Marketing is the process associated with promotion for sale of goods or services. It is considered a "social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and values with others." It is an integrated process through which companies create value for customers and build strong customer relationships in order to capture value from customers in return. Marketing is used to create the customer, to keep the customer and to satisfy the customer. With the customer as the focus of its activities, it can be concluded that marketing management is one of the major components of business management. The evolution of marketing was caused due to mature markets and overcapacities in the last decades. Companies then shifted the focus from production to the customer in order to stay profitable. The term marketing concept holds that achieving organizational goals depends on knowing the needs and wants of target markets and delivering the desired satisfactions. It proposes that in order to satisfy its organizational objectives, an organization should anticipate the needs and wants of consumers and satisfy these more effectively than competitors.

Strategic planning is an organization's process of defining its strategy, or direction, and making decisions on allocating its resources to pursue this strategy, including its capital and people. Various business analysis techniques can be used in strategic planning, including SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats) PEST analysis (political, economic, social and technological)


Strategic planning is the formal consideration of an organization's future course. All strategic planning deals with at least one of three key questions: 1. "What do we do?" 2. "For whom do we do it?" 3. "How do we excel?" In many organizations, this is viewed as a process for determining where an organization is going over the next year or more, typically 3 to 5 years, although some extend their vision to 20 years. In order to determine where it is going, the organization needs to know exactly where it stands, then determine where it wants to go and how it will get there. The resulting document is called the "strategic plan." It is also true that strategic planning may be a tool for effectively plotting the direction of a company; however, strategic planning itself cannot foretell exactly how the market will evolve and what issues will surface in the coming days in order to plan your organizational strategy. Therefore, strategic innovation and tinkering with the 'strategic plan' have to be a cornerstone strategy for an organization to survive the turbulent business climate. DEVELOPING A VISION AND MISSION Mission: Defines the fundamental purpose of an organization or an enterprise, basically describing why it exists and what it does to achieve its Vision. Mission may be long term as well as for short term for any organization. A corporate mission can last for many years, or for the life of the organization or may change as per the demand of the organization mission varies. It is an objective with a timeline, but rather the overall goal that is accomplished over the years as objectives are achieved that are aligned with the corporate mission. Vision: Defines the desired or intended future state of an organization or enterprise in terms of its fundamental objective and/or strategic direction. Vision is a long term planning, sometimes describing a view of how the organization would like the world in which it operates to be. For example a charity working with the poor might have a vision statement which read "A world without poverty"

A marketing plan is a written document that details the necessary actions to achieve one or more marketing objectives. It can be for a product or service, a brand, or a product line. Marketing plans cover between one and five years. A marketing plan may be part of an overall business plan. Solid marketing strategy is the foundation of a well-written marketing plan. While a marketing plan contains a list of actions, a marketing plan without a sound strategic foundation is of little use. THE MARKETING PLANNING PROCESS In most organizations, "strategic planning" is an annual process, typically covering just the year ahead. Occasionally, a few organizations may look at a practical plan which stretches three or more years ahead. To be most effective, the plan has to be formalized, usually in written form, as a formal "marketing plan." The essence of the process is that it moves from the general to the specific; from the overall objectives of the organization down to the individual action plan for a part of one marketing program. It is also an interactive process, so that the draft output of each stage is checked to see what impact it has on the earlier stages and is then amended accordingly. The marketing planning process can thus be elaborated in just a few points which will cover each and every important aspect of the market that can be beneficial for an effective marketing plan. These steps can be elaborated as:
1. Review of the marketing environment. A study of the

organization's markets, customers, competitors and the overall economic, political, cultural and technical environment; covering developing trends, as well as the current situation. 2. Review of the detailed marketing activity. A study of the company's marketing mix; in terms of the 7 Ps. 3. Review of the marketing system. A study of the marketing organization, marketing research systems and the current marketing objectives and strategies. The last of these is too frequently ignored. The marketing system itself needs to be

regularly questioned, because the validity of the whole marketing plan is reliant upon the accuracy of the input from this system, and `garbage in, garbage out' applies with a vengeance.

Current Market Situation


The auto market is one of the largest segments in world trade. The annual size of automotive export trade in the world has grown to a massive level of over US$ 600 billion, this account for about 10 per cent of the world export. Changing models, improving fuel efficiency, cutting costs and enhancing user comfort without compromising quality are the most important challenges of the auto industry in a fast globalizing world. Hence there is a need for exploring the industrial complementarities in the region for better quality, favorable costs, fuel efficiency and attractive designs. Therefore, the requirement of information exchange in the region is much more pronounced now than ever before for keeping the auto industry afloat and competitive. The objective should not be only to understand each other’s comparative advantage but also to explore mutual complementarities as well as to build an early warning system on the trends in industry and changes in user preference to brace for the challenges confronting the auto industry. Mutual consultation among the countries of the region therefore assumes the proportion of an abiding imperative for regional capacity-building and preparing the countries to meet the requirements of the new economy through research, advisory services, information dissemination and exchange

