Changes your Life
Table of Contents
Table of contents ………………………………………………………………….. 1 Executive Summary ………………………………………………………………. 3 Introduction ………………………………………………………………………...4 PEL profile ………………………………………………………………………….4 PEL air conditioner ----------------------------------------------------------------------- 5 PEL refrigerator--------------------------------------------------------------------------- 5 PEL micro wave Owen------------------------------------------------------------------- 5 PEL television ----------------------------------------------------------------------------- 6 Power division ------------------------------------------------------------------------------ 6 Industrial Analysis ------------------------------------------------------------------------ 7 PEST analysis ------------------------------------------------------------ 7 Political environment---------------------------------------------------- 7 Economical environment ----------------------------------------------- 8 Social environment -----------------------------------------------------8 Buying pattern ----------------------------------------9 Standard of living ------------------------------------9 Technological environment ------------------------------------------9 Cooling system ---------------------------------------9 Testing and adding accessories -------------------9 Future Environmental Analysis -------------------------------------------10 Future Trend of Political environment ----------------10 Future look of economic environment ---------------10 Future look of technology environment --------------11 Future look of social environment 11 Competitors Analysis Competitors of PEL 12 DAWLANCE 12 The Vision 12 Corporate Belief 12 Corporate Responsibilities 12 Business 13 Market Position 13 Customers 13 History 13 WAVES: 14 Reason for Growth: 14 SWOT analysis of PEL: 15 STRENGTHS: 15 WEAKNESSES: 16 OPPORTUNITIES: 17
Changes your Life THREATS: 17 Porter Model Bargaining power of buyers 18 Concentration: 18 Product Differentiation: 19 Switching Cost: 19 Profit. 19 Impact on Quality/Performance: 19 Buyers Information 19 Supplier’s power 20 Suppliers 20 Concentration 20 Presence of Substitute inputs 20 Importance relative to customer 20 Switching Cost 21 Rivals Industry Growth: 21 Fixed Cost: 21 Product differentiation: 22 Concentration and Balance:22 Switch cost: 22 Exit Barriers 22 New entrance 22 Substitute: Switching Cost: 23 Price, Performance 23 Industrial Structure 23
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Pak Elektron Limited (PEL) is the flag bearer of the Saigol Group of Companies. The products manufactured by PEL have always been of high standard and the name 'PEL' is synonymous with QUALITY all over Pakistan. Since its inception, the company has been working for the advancement and development of engineering know-how in Pakistan. The company has produced hundreds of engineers, skilled workers and technicians through its apprenticeship schemes & training programs. The company comprises of two divisions:
Appliances Division: This Division of PEL consists of home appliances
manufacturing particularly Refrigerators
Power Division: PEL Power Division is one of the major electrical equipment
suppliers to WAPDA & KESC. The company manufactures transformers, energy meters, switchgears, kiosks, compact stations and shunt capacitor banks
Other than this, the company has developed a very good repute in the world of credit due to which most of the Financial Institutions like National Bank, Faysal Bank, Punjab Modarba have provided especial credit limits to the Company in order to support its operational activities. While working with PAK ELEKTRON LTD, I got very broader visions about company financial and marketing activities more than those that I had learned during my MBA program. In 1956, the Saigol Group of Companies purchased major shares of PAK Elektron Limited. At this junction, the company was only manufacturing transformers and switchgears. With the Saigols in management, PEL expanded into Refrigerators & Air Conditioner manufacturing and now it has become a Giant in the World of Appliances.
Changes your Life
Pak Elektron Limited (PEL) is the flag bearer of the Saigol Group of Companies. The products manufactured by PEL have always been of high standard and the name 'PEL' is synonymous with QUALITY all over Pakistan. Since its inception, the company has been working for the advancement and development of engineering know-how in Pakistan. The company has produced hundreds of engineers, skilled workers and technicians through its apprenticeship schemes & training programs. PEL has been continuously adding new products to its range. As a result, PEL has registered a significant increase in its sales volume, during the last ten years.
Elektron Limited (PEL) is the pioneer manufacturer of electrical goods in Pakistan. It was established in 1956 in technical collaboration with M/s AEG of Germany. In October 1978, the Saigol Group of Companies bought the company. 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 home appliances and by producing hundreds of engineers, skilled workers and technicians through its apprenticeship schemes and training programs.
