STRATEGIC MANAGEMENT

PROJECT REPORT ON
Pak Electron Limited (PEL)

Submitted By:
Anas Muhamman Khan ()
Safeer Ahmed (60674)
Shahzad Anwar ()
Mohsin ()
Maliha ()

Submitted To:
Sir Naheem Bojani

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Table of Contents

About PEL ................................................................................................................................................. 5

Power Division: .......................................................................................................................................... 6

Appliances Division: ................................................................................................................................... 6

GEOGRAPHICAL PRESENCE ................................................................................................................ 6

PEL Dealer/Service Centre Network: ......................................................................................................... 6

International Presence: ................................................................................................................................ 8

GOALS OF PEL ......................................................................................................................................... 9

Non-Financial Goal:.................................................................................................................................... 9

Financial Goal: ............................................................................................................................................ 9

OBJECTIVES OF PEL ............................................................................................................................... 9

Vision .......................................................................................................................................................... 9

Mission...................................................................................................................................................... 10

Analysis of mission statement .................................................................................................................. 10

PROPOSED MISSION STATEMENT .................................................................................................... 10

Organizational Structure ........................................................................................................................... 11

PRODUCT HIERARCHY........................................................................................................................ 12

PEL-LG Strategic Partnership .................................................................................................................. 13

Main Strategies Under Taken ................................................................................................................... 13

At corporate level:..................................................................................................................................... 13

Business Unit Level .................................................................................................................................. 13

At Functional Level .................................................................................................................................. 13

External and Internal Assessment ............................................................................................................. 14

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PESTLE ANAYLSIS: .............................................................................................................................. 14

Political Environment: .............................................................................................................................. 14

Economic environment: ............................................................................................................................ 15

Social Environment:.................................................................................................................................. 15

Technological environment: ..................................................................................................................... 15

Legal: ........................................................................................................................................................ 15

Porter Model ............................................................................................................................................. 16

Bargaining power of supplier: .................................................................................................................. 16

Bargaining power of buyer: ...................................................................................................................... 16

Threats of substitute: ................................................................................................................................. 17

Threats of new Entrants: ........................................................................................................................... 17

Rivalry among competitors: ...................................................................................................................... 17

COMPETITOR PROFILE MATRIX ....................................................................................................... 18

INTERNAL FACTOR EVAULATION MATRIX .................................................................................. 18

EXTERNAL FACTOR EVAULATION MATRIX ................................................................................. 20

BCG MATRIX FOR PEL ......................................................................................................................... 21

STAR: ....................................................................................................................................................... 21

Cash Cow: ................................................................................................................................................. 21

Question Mark: ......................................................................................................................................... 21

Dog:........................................................................................................................................................... 22

S.W.O.T MATRIX ANAYLSIS ............................................................................................................... 22

Strengths: .................................................................................................................................................. 22

Brand Name: ............................................................................................................................................. 23

Strong Dealer Network: ............................................................................................................................ 23

Quality Products: ...................................................................................................................................... 23

Best Sales Services: .................................................................................................................................. 23

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Market leader in WRAC: .......................................................................................................................... 23

Number 2 in Refrigerators in Pakistan: .................................................................................................... 23

Strong Management Team: ....................................................................................................................... 24

Distribution of Authority: ......................................................................................................................... 24

Research and Development Department:.................................................................................................. 24

Free Customer Service: ............................................................................................................................. 24

Weaknesses of PEL: ................................................................................................................................. 24

Financial Problems: .................................................................................................................................. 24

Lack of advertisement: .............................................................................................................................. 24

System variations: ..................................................................................................................................... 24

Lack of Product range: .............................................................................................................................. 25

Less Utilization of capacity: ..................................................................................................................... 25

Opportunities for PEL ............................................................................................................................... 25

Exploration of market in Pakistan: ........................................................................................................... 25

Increase in Product Range: ....................................................................................................................... 25

Export opportunity: ................................................................................................................................... 25