of country experiences, besides joint ventures and technology tieups. Pakistan’s automobile sector is surely better off than many other Asian neighbors including Sri Lanka, Nepal, Bhutan and Bangladesh. It’s high time that local manufacturers and assemblers should penetrate into the world market. Signing free trade agreements with these countries is surely beneficial for the local automobile industry. However, franchises cannot export so policies should be formulated and strategies designed to enhance infrastructural development and promote innovation by local investors by offering duty free capital investment as well as ample amount of financial assistance. To become a part of world supply chain a culture of progression should be promulgated and investment should be done at both technological level as well as labor level.

(ii) PAKISTAN AUTO INDUSTRY: Among the active players of the large scale manufacturing sector, probably the automobile comes on the top of the list in view of multidimensional impact on socio-economic as well as trade relations with the countries taking extra interest in the backdrop of a huge untapped market as only 8 persons out of 1000 have a car in Pakistan. Automobile sector is one of the fastest growing sectors in Pakistan. It contributes towards the nation’s economy in the form of Technology Transfer, Employment, Investment and much more. Automobile sector contributed over Rs.23 billion to the national exchequer in the year 2007-08. Pakistani market has lesser penetration for cars. Eight in every one thousand in the country have the cars. The same figure is 10, 12 and 21 in every one thousand in India, China and Indonesia respectively. This is also a fact that from 1993 to 2004 the car industry was working below capacity as the car market had been staying below 50,000 units per annum. In the year 2005-06 the industry produced 49,656 units against its installed capacity of 108,000 units per year. The total car production stood at 120,000 units in 2007-08 compared to 80,000 units in the previous financial year. This indicates that the

response was very quick. The car industry is on the track and it is poised to produce a more than 215,000 units this fiscal. The existing population of automotive vehicles in Pakistan is 3.9 million. The annual demand is estimated at 300,000, two thirds of which is being met from local sources and imports and the remaining one third is left unmet. The market value of automotive vehicles in dollar terms is estimated at more than 1 billion, out of which import constitutes around US$ 200 million. The after market of auto parts is estimated at US$ 500 million, imports and local production taken together. Notwithstanding a manifold increase in car production in Pakistan during the last few years, Pakistan still stands relatively low in terms of motorization when compared globally and even to its neighbors. The automakers need to take into account, as the demand is lot greater then the supply. Since 2005-06 the automobile market is growing rapidly by over 40 percent per annum and if an average annual growth of 30 percent per annum is maintained, Pakistan’s market will cross the milestone of 500,000 units by the year 2010. Long-term investment friendly policies of the government and up-gradation of production facilities are considered as pre-requisite by experts for achieving the automobile vision 2010 of 500, 000 units. Major automobile companies in Pakistan have set up as joint ventures with foreign multinational companies, thus encouraging the inflows of FDI in Pakistan. The automobile sector of Pakistan has shown significant growth in the last couple of years. Sales performance of different segments is given below. Production of cars in first nine months of 2007-08 increased from 87,104 to 112,478 units. Another 16, 885 different types of vehicles were imported during July-Feb, FY06 under transfer of residence, baggage and gift schemes as compared to only 5,177 units in the same period last year, showing an increase of 230 percent. So far, Pak Suzuki, Honda Atlas and Indus Motor have been dominating the market, emergence of competition was experienced by the entrance of Dewan Farooque, Daihatsu and Hyundai Motors in

the market with a number of new product lines. This intense competition has totally changed the paradigm of Auto Industry in Pakistan. Pak Suzuki has been a sole market leader in assembling 800cc and 1000cc small passenger cars as well as 1000cc jeeps, Potohar. In 1993, Toyota started its operation and in the proceeding year 1994 Honda Atlas has commenced its operation in Pakistan as the main competitors in 1300-2000cc segment but the Suzuki has an edge over the market with 1300cc (Margalla) Baleno. Automobile market has become more competitive in recent years as new players are going to introduce their products in the market like Daihatsu has launched its 850cc Daihatsu Coure, Dewan Farooque has launched its Kia classic 1300cc and Hyundai Santro Plus 1000cc car. There are a number of new products like Kia Shuma 15001800cc car by Dewan Farooque Motors. The sudden competition in small car segment is expected to pose challenge for Pak Suzuki, the former lone player in the market and other leading name in the market. In near future, Dewan Farooque will offer the widest range of products in the domestic automobile market. The trend of localization is experienced at large in the industry. Toyota is also following the trend of localization with 3o per cent on its all models of 1300-2000 cc Corolla.