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PEL AIR CONDITIONERS:
PEL window-type air conditioners were introduced in 1981 in technical collaboration with General Corporation of Japan. Ever since their launch, PEL air conditioners have a leading position in the market. PEL air conditioners cooling performance has been tested and approved by Copeland and ITS USA and today PEL holds approximately 45% of air conditioners market share.
The manufacturing of refrigerators started in 1986-87 in technical collaboration with M/s IAR-SILTAL of Italy. Like the air conditioner, PEL's refrigerators are also in great demand. Today, PEL Crystal has 30% market share. Its cooling performance is tested and approved by Danfoss Germany and its manufacturing facility is ISO 9002 certified by SGS Switzerland.
PEL MICROWAVE OWEN:
PEL the trustful company name in home appliances all over the country now introduced all new models of "PEL Power Wave" Microwave Ovens. Now PEL customers can have four models of PEL Power Wave in which they can enjoy the grilling feature as well. PEL Microwave Ovens are available in different sizes, inner cavities (steel & painted) and features.
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PEL introduced Color Television under the brand name of "PEL DIGITAL LIFE". PEL has introduced four models (flat & semi flat). Now PEL customers can enjoy a Multi System, Multi Sound, DVD Input, AV In/Out, Clock, Timer and Auto Degauss Technology all in PEL Digital Life Color Television. PEL provides strong back up of customer services all over Pakistan with 5 years picture tube and 1 year parts warranty.
PEL Power Division manufactures energy meters, transformers, switchgears, Kiosks, compact stations, shunt capacitor banks etc. All these electrical goods are assembled 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 companies working in Pakistan. Over the years, PEL electrical equipment has had been used in numerous power projects of national importance within Pakistan. PEL has the privilege of getting its equipment approved and certified from well-reputed international consultants such as:
• • • • •
Preece, Cardew and Rider, England Harza Engineering Company, USA Snam Progeti, Italy Societe Dumezm, France Miner & Miner International Inc. USA
In spite of stiff competition from emerging local and multinational brands, PEL Group's appliances and electrical equipments have remained in the spotlight due to constant innovation. Strategic partnerships with Copeland, Danfoss, Samsung and others have
Changes your Life enabled the PEL Group to incorporate new technologies into existing product ranges, thus giving the Pakistani market access to innovative, affordable and quality products.
Industrial Analysis: Pest Analysis:
• The political condition of the Pakistan is not stable, mean when the government changes the polices are also change the new comer in politics. He tries to run the country with his own ways which are entirely different from the previous government. • From the previous some years we have seen that the Government of the Pakistan encourages to import and export polices. And also encourage the foreign investors to invest in Pakistan. • • There are no many difficult formalities to import or export, any dealer can import in Pakistan and sell by the fulfilling the certain formalizes required by the law. Different countries provides to the different countries there services by the using of labor of that country. As china is performing this job by the providing the services to the Pakistan. In this case during the manufacturing of the product the cost becomes reduce, like the electricity bills, government taxes, other factory overheads etc, so that’s why Pakistan prefer to outsourcing mostly from China. • • The required demand is fulfilled in Pakistan by the importing from China. Because 17% subsidies are given to the exporters in China. If the Government reduces the import duties on the raw materials the purchasing power can be increased of HVACR (Heating, Ventilation, Air conditions and Refrigerators). • Eng. Abdul Rasheed Director General Pakistan National Accreditation Council (PNAC) said we can save energy with quality management practice and by evolving a national quality infrastructure based on technical regulation, standardization and conformity assessment. 7
Changes your Life Economic Environment • • • Pakistan’s economy continued to perform impressively as it is experiencing longest spell of growth in its history. The outcome of the fiscal year 2006-07 indicates that Pakistan’s economic momentum remained on track. Economic growth accelerated to 7 percent in 2006-07 as a result of robust growth in agriculture, manufacturing and services and has been notably stable and resilient. Compared with other emerging economies in Asia, this puts Pakistan as one of the fastest growing economies in the region. • Growing per capita income coupled with fiscal revenues approaching a trillion mark are resulting into increased consumer spending on one side and increased investment in infrastructure by the government on the other side. • • • These prime indicators are providing a healthy canvass for both of our business divisions i.e. Appliances and Power. The per capita income of Pakistan has reached up to $763. Growing interest of foreign investors in Pakistan as manifested by the visits of over 200 foreign investors’ delegation in the last 2 years.
