged in appliance business. Dawlance stands for durable & reliable household appliances. Its refrigerator Factory is located in Hyderabad. The main Objectives are to provide dependable and reliable product at reasonable price to majority of Pakistanis and to enhance their quality of Life. Present Market Share of Dawlance product is: refrigerators 65%, Washing Machines 35%, Microwave Oven 40%, Chest Freezers 45%, Air Conditioners 15%,

L.G.

Haniska International is a multinational company, located in Korea. LG is an agent of Haniska International in Pakistan market. LG is an importer of home appliances in Pakistan. It imports Refrigerators, Air Conditioners, Washing Machines & Microwave Ovens from Korea and China. LG has got around 300 dealers all over the country. Marketing objectives of L.G are: to provide world class product to upper and upper middle class to enjoy real luxury in their life. Present Market Share of L.G product is: Refrigerators 4%, Washing Machines 2%, Microwave Oven 3%, Chest Freezers nil, Air Conditioners 25%.

3.1. MARKETING STRATEGIES

The marketing mix is the organization's overall offer, or value, to the customer. 'The basic marketing mix is often nick named "the 4Ps" (product, place/distribution, pricing, promotion); these are elements in the marketers armory aspects that can be manipulated to keep ahead of the competition'. Here I've explored the marketing strategies of Dawlance in terms of marketing mix have been explored.

3.1.1 PRODUCT STRATEGY

The object of Dawlance is to provide refrigerator to all people who fall in lower middle, middle, and upper middle class in this country such that most of the families should have refrigerators in their home because they enhance better quality of life. Dawlance has got products, which are as per international standards and carry all the basic features, which need in any such type of appliances.

Dawlance believe that whatever they provide to their customers should be durable and reliable. All the products, which Dawlance market, are durable enough and customer can keep on using them for quite many years without any problem. It provides its refrigerators, 3 years compressor guarantee and 1 year chest freezer, and free service in spare parts under normal use.

Whereas, LG's objective is to provide world class product to upper class and upper middle class to enjoy real luxury in their life. Since LG is a Korean brand and being imported from Korea, it has very advanced features, which are normally demanded by in developed countries.

LG also insures that whatever product they market should be durable enough which last quite many years and give trouble free service to their customers. It provides its refrigerators, five years compressor guarantee and one year free service in spare parts under normal use.

3.1.2 PRICING STRATEGY

Dawlance has got around 52 models in their refrigerator product line. From the price list and discussion had with their management, it appears that they have position their product pricing in such a way that their main focus is middle and upper middle class. However, they have some selected range for upper class as well. Product-wise price list enclosed in appendix for reference.

Dawlance has got a policy that their all product price should be the same in all cities and town in Pakistan market. Dawlance bear freight cost and make their product available to their dealers irrespective of where they are located. For this, they give uniform margin to their dealers irrespective of whether he is big or small.

Dawlance consider pricing as one of an important element of marketing mix. It believes that their retail prices should be uniform all over the country irrespective of whether customers buy from Peshawar or Karachi. In order to maintain a uniform price all over the country, Dawlance bear transportation charges and make the product available at cost price at dealer premises.

Whereas the LG pricing strategy is cost + fixed mark up to cover their GP. Since they cater to upper middle and upper class, therefore their 90% dealers are in big cities only. Product-wise price list enclosed in appendix for reference. LG follows pricing policy in which their normal formula is import cost + reasonable gross profit to cover their marketing expenses and also give them reasonable profit.

3.1.3 PROMOTION STRATEGY

Dawlance promotion budget is around 1.75% of their turnover. 40% spending of their budget is Print Media, 20% goes on TV, 20% on Out door activity and balance 20% on Sales Promotion activity. They believe that print media and out door activity help them to reach to their target customer. Due to satellite transmission and having multi-channels, it does not pay one unless you have very huge budget to spend on this media. On promotion, their spending is more on consumer incentive schemes. Since it pay them and there is direct relationship between sales and consumer. Further, it gives customer a direct benefit in shape of price reduction.