The demand in the auto sector in Pakistan is skewed towards small cars. Due to this trend Pak Suzuki Motors enjoys a monopoly in the small-car market. Despite ongoing import of cars units from other countries and increase in the production of cars in the country, the demand of cars in market is increasing day by day. The production of cars has registered a staggering increase of 127738 units as compared to last year’s figure of 100213 (27.5%).

Product Situation
Toyota Corolla is the market leader in its class. Toyota Corolla is manufactured both in Diesel and Petrol engines i.e. 2000cc diesel and 1300cc and 1600cc petrol versions. Its main attributes are: Competitive pricing. High reliability. Easy availability of spare-parts. High goodwill. Aggressive styling. After sales services. Swift distribution channels. High resale value. • Decent safety features.


Toyota Corolla is the market leader in the 1300cc and higher engines. In an effort to appeal more to the Young at Heart people, the New Corolla is aimed at offering the Pakistani Customer with World-size Wheelbase and Height to achieve more interior space, luxury and a sporty look. We call it NCV."NewCenturyVehicle”. Cool, Sleek styling and bigger dimensions for an improved sense of luxury. Many things in our life get bigger as society and the environment change, or smaller as technology advances. Toyota Engineers designed the Corolla by setting aside conventional ideas such as, "This class of car must be this size". Making the Corolla bigger was a natural consequence of today's trends. Capturing Tomorrow's Values: Comfort and Luxury. Toyota Engineers reviewed every possible angle to ensure total luxury: from the concept of interior space to how the quality and texture of materials appeal to the eye and to the touch. Today's users are not wiling to be satisfied with the status quo. We are determined to offer a level of comfort that goes beyond even what the users seek.

Integrating today's leading-edge technology. Society and specially the car's role are definitely changing, as seen in cars attaining higher performance. At Toyota, we integrated today's leading edge technology to reflect those changes. Indus Motor’s sales during FY06 stood at 40,961 units, portraying 17 per cent upsurge compared to 34,983 units last year. The company’s Toyota Corolla sales depicted 33 per cent increment to 30,527 units with market share at 46 per cent in the 1300cc and higher engine

cars. Toyota Corolla is considered to be the most successful car in Pakistan. Products specification includes:
Basic 1.3L XLi Corolla Sedan 1.8L 1.3L 1.8L Manual Automatic GLi Transmission Transmission 4530 x 1705 x 1480 1915 x 1430 x 1230 2600 4.9 m 1 ZZ-FE 1794 VVTi 100kw@6000 rpm 171 Nm @4200 rpm 5 M/T X 4 A/T W / OD 0 2C 1975 Fuel Injection 53 kw @4600 rpm 131 Nm@ 2800rpm 5 M/T X 2.0D 2.0D Saloon

Exterior- L x W X H (mm) Exterior- L x W x H (mm) Wheelbase (mm) Minimum Turning Radius Engine Type 2NZ-FE Engine Displacement 1299 (cc) Fuel System EFI Max.Output 60K KW @ (SAE-NET) 6000 rpm Max.Torque 119 Nm (SAE-NET) @4400 rpm Transmission 5 M/T ECT Switch X X

X ABS with Brakes Ventilated Ventilated ABS with Brake Assist Brake (FR/RR) Disc/Disc Disc/Disc Assist Suspension Leading Arm, McPherson Strut Coil Spring/ETA Torsion Beam, (FR/RR) McPherson Strut Coil Spring Stabilizer Bar Front/Rear Steering Power System 175/70 Tires 175/70 R14 185/65 R14 185/65 R14 R14 Fuel Cut X X 0 0 X 0 System Exterior Antenna Glass Embedded Print Antenna


Bumpers Front Head Lamps Rear Lamps Door Mirrors Manual Door Sash Black 0 0

Coloured 4 Lamp Multi-reflector LED (Light Emitting Diode) Type Power (Colored) 0 0 Manual 0 Intermittent X X Power (Colored) 0 VarIntermittent 0 0

Front Wipers Intermittent Fog Lamps Highmounted Stop Lamp Laminated/ tinted Windscreen Mud Flaps (FR/RR) RR Garnish Side Impact Bars Side Protection Molding Side skirts Wheel Caps Wheel Rim Interior Air Conditioner Cassette Player W/AM/FM Radio (Remote Control) Central Door Locking Digital Clock Digital Trip Meter Door Trim Foot Rest Heater 0 0 X X X 0

Var-Intermittent 0 0 0 0

0 Black




0 Black

0 Colored (RR only) 0 Chrome 0 (Colored)

Colored (RR only) Colored

0 Black X


0 Chrome


0 Black X


0 (Colored) full Steel







0 (with Mp3 CD Player)


0 (with Mp3 CD Player)

X 0 0 0 0

0 0 0 0 0

0 0 0 0 0

0 0 0 Semi Fabric 0 0

X 0 0 0 0

0 0 0 0 0


Key Reminder Warning Leather Gear Shift Knob Light on Warning Optitron Meter Power Windows Reverse Gear Warning RR Seat Arm Rest (Center) RR Console Box RR Head Rest Roof Lining Seat Belt (FR)

