MARKETING STRATEGIES OF DAWLANCE AND LG

A Comparative Study. By ANNIE IDREES MEMON (MITM) Department of Management S ien e! I!ra "niver!ity #ydera$ad. June 10 - 16, 2002 The study is based on the comparison of marketing strategies applied in LG and !a"lance #n this study, the main focus to see the effecti$eness of the marketing strategies applied by both the companies % !a"lance and LG, for selling their products particularly &efrigerators Just to understand the marketing strategies in general and refrigeration market in particular, one should kno" that "hat marketing strategies ought to be' (ho are the main players in the market' (hat kind of other products do they produce' )o" do they promote and supply their products' (hat type of competition is going on in the market' *nd finally "hat are the marketing strategies being applied by both the companies' These are the +uestions to be addressed, but the main theme is the marketing strategies of !a"lance and LG &efrigerators This paper is mainly di$ided in to four sections The first section deals "ith the marketing strategies in general The second section focuses on the main players of &efrigerators in the ,akistan market The third section sheds light upon the marketing strategies of !a"lance and L G Though the marketing strategies of all the products may be the same -ut mainly it has been focused on the refrigerator marketing strategies here .inally, the paper is concluded in the last section *ll the information that is presented in this paper has been ac+uired and e/tracted from $arious primary and secondary sources #n this study, best possible efforts ha$e been made to collect the correct and unco$ered information .or this, the information has been collected by both primary and secondary sources ,rimary data is based on the inter$ie"s from the top officials of both the companies based on the semi-structured +uestionnaire The secondary data is based on the published reports and #nternet 1. MARKETING STRATEGIES IN GENERAL .luctuating customer re+uirements and competiti$e forces are putting more pressure on marketing and are demanding superior marketing strategy and tactical e/ecution The cycle time from product creation, to product launch, for a "inning go-to-market strategy, lea$es no margin for error 0arketing puts the customer at the center of the organi1ation The organi1ations, "hich do so, reap the profits The idle marketing ought to be or the key steps to a successful strategy can be summari1ed as2 1.1 BE CLEAR ABOUT MISSION The common, customer-orientated thread running through all the acti$ities of the organi1ation and ho" "e define the kind of market oriented organi1ation "e "ant to be

1.2 MARKETING RESEARCH #n marketing strategy some one should do kno" about the marketing potential for his the product and should find out through research that2 WHO ARE OUR CUSTOMERS? What do we reall !"ow a#o$t the%r "eed&' (re)ere"*e&' #eha+%or a"d the%r l%)e &t le&? What *a" we o))er the,... at a (r%*e... that other *o,(a"%e& do "ot? How do we (er)or, %" *o,(ar%&o" to o$r *o,(et%tor&? How are we *$rre"tl (er)or,%"- )or o$r *$&to,er&? Where are the -a(&' the wea! (o%"t&' the )$d-e&' a"d the (o%"t o) e.*elle"*e... the US/& 0U"%1$e Sell%"- (o%"t&2? How are we d%))ere"t? Wh are we d%))ere"t? How *a" we #etter del%-ht? How do we *ha"-e? What do we *ha"-e? How *le+er are we w%th o$r ,ar!et %"tell%-e"*e? How well %& o$r ,ar!et re&ear*h wor!%"-?