Increase in production Line: ..................................................................................................................... 25

Threats for PEL ......................................................................................................................................... 25

Strong competition: ................................................................................................................................... 25

China’s product: ........................................................................................................................................ 26

Price war: .................................................................................................................................................. 26

Slow growth rate in Pakistan: ................................................................................................................... 26

Instability of Government: ........................................................................................................................ 26

Tax department: ........................................................................................................................................ 26

World trade organization: ......................................................................................................................... 26

COMPETITOR ANALYSIS .................................................................................................................... 27

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DIRECT COMPETITORS: ...................................................................................................................... 27

INDIRECT COMPETITORS: .................................................................................................................. 27

BUSINESS DIVISIONS ........................................................................................................................... 27

APPLIANCES DIVISION........................................................................................................................ 27

POWER DIVISION .................................................................................................................................. 27

FINANACIAL ANALYSIS ..................................................................................................................... 29

Horizontal and Vertical Analysis .............................................................................................................. 30

In Future What Should PEL to Do ............................................................................................................ 38

Increase Utilization of capacity: ............................................................................................................... 38

Lack of advertisement: .............................................................................................................................. 38

System variations: ..................................................................................................................................... 38

Lack of Product range: .............................................................................................................................. 38

About PEL
PEL is the pioneer manufacturer of electrical goods in Pakistan. In 1956, the Company was set up by

Malik Brothers in technical collaboration with M/s AEG of Germany (“AEG”) to manufacture

transformers, switchgear and electric motors. AEG exited from the venture and sold their share of PEL to

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the Malik Brothers in the late 1960s, which was subsequently acquired by the Saigol Group of Companies
in 1978.
Since its inception, the Company has always been contributing towards the advancement and
Development of the engineering sector in Pakistan by introducing a range of quality electrical
Equipment, home appliances and by producing hundreds of engineers, skilled workers and
Technicians through its apprenticeship schemes and training programmed. Until the acquisition by the
Saigol Group, PEL was solely catering the power equipment market. The Company ventured into home

appliances market in 1981 after acquisition as a part of the Group’s long term strategy of diversi cation.

Power Division:
o Distribution Transformers
o Power Transformers
o Energy Meters
o Switchgears
o Grid Stations
o EPC

Appliances Division:
o Refrigerators
o Air Conditioners
o Deep Freezers
o Microwave Ovens
o Water Dispensers

GEOGRAPHICAL PRESENCE

PEL Dealer/Service Centre Network:

Our nationwide Dealer and Service Centre Network provides us access to a wide range of customers and
enables us to provide quality after sales services.

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International Presence:
PEL exports to customers and see potential in following countries and has continued focus on expanding
presence in international market:

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 GOALS OF PEL

Non-Financial Goal:

 To add a new product to its range in every third year for increasing the sales volume
 To set on image as the best quality of local home appliances
 To set an image the best quality of local power division product

Financial Goal:

 To obtain a real (inflation and adjusted) growth in earning per share 10%per year over time.
 To increase the market share of split unit to at least 20%-25%by the end of 2017

OBJECTIVES OF PEL
The objectives and mission for which the company is established are as following:
o To carry on the business or businesses of manufacturing, selling, installing, maintaining designing
and dealing in all kinds of electrical equipment.
o To carry on any business whether manufacturing or otherwise which may be found convenient to
undertake in connection with or in addition to any of these objectives mentioned above.
o To do all such things that are incidental for the attainment of the above objectives or any of them.
To produce high quality and standard products.
o To produce equipment to be used in numerous projects of national importance.
o To secure a high share / quota of WAPDA’s demand for power products.
o To produce skilled workers and technicians through its apprenticeship schemes and training
programs for engineers and technician

Vision
“To excel in providing engineering goods and services through continuous improvement.”

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 Mission

o To provide quality products & services to the complete satisfaction of our customers and maximize
returns for all stakeholders through optimal use of resources
o To focus on personal development of our employees to meet future challenges
o To promote good governance, corporate values and a safe working environment with a strong
sense of social responsibility.