0 X 0 X X X X

0 X 0 X 0 X X

0 0 0 0 0 X

0 0 0 0 0 0

0 X 0 X X X X W/Lid

0 0 0 0 0 X 0 (with Cup Holder) W/2 Level Lid (F)

0 (with Cup Holder) W/2 Level Lid (F) Adjustable Molded

W/Lid W/Lid

3 Point ELR x 2 (W / Adjustable Anchorage) 3 point ELR x 2, Lap Type x1 X 4 X

Seat Belt (RR)


3 Point ELR x 2, Lap Type x 1


3 Point ELR x2, Lap Type x1

Seat Material Shift Position Indicator Speaker SRS Air Bag (Drive) Steering Wheel Sun visor Tachometer Tilt Steering Trunk Lamp Wood Grain Finish Wood Grain Finish on Arm Rest

Fabric X 2 X X 6 0 X 2 X

3 Spoke 0 0 0 X X 0 0 0 X X

6 0 0 (Electronic) 0 (Electronic) 4 Spoke 4 Spoke Leather 3 Spoke Leather D + P W/Mirror and Card Holder 0 0 X 0 0 0 0 0 0 0 0 0 0 0 0 0 X X 0 0


VVT-I (Variable Valve Timing - intelligent) The powerful 1.8 liter VVT-i engine offers smooth and seamless delivery of power, thanks to optimal timing achieved by using Toyota's proprietary VVT-i (Variable Valve Timing - intelligent) technology • Delivers powerful torque through low-to-medium engine rpms by optimizing valve timing • Provides smooth acceleration • Enhances fuel economy and reduces emissions ECT - Electronically Controlled Transmission The new Altis 1.8 VVT-i comes equipped with an electronically Controlled Transmission Switch that allows you to choose the kind of driving experience you want to enjoy. You can choose between normal and power driving modes. The normal drive results in economic fuel consumption while driving on busy roads in the city, whereas, the power drive extends the interval of automatic gear shifts for optimal speed. SAFETY Anti-lock Breaking System (ABS) with BRAKE ASSIST ABS (Antilock Braking System) prevents wheel lock-up when braking hard or on slippery roads. This allows the driver to steer around obstacles and ensures stability. GOA BODY STRUCTURE Highest level of safety body, conforming to Global Outstanding Assessment body standards provides a crushable zone specifically

designed to dispense impact energy through the rest of the structure, while keeping the reinforcement cabin intact, protecting passengers.

MODEL PRICE (PKR) 1,269,000 1,384,000 1,317,000 1,754,000 1,754,000 1,839,000

Corolla Xli, 1.3L Corolla Gli, 1.3L Corolla 2.0D Corolla 2.0D Saloon Corolla Altis M/T 1.8L Corolla Altis A/T 1.8L(Sun Roof)

Competitors Situation
SUZUKI MOTORS: Suzuki is the leading name in small commercial vehicles and passenger cars. Suzuki commenced its operation by assembling small 800 cc cars. Suzuki has been so far a sole leader in 800cc and 1000cc passenger cars as well as 1000cc jeep Potohar. But the emergence of so many competitors in the market will definitely trigger a very hard time to Pak Suzuki. Suzuki has launched Mehran 800cc, Cultus 1000cc, Baleno 1.3 & 1.6 Eli and Gxi, Bolan van & Ravi pickup 800cc and Potohar jeep. Pak Suzuki’s sales during FY08 portrayed 31 per cent upsurge. Sales figures of Pak Suzuki Motor’s during FY08 posted sanguine growth at 31 per cent to 99,104 units compared to 75,720 units during FY07. On MoM(month to month) basis, sales figures increased by 3.9 per cent to 11,247 units during June compared to 10,824 units in May 2006. Pak Suzuki is the market leader in the 1000cc and lower segment of cars with sales of Suzuki Mehran, Suzuki Alto and