• • • Most of the population of Pakistan belongs to middle class who are the potential buyers of PEL’ products. So the scope of product is high. Most of middle class people are price conscious and tend to save money so they would prefer the products with low electricity consumption. In recent times joint family system is vanishing and a product such as Refrigerator which was used by 5 people is now used by only 2 or 3 so the demand is increasing day by day.
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It is a norm of Pakistan to purchase white products at the time of marriage. They buy them as dowry item and it has changed the sales pattern. The units of refrigerators are sold throughout the year, as compared to the previous pattern of seasonal sales. The availability of different products options has also affected the buying pattern.
Standard of Living:
The overall standard of living is improving day by day and also the availability of low cost items has contributed a lot in the consumption of white products. This is an opportunity for PEL to get benefit out of this improving trend.
The refrigeration components are attached to the cabinet using screws and clips. The tubing is soldered together, and a protective coating is sprayed on the joints. The order of this assembly varies between manufacturers and models. The copper tubing from which the coils (condensers and evaporators) have separately been cut, bent, and soldered is then attached to the refrigerator as a unit.
The seal on the refrigerator door is created by means of magnet laden gaskets that are attached to the doors with screws. Handles and hinges are also screwed onto the door before its hinges are screwed onto the cabinet. Some adjustment is allowed for proper operation of the door.
Testing and adding accessories
Most manufacturers mix testing with manufacturing from this point on. The unit is leak tested with nitrogen (a safe gas that makes up about 79 percent of the air); if it passes, it is charged with refrigerant and subjected to further testing. Next, the accessories (shelves, crispers, ice trays, etc.) are added and taped down for shipping. The unit is given a final look and then packaged for shipping
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Future Environmental Analysis: Future Trend of Political environment.
By the study of the political environment we come to know that the formalities which are fulfilled by the both Pak electron industry and the government are completed. And according to the Eng. Abdul Rasheed Director General Pakistan National Accreditation Council (PNAC) that the National Quality Policy is almost completed and would be introduced soon. In future a legal framework is an urgent need for preventing supply of unsafe products; evolve an effective certification system, rationalization of quality and conformity system and raising awareness amongst the masses. He said the rules are being framed so that in future every product is tested by the government agencies. “it will be a regular feature and findings of such testing will be made public. In future for the seek of the environmental protection there must b rules and regulation by the government especially the role of PSQCA and EPAs, while standards for home appliances should be strictly enforced and the government, civil society groups and media should promote responsible consumption attitudes.
Future Look of Economic Environment
The economy is expected to perform well in the next year however it is exposed to certain challenges like current account deficit, lower exports, increased competition in the international market and lack of technological advancement as compared to competing nations. It is still hoped that national economy will continue to grow and rising prosperity will bring expanding opportunities for the Engineering Industry and for your Company. The company will continue to focus on cost effectiveness, quality standards and best after sales services to our valued customers. And the Pak electron expects to go farther, faster and higher than they have ever been in serving the interests of their customers, shareholders and employees.
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Future look of Technological environment
In terms of Freon, several intermediate steps have been taken to minimize CFC emission as researchers attempt to identify safe coolant alternatives. Refrigerator designs have been improved to reduce the amount of freon needed; leak detection systems have been installed; maintenance has been limited to trained, authorized personnel; and refrigerant is recovered and recycled whenever possible. Moreover, long-term replacements for freon are being explored. Thus far, the most promising among them is HCFC-22, which, although still a chlorofluorocarbon, contains an additional hydrogen atom that reduces the molecule's ozone-depletion capacity by 95 percent. While its cost (three to five times greater than that of freon) is problematic, HCFC-22 is presently undergoing tests to determine its toxicity. CFC-containing insulation may be replaced by the same kind of vacuum insulation that is used in thermos bottles. Research indicates that vacuum insulation is more efficient in terms of both space and energy, so, at present, it appears that insulation alternatives will become viable well before freon substitutes. Now the new refrigerators are introducing by the Hinoon lab. On the solar energy. Because there is a problem of electricity in Pakistan which can be solved by the introducing solar energy technology.
Future look of Social environment:
People will buy the refrigerators and other home appliance by the same previous pattern. And people will mostly prefer to buy the new refrigerators which is introducing by High noon lab by the solar energy. And with the change of seasons people buying pattern will also change. The season of marriages is mostly between both two Eid’s. So the buying power of people will increase in these days. And the people prefer to buy those appliances which become match with their home settings and designing. This is called the trend of fashion. People decorate their home according the changing of the trend of fashion.
