LG Quadoor 1

Introduction
Side By Side Refrigerators:
The most popular refrigerator style by far is the side-by-side, which has the refrigerator on the
right side and the freezer in the left side. The fresh food compartment is generally about 50
percent larger than the freezer compartment. With side-by-side refrigerators, the freezer and the
fresh food compartment get equal real estate. They can come with in-door water and ice systems
or other gadgets such as TV screens. The average dimensions for standalone refrigerator units
are: Width: 35 inches; Depth: 30 inches; Depth with door open 90 degrees: 45 inches; Height: 71
inches. Space efficient cooks who also want in-door extras will like side-by-sides best.

LG’s new side by side innovative product design allows for more space inside, without adding
space outside. To cool or chill (a substance) and to preserve (food) by chilling their products in
Pakistan keeping abreast with the changing lifestyles, where consumers seek convenience
bundled with style, LG has also added its usual touch of innovation, which is its hallmark. Being
the pioneer in Twin cooling technology, now it has further enhanced the product by
incorporating space-saving technology to increase storage capabilities without adding to the units
outside dimensions. However, the formal designed bulky refrigerators failed to appeal to
European tastes that care more about kitchen decor. LG research addressed this concern and
since then, LG Electronics has been ranked first in the European side-by-side refrigerator market
for several years. The changing preferences and lifestyle of the Pakistani consumers LG has
introduced its sleek and stylish refrigerator in the Pakistani market as well, for those who have an
eye for perfection and beauty. LG Electronics first took a leadership role in the side-by-side
refrigerator market with the introduction of new product technology at a steady rate in the history
of Pakistan. LG has brought revolutionary solutions in Pakistan, while maintaining the edge of
unsurpassed external dimensions. LG Being number one in the Side-By-Side category worldwide
understand its consumers and offers deeper and wider storage facility by expanding the capacity
of a conventional-sized refrigerator by more than 100 liters that can accommodate larger items
than traditional refrigerators. LG patented LCD display system on its new refrigerator series,
which allows the ultimate user experience of its product.

Types of Refrigerators:
Top-freezer refrigerators:

These are the traditional type, dating back to the earliest refrigerators.
Widths typically run from about 30 to 33 inches. Manufacturers claim up to
22-cubic-foot capacities, but usable capacity is typically 20 percent lower by
our measurements. They typically offer the most storage for their size.
Fairly wide refrigerator shelves make it easy to reach the back. They also
cost the least as a group, yet they offer stainless trim on more models for a
more stylish look.

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Bottom-freezer refrigerators:

Sales of bottom-freezers are growing fastest. Widths run from 30 to 36 inches.

Claimed capacities go up to 26 cubic feet, though usable space doesn't quite
match that of comparable top-freezers. Bottom-freezers offer the convenience
of an eye-level refrigerator. French-door models offer the space-saving narrow
door swing of a side-by-side and the option of opening only half the
refrigerator for smaller items.

Side-by-side refrigerators:

A vertical, full-length split places the freezer on one side and refrigerator on
the other. Side-by-sides typically comes with through-the-door ice and water
dispensers, temperature-controlled bins, and rapid ice-making cycles. Width
typically measures 32 to 36 inches. Claimed capacities are up to 30 cubic feet,
but only about 65 to 70 percent is usable. The narrow doors are a plus in a
tight kitchen.

Built-in refrigerators

These pricey models are designed to fit almost flush with

cabinets and counters. Built-ins typically come in bottom-freezer
and side-by-side styles. You can even buy a separate refrigerator
and freezer and build them into a 72-inch-wide opening. Claimed
capacities go up to 26 cubic feet, but only about 70 percent of
that is usable. These offer the sleekest look. And most can accept
optional front panels that match other elements of your kitchen.
Built-in refrigerators are the least space efficient overall. They're
wide (36 inches or more) but relatively shallow-25 or 26 inches
front to back. They've also been repair-prone as a group.

Company Profile
LG Electronics:
LG is enhancing users' daily lives with innovative home appliances combining style and
technological excellence, while leading the industry in green technology.
LG Electronics is also using the most advanced technology and the most insightful designs. LG
is committed to preserving the natural environment and creating consumer-optimized products
its core principle is to help our planet. LG is taking a proactive approach to energy and
environmental issues, working on enhancing these areas and exploring a range of ways to
minimize greenhouse gas emissions and increase energy efficiency. Going beyond greener
products, this philosophy is used through all processes in line to meet global standards. LG also

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cares about the health inside its customers' homes, creating products with health-conscious
features that remove germs and allergens from the immediate environment.

Main Products:
Washing Machines
LG is currently the bestselling and leading brand of front-loading washers
in the United States, carried by major American distributors including Best
Buy, Home Depot, and Sears, helping to expand this segment in the market.
LG's innovative and stylish front-loading STEAM washer was voted
number one by several consumer magazines (Consumer Reports, JD Power
Magazine) for three consecutive years (2006, 2007,2008) gaining the
reputation as the best product on the market.

Refrigerators
LG creates products that reflect the specific needs and preferences of its customers. LG
Electronics sells convenient, spacious, and stylish refrigerators adapted for different users. LG
introduced the door-mounted ice maker, a unique system that provides 10
% more storage by placing the ice maker on the freezer door. LG
refrigerators consume less energy and create less noise thanks to a linear
compressor, while keeping food fresher with innovative technologies
such as vita-light, green ion door cooling and Vacuum Fresh crisper. The
LG multi door refrigerator has led the North American market since its
launch in 2007.

Cooking Appliances
LG's Solar CUBE light wave oven, the second generation of Solar DOM,
combines all the functions of a convection oven, grill, and microwave,
allowing chefs to cook a variety of foods much faster than with
conventional ovens. The Solar CUBE also helps to retain nutrients and
flavor and makes healthier meals through the Steam Chef function. Despite
its unconventional features and convenient touch control panel, the Solar
CUBE is designed to fit well into the kitchen with the look of a traditional oven.

Built-in Appliances
LG's Built-In Appliances create a convenient and efficient kitchen
environment by combining individual home appliances into well-designed
integrated packages. LG's built-in appliances include hoods, hobs, built-in
ovens, built-in microwaves, dishwashers, and refrigerators. LG's Built-in
Oven, with an e-Cookbook on the LCD panel, helps cooks become world-
class chefs while saving time and energy.