Suzuki Cultus at 35,982 units, 16,823 units and 21,390 units respectively. The company has replaced Suzuki Baleno with Suzuki Liana during the period and the product is getting acceptance in the market. Sales figures of Suzuki Liana remained on the ascending trend with 1,535 units during June compared to 1,187 units in May. Honda: Honda started its operation in Pakistan in 1994. Honda is enjoying its key position in the segment of 1300 cc and above. Honda has launched many models like Civic 1.5 cc, City 1.3 cc to 1.5 cc etc. VTI brand continued to be popular among customers. During FY08, Honda Atlas Cars’ sales soared by 17 per cent to 28,134 units as against 24,066 units previously. Currently, Honda Atlas assembles only two vehicles namely Honda Civic and Honda City to tap the upper-end segment of car market. On MoM basis, Honda City sales stood at 1,229 units in June, almost double compared to 626 units during the preceding month. Demand of Honda Civic declined by 61 per cent to 341 units MoM. Dewan Farooque Motors: It is the major competitor which has commenced its operation with a wide range of products in domestic automobile market. Dewan Motors is basically collaboration with Hyundai and Kia, two Korean auto manufacturers. The initial response to Dewan's offering in the market with record company booking of its Santro Plus. It has launched its Kia classic 1300 cc car with sophisticated features. In future wide range of models like Kia Shuma 1500-1800cc car, Kia Sportage 2000 cc sports utility are expected to launch in the market. Dewan has also launched its 1.5 tons Shehzore, the assembly of Hyundai light commercial vehicle has already started at the Sindh Engineering Plant in Karachi under contractual agreement. Dewan's presence in the market will give the major move to the auto industry in Pakistan. The intense competition will give the benefit to the potential buyer in the market. Automobile sales figures of Dewan Farooque Motors’ has remained stable on the back of increased demand of Hyundai Shahzore, which is considered to be the most competitive vehicle in the LCV segment.

During FY08, Hyundai Shahzore’s sales stood at 9,234 units, 15 per cent higher compared to 8,012 units previously. On the other hand, Hyundai Santro’s sales remained almost intact at 7,031 units during FY08 as against 7,009 units last year due to intense competition from small imported cars. Daihatsu: Daihatsu, another new player in the market with its Cuore 850 cc, increased the competition in the market . Daihatsu and Indus Motor signed an agreement to launch the Coure in market. The project worth Rs 750 million was developed at Port Qasim between Daihatsu and Indus Motor to produce Coure. Daihatsu also heated up the competition in small car segments. Suzuki for the first time faces competition in small car business. It is for the first time that Daihatsu will produce its car in Toyota Plant in Karachi. The assembly plant of Daihatsu has the capacity to produce 10,000 Cuore cars in the year. But the expected level of output in future will be some about 5000 cars in the starting year of its operation.

Distribution Situation
Toyota's corporate philosophy revolves around customer satisfaction, which is symbolized in the 3S Concept. Toyota is the Pioneer in the 3S System, which offers Sales, Service and Spare Parts all from the same facility. Indus Motor Company is privileged to have the most modern Service Network in the country. All our Toyota and Daihatsu Dealers operate on "3S" basis (Sales, Service, and Spare Parts). Customer Satisfaction is the cornerstone of our Marketing philosophy. Modern equipment and facilities exist at each dealership that is named by professionally trained Service Technicians. The Service network under-went recent expansion and comprises of 25 Dealerships in 14 cities. Our Service network has over 750 stalls where catering to General Jobs, Car Wash, and Body Paint Jobs are undertaken.


IMC's dealerships are equipped with Toyota and Daihatsu special Service Tools (SSTs), modern state-of-the-art computerized auto servicing and diagnostic equipment. The repair jobs are under taken by trained and qualified staff. Service staff training and development are always a priority at Indus Motors.
IMC '3S' Dealers are in the following cities:

Karachi (7), Quetta (1), Multan (2), Lahore (6), Faisalabad (1), Sargodha (1), Mirpur AK (1), Rawalpindi (1), Islamabad (2), DI Khan (1), Peshawar (1), Mardan (1), 25 Dealers in 14 Cities.

Specialized Equipment with dealers:

• • • • • • • • • • •

Engine Analyzers Computerized 4 wheel alignment equipment Paint Booths Special Service Tools 2 Post Auto Lifts Wheel Balancer Frame Aligner (some dealers) Wide Range of Garage Equipment Body Repairing Equipment Electrical Service Equipment Other computerized Equipment and Testers

IMC and its service Department undertaken extensive training of its dealer' service staff by conducting over 30 specialized course a year for service managers/service advisors, service Engineers and Technicians. Over 200 man-days are devoted each year to Service Training.

Macro Environment Situation
STABLE political conditions, improved international standing and robust economic growth in the country have really changed the market dynamics during the past some years. Pakistan has become one of the leading countries in the developing world to register a GDP