Analysis of mission statement

o Core competency
o Technology
o Philosophy
These are the three things which are not mension in the mission statement of PEL

PROPOSED MISSION STATEMENT

o To provide quality products & services to the complete satisfaction of our customers all over the
Pakistan and maximize returns for all stakeholders through optimal use of resources
o To focus on personal development of our employees to meet future challenges
o To promote good governance, corporate values and a safe working environment with a strong
sense of social responsibility.
o Our philosophy is to give people energy efficient and reliable products in home appliances
o Our all across distribution network make us dominant over our competitors
o By using latest technology and providing innovative features in our Product

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Organizational Structure

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PRODUCT HIERARCHY

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 PEL-LG Strategic Partnership
o Pak Electron Limited, held a press conference (April 21, 2009) to announce the strategic alliance
between Pak Electron Limited & LG Electronics.
o An agreement in this regards was signed at the ceremony by Mr. Murad Saigol, Director
Operations, Pak Electron Limited & Mr. E. D. Choi, General Manager, LG electronics, Pakistan
Liaison Office.
o Mr. Saigol announced this to be the biggest partnership in the history of home appliances and air
conditioners in Pakistan and this strategic alliance will expand in the times to come.
o PEL has been appointed the official distributor for LG Air Conditioners, Refrigerators, Microwave
ovens, washing machines and vacuum cleaners from June 2009.
o The addition of LG for Pak Electron will now mean Pak Electron will have two leading brands,
PEL and LG, in both the categories of home appliances and Air conditioners.

Main Strategies Under Taken

At corporate level:

o The main objective of firm to give customer’s satisfaction with high customer satisfaction.
o The PEL use grow and build strategy.

Business Unit Level

On business unit level PEL is applying “Diversification Strategy”.

At Functional Level

o Two way relationship with distributors

o PEL has Strategy for introducing product in every 3 years

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 External and Internal Assessment

PESTLE ANAYLSIS:

Political Environment:
Pakistan is facing the situation of great political instability and uncertainty since last couple of year.
According to the economist survey Pakistan is at the 11th number of top most vulnerable country of the
world. Due to this problem business activities in Pakistan are severely affected. The FDI is also decreased
dramatically due to current insecurity. There are few incentives to manufacture of Pakistan by the
government as compared to upcoming giants in china. The cost of manufacturing is high due to electricity
rate and overhead. So most of the time manufacture hesitate to do manufacturing in Pakistan and prefer
to import finished goods are only assemble good in Pakistan.

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Economic environment:

Due to global environment economic crises, Pakistan is also facing a lot of problem. Although Pakistan
economy is not directly hit by the crises yet the economic situation in server in Pakistan
To resolve the power sector issue, removing subsidies and concurrent transfer of international oil price
changes also likely to risk a further slowdown in economic activities at least in the near future. In Pakistan
there is a strong black economy due to the circulation of black money illegal business like smuggling
Economist are expected better condition for Pakistan economy due to the loan of IMF. The consumer in
Pakistan is spending most of their income of food and basic needs of life.

Social Environment:

Now a day’s people are becoming more price conscious due to inflation and crises of Pakistan. Their
primary focus on food and daily use good and thus people have lessened their interest in electronic good.
Now consumer prefers the split air conditioner over window air conditioner because split ACs are
considered as energy severs. That is why window ACs are almost obsolete because of high consumption
and split ACs are becoming more popular because of low electricity.
In countries like Pakistan the usage of air conditioner is great because of extended summer season of
nearly 8 month. The company are becoming more socially responsible these days as they have introduce
CFC free refrigerant, anti-bacterial and dust filter .

Technological environment:

With the introduction of spilt air conditioner, it made the air conditioner more affordable and easy to install
and maintain. The efficiency of air conditioner depends upon its outer unit. The bigger is the outer unit
the more efficient will its inner unit. In split air conditioner the rotator compressor are used which are
soundless and do not heat up in extreme situation. Companies are introducing refrigerator with cool bank
which remain working for 5 hours even after switch off. The multinational national companies are using
information technology to coordinate and communicate with in companies as well as extreme parties. The
electronic management system are used to reduce the cost of handling the inventory order.