Competitors

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The freezing unit industry has two types of competitors local and imported. The local
competitors are Dawlance, Waves, PEL, Singer and they cater the 90% of the refrigerator market
of Pakistan. The imported competitors are LG, Samsung, Siemens and General. They cater the
5% market requirements. Haier is a joint venture of Government of China and Private sector of
Pakistan, so it is the only multinational company which has its plant in Pakistan and cater almost
5% market share. The direct competition of LG is with Haier, Samsung and Siemens for the
given product of Side by Side Refrigerators.

Direct Competitors Profiles:

Currently there are two direct competitors in the local market for the side by side
refrigerators and these are Samsung and Haier.

SAMSUNG:
Current and future objectives:

Vision of SAMSUNG Electronics is "Leading the Digital Convergence Revolution" and our
mission to carry out this vision is "Digital-e Company.

For this goal, SAMSUNG Electronics restructured into 4 strategic business areas - Home
Network, Mobile Network, Office Network and Core components - that support network
products. Also pioneering products and technology in semiconductors, telecommunication
devices and home appliances field which will make SAMSUNG Electronics a most competitive
total solution provider in digital convergence era.

Brand History:

Samsung is market oriented enterprise having headquartered in Dubai, United Arab Emirates;
Samsung Electronics has been operational for over two decades and operating through 13
offices. Through a network of over 140 distributors, Samsung looks after the distribution of its
digital devices across the world. The company has also invested in a service subsidiary, located
in the Jebel Ali Free Trade Zone in Dubai. The service facility has been functional for over a
decade, and is among the largest within the GCC countries. Samsung MEA has witnessed
phenomenal growth in the past few years and has recorded a sales revenue value of $2.6 billion
in 2006, a 6% growth over 2005.

Brand Value:

In digital era, products will be distinguished by its brand more than by its functions or by its
quality. Since 1999 SAMSUNG Electronics is practicing global brand communication strategy.
Based on the research done by Interbrand INC., USA, SAMSUNG Electronics is the fastest
growing brand from 6.4billion USD (2001) to 8.3billion USD (2002) in Brand equity.

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Current Strategies:

Target Markets:

Samsung is also a most diversified business across the world and has a vast product lines.
Samsung is indulged in continuous innovation and delivering new products at a steady rate.
Currently Samsung Focuses on a big segments in the markets and has targeted several segments.
But in the local market there are only upper middle class products available from Samsung so
here in Pakistan Samsung is Focusing only on the upper middle class product lines and there is
very limited product line available in Pakistan.

Competitors’ strategic focus

Samsung is producing innovative high quality products, they are the innovative and leaders in
the international refrigerator manufacturing through design and technology. Samsung line of
refrigeration units includes many of the products. This proves their intention and research in the
current era. Samsung high-end refrigerators are trend leaders in international design. They keep
on their self as trend setter.

Haier:
Current and future objectives

The objective is to develop a fair, transparent and satisfactory system so as to let everyone focus
on the major aim – the aim to facilitate the customers with the high quality products and on-door
problem solution for their queries. Thus, we mutually create a work environment that inspires
every lifestyle by offering the most authentic product experience to the end customers

Haier is achieving its goal of building a global brand using the "Three-in-One" localization
strategy. "Operational framework: complete localization of design, manufacture, and marketing.

CEO speech in china: “Through every single product and service, Haier is spreading happiness
to customers. We hope consumers can sense our intention and experience happiness every time
when they think of Haier, thus, our value of existence can be finally incarnated.”

Current strategies:

Target Market:

The Haier is targeting all the segments and classes of people. If we see the price range of
products, Haier is doing best for attracting all the classes of customers but no compromise in the
quality and satisfaction matching. Haier Pakistan has entered the local market with a
commitment to help its consumers reap the benefits of modern lifestyle and to provide them

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world-class innovative products, unmatched nationwide customer support, a vast dealer network
and a steadfast after- sales-service throughout the country.

Competitors’ strategic focus:

The Haier is producing low cost and high quality products, they are the innovative and leaders in
the international refrigerator manufacturing through design and technology. Haier's line of
refrigeration units includes many of the products. This proves their intention and research in the
current era and focusing on low cost production.

Indirect Competitors:
Indirect Competitors are local Manufacturers and are Dawlance, PEL and Orient. The Brief
profiles of these companies are as follows:

Dawlance:

Dawlance was established in Pakistan in 1980. Dawlance is the largest company in Pakistan, in
respect of both capacity and market share. It holds market share of approx. 31% for refrigerators.
It has its plant in Hyderabad. Dawlance provides durable, reliable, and stylish products to its
customer nationwide at respectable prices. Dawlance product line includes refrigerators, deep
freezers, washing machines, micro wave oven and air conditioners. Its each product has unique
image in customers mind.

PEL:

PEL is abbreviation of Pak Electron Limited. PEL was established in 1956 in collaboration with
M/S AEG of Germany which was then taken over by Saigol group. PEL started production of
refrigerators in 1986-87 in technical collaboration with M/s IAR-SILTAL of Italy. Today PEL I
the second largest market share holder of refrigerator industry. It holds approx. 33% market
share of the whole market. Its production and manufacturing facilities are up to international
standards approved be Danfoss Germany and its manufacturing facility is also ISO 9002
certified. PEL’s product line includes Refrigerators, Deep Freezers and micro wave ovens.

Orient:

Orient was established in Pakistan in 1957. The business was started as orient color labs and now
50 years later company has developed to a multi business corporation. In Electronics business

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orient started as a distributor of Mitsubishi. But now orient group of companies are assembling
several home appliance products at their facilities and selling them to customer. Orient brings to
its customers top products at very affordable prices. Orient provides in house modifications to
meet customer specifications and for that purpose their staff is passes through regular trainings
on the latest in electronics technology.