growth of over 6.5 percent for the last two consecutive financial years. With changes in the market dynamics, the demand for certain industrial goods has increased and almost the same happened in the demand for passenger cars. A fast emerging middle income group on the back of growing noticeable economic growth in the region, huge investment in auto sector is a natural come especially Pakistan is the country which offers highest rate of return in this region. Generally speaking, the minimum rate of return on investment in Pakistan is 15 percent while it shoots up geometrically in many cases. As against that the average rate of return or profit earnings in neighboring India, China, Singapore, Thailand etc hardly oscillates between 3-5 percent, whether it is automobile, pharmaceutical or for that matter investment in the stock exchange business. As a result of this attractive rate of return, loopholes in the system, ever growing demand, and the investors in the automobile sector have brought in huge investment by almost doubling the volume of production. The major factors that really revolutionized the market are the introduction of bank leasing and financing at a larger scale than imagined. Flushed with liquidity, the banks also enhanced their credit disbursement to the private sector at very low mark up rate. Similarly, the economic condition of the people has improved to some extent and they also went for buying cars. There was also a surge in remittances of expatriate Pakistanis since 2001. With these developments the passenger cars demand has increased thus resulting in a gap between supply and demand. This problem has perturbed a large segment of society. However, the prime victim of this episode is itself the car industry of Pakistan. There has been consistent criticism of the car manufacturers at every possible level despite the fact that this increase in demand is actually offering a unique opportunity for them to penetrate in the market. Instead facilitating the car industry, the government went on a rampage and it allowed the used cars imports with liberal depreciation allowance and easy conditions in the Trade Policy 200518

06. The government says that the import of used cars has been facilitated only for the overseas Pakistanis. But the fact remains otherwise if properly analyzed. Numbers of auto dealers are openly trading imported used cars and in some cases massive under invoicing is resorted to. The capacity expansion plans drawn by the local automobile industry involving a huge investment worth Rs150 billion during 2006 is feared to receive a severe jolt by the permission given to the overseas Pakistanis to import used cars in Pakistan. During July 2005 until May 2006, 34,723 vehicles have entered Pakistan, which indicates a 225% rise as compared to the previous fiscal year in which only 19,658 vehicles were imported. This alarming trend is setting off warning signals for the local automakers who were disheartened by the budget and the government’s allowance in facilitating a new tax regime for the new admissions in the auto sector. The local auto industry sees the new budget as a move by the government in discouraging the local car makers as the new policies will lead them to eventually scrap their capacity enhancement plans. These figures reveal that the import of cars facilitated not the middle class but the elite segment of society. This small majority who prefer the cars are not concerned about the cost or the availability of the spare parts in the local market. The local auto sector has repeatedly reminded the government that the facilities which are being offered under various schemes are continuously being violated by dealers and non- genuine buyers who sell these used cars which are in reality imported by overseas Pakistanis and are in fact breaking the law as these vehicles are only to be used by members of family. The government has allowed the overseas Pakistanis to import the cars. But there is no mechanism in place to ensure that only this segment of Pakistanis is actually importing the cars. The government claims in this regard seem baseless because the unregistered car dealers largely misuse this facility.


Here one must know that import is done of some vehicles, which are not suitable for the roads of Pakistan. They are also not fit as far as the fuel specification generally being observed in the country. Most of expatriates are exploited by the used car dealers as service and back up facility remain unavailable in the market. On the other hand this could give really a very serious blow to the local industry’s growth prospects in the long run. Over 400,000 people are employed by the car industry. Their employment could be at risk due to import of used cars which offers no employment. Unlike the imports, with the local manufacturing the technology is also transferred. The significant aspect of this episode is that the import of used cars is contributing much to the rising trade deficit, which has touched an alarming level in the current financial year. The used car import is capital intensive business. The local manufacturing leads the country self-reliance and other option will leave the country dependent on foreign sources. Automobile development is a fusion of more than seven hundred technologies and thereof it’s an extensive and multifaceted process. Where nations like Germany have been consistently trying since 1800 or so they are reaping the benefits at this point in time. India too has locally manufactured vehicle under the brand name of Maruti. Indian government fully supports locally made cars and this is portrayed by the usage of locally manufactured cars by their own governmental officials. As for Pakistan several prototypes have been built lately but government has not been very supportive. University level education in Pakistan is not up to the mark. There is no specific engineering branch for automobile engineering or production engineering. At present the industry requires innovative thinking professionals and entrepreneurs. Good professionals aren’t available owing to the brain drain, and those present are very few in number to meet the market demand. Pakistan lacks research and development facilities therefore local manufacturers can only copy and not tailor-make when developing an automobile. Unlike the west Pakistan’s a third world country where fuel is as expensive as Rs57 per liter hence development of an

underpowered, fuel efficient car is required. This would not only require lesser fuel intake but will also be comparatively cheaper. Government’s investment policies The Government has liberalized the investment policy environment for domestic as well as foreign private investment in the industrial sector. There is no upper limit on foreign equity and foreign ownership of industrial projects. There is also no restriction on remittance of profit, dividends, payment of royalty and technical fee. The Government is also encouraging joint ventures, technology tieups, co-manufacturing and co-exporting arrangements with foreign investors. Even relocation of projects is being encouraged in view of the transformation of developed economies into hi-tech areas. Major advantages for investment in Pakistan are as follows: • Abundant land and natural resources • Vast human resources • Growing domestic market • Well established infrastructure • Strategic geographical location