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Competitors Analysis Competitors of PEL Dawlance:
Dawlance is the Leader in household appliances in Pakistan. It’s the largest company engaged in appliances business. It is rated no.1 in refrigerators and has the market share of 40%.
Dawlance has 23 service centers in Pakistan. Sales network has reached 850 dealers nationwide.
The Vision: "We are committed. Above everything else, Dawlance places its top priority on the satisfaction of human beings the satisfaction of its customers, partners and employees. All our policies and approach towards work revolve around our corporate belief." Corporate Belief: • • • Individual must be respected. The customer must be given the best possible products and services. Excellence and superior performance must be pursued.
Corporate Responsibilities: • • • • Advancing the standard of living in Pakistan by manufacturing reliable and affordable electrical products. Implementation of first class production engineering. Development of our employee not only for the firm's benefit but to contribute to each employee personal growth. Major contributor in restoring Pakistani status and prestige.
Changes your Life • To reinforce value like harmony, solidarity, discipline and dedication.
Manufacturing and marketing of domestic appliances
• • Leader in household appliances in Pakistan Largest company engaged in appliances business
Up to Middle Upper Class of Pakistan History: • • • • • • • • • • • • • • • Established 1980 Refrigerator Production 1981 Deep Freezer Production 1988
Deep Freezer Manufacturing Unit 1992 Launched RAC and No-Frost Ref. 1992 Launched WM and MWO 1995 Production of No-Frost Refrigerator 1996 Production of Aero-Design Series 1996 Production of Up-Right Freezer 1997 ISO 9001 Certification 1999 Production of Washing Machine 2000 ISO 14000 Certification USL Shops 2001 Electric city # 1 2001 Signature series USL Shops 2002 2001
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Cool industries are basically deep freezers manufacturer that started its operations in late 80s and added refrigerators in their product line by mid 90’s. in the beginning they didn’t get a good response for their refrigerators but as time passed, their market share position is getting better. In year 2003-04, like all other brands, waves got a good growth in refrigerator market. They have successfully launched their split air conditioners. They are the pioneers of low price split AC in Pakistan. Waves in the beginning, considered to be a low price and low quality product, were not very much accepted, but later with the re-launch of their refrigerators, got a good response from the dealers. Currently WAVES is the third largest manufacturer of refrigerators and expected to sell 79,500 units in last year. Reason for Growth: There are the following reasons for growth of WAVES • • • • Improved quality product Strong distribution network Low prices Heavy advertising
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SWOT analysis of PEL:
• As we all know PEL has been serving since 5 to 6 decades, it has captured almost 50% of the Appliances demand and near about 70% of the power products demand with the passage of time. Due to its strong positioning, its Goodwill has always been a threat for the new business arrivals and for the small-scale businesses. And PEL holds a great part of the people trust.
Technological improvements in the business environment always play a vital role for the expansion of the Corporations. PEL has sensed the importance of technology very earlier and has introduced latest equipments to all of its departments along with the expertise to increase its staff technological know how as well as their efficiency level. Now people working in PEL are ready to cope with any of the internal and external threats easily. This technological improvement has enhanced company’s productivity comparatively more than 60 percent from past and still the company is struggling for more improvements.
In a competitive environment, where every producer tries to maximize its market share and profitability, requires a very strong financial backup. Pak Electron Appliance division has large number of competitors in the market including National and International firms and they are continuously trying to break PEL’s market share but due to strong financial backup from its own POWER DIVISION, from Top class financial institutions and its exclusive distribution network all those companies have become un-able to change its position.
One another Strength would be the environment, PEL ensures a very neat, clean environment to its staff which keeps them motivated and committed to their jobs and that’s why they usually resist to jump for external opportunities. 15
Changes your Life • Due to PEL’s reputation and Goodwill many financial institutions have increased its credit facility limits due to which it has started expanding its businesses into those areas where access was a bit tough or where it wanted to participate. Similarly due to this advantage it has started increasing its product’s National and International Material Supply to achieve production scale as well as the annual Sales.
• Other than strengths the internal weaknesses of PEL includes low morale of the employees due to OLD and RIGID ideologies of the top-level staff. Top level staff at PEL dislike middle or lower level employees participation in the decision making, exert excessive, un-necessary pressures, work loads and discourage them a lot, this significantly reduces employees interests in their work and respect for the Top-level staff. • Another weaknesses of the PAK Elektron lies in its marketing strategy where its continuously trying to rely on the Distribution Network for its Appliances specially for its microwaves and splits with out proper Advertisement and promotions. Due to which people un-awareness remains there as it is and they bother to go for its products. • As it was mentioned earlier that due to certain reasons PEL’s Cost of Production fluctuates it simultaneously effect over the sales price level due to which it does not remain stable through out the year. And if the company does not have a tight control over cost of production, customer who comes to buy any product after estimating its own budget when finds a different price from the prior visit or information faces decisional problems and in this way Company looses its customer. It is happening with Pak Elektron • Another weaknesses of PAK ELEKTRON, is its delivery system. Retailers of PEL use to complain about its delivery patterns and they are un-happy and moving towards other company’s products.
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Following are the opportunities on the way, which the company can avail in future. • SAFTA, a free trade agreement between South Asian Countries, is hopefully going to bring large number of penetration opportunities for the companies like PEL in January 2006. This will help PEL in achieving Economies of Scale and further help it in bringing technological enhancements in it all facilities. This will also make its name stronger in the market. • Another opportunity is the Sales Tax exemption by the Government over the Production material and Sales of transformers, switchgears, electric meters, etc by this year. Due to this PEL soon will enjoy huge profits than before.
• As SAFTA, an agreement between south Asian Countries is on its way so sooner we will be having all Asian Products and producers such as Chinese, Hong kong, etc. Competition in all Asian Countries will be so tight we can’t even imagine. Where it is going to bring large number of opportunities it will also create threats for the domestic producers like PEL because of their Advance Factors of production such as technology and because of their Basic Factors of Production such as cheep labor etc. Further, these factors will give those producers a chance to charge lower prices than domestic producers for their products and they will soon be having a competitive edge over companies like PEL due to which its survival would become difficult. • Similarly, another threat for PAK Elektron is the increasing preferences of customers towards other companies’ products like Dawlence, which is speedily exploring un-identified markets in Pakistan and engage in heavy advertisement of its products. This has been increasing its brand loyal day by day. It seems that PEL will be no more dealing in Appliances if it does not take any precautionary measures for future.
Changes your Life • Distributors of any product always look forward for the higher margins. Companies have started offering sufficient amount more than PEL, as incentives to the distributors soon will take over PEL’s Exclusive Distribution Network and this will be the huge loss for PAK ELEKTRON.
Porter -5 Model:
Bargaining power of buyers:
In the market of home appliances the buyers are fragmented. Because when people go to purchase the refrigerators and mostly no try to bargain because mostly people know about the price and quality of the product and they themselves make the competitive study and decide to buy or not buy the products. So the buyers bargaining power is not high.
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The branding is critical for success. The product is undifferentiated because if we compare the technology and the prices and the services offered by the competitors of the Pak Electron then we can’t differentiate. So that’s why here is also the buyers have the high bargaining power.
The buyers bargaining power is high due to the low switching cost. If a buyer is not satisfy on the product of the Pak electron then he can easily switch to other product mostly towards dawlance and Hier. Because the Dawlance is the providing the product specially refrigerators on the market price.
In this case the customer’s profit can say the same because the Pak electron is also improving gradually. But the customers bargaining power will only slightly high. He must compare his profit or benefit getting by the Pak electron with the other competitors. The customer is profit conscious at first.
Impact on Quality/Performance:
The mostly customers are quality conscious with the combination of the price of the product. And the customers do the competitive study. But at the large scale the customers can not differentiate the quality of different brands. And this is done mostly by practical experience. As my self experience by using the different brands of the refrigerators with a specific time period. So here the bargaining power of those customers will be high who have the practical experience or perfect research about the different brands available in the competitive market.
Changes your Life The buyers have sufficient information mostly those having the research. Because the customer who invest the money can not take any risk. So that’s why nobody can spend the money by closing their eyes. And here also the buyers have the high bargaining power.
Major suppliers of raw material and sub-components/components are Japan, U.S.A, Italy, South Korea, Singapore and Thailand.
• As concentrate on the quality on the PEL with the comparing to the DAWLANCE is low because PEL is not compromising with the price to suppliers. So that’s why the suppliers who give the material to PEL and DAWLANCE and WAVES are concentrated because if the suppliers don’t want to supply the material to PEL they are not conscious because they have the good opportunist to sell their raw material to the concentrated firm in market which is DAWLANCE having 45% shares of refrigerators in market.
Presence of Substitute inputs:
There is a substitute of refrigerators that is deep freezers which are offering by