Concentration Index:

Company (Refrigerator) Share (%) Ranks

LG 30% 1
PEL 30% 2
Haier 7% 3
Dawlance 31% 4
Others( Samsung, Super, General, etc) 2 5

PEST Analysis
Political Environment:
Pakistan is suffering from political crisis. These political conditions have made industry very
unstable. Energy problem (continuously decreasing cost and power shut downs) is also a very
critical and alarming problem to industries of Pakistan. It increases cost of production and hence
leads them to backward position in global industry. From the previous some years Government
of the Pakistan are encouraging import and export policies. And also encourage the foreign
investors to invest in Pakistan but their interest has decreased substantially due to terrorist
activities 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 formalities required by the law.
Government of Pakistan has increased duty rate on air conditioners/ refrigerators, electric fans,
toasters, micro wave ovens, televisions etc from 25% to 35% while rates on electric ovens/
cooking ranges increased from 20% to 30% and it is not a good sign for new investors, because it
will also promote smuggling of home appliances products.
If the Government reduces the import duties on the raw materials the purchasing power can be
increased for refrigerators. Countries provide services to other countries by the using of labor of
that country, as China is providing the services to the Pakistan. Main advantage of it is, that
manufacturing cost of the products come down (cost reduction), like the electricity bills, other
factory overheads, taxes etc, so this is the reason that Pakistan prefer to outsource mostly
products from China. To establish a plant for this industry is not so much easy, one has to fulfill
certain rules and regulations, and also the huge investment is required.

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Economic Environment:

Pakistan was facing some economic threats in last few months but now the situation again is in
much control mainly due to the decrease in petrol prices, loan from IMF and some measures to
reduce imports. In the era of Gen. Musharraf, services sector was on top but manufacturing
industry also grew with 9.81% (average), and also the agriculture sector. It overall increased the
per capita income and GDP. The per capita income in dollar term has grown at an average rate of
13.5 percent per annum during the last six years rising from $ 586 in 2002-03 to $ 1085 in 2007-
08. GDP has grown at an average rate of almost 6.6% in last five years. In recent years
refrigerator industry’s growth rate is 10.7%.
Growing per capita income and government spending on infrastructure are also healthy signs to
invest in this industry. Now government is encouraging the investors and giving them incentives
to either install or shift their plant in Pakistan, but many countries are now afraid of transferring
their facilities in Pakistan due to increased terrorist activities.

Social Environment:

There is a major shift in the values of the people of Pakistan. The family size has decreased,
because now people prefer to live separate rather than the joint family system. So it overall
increased demand for home appliances products and especially for refrigerator industry. In
Pakistan people mostly purchase home appliances on the time of occasion like marriages. They
buy them as dowry item and it has changed the sales patterns now the sale for freezing unit is not
seasonal but it is sold throughout the year. The availability of different products has also affected
the buying pattern. Demand for refrigerators is increasing because of leasing facilities provided
by several sole proprietor corporations even in small and remote areas of country. Continuous
increase in per capita has increased consumer’s buying power to purchase their basic necessities
of life. And due to long and hot summer season it has become basic need of every home.
Pakistan is country with more than 17 million people in it. This huge population has made our
country heaven for whole home appliance industry.

Technological Environment:

In Pakistan world’s best refrigerators with hi-tech systems are also available in the market.
Modern refrigerators don't use CFC because CFCs are harmful to the atmosphere if released.
Instead they use another type of gas called HFC-134a, also called tetrafluoroethane. HFC turns
into a liquid when it is cooled to -15.9 degrees Fahrenheit (-26.6 degrees Celsius).
A motor and compressor squeezes the HFC. When it is compressed a gas heats up as it is
pressurized. When you pass the compressed gas through the coils on the back or bottom of a
modern refrigerator, the warmer gas can lose its heat to the air in the room.
Some appliances includes micro processor based control that allows for adaptive defrost. Certain
parameters are monitored and the control software determines the moment of defrosting.

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In freezing units, products are made with energy efficient in keeping the view that people have to
buy both refrigerators and deep freezers for capacity purposes. Refrigerator like intelligent
operation for automatic operation is a new feature. Vitamin C technology is using for fresh food
storage. Slide-out shelf for easy food access is new trend. Automatic problem detecting and
warming system, door cooling warning system, optimized condensing system. Water dispensers
are also attached with new units. Nowadays industry is focusing on low noise operation and low
energy consumption products. Three door refrigerators with improved quality and high storage
capacity are also available in the industry. Another wonderful feature added to refrigerator is
television affixed in its door.

Porter Analysis
Rivals power:
The freezing unit industry has two types of competitors local and imported. The local
competitors are Dawlance, Waves, PEL, Singer and they cater the 90% of the refrigerator market
of Pakistan. The imported competitors are LG, Sam Sung, Siemens and General. They cater the
5% market requirements. Haier is a joint venture of Government of China and Private sector of
Pakistan, so it is the only multinational company which has its plant in Pakistan and cater almost
5% market share. The direct competition of Dawlance is with PEL, Haier, LG and waves.

Industry Growth: According to the previous annual financial reports issued by SBP this
industry was growing with a steady pace. Gross sale and the gross profit is also 442 to 582 from
the year 2005-06 to 2006-7, but after 2007 the industry is on decline as reported by SPB in
annual reports: “Production in electronics industry witnessed a decline of 4.0 percent during Q1-
FY08 in contrast to a remarkable growth of 40.9 percent seen in the corresponding period of
FY07. This is the first ever decline in the electronics production since FY97.” In Govt. budget
2009 report it is quoted that there is negative growth in deep freezer with 17.7 per cent and
refrigerator with 12.2 per cent.

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.

Fixed Cost: 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. are required very heavy investment. So its high fixed cost is
threat for the new entrance.

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Concentration and Balance: There are many firms making the freezing unit industry. But very
few firms have captured the maximum market share in the market nominated by DAWLANCE
and PEL; they have the 61% and 28% market shares respectively in refrigerators.

Brand Identity: Branding in this industry is very crucial and buyers are more conscious about
choosing brands, so Brands who have build strong brand equity are more successful in this
industry.

Product Differentiation: The refrigerator and freezer products are about same in specification
previously, but now different firms are emphasizing on product differentiation in order to gain
more market share and continually introducing new technology with innovative features in their
products. So product differentiation is required in this industry in order to have an identity in
market.

High 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 barrier for any firm because it is
most difficult to sale out inventory.

New Entrance: The new entrant threat is low as the entry barriers of this industry are high,
including high capital cost, government policies, higher import taxes, already existing strong
brand names, and a concentrated industry.

Economies of Scale: The existing firms are operating at higher costs and are availing the benefit
of economies of scale, as production costs are very higher so economies of scale is a big issue for
new firms to enter in market.