Fundamental problems in the automotive sector are as follows: • Low volumes / under utilization of capacity • High prices • Slow transfer of technology Pakistan’s investment space is vast. Imperatives of the investment continuum e.g. economic interest of the country and the financial interest of the individual investors are the key considerations. There is a kind of an organic link between the national economic interest on the one hand and the individual’s financial interest on the other. Sustainability of this linkage is the key to a win-win situation. This is being achieved by completely freeing the Government from the upfront controls and regulatory overhang which it had instituted on investment over the years. Trade and industry is no more being controlled by the Government. The private sector is now in the drivers’ seat. The Government is trying to put it on the high road of

development. Approach is fast-track. The policy focus is shifting to the provision of the following requirements; namely:

• Adequate policy framework • Simplified operating procedures • Strong support mechanisms • Easy access to capital • Upgrading technologies • Enhanced productivity • Reliable quality control • Enhanced management skills • Well-trained manpower • Improved marketing skills. Thus a reliable investment environment is being developed. The strategic preference is massive change instead of marginal one. Value-addition is our national priority for increasing national wealth. This requires upgrading of technology and capacity-building in design development for improving our position on the value chain. There is therefore an immense scope of cooperation and technology tie-ups for cost-effective co-manufacturing of automotive vehicles in Pakistan for domestic and export requirements. The Asian and Pacific region’s support to Pakistan’s volume-starved automotive sector and nascent vendor industry manufacturing auto parts for OEM and export markets is therefore a felt need of Pakistan.


Competitive pricing. High market share. High durability. Easy availability of spare parts. Aerodynamic body shape. Elegant body features. Comfortable ride. Luxurious car interior. High goodwill. Prestigious car history. Good resale value. Swift distribution channels. Updated safety features (Air-bags, seat-belts, ABS braking, Safety beams etc.) • Low fuel consumption • As production of vehicle is based on foreign joint ventures of Japanese origin, the product quality is of international standard.



People often criticize the breaking of the car although that braking system of the car has been updated to ABS but still the body rolls when the brakes are applied at high speed. The cheesy of the car is not stable while doing high-speed sharp turns. The body of the car is too heavy. The rims and tires of the car are not impressive. • The cars steering is a bit light and the driver cannot feel the road.

Making a sporty version of the car just like the CIVIC TYPE-R, this is the faster racing version of HONDA CIVIC having 200bhp and a sports body frame. Extra market can be captured by introducing Company fitted CNG Kitts in the car.

Swift competition from other manufacturers’ mainly Japanese and Korean car-makers. High oil prices resulting in decrease in demand of fuel thirsty sedans. But the fuel Consumption of Toyota Corolla is fairly decent. Global inflation due to increase in population and high oil prices may result in decrease in demand of sedans.


Increase in demand of other cars may result in downward trend of the brands goodwill. Lower prices of Korean car manufacturers may be a threat in the future. But presently Korean cars are not making a big impact in the market because of reliability and resale problems. • Currently Pak Suzuki is posing a threat as Pak Suzuki is producing cheap cars and is targeting the lower-middle and middle income group consumers. • Permission given by the Government to the overseas Pakistanis to import used cars in Pakistan.

Issue analysis
Main issues concerning the Toyota Corolla are: a) Should it develop a Sports version of the car, like in the case of Honda making CIVIC TYPE-R to complement Honda CIVIC? b) Should company fitted CNG kits be introduced in the cars? c) Should it increase its prices?

 To obtain the production target of 29,000 units (current: 25,100) by the end of year.  To increase market share from 25% to 29%.  To achieve internal growth rate of 50%.  To increase brand awareness among consumers target market.  To earn rate of return on investment (ROI) of 10%.  Produce net profit of 2.14 billion with a target net profit margin of 6%.

 To increase sales volume from current 24,344 units to about 27,000 units annually.

Product Development:  Alloy rims should be introduced in all the versions of Corolla so as to contribute to smooth braking, stability, comfort & vibrant look of the car.  Speedometer panels should be developed into digital units to compete with new Honda Civic.  Accessories like Traction Control should be introduced in the car so as to improve its traction on rainy and snowy surfaces. It will also enhance high speed cornering stability. This new product feature will attract extra customers in the Pakistani market.  Electronic Sunroof should be etched in the Saloon versions (2.0D Saloon and 1.8 VVT-i) as it is in Honda Civic. Concentric Diversification Strategy: As Corolla is the market leader in manufacturing Sedans and is enjoying wide customer base and high good will, it should take advantage of the present situation and develop a Sports version of Corolla because of the following reasons:  To compete with the Civic Type-R, this is the sport version of Honda Civic.  To increase its customer base.  To increase its sales revenue. Pricing Strategy: The prices of the present Corolla should be reassessed for the 1.8 Corolla Altis VVT-i (Manual and automatic) units which are the front line competitors to the new Honda Civic 2006.