Legal:

Legal factors include description law employment law, and earth and safety. These factors can affect how
a company operates, its costs, and the demand for its products.

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 Porter Model

Bargaining power of supplier:

The bargaining power of supplier is low because of availability of a number of chine’s brand in the market.

Bargaining power of buyer:

The bargaining power of the buyer is high because

o They have choice of different in the market

o They have choice of models and features
o They have choice of product in different prices
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Threats of substitute:

o Threats of substitutes high because

o The gas generators and ups are the substitute of Pel’s diesel and petrol generator
o The major substitute of air conditioners are Room air cooler
o The room air coolers are available at are low price starting from 6000
o Electric fans are also very cost effective and its major company GFC fans ,Younas fans Royal fans

Threats of new Entrants:

PEL has low level of threats of new entrants in the industry as the electronics industry has different barrier
to entry.

o Requires huge capital to get entry in the industry

o High manufacturing costs
o High advertisement cost
o High cost of raw material

Rivalry among competitors:

o There is intense competition within the industry to capture the market in term of share of market.
o The companies are introducing product with new and advance technology to attract and capture
the customers.
o They are using advertisement and technology as a weapon to increase market share in related
market.

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 COMPETITOR PROFILE MATRIX

INTERNAL FACTOR EVAULATION MATRIX

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EXTERNAL FACTOR EVAULATION MATRIX

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 BCG MATRIX FOR PEL

STAR:
Star is a business unit that has large market share in fast growing industry. Such unit requires more
investment to generate more cash. If due to more investment it will become successful and become cash
cow and it will reach at maturity stage.

o Refrigerator of PEL is the product having high market share and high annual growth rate.

Cash Cow:
It is the business unit sometimes known as problem child. It has a large market share and low annual
growth. Each cash cow requires little investment and it generates more cash that can be used for investment
purpose in other business units. For cash cow the strategy is called HOLD, you must preserve market.

o Split air conditioners is the product of PEL having high market share and low annual growth rate.

Question Mark:

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It is the business unit that has a low market share and high annual growth. These business unit requires
resources to grow market share but if they succeeded that will become STAR. For question mark the
strategy is called BUILD, you try to make up the market share.

o Washing machine and microwave oven are the products of PEL having low market share but high
annual growth.

Dog:

Dog is the business unit that has small market share as well as low annual market growth rate. A company
normally would be unwise to invest substantial funds in SBUs in this category. Marketing strategies for
dogs are intended to maximize any potential profits by minimizing expenditures or to promote a
differential advantage to build market share and the company can diverts or liquidate the dog product.

o Deep freezer is the product of PEL having low market share plus low annual growth share.

S.W.O.T MATRIX ANAYLSIS

Strengths:

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Brand Name:
PEL has created a strong brand image in the mind of the customers through higher quality and low prices.
The customers of PEL always prefer its home appliances like Window AC, split AC and refrigerators,
during the time of purchase. PEL is a popular company in Pakistan and everyone knows about the PEL
products and its brand name. That’s why PEL is a market leader when it comes to Window AC.

Strong Dealer Network:

It is also the plus point for PEL that it has developed a strong dealer network in the market. The dealers
always try to sell the PEL products to the customers because, the company for its products, gives them a
high margin. The management of PEL also provides more incentives to their dealers than their
competitors. Dealers are very conscious about the PEL products and always guide the customer in buying
the PEL products.

Quality Products:

PEL is also in a strong position because it provides superior quality products to customers. So it gives an
edge to company over its competitors. Due to best quality, guarantee of products of PEL is more than its
competitors.

Best Sales Services:

PEL provides the after sale service to customers which increases the customers satisfaction. The biggest
strength of services department is that it handles a complaint within 24 hours in any part of the country
that helps in increasing the satisfaction level of customers.