High cost of production: It is one of the main barriers of entering the freezing unit industry.
High costs of raw materials and other inputs like cost of electricity and custom duties on imports
made it highly capital intensive industry.

High advertisement cost: To compete in the freezing unit industry huge advertisement cost is
required to make position in the market and to create awareness for customers.

Government polices: Import duties on about 300 non-essential and luxury items including
Refrigerators and freezers have been extended from existing 15%, 20% and 25% slabs of import
duties to the higher slabs of 30% and 35% respectively. (Govt. of Pakistan; Budget 2008-09)

This rise in the custom tax rate proved to be a hurdle in imported brands competition and
discouraging imported brands to enter in the market as imported brands have very high prices
than local brands.

Brand identity: Brand identity is also a threat for the new entrance, as switching costs are
higher for ultimate customer and new brands have to build brand image in order to capture
market share.

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Product Differentiation: This is a big issue for new firms as new firms have to come up with
some new innovative product that differentiate from existing products’ feature and performance
in order to capture market.

Bargaining power of buyers:

At the manufacturing level the buyer power is moderate. There are many companies making
refrigerators in Pakistan, they are actually assembling in Pakistan, most of the parts like body of
the product, their pipes lines and their circuits are manufacturing abroad, some are even
importing the circuits too. The Haier electronics, the waves refrigerator are making many of their
parts locally and getting the low cost benefits.

At consumer/ ultimate customer level the bargaining power is very low as the buyers are
fragmented. The prices are fixed in most of the cases and no discount is offered. The buyers are
usually aware of the prices and they don’t try to bargain which makes the bargaining power of
the buyers low

Concentration: In Pakistan there are only branded companies which have the share in the
market.PEL, Haier, waves, Dawlance these are the local companies which purchases the raw
material from international market, LG assembling the fridge in Pakistan. There are many
suppliers in international market. So at manufacturer level the buyer bargaining power is
typically higher for some parts due to their quality and common availability in international
market but for some parts like compressor the bargaining power of manufacturing firms is low
due to quality of product.

Product cost versus total purchases: At the manufacturing level there are many customers in
international market assembling parts from international market to their places. The compressor
are the important part which reflects the heavy cost in refrigerators so in this way the buyer
highly insist to bargain for the low price and there are many companies(supplier) like in china,
Italy and France so the buyer barging power is moderate.

Product differentiation: At the manufacturing level there is a very little product differentiation.
So the buyer has the opportunity to buy from anywhere for the lowest price and highest quality
so this makes the bargaining power of buyer high. But at ultimate product market there is
differentiates products available with different features so this make ultimate customer
bargaining power low.

Switching cost: At the manufacturing level the switching cost is low because there are many
suppliers in the market, the buyer may easily switch if he analyze the cost and quality
effectiveness of the other supplier. As wide information of suppliers is available in the market
through online and other resources

Profits: There are many local and imported companies and the rate of their products is
approximately near to each other. It means they try hard to reduce the cost of manufacturing by
doing more barging with the supplier. So in this way their barging power is high.

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Backward integration: The backward integration is not easy because most of the parts are very
unique in nature that their machinery is too costly to start and as there are still many suppliers so
the buyer cannot survive easily in the supplier competition.

Impact on Quality/Performance: Mostly customers are quality conscious with the combination
of the price of the product. And the customers do the competitive study. But at the large scale the
customers can not differentiate the quality of different brands. And this is done mostly by
practical experience. So here the bargaining power of those customers will be high who have the
information about the product through their practical experience or perfect research about the
different brands available in the competitive market.
As there are many suppliers so the buyer switch if he is not satisfy by the supplier product. The
supplier product quality is very essential in this market.

Buyer information: For these costly products customers always first try to gather information
and then make decision. Those buyers have the high bargaining power that has sufficient
information. Before buying the product most of the customers try to gather information through
there available resources as the customer who invest the money are not willing to take any risk.

Threat of Substitute:
There is no close substitute to refrigerators and freezers. Still currently there is no
technological product that proved to be a close substitute of either refrigerator or freezers. As
both products have different advantages and attributes so there are some combo products
available.

High Switching Cost: There is high switching cost associated with these products as these are
expensive long use products so it is not easy to switch product or brands
Price, Performance: The close substitute can be combined freezer-refrigerator, as there are
some such products available so those products offer better performance in order that they
occupy less space and are available at one place in place of two different products.

BARGAINING POWER OF SUPPLIERS:

Supplier industry dominance

Here the supplier in this industry are not dominant as there are lot of suppliers from different
countries and supplying different parts of multiple qualities such as major part of the refrigerator
is the compressor in which the whole fridge is lying on the compressor is import from China,
Italy, France, Japan and USA etc. There are many suppliers who are making compressors. They
are making different qualities of compressors i.e. high quality, normal quality, and also low
quality. There is no local supplier of compressors. So the buyer can bargain with the suppliers
according to quality and price as well, and buyer is strong in this segment. Secondly magnetic
door rubber is also import from different countries and there is also no local supplier. In this
segment lots of foreign companies making magnetic door rubber. So in this segment buyer is

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again strong. The other materials like body of refrigerator are locally manufactured. There are
lots of local manufactured who is supplying metal sheet then molded it according to their need
and paint on it. The plastic body which is used inside the refrigerator also produced locally. Lots
of suppliers in the local market who are providing metal sheet and plastic body and they give the
shape according to the requirement. In the end refrigerator is assembled locally. So it shows that
buyer have extra options that they can buy from anywhere.

Buyer is not an important customer to supplier

In this industry there is a lot of options for every buyer that they can switch to many alternatives
whatever is feasible for them and they have to purchase in bulk quantity, so buyer is really
important customer for suppliers.

Supplier is an important input to buyer’s product

Yes, supplier product is really important as its acts as a backbone for the customers or buyer such
as with compressor of the refrigerator works and without it, its just like a cupboard for keeping
things without it. So every part of refrigerator is important input to buyer.

Suppliers products have high switching cost

Supplier product have low switching cost because there are lots of suppliers in the market locally
and internationally so if any other supplier gives more benefit than the current supplier so buyer
can easily switch to other supplier.

Threatening to raise prices or to reduce quality

There is threat of raising prices or reducing quality as the raw material used in them get
expensive, they have to increase prices to maintain quality or another side if maintaining price it
then the quality falls down as there is not much profit in between the raw material and ready
product of the supplier as there are hard competition in the market, so there is compulsion that
they have to do this above mentioned.