The prices for the above model should be increased up to a minimum of Rs. 30,000 because of the following reasons:
 The new Honda Civic is charging from Rs. 1.32 million to 1.5

million, whereas Corolla being the market leader is charging from Rs. 1.22 million to 1.31 million (Corolla Altis M/T 1.8L and Corolla Altis A/T 1.8L) respectively.  As the demand for Toyota Corolla is considerably more than the supply, thus, an increase in prices will not harm the current demand.  Due to double-digit growth in inflation and subsequent increase in production costs.

To increase its sales revenue and to achieve the production target of 52,000 units by the end of the year, the company should take the following steps: a) It should expand its present production plant capacity so as to meet the required target. b) The company should hire trained manpower so as to meet the requirements. c) The company should expand its distribution channel. For the Sport version of Corolla, the company should establish a separate division and should be assigned the task of developing the new Sports prototype with a span of one year. For this, Toyota should acquire technical assistance like engineers and mechanics from abroad. After the development of the prototype, it should be tested thoroughly in all respects. The new product should be launched during the first quarter of 2009 with an aggressive marketing strategy.



(Rupees '000’) June March 30,2009 31,2008 ASSETS
NON-CURRENT ASSETS Fixed assets Long-term loans Long-term deposits Finance under musharika arrangements CURRENT ASSETS Stores and spares Stock-in-trade Trade debts Current maturity of finance under musharika arrangements Loans and advances Short-term prepayments Accrued mark-up Other receivables Taxation - net Cash and bank balances 1,630,541 2,631 5,163 9,503 1,647,838 278,355 5,361,489 1,740,247 3,589 1,051,100 310,938 191,302 2,414,822 15,206,585 26,558427

1,484,672 1,462 5,181 7,986 1,499,301 200,256 4,142,145 1,139,092 5,844 448,039 49,044 98,356 1,620,686 9,639,674 17,343,136


Authorized capital 100,000,000 (June 30, 2007:100,000,000) Ordinary shares of Rs 10 each Issued, subscribed and paid-up capital Reserves

1,000,000 786,000 8,325,895 9,111,895

1,000,000 786,000 4,613,023 5,399,023



Liabilities against assets subject to finance lease Deferred taxation

877,378 55,556 932,934

7,883 58,469 66,352 2,834,543 10,290,208 28,110 5,552 218,649 13,377,062 18,842,437

CURRENT LIABILITIES Trade and other payables Advances from customers and dealers Accrued mark-up Current portion of liabilities against assets subject to finance lease Taxation- Net CONTINGENCIES AND COMMITMENTS

3,702,338 14,056,681 56,361 4,386 347,160 18,161,436 28,206,265



(Rupees '000’) June March 30,2009 31,2008
NET SALES Cost of sales GROSS PROFIT Distribution cost Administrative expenses 32,419,951 29,509,135 2,910,816 399,382 194,940 594,322 2,316,494 284,697 2,031,797 1,401,755 3,433,552 97,492 3,336,060 1,187,812 2,148,248 25,345,908 22,541,544 2,804,364 270,749 167,202 437,951 2,366,413 233,358 2,133,055 778,753 2,911,808 95,581 2,816,227 1,034,635 1,781,592

Other operating expenses Other operating income Finance costs PROFIT BEFORE TAXATION Taxation PROFIT AFTER TAXATION



(Rupees '000’) June March 30,2009 31,2008
CASH FLOWS FROM OPERATING ACTIVITIES Cash generated from operations Interest paid Workers’ Profit Participation Fund paid Workers’ Welfare Fund paid Interest received Income tax paid Long-term loans – net Long-term deposits Net cash inflow from operating activities CASH FLOW FROM INVESTING ACTIVITIES Fixed capital expenditure Proceeds from sales of fixed assets Receipt of finance under musharika arrangements Net cash used in investing activities CASH FLOW FROM FINANCING ACTIVITIES Repayment of obligation against assets subject to finance lease Dividend paid Net cash used in financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the period (77,222) (951,852) (1,029,074) 5,566,911 9,639,674
15,206,585 8,089,626 4,699,737

(88,397) (5,257) (39,200) 1,270,601 (488,886) (4,296) (14) 644,551 8,734,177

( 61,175) (6,547) ( 38,804) 696,220 ( 717,895) (1,074) (32) ( 129,307) 4,570,430

(2,247,739) 63,484 46,063 (2,138,192)

( 832,496) 3 8,129 2 7,583 ( 766,784)

( 26,446) ( 857,525) ( 883,971) 2,919,675 6,719,999


The goals and objectives that are set out and the targets mentioned in Projected Financial Statements should be evaluated at every stage. Necessary corrective measures should be taken if any deviation is found from the predetermined benchmarks. Promotional expenditures allocated should be properly utilized and the subsequent results of the advertising campaigns should be evaluated from time to time. Strategies implemented should be assessed and necessary changes should be made according to the changes in internal and external environmental factors.


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