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MEASURE AGAINST STAN4AR4S AN4 CONTROL. 2. Ma%" /la er& o) the Re)r%-erator& %" /a!%&ta" Mar!et Just to understand the refrigeration market, first of all "e should kno" "ho the main players in the market are' *ctually there are t"o types of marketers2 those "ho manufacture refrigerators locally and those "ho import and market the same in ,akistan Local 0anufacturers of &efrigerators are2 !a"lance, (a$es, ,el and 3inger These manufacturers roughly cater 405 need of the market #mported 0anufacturers of &efrigerators are2 LG, 3uper, General, )air, 3am 3ung, #ndesit, 3emins, ,arties import refrigerators from their principal and market the same in ,akistan #n-fact these all parties contribute only 205 of the market re+uirement The abo$e all are direct competitors of !a"lance and LG electronics 6 70arketing 3trategies of !a"lance and L G &efrigerator7 -efore discussing the marketing strategies of !a"lance and L G, first "e "ill go through the profiles of the companies in brief 4AWLANCE: !a"lance 8nited &efrigeration #ndustries Ltd "as established in 1940 #t is the Largest :ompany in ,akistan engaged in appliance business !a"lance stands for durable ; reliable household appliances #ts refrigerator .actory is located in )yderabad The main <b=ecti$es are to pro$ide dependable and reliable product at reasonable price to ma=ority of ,akistanis and to enhance their +uality of Life ,resent 0arket 3hare of !a"lance product is2 refrigerators 6>5, (ashing 0achines 6>5, 0icro"a$e <$en ?05, :hest .ree1ers ?>5, *ir :onditioners 1>5, L.G. )aniska #nternational is a multinational company, located in @orea LG is an agent of )aniska #nternational in ,akistan market LG is an importer of home appliances in ,akistan #t imports &efrigerators, *ir :onditioners, (ashing 0achines ; 0icro"a$e <$ens from @orea and :hina LG has got around 600 dealers all o$er the country 0arketing ob=ecti$es of L G are2 to pro$ide "orld class product to upper and upper middle class to en=oy real lu/ury in their life ,resent 0arket 3hare of L G product is2 &efrigerators ?5, (ashing 0achines 25, 0icro"a$e <$en 65, :hest .ree1ers nil, *ir :onditioners 2>5

3.1. MARKETING STRATEGIES The marketing mi/ is the organi1ationAs o$erall offer, or $alue, to the customer AThe basic marketing mi/ is often nick named 7the ?,s7 Bproduct, placeCdistribution, pricing, promotionDE these are elements in the marketers armory % aspects that can be manipulated to keep ahead of the competitionA )ere #A$e e/plored the marketing strategies of !a"lance in terms of marketing mi/ ha$e been e/plored 3.1.1 /RO4UCT STRATEG; The ob=ect of !a"lance is to pro$ide refrigerator to all people "ho fall in lo"er middle, middle, and upper middle class in this country such that most of the families should ha$e refrigerators in their home because they enhance better +uality of life !a"lance has got products, "hich are as per international standards and carry all the basic features, "hich need in any such type of appliances !a"lance belie$e that "hate$er they pro$ide to their customers should be durable and reliable *ll the products, "hich !a"lance market, are durable enough and customer can keep on using them for +uite many years "ithout any problem #t pro$ides its refrigerators, 6 years compressor guarantee and 1 year chest free1er, and free ser$ice in spare parts under normal use (hereas, LGAs ob=ecti$e is to pro$ide "orld class product to upper class and upper middle class to en=oy real lu/ury in their life 3ince LG is a @orean brand and being imported from @orea, it has $ery ad$anced features, "hich are normally demanded by in de$eloped countries LG also insures that "hate$er product they market should be durable enough "hich last +uite many years and gi$e trouble free ser$ice to their customers #t pro$ides its refrigerators, fi$e years compressor guarantee and one year free ser$ice in spare parts under normal use 3.1.2 /RICING STRATEG; !a"lance has got around >2 models in their refrigerator product line .rom the price list and discussion had "ith their management, it appears that they ha$e position their product pricing in such a "ay that their main focus is middle and upper middle class )o"e$er, they ha$e some selected range for upper class as "ell ,roduct-"ise price list enclosed in appendi/ for reference !a"lance has got a policy that their all product price should be the same in all cities and to"n in ,akistan market !a"lance bear freight cost and make their product a$ailable to their dealers irrespecti$e of "here they are located .or this, they gi$e uniform margin to their dealers irrespecti$e of "hether he is big or small !a"lance consider pricing as one of an important element of marketing mi/ #t belie$es that their retail prices should be uniform all o$er the country irrespecti$e of "hether customers buy from ,esha"ar or @arachi #n order to maintain a uniform price all o$er the country, !a"lance bear transportation charges and make the product a$ailable at cost price at dealer premises (hereas the LG pricing strategy is cost F fi/ed mark up to co$er their G, 3ince they cater to upper middle and upper class, therefore their 905 dealers are in big cities only ,roduct-"ise price list enclosed in appendi/ for reference LG follo"s pricing policy in "hich their normal formula is import cost F reasonable gross profit to co$er their marketing e/penses and also gi$e them reasonable profit 3.1.3 /ROMOTION STRATEG;