Market leader in WRAC:

It is also strength of PEL that it is a market leader in WRAC. Costumer always gives preference to PEL
in window AC market because of low price, high quality and durability.

Number 2 in Refrigerators in Pakistan:

After the Dawlance refrigerators, PEL has the second position in the refrigerators market. PEL is gradually
coming up in refrigerator market and increasing its market share. Due to improved quality, innovative
features and good sales services PEL is becoming the first choice for customers.

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Strong Management Team:
It is another plus point that PEL has a strong management. Its employees are competent, efficient, skilled
and knowledge. They always cooperate with the top management in achieving of goals that are assigned
to them.

Distribution of Authority:
Top management of PEL delegates the power to the subordinates for achieving the marketing objectives
in a specified time period. So every manager has an authority to take decisions to achieve the goals of
company. In this way they save the time and react quickly.

Research and Development Department:

PEL has a strong research and development department that is continuously trying to develop new features
for the products. R&D department spends huge amount of money for the development of new products.

Free Customer Service:

PEL provides free customer service for one year to its customers. The customers who buy the PEL
products become brand loyal due to this facility.

Weaknesses of PEL:
Like other companies PEL has some weaknesses. If PEL overcomes these weaknesses then it can become
a market leader in home appliances. PEL loses some competitive edge in the following areas:

Financial Problems:
Sometimes PEL faces the financial problems because its stocks are so much piled up in the stores that
creates problem of cash flow because when the stocks are not sold and the production is in process for 24
hours a day then the company faces such problems.

Lack of advertisement:
It is a second major weakness of PEL that it is not a vigorous advertiser. Only recently has PEL invested
a considerable amount in advertisement, but when we look at its competitors, PEL still has to do a lot in
this sector.

System variations:
It is also the main weakness of PEL that there is a rapid change in polices of selling the products. That
creates problems for the selling team to sell the products to the dealers because the top management
requires urgent amount of money. Thus the products are sometimes sold on hard cash that reduces the
prices of products that creates problems for the management.
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Lack of Product range:
PEL has introduced more products of consumer items but there are more needs to develop new consumer
items like PEL washing Machines, Vacuum cleaner and other items.

Less Utilization of capacity:

Due to lack of finance a company cannot utilize all its resources on its full capacity. It increases the cost
of products per unit that decreases the profit margin of each consumer item. Sometimes, the company
cannot allocate the resources according to the requirements of the production department, which later on
becomes a problem for the complete utilization of resources.

Opportunities for PEL

For PEL, there are more opportunities for expansion in business. Following are the opportunities for the
PEL.

Exploration of market in Pakistan:

PEL has the opportunity to explore the market in all over the Pakistan. Even though PEL has introduced
its products in many cities of Pakistan but there are so many places that are yet to be exploited.

Increase in Product Range:

PEL can increase its product range that will be more profitable for the company. There are more needs to
develop new consumer items like PEL washing Machines, Vacuum cleaner and other items.

Export opportunity:
PEL has also the opportunity to export their products in other international countries like UAE, SAUDI
ARABIA, and other Arabic and African countries.

Increase in production Line:

Company can also increase its production line at the maximum level that will increase the efficiency of
the employees and will also reduce the total cost.

Threats for PEL

Following are the main threats for the PEL:

Strong competition:

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There is very strong competition in the home appliance division. Every company adopts different
strategies for selling of the products. It reduces the profit margin of each company and increases the
bargaining power of the buyers who will demand higher quality of products at lower cost.

China’s product:

China’s products are another threat for the Pakistani companies because these products are cheaper than
the Pakistani products. China products stress the indigenous companies to lower the quality and prices
that will not be profitable in the long run.

Price war:

As there is stiff competition in the home appliance market that will cause the price war.

Slow growth rate in Pakistan:

There is also slow growth rate of home appliance in Pakistan that will increase the stocks of the company.
Although, this industry is in the growth phase, but the speed of the growth is very slow.