As far as Advertising strategy of LG is concerned, it is being planned and executed by LG, Korea through their Pakistan Office keeping in view their global approach and theme line. Local Agent of LG simply gives advice and coordinate in its implementation. Since LG is a multi-national brand, their spending on advertising is in such a way that their all product get promoted. Although for different product they have got different agent; like for TV, New Electronics/Karachi. For computer monitor, Vision Computer. For mobile phone, Chimera.

It was not possible to get the exact advertising budget of LG, but it appears from their spending and the figures collected from Pakistan Advertising Association and from some other sources that their spending is around 6/7 per cent of their sales in Pakistan territory. Due to being a multi-national company and as a part of their global Strategy they, most of the time, divert their funds from strong market and spend more on weak or under developed markets.

Further, as far as Sales Promotion strategy is concerned, it is being designed and implemented by their respective agent of each product in Pakistan. For the promotion of Home Appliances products: Hanaska International designs their own strategy. Their major approach and emphasis on promotion through trade. They offer very handsome incentives to their dealers, who in return push their product among the customer and thus they get their desired volumes in Pakistan. It has been noted that due to being import base product they are always high price vis-a-vis other brands in the market and it is one of the reason why they give so much emphasis on the motivation of dealers.

3.1.4 DISTRIBUTION STRATEGY

Dawlance has got around 800 dealers all over the country. Dawlance ensures that its refrigerators are available almost in all appliances markets of Pakistan. They have got 80% penetration in dealer sector. One can get very easily their product in any city or small town of Pakistan.

Dawlance has got various types of dealers according to their potential. Around 25% of dealers are "A-class" dealers who sell over 1000 units and above per year. "B-class" dealers are those dealers who sell from 400 units up to 999 units per year. They are around 50% in total dealer and the rest are in best 25% of "C-class" dealers sell from 200 up to 399 units per year.

In order to provide quick and timely delivery to their dealers: they have got big warehouses located in almost all big cities and towns. Whenever they get order from the dealer they try to provide supplies to their dealer from closest warehouse. In case stock is not available in the warehouse then it is delivered directly from Hyderabad Factory. The maximum delivery time incase stock is delivered from Hyderabad Factory is four (4) days. However if supply is given from closest warehouse then hardly it takes 2-3 hours time. They believe that, timely delivery of their product to the dealer, is one of an important element in their success in Pakistan.

As it has already been stated in earlier that LG refrigerators are imported. Mostly they import from Korea and some of the models are imported from China as well. LG relatively don't maintain loose stock at their end. Simply based on historical forecast and feedback of their dealer about the possible demand, they import from their principal.

They ask their dealer to maintain sufficient stock at-least 4-6 week at their end. Rather they believe in replenishment of dealer stock based on their sales. It means dealers stock always remain in within a limit, doesn't exceed beyond 6 week level.

As mentioned above, they have only 300 dealers mostly in big cities and some in small towns. They also have got a policy that retail price all over the country should be uniformed for the customers, whether he/she buy from Karachi, Islamabad, or Peshawar.

They also bear transportation cost and thus provide supplies at uniform rate to their dealers. They have got three big warehouses in Karachi, Lahore and in Islamabad. From these warehouses they feed their product to their dealers and thus they make their product available to them.

3.1.5 PRODUCT LIFE CYCLE

Dawlance is an ISO 9000 certified company and among its mission statement. It is one of their missions to provide quality product to their customers. Therefore, they ensure that every product, which is delivered from their factory, must go through rigorous quality check. So that only perfect product, free from any defect is delivered to their customers.

Since LG is an international name in home appliances, therefore LG ensures that their product must meet their rigorous quality standard. So, when it is delivered to the customer, it must meet customer's expectations.

3.1.6 AFTER SALES SERVICES

Dawlance believes that after sales service is one of the most important elements of marketing mix and thus give due emphasize in providing quality after sale service to its refrigerator customers. Dawlance has got qualified foreign-trained engineers in its team of after sale service and also properly trained technicians and supervisors who look after service centers and provide reliable quality after sales service to its customers.

Dawlance has got 17 its own service centers in different parts of country. Besides, they have got 34 franchise workshops to cover remote areas, where its service center doesn't exist. These are service centers and franchise workshops cover almost 99% market of Pakistan. Wherever Dawlance dealer is, there you'll find Dawlance workshop or either franchise workshop to take care of service need.

In order to provide satisfactory after-sales service, Dawlance ensures that in all of its service centers sufficient inventory of spare parts is maintained, even these are available with franchise workshops.

Dawlance has got the policy first of all to carryout repair, if required at customer place. Incase if refrigerator problem is not diagnosed at customer premises then it is taken to its workshop. Whenever they get any complain, they prepare job sheets and puts its record in computer and whenever at later date if complain is repeated, in that case they also have a history with them of such product in their data bank. Even after five years if you want to find out from Dawlance service center that how many times there refrigerators have been referred on account of technical problem to their center, they can dig out from their computer record. In nutshell, we can say that Dalliance's after sales service workshops are very well properly organized and they work according to international service standard. As far as service charges are concerned Dawlance consider that it is not a profit center rather it's a support center for sales.

As it has been mentioned earlier that LG has got market of refrigerators only in big cities and some of its big towns in Pakistan. Therefore, they have got relatively lesser number of service centers as compared to Dawlance. At present LG has got only eight after sales service centers in Pakistan. From these service centers LG provides after sales service to each customers. They also maintain spare parts of serviceable items. Since their product is 100% imported, the souring of spare parts is only import based.

Relatively LG refrigerator's parts are expensive comparative to locally made because LG imports spare parts from Korea and various other LG production centers. One of the reasons for being these parts expensive is that LG's local agent has to pay almost 70% of the product cost towards import duty, sales tax and other import cost.

We can say that LG also believe in quality, after sale service to its customers and also considers after sales service as one of the important element of marketing mix.

CONCLUSION

From the above information, it has been analyzed that there is no comparison between Dawlance and LG. There are several reasons behind it. For example: Dawlance is a big local manufacturer of refrigeration industry in Pakistan. It has got all engineering capabilities and very good finance and of course technical know-how to produce internationally accepted quality refrigerators locally. On the other hand L.G is a multinational company and has got different agents in some of the big cities of Pakistan. It is simply an importer and imports refrigerator from Korea and markets the same in Pakistan.

Since Dawlance has very strong industrial base as well as deep-rooted marketing network in Pakistan, they don't feel any threat from any of their competitors, either local or from importers. In the contrary L.G refrigerator is an import-based activity. Every year due to weakness of Pak Rupee, US $ cost of import is going up and thus LG refrigerator is becoming costlier day by day. Therefore, they have a big challenge before them to maintain their market share and also to maintain their reasonable growth against local manufacturers.

All Dawlance products are made for middle, upper-middle and upper class. While LG products are made for upper-middle and upper class. Present market share of Dawlance refrigerators is 65% while L.G's present market share for refrigerators is 4%.

In the light of above evidences, it could be said that Dawlance is a leading company as compared to LG, due to its dominance in the market, lower prices, and availability of spare parts and after sale service, etc. Hence people prefer to buy their products. Dawlance is dominant in the Pakistan market because not of its marketing strategies but least competition by L.G. L.G being a foreign company suffers because of government policies by paying heavy import taxes. It means, it is not only the marketing strategies of any company which plays a dominant role but it the success of product lies in the marketing strategies as well as the policies of the Government i.e favorable or unfavorable. As far as the case of L.G is concerned, it is suggested that instead of depending on import it should install its plant in Pakistan so that it may lessen its burden on taxes.

* Annie Idrees is the final year student of MITM at Isra University Hyderabad. The writer is very grateful to Professor Dr. Amanat Ali Jalbani, Chairman Department of Management Sciences, Isra University, Hyderabad, who very kindly has provided full support and guidance for writing this paper, otherwise it would have been very difficult to complete it.