!a"lance promotion budget is around 1 G>5 of their turno$er ?05 spending of their budget is ,rint 0edia, 205 goes on TH, 205 on <ut door acti$ity and balance 205 on 3ales ,romotion acti$ity They belie$e that print media and out door acti$ity help them to reach to their target customer !ue to satellite transmission and ha$ing multi-channels, it does not pay one unless you ha$e $ery huge budget to spend on this media <n promotion, their spending is more on consumer incenti$e schemes 3ince it pay them and there is direct relationship bet"een sales and consumer .urther, it gi$es customer a direct benefit in shape of price reduction *s far as *d$ertising strategy of LG is concerned, it is being planned and e/ecuted by LG, @orea through their ,akistan <ffice keeping in $ie" their global approach and theme line Local *gent of LG simply gi$es ad$ice and coordinate in its implementation 3ince LG is a multi-national brand, their spending on ad$ertising is in such a "ay that their all product get promoted *lthough for different product they ha$e got different agentE like for TH, Ie" JlectronicsC@arachi .or computer monitor, Hision :omputer .or mobile phone, :himera #t "as not possible to get the e/act ad$ertising budget of LG, but it appears from their spending and the figures collected from ,akistan *d$ertising *ssociation and from some other sources that their spending is around 6CG per cent of their sales in ,akistan territory !ue to being a multinational company and as a part of their global 3trategy they, most of the time, di$ert their funds from strong market and spend more on "eak or under de$eloped markets .urther, as far as 3ales ,romotion strategy is concerned, it is being designed and implemented by their respecti$e agent of each product in ,akistan .or the promotion of )ome *ppliances products2 )anaska #nternational designs their o"n strategy Their ma=or approach and emphasis on promotion through trade They offer $ery handsome incenti$es to their dealers, "ho in return push their product among the customer and thus they get their desired $olumes in ,akistan #t has been noted that due to being import base product they are al"ays high price $is-a-$is other brands in the market and it is one of the reason "hy they gi$e so much emphasis on the moti$ation of dealers 3.1.5 4ISTRIBUTION STRATEG; !a"lance has got around 400 dealers all o$er the country !a"lance ensures that its refrigerators are a$ailable almost in all appliances markets of ,akistan They ha$e got 405 penetration in dealer sector <ne can get $ery easily their product in any city or small to"n of ,akistan !a"lance has got $arious types of dealers according to their potential *round 2>5 of dealers are 7*-class7 dealers "ho sell o$er 1000 units and abo$e per year 7--class7 dealers are those dealers "ho sell from ?00 units up to 999 units per year They are around >05 in total dealer and the rest are in best 2>5 of 7:-class7 dealers sell from 200 up to 699 units per year #n order to pro$ide +uick and timely deli$ery to their dealers2 they ha$e got big "arehouses located in almost all big cities and to"ns (hene$er they get order from the dealer they try to pro$ide supplies to their dealer from closest "arehouse #n case stock is not a$ailable in the "arehouse then it is deli$ered directly from )yderabad .actory The ma/imum deli$ery time incase stock is deli$ered from )yderabad .actory is four B?D days )o"e$er if supply is gi$en from closest "arehouse then hardly it takes 2-6 hours time They belie$e that, timely deli$ery of their product to the dealer, is one of an important element in their success in ,akistan *s it has already been stated in earlier that LG refrigerators are imported 0ostly they import from @orea and some of the models are imported from :hina as "ell LG relati$ely donAt maintain loose stock at their end 3imply 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 ?-6 "eek at their end &ather they belie$e in replenishment of dealer stock based on their sales #t means dealers stock al"ays remain in "ithin a limit, doesnAt e/ceed beyond 6 "eek le$el *s mentioned abo$e, they ha$e only 600 dealers mostly in big cities and some in small to"ns They also ha$e got a policy that retail price all o$er the country should be uniformed for the customers, "hether heCshe buy from @arachi, #slamabad, or ,esha"ar They also bear transportation cost and thus pro$ide supplies at uniform rate to their dealers They ha$e got three big "arehouses in @arachi, Lahore and in #slamabad .rom these "arehouses they feed their product to their dealers and thus they make their product a$ailable to them 3.1.6 /RO4UCT LI<E C;CLE !a"lance is an #3< 9000 certified company and among its mission statement #t is one of their missions to pro$ide +uality product to their customers Therefore, they ensure that e$ery product, "hich is deli$ered from their factory, must go through rigorous +uality check 3o that only perfect product, free from any defect is deli$ered to their customers 3ince LG is an international name in home appliances, therefore LG ensures that their product must meet their rigorous +uality standard 3o, "hen it is deli$ered to the customer, it must meet customerAs e/pectations 3.1.8 A<TER SALES SER=ICES !a"lance belie$es that after sales ser$ice is one of the most important elements of marketing mi/ and thus gi$e due emphasi1e in pro$iding +uality after sale ser$ice to its refrigerator customers !a"lance has got +ualified foreign-trained engineers in its team of after sale ser$ice and also properly trained technicians and super$isors "ho look after ser$ice centers and pro$ide reliable +uality after sales ser$ice to its customers !a"lance has got 1G its o"n ser$ice centers in different parts of country -esides, they ha$e got 6? franchise "orkshops to co$er remote areas, "here its ser$ice center doesnAt e/ist These are ser$ice centers and franchise "orkshops co$er almost 995 market of ,akistan (here$er !a"lance dealer is, there youAll find !a"lance "orkshop or either franchise "orkshop to take care of ser$ice need #n order to pro$ide satisfactory after-sales ser$ice, !a"lance ensures that in all of its ser$ice centers sufficient in$entory of spare parts is maintained, e$en these are a$ailable "ith franchise "orkshops !a"lance has got the policy first of all to carryout repair, if re+uired at customer place #ncase if refrigerator problem is not diagnosed at customer premises then it is taken to its "orkshop (hene$er they get any complain, they prepare =ob sheets and puts its record in computer and "hene$er at later date if complain is repeated, in that case they also ha$e a history "ith them of such product in their data bank J$en after fi$e years if you "ant to find out from !a"lance ser$ice center that ho" many times there refrigerators ha$e been referred on account of technical problem to their center, they can dig out from their computer record #n nutshell, "e can say that !allianceAs after sales ser$ice "orkshops are $ery "ell properly organi1ed and they "ork according to international ser$ice standard *s far as ser$ice charges are concerned !a"lance consider that it is not a profit center rather itAs a support center for sales

*s it has been mentioned earlier that LG has got market of refrigerators only in big cities and some of its big to"ns in ,akistan Therefore, they ha$e got relati$ely lesser number of ser$ice centers as compared to !a"lance *t present LG has got only eight after sales ser$ice centers in ,akistan .rom these ser$ice centers LG pro$ides after sales ser$ice to each customers They also maintain spare parts of ser$iceable items 3ince their product is 1005 imported, the souring of spare parts is only import based &elati$ely LG refrigeratorAs parts are e/pensi$e comparati$e to locally made because LG imports spare parts from @orea and $arious other LG production centers <ne of the reasons for being these parts e/pensi$e is that LGAs local agent has to pay almost G05 of the product cost to"ards import duty, sales ta/ and other import cost (e can say that LG also belie$e in +uality, after sale ser$ice to its customers and also considers after sales ser$ice as one of the important element of marketing mi/ CONCLUSION .rom the abo$e information, it has been analy1ed that there is no comparison bet"een !a"lance and LG There are se$eral reasons behind it .or e/ample2 !a"lance is a big local manufacturer of refrigeration industry in ,akistan #t has got all engineering capabilities and $ery good finance and of course technical kno"-ho" to produce internationally accepted +uality refrigerators locally <n the other hand L G is a multinational company and has got different agents in some of the big cities of ,akistan #t is simply an importer and imports refrigerator from @orea and markets the same in ,akistan 3ince !a"lance has $ery strong industrial base as "ell as deep-rooted marketing net"ork in ,akistan, they donAt feel any threat from any of their competitors, either local or from importers #n the contrary L G refrigerator is an import-based acti$ity J$ery year due to "eakness of ,ak &upee, 83 K cost of import is going up and thus LG refrigerator is becoming costlier day by day Therefore, they ha$e a big challenge before them to maintain their market share and also to maintain their reasonable gro"th against local manufacturers *ll !a"lance products are made for middle, upper-middle and upper class (hile LG products are made for upper-middle and upper class ,resent market share of !a"lance refrigerators is 6>5 "hile L GAs present market share for refrigerators is ?5 #n the light of abo$e e$idences, it could be said that !a"lance is a leading company as compared to LG, due to its dominance in the market, lo"er prices, and a$ailability of spare parts and after sale ser$ice, etc )ence people prefer to buy their products !a"lance is dominant in the ,akistan market because not of its marketing strategies but least competition by L G L G being a foreign company suffers because of go$ernment policies by paying hea$y import ta/es #t means, it is not only the marketing strategies of any company "hich plays a dominant role but it the success of product lies in the marketing strategies as "ell as the policies of the Go$ernment i e fa$orable or unfa$orable *s far as the case of L G is concerned, it is suggested that instead of depending on import it should install its plant in ,akistan so that it may lessen its burden on ta/es