Instability of Government:
The rapid changes in governments will become a threat for the companies because every government
adopts new policies for the industries. So it increases the uncertainty for the investors who want to invest
heavy amounts in their new projects.

Tax department:
Tax department is another major threat for the company that will restrain the business expansion. There
is a most complicated tax procedure operating in the country that creates hurdle in the production and
smooth functioning of different companies in Pakistan.

World trade organization:

World trade organization will give the permission in 2005 to each company of home appliance to export
their products after paying less duties or duty free products. That will increase the pressures for the
indigenous companies to reduce the prices and increase the quality. It will increase the competition among
the foreign companies and indigenous companies.

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 COMPETITOR ANALYSIS
In this modern word, it is very hard to survive in the market due to swear competition between the
companies. Every existing product in the market has its substitute or similar product. “Competitors are
the companies that satisfy the same customer needs and wants.” To explain the competition we can classify
the competitors in two ways which are given below:

o Direct competitors
o Indirect competitors

DIRECT COMPETITORS:
The direct competitors of PEL are Dawlance, Waves, LG, and Haier etc. The Dawlance is market leader
in the refrigerator and PEL is still on second number. But in window room air conditioner (WRAC) the
PEL is market leader.

INDIRECT COMPETITORS:
The indirect competitors for PEL in this industry are Samsung, Orient, Mitsubishi, Sabro, Nobel and others
Chinese brands available in the market. The PEL has no big threat from all these companies. But the Sabro
pioneer for introducing the split air conditioner in Pakistan.

BUSINESS DIVISIONS
PEL is organized in two business divisions:

 Appliances Division

 Power Division

APPLIANCES DIVISION

o Refrigerator
o Deep freezers
o Microwave oven
o Washing machine
o Generators

POWER DIVISION

PEL Power Division manufactures:

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o Energy meters
o Transformers
o Switchgears
o Kiosks
o Compact stations
o Shunt capacitor banks
o Energy meters
o Generators

 All these electrical goods are manufactured under strict quality control and in accordance with
international standards.
 PEL is one of the major electrical equipment suppliers to Water and Power Development Authority
(WAPDA) and Karachi Electrical Supply Corporation (KESC), which are the largest power
utilities in Pakistan.
 Over the years, PEL electrical equipment has had been used in numerous power projects of national
importance within Pakistan.
 In spite of stiff competition from emerging local and multinational brands, PEL Group's appliances
and electrical equipment's have remained in the spotlight due to constant innovation.
 Strategic partnership with multinationals of repute have enabled the PEL Group to incorporate
new technologies into existing product ranges, thus giving the Pakistani market access to
innovative, affordable and quality products.

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FINANACIAL ANALYSIS

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Horizontal and Vertical Analysis

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 In Future What Should PEL to Do

Increase Utilization of capacity:

PEL could not make the freezer as they target. They have enough capacity to make but the less or lack of
utilization of capacity they fail to meet their targets.

Lack of advertisement:

Other competitor companies have good marketing and advertising campaigns as I observed that near the
PEL there is a great sign board of Waves.

System variations:

PEL should have to adopt the one system. As they are changing the system to ERP which is very good but
they have to train their employee as well. Training procedure must be change. There should be the
presentation to all workers.

Lack of Product range:

They should have to increase their product range as their new competitor SAMSANG in appliances has a
lot of product range so they also have to increase their products.
o To gain more competitive advantage over their competitors, PEL has to work on their distribution
network
o The company must give more incentives to the dealers so that they remain loyal to the company
and promote the products.
o PEL should open its internship programs on frequent basis so more and more students can get the
chance to work as an internee in such a huge institute and get their relevant work experience.
o Introduction of seasonal schemes can help to boost sales
 Too much favoritism in PEL so there should be control and merit should be followed
 There is no rotation of job work so one person is limited to his work.

 PEL more focus should be on electronic media to get competitive advantage over the
competitors.

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