Concentration

The bargaining power of the suppliers is high because there are many buyers and suppliers and
all buyers and suppliers are fragmented, even if one company does not buys its raw material
from a supplier it make no major difference as they have other customers in the same market to
sell their product.

Current industry structure and how is it changing

In Pakistan refrigerator industry is facing monopolistic competition as it has approximately 10

competitors. However most of big global players are also exist in the market making it very
competitive. It has also increased imported raw materials and refrigerators. And due to changing
security environments many industries are shifting their production facilities from Pakistan.

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Therefore it may also have adverse effect on refrigerator industry. However many new
companies are expected to launch their product in Pakistan due to attractiveness of the industry.

Number of companies in five years

Due to attractiveness in home appliance industry due to rising population of country we can
expect at-least 1-2 more companies in the industry making competition in industry more and
stronger.

Basis of Competition

Due to ever increasing competition in the industry competition will be on following basis.

• Innovation and Differentiation

• Energy Efficient
• Less Expensive
• Quality of the product
• After sales services
• Good brand reputation
• Quick and on-time and safer delivery of the products
Emergence of new type of competition

With the emergence of new companies in Pakistan, it will be necessary for the local
manufacturing companies to increase their quality to compete with them, because new firms are
coming with imported and hi-tech products. Hence competition will be on quality, leading to
companies to some extent to perfect competition state.

Important Forces

Social factors are bringing very major changes in the demand structure of the industry.

Increased bargaining power of buyer made him able to experience multiple product and select a
best fit among his requirement from refrigerator and his resources.

Value Chain and Value Share

Value is divided among various players in the industry. It starts from raw material to parts
manufacturer to supplier to manufacturer of refrigerator to distributor to retailer to customer. In
this bulky value chain this is retailer who is earning more out of the vale chain profitability.

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SWOT Analysis
LG Electronics (LGE) is a manufacturer of electronic appliances, home entertainment products,
communication devices and electronic components. The company manufactures a wide range of
products ranging from color monitors to LCD products to home appliances. The company also
manufactures wireless handsets and telecommunication infrastructure systems. A diversified
operation enables the company to take advantage of opportunities within specific markets and
geographies, and at the same time protects it from segment specific setbacks. However,
counterfeit product affects the revenue of the company in the long run.

Strengths:
• Diversified operations:
LGE has diversified operations. The company manufactures a wide range of products
ranging from color monitors to LCD products to home appliances. It also manufactures
wireless handsets and telecommunication infrastructure systems. LGE generates revenues
through six business divisions: LCD (24.2%), digital display (21.3%), digital appliance
(19.9%), mobile communication (18.7%), digital media (9.1%), and other business (6.7%).
The company's business is also geographically diversified, with the largest geographic
segment, Europe, accounting for 22% of the total revenues in FY2007. Other geographic
divisions includes North America, Domestic (Korea), China, Asia, Central and South
America, and others accounted for 21.8%, 19.4%, 18.5%, 11.6%, 6.6% and 0.1% of total
revenues, respectively.
A diverse revenue base enables the company to take advantage of opportunities within
specific markets and geographies, and at the same time cushions it from segment specific
setbacks.

• Strong research and development capabilities:

LGE has strong research and development (R&D) capabilities. LGE is committed to invest in
R&D to create products with the latest technology and style. LGE operates 38 research labs
throughout the world. The company's strong focus on R&D has enabled it to come out with
innovative products.

• Strong Financial position:

LG is a reputed international firm has a diversified Product lines in electronics, So LG has a

strong financial position that is a big strength for the firm.

• Strong brand name Innovative:

LG is using efficiently its R&D resource base and continuously indulged in innovative
products development.

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• Advance technology

LG is providing advanced technological equipment and developing products according to the

latest trends in the market and proved to be a market oriented organization.

• Distribution channel:

Currently LG is using the distribution channel of Pak Elektron (Pvt.) Ltd. that is very
intensive and strong distribution channel that enables company to make its products available
company wide. So there is strong distribution network owned by LG.

• Marketing department:

Marketing Department is a core competency of LG electronics in Pakistan and Marketing

department is playing a vital role for the reputation of company across the company and this
is proved to be a strong point for LGE in Pakistan. Marketing Department made available LG
Products across the country and that’s why LG has a strong brand name due to its core
competencies and its strengths in the areas like marketing and R&D.

• Product Leadership:

Refers to the ability to develop creative, premium products through specialized new
technologies

• Corporate Culture:

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

Weakness:
Currently there are no big weaknesses of LG in the Local Market and LG is doing at its best in
the market in order to sustain in the local market and proving to be a revolutionary leadership
capability through continuous development in its product lines.

• Dependant Distribution Network:

LG has not its own independent Distribution network and have strategic alliance with PEL
and using the distribution channel of Pak Elektron to market its electrical appliances
products.

• Target Markets:

LG is focusing on upper middle class and elite class only in its refrigerator market and not
focusing on middle class of the population that’s why it cannot gain the maximum market
share than other competitors and not market leader at the instance.

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Threats:
The Major threats faced by the company are:

• Security issues:

Security is proving to be a big threat now days in Pakistan and affecting almost every
business in Pakistan. This is systematic threat and it is hard to avoid.

• Imported brands:

Imported Brands are available in the market so that has proved to be a threat for the local and
international firms to maximize their share in the local market.

• Higher distributer margins:

Dealers want to have the higher distribution margin from the suppliers in order to advertise a
firm’s products through their advisory services as there is a big impact of dealers’ advice on
the customers’ buying behavior.

• High competition:

There are many competitors in the market and providing the products of almost same
attributes and due to less functional differentiation there is intensive competition in the
market.

• Barrier to exit is high.

Due to higher initial cost for the setup barriers for the exit is higher, as there are higher fixed
costs and it is not easy for the company to exit from the industry at a short instance.

Opportunities:
Following factors are considered to be the major opportunities for the company

• Growth in population:
Growth in population is always a big opportunity for firms to enhance their product lines and
capacity as this increase demand accordingly.

• Availability of consumer financing:

Availability of Consumer Financing increased the buying power of customers and this trend
proved to be a big opportunity for the firms to offer valuable products at an extra prices.

• Customer needs:
As there are always product development opportunities for the firms to develop their
products in such a way to maximize the product utility and to provide the more benefits to
customers.

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• New technology:
New Technology is proved to be a big driver for the new product development and
development of existing products. So, new technological trends always provide ultimate
opportunities to the firms to develop their products in a new way.

• Potential to capture additional market share:

Firms can capture additional market share through diversification strategies, as LG is most
diversified company has a large diversified product lines.

TOWS Matrix
SO-Strategies (Maxi-Maxi" Strategy):
Strategies that use strengths to maximize opportunities. Strategies use a firm's internal strengths
to take advantage of external opportunities. As the Population is growing so using company’s
financial base growth in the market can be pursue. Availing the consumer financing option and
R&D base new products designs and more diversified product lines can be generated. Using
strong brand name, Distribution network and innovative product resource base, potential for
market share can be avail easily
WO-Strategies ("Mini-Maxi" Strategy):
Strategies that minimize weaknesses by taking advantage of opportunities. In order to capture
additional market share LG should develop own distribution channel rather than using Strategic
alliance base. As the Population is growing so they should also capture the middle income level
market in order to grow their market share.

WT-Strategies ("Mini-Mini" Strategy)

Strategies that can minimize weaknesses and avoid threats, as imported brands also capturing the
middle class so in order to get more market share focusing on middle class segment can increase
market share.

ST-Strategies ("Maxi-Mini" Strategy)

Strategies that use strengths to minimize threats, Using our strengths like product leadership,
strong financial position and brand name we can keep customers away from switching to other
local and foreign brands.

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EFE / IFE Matrices:

Strength (Internal) Weakness (Internal)

FACTOR
TOWS EXTERNAL FACTOR EVALUATION
• diversified
•
operations RATE 1-4
WEIGHTAGE
Research and Development
• dependent distribution
TOTAL
channel
OPPURTUNITIES
• financial position • target market
MATRICS
Growth in population 0.1 4 0.4
• brand name
availability of consumer financing • innovative 0.1 4 0.4
customer needs • advance technology
0.05 4 0.2
• distribution channel
0.2 4 0.8
new technology • marketing department
potential for additional market share • 0.05
product leadership 2 0.1
THREATS • corporate culture
security issue 0.05 1 0.05
imported brands (External)
Opportunity 0.15
SO Strategies 3 WO 0.45
Strategies
higher distribution margins 0.1 2 0.2
• Growth in population As the Population is Growing so using In order to capture additional
High 0.1 4 0.4
• competition
availability of consumer company’s financial base growth in the market share LG should
exit barrier is high
financing 0.1
market can be pursue.
1 0.1
develop own distribution
•
Total: customer needs 1 29 channel rather
3.1 than using
• new technology Availing the consumer financing option
• potential for additional Strategic alliance base.
INTERNAL
andFACTOR
R&D base EVALUATION
new products designs
FACTOR market share WEIGHTAGE RATE 1-4 AsTOTAL
and more diversified product lines can the Population is growing
STRENGTH be generated so they should also capture the
diversified operations 0.1 4middle income 0.4level market in
Research and Development Using strong brand name,0.15Distribution 4 order to grow 0.6their market
financial position network and innovative
0.05 product 4 0.2
share.
resource base, potential for market share
brand name 0.05 4 0.2
can be avail easily
innovative 0.1 4 0.4
advanceThreats (External)
technology ST Strategies
0.1 4 WT Strategies
0.4
distribution channel 0.1 3 0.3
• security issue Using our strengths like product As imported brands also
marketing department
• imported brands 0.04
leadership, strong financial position and
3 0.12
capturing the middle class so
• higher
product leadership
distribution margins brand name we can keep 0.1customers 4 in order to get
0.4more market
• Highculture
corporate competition away from switching to 0.01
other local and 4share focusing
0.04on middle class
• exit barrier is high
foreign brands segment can increase market
WEAKNESS share.
dependent distribution channel 0.1 2 0.2
target market 0.1 2 0.2
Total 1 42 3.46

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LG Quadoor 20

On the Basis of these scores now we will build G.E. matrix

G.E. Matrix

Ansoff's product / market matrix

The Ansoff Growth matrix is a tool that helps businesses decides their product and market
growth strategy. Ansoff’s product/market growth matrix suggests that a business’ attempts to
grow depend on whether it markets new or existing products in new or existing markets.

Existing Product New Product

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Existing Market Market Penetration Product

Development

New Market Market Development Diversification

Here we are introducing new product in the existing market so we are lying in the product
development area.

Arthur De Little (ADL) Matrix:

Through our previous analysis we have evaluated that LG proved to be a market leader in this
industry with its innovative product introduction in refrigerator industry. So, it takes the position
of Dominant in the market and the industry is in growth stage.

Industry Maturity

Embryonic Growth Mature Aging

Dominant
LG

Competiti Strong
ve
Favorable -
Position

Tenable

Weak

The Suggested strategies for the given position are:

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LG Quadoor 22

- Maintain industry position and market share

- Invest to sustain growth

Gap Analysis:
Refrigerator is gradually becoming necessity of life due to its benefits of preservation of food for
some time. There are several refrigerators available in the market for each social class of the
country. There are some products for lower class, some for middle class and also some for elite
or upper class.
After deep analysis of refrigerator market and consumer need we came to know that there is gap
in the market that there must be some products which may store different products at different
temperatures necessarily required to maintain their freshness and hygeneity. Vegetables require
different temperatures, meat requires different temperature, and cooked food requires different
temperature to preserve them. So we found that there must be a single but with multiple
compartment refrigerators that has the capacity to store all these products at their specifically
required temperatures.

The Product “Quadoor” Refrigerator:

From the gap analysis we can see that there is a big
need of unique product which can store all the products
at their specific temperatures. So we will introduce
Quadoor refrigerator in the market for the first time in
Pakistan.

Features of Quadoor Refrigerator

Quadoor refrigerator has following features and
specifications
Net Total capacity 25.0 cu.ft.

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Fridge Features:

➢ Dairy compartment ➢ Spill proof shelves

➢ Egg Container ➢ Door Pocket
➢ Foldable shelves ➢ Total No. of shelves: 4
➢ Gallon door storage ➢ Vegetable & Fruit Drawers
➢ Humidity controller ➢ Tempered glass shelves
➢ Interior Light

Freezer Features:

➢ Drawers ➢ Tilt Pockets

➢ Automatic Icemaker ➢ Door Pocket
➢ Interior Light
➢ Tempered glass shelves

Exterior Features:
➢
➢ Ice & water dispenser
➢ Internal Inline water filter
➢ Beverage Station
➢ Display & Controllable digital LCD

Others:

➢ Door Alarm(2min.) ➢ Silver Nano health system

➢ Freezer Star Rating: 4 STAR ➢ CFC free and HCFC free
➢ Refrigerant: R-134a ➢ Digital energy saving system
➢ Cyclopentane Insulation ➢ Power deodorize
➢ Stainless Steel body

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Benefits of Quadoor Refrigerator:

Four cooling Sections

Quadoor refrigerator is a refrigerator which has four
different cooling temperature cooling compartments.
Each compartment has its own fan and evaporator
which enable it to maintain separate temperature in
each compartment as per requirement. These
compartments can be used to store different products
which require different preservation temperature like
vegetables require different temperature than meat and
raw meat required different temperature than cooked
meat etc.

Flexible Capacity
If you need more space of freezer you can use freezer as
well as two bottom compartments as freezer. Similarly if
you need more space as refrigerator you can use 1
refrigerator compartment and two bottom compartment
as refrigerator. So it is very convenient to change
capacity according to need.

Free from Mixing of Odour

As we know that product is divided into multiple compartments so we can store items in
different locations to avoid mixing of odours of different food
products. This feature keeps the original taste and fragrance of
food alive.
Maintains Freshness

High humidity level is critical for keeping vegetables and

fruits at their freshest. While conventional refrigerators
maintain humidity level of only 17%, often drying out food

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quickly, the Quadoor system can maintain up to 72% humidity, four times more than or binary
refrigerators. With the Quadoor system, food retains its moisture for much longer.
- Maintain humidity levels of 72%
- Keep the food like it was just handpicked from the garden.

Marketing Plan

An idea is nothing unless executed properly. A marketing plan includes list of actions and
procedures to be used in the execution of product plan. So we will develop a marketing plan to
execute our product plan.

Reasons for marketing plan:

The reason for the formation of this marketing plan is that we are launching a new and
specialized product in the market. As the product is new so we have to change consumer
behavior as well as position our product as premium product in the mind of consumers who are
health conscious. Moreover that we need to make marketing strategies to successfully launch our
new product in the market. This report provides a detailed analysis of refrigerator industry,
targeting, positioning, competitors, price and product strategies.

Target Markets:

Before we select a target market we need to identify potential segments that are available to
launch our product.
Identifying the Segment:
There are several bases to identify the segments for a product but we will select our segment on
the basis of
➢ Geographic

➢ Demographics

➢ Behaviouralistic

Segmentation from Geographic:

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From geographic segmentation we have selected region to select our segment. Initially we will
take elite class of Lahore. The area that we will cater is Defence, Gulberg, Model Town, Behria
Town, Johar Town etc . After successful launch of refrigerator in Lahore we will launch it in
major cities of Lahore like Karachi, Islamabad, and Rawalpindi etc.

Segmentation from Demographics (Income Level):

Second base we have selected for our segmentation is Demographic Segmentation where we will
create segment on the base of income level. As our target market is elite class of Lahore so our
segment will be consumers with high income levels.

Segmentation from Behavioralistic approach:

The third base that we have selected is Behavioralistic segmentation approach. And in this part
we will select a segment on the behavior of buyer like benefit sought by the customer like quality
of the product, look of the product etc.

Calculation of Segment Potential:

Total population of Lahore is estimated to be approximately 10,000,000. And out of that elite
class is approximately 2.5 % of total population. So we can say that size of our potential target
market is 10,000,000*2.5% = 250,000 customers from Lahore.

Market Definition:
We can define market on the basis of three aspects like area, income level and behavior of
people. Hence our market will be the people of Lahore from Defence and Gulberg with highest
income level who wants a product with more and more benefits and look of the product.
Segment for this Product (Target Market):
As defined in the market definition we will select a segment of elite class people of the country
from the posh areas and also with the high income level in all social classes.
Size of the Target Market:
As we have calculated potential customer in our segment so we can calculate the size of our
target market as follow:
Size of target market = N*P*Q
Size of target market = 250,000 * 250,000 * 1
Size of target market = 62,500,000,000

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LG Quadoor 27

So we can say that the size of target market is approximately Rs. 6.25*1010.

Strategic Group:
We can develop strategic groups as follows on the basis of prices they charge and innovation
they brought to the market.
High
LG & Samsung

Dawlance & Pel Orient & Haier

Prices

Low

Less Innovative More

Positioning:
LG is a brand with the image of most innovative manufacturer of electronics in the world. The
products are positioned in the minds of its customers as premium products.
LG has a positioning statement of “Life’s Good” which represents LG's determination to provide
delightfully smart products that will make their consumer’s life good.
Their slogan, 'Life's Good' best expresses their brand's values, promises, benefits and personality.
It is an ultimate expression for what their brand stands for and what they strive to deliver
continuously.

MOST
Mission
LG is the most innovative brand in Pakistan where most of the people who are quality conscious
and want something different would prefer LG.

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“LG Electronics pursues its 21st century vision of becoming a true global digital leader who can
make its customers worldwide happy through its innovative digital products and services.”
In the chase of this mission we can see that LG is aggressive in its R & D and in its marketing
strategy. So in alignment with this mission we are launching a new product to bring innovation
for consumers.
Objective
There are certain objectives of launching new product. Some of them are as follows:
➢ To cater the need of health conscious people by providing them right product.
➢ To increase profitability of LG by introducing innovative product in the market at
premium price.
➢ To find new market segment to increase its market share
➢ Strive to gain leadership position in the market
➢ To maintain the competitive edge over its competitors

Strategy
LG is aggressive to gain more and more market share. To achieve this goal they will invest more
and more in promotion of their products. For that they will increase their advertisement budget,
research and development budget, distribution network, and production facilities in Pakistan so
that they can generate more and more demand and then cater that demand. Consumers will be
made aware of the product’s benefits and the benefits of preserving food items in the specific
temperature environment.

Tactics
To implement this strategy LG need to advertise in high end magazines, to install bill boards at
key positions like DHA, Gulberg etc. Visibility and availability of the product in the market will
be ensured.

Marketing Mix
Marketing mix of our plan is the combination of different strategies to be used like product,
price, place and promotion. The combinations of these P’s that we will use is as follows

Product Strategy

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LG is striving to gain market leadership position so they will bring new and innovative products
in the market. To gain market leadership they are introducing different ranges of refrigerators to
cater the demand of major classes of the market.
LG has product differentiation strategy in the market. Hence they are bringing different products
to the market. This Quadoor refrigerator is also the part of LG’s competitive strategy. The
product has four different temperature controllable compartments. The product is modern side by
side type refrigerator with water dispenser.

Pricing Strategy
To launch a new product the most suitable pricing strategy is skimming pricing policy. So we
will earn money from early adopters at initial stage. The product will be available in the market
at a price ranging from Rs. 250,000 to Rs. 300,000. The product will be available at outlets at
same or uniform price level. The product has brought benefit to customers through innovation so
it will be charged at premium price. The refrigerator will fall in categories like Prestige goods
and product innovation. So the value proposition of the refrigerator is high. The product will be
available in the whole country at the same price whereas outbound cost of the refrigerator from
LG to distributor or retail outlet will be beard by LG making LG enable to implement a uniform
pricing policy for all the dealers irrespective of whether they are big or small through out the
country.

Promotion Strategy
LG will enter new product market with very attractive strategy. They are already investing very
high amount in promotion i.e approximately 6-7 % of their revenue. Total budget of LG for
promotional activities is approximately Rs. 300,000,000. Usually the sales promotion budget and
their allocation are described by LG Korea. To launch this product we need a very heavy budget
for its advertisement.

Advertising
Approximately 80 % of the promotion budget will be used for the advertisement of the product.

Electronic Media:
Out of total advertisement budget approximately 25% of the budget will be allocated to the
electronic media like GEO news and local cable network of specific areas.

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Outdoor Media:
Out of advertisement budget approximately 40% will be allocated for the outdoor advertisement.
Bill boards should be installed at major round about areas. Like in Lahore it should be installed
near liberty choke, cavalry ground etc.
Print Media:
35% of the advertisement budget should be allocated to the print media. These will include
advertisement on top line newspapers like Dawn and high end magazines. Moreover, pamphlets
will be published with the material containing benefits and usage of the product.
Direct Marketing:
20% of total budget should be allocated to direct marketing. Dealers will be a major tool for the
sale of our product as they have influence on buying decision of the consumer. They should be
educated completely about our product. They must know all the specification, benefits and
features of our product.
Distribution Strategy:
LG has a strategic coalition with PEL to use its distribution network. This effort will create a
strategic fit of availability and visibility of the product at different markets. PEL has a strong
network country wide and now LG can take benefit of that. However in the initial Phase product
will be available at selected outlets like at Abid Market, Defence commercial Market etc as we
catering the demand of Lahore only in its initial phase of launching.

There are approximately 2500 distributors available to LG countrywide. Hence LG has great
opportunity to efficiently and effectively utilize this huge network. As the product is targeting
the demand of niche therefore not all but some of them will be used for the distribution of the
products. Distributors in those markets where elite class usually do their shopping will be
locations of our product.

Three Year Marketing Plan of the Product:

The three year marketing plan of the product will be as follows
Year 1: We will launch our product in Lahore only.
Year 2: We will launch our product in Karachi, Islamabad and Peshawar.
Year 3: Will launch our product to other major cities of the country and introduce some more
features to the products like LCD TV if necessary.

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Future Outlook of Quadoor Cooling System:

Quadoor cooling refrigerator is being launch in Pakistan for the first time. The refrigerator has
been launched in the international market where the product is gaining very good market share in
side by side refrigerator category. The concept has also successfully earned many international
awards. Some of them are as follows:

• Highest in Customer Satisfaction 2005 & 2006 – J.D. Power & Associates
• Good Buy Awards – Good Housekeeping
• Best of Innovations 2006 – International CES
• Innovative Award - EETimes2006
• American Building Product Award
• Kitchen and Bath Ideas
• Must-Have Gadgets – TIME Magazine
These awards clearly indicate the success of the product in the international market, however if
the marketing plan is executed properly in Pakistan it will be preferred by most of the potential
customers in the market.
The product will face very tight market situation due to security crisis of Pakistan, however it
will not be affected too much because in future situation is expected to be controlled and the
security position will be better and also the elite or upper class is not affected too much by this
crisis but a little bit so we can say that it does not have any major impact on our target market so
the product will have a good growth rate in the market in upcoming 5 years.

The product will reach to its maturity stage and there are also chances of up gradation of the
product or improvement or installation of some extra part like LCD’s in the product that will
create expansion of product in the market. Hence we can say that the product will be used as a
base product in the market to bring innovation and differentiation in the market.

Conclusion

Refrigerator is developing as a necessity product. The market of refrigerator industry has been
continuously for the last many years. There are several products available in the market with a
lot of differentiation but there is a gap of a product with most of the features available and
integrated in one unit. If the product is launched with the right marketing strategies it will
definitely cover the niche market and will generate handsome amount of revenue for the

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LG Quadoor 32

company that will take the initiative. So we are launching a Quadoor refrigerator with four
different temperature controlled compartments having flexible capacity for both freezer and
refrigerator units.

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References
• http://www.lge.com/pk/home-appliance/refrigerator/index.jsp
• http://www.in.lge.com/Aboutus/aboutus-corporateIdentity-slogan.aspx
• http://www.dawlance.com.pk/products/refrigerators/default.asp
• http://www.samsung.com/me/products/refrigerator/sidebysidetype/rm27kgrs.
asp
• http://www.samsung.com/me/products/refrigerator/sidebysidetype/rm27kgrs.
asp?page=Specifications
• http://www.pacra.com/pdf/PEL.pdf
• www.dawlance.com.pk/products/refrigerators/default.asp
• www.haier.com.pk/abouthaierPakistan.asp
• www.orientpakistan.com/
• http://www.haier.com/abouthaier/HaierWorldwide/introduction.asp
• http://www.haier.com.pk/abouthaierPakistan.asp
• http://www.scribd.com/doc/18658535/PEL-Pakistan

Strategic Marketing Management Abrar, Ali, Hamza, Waseem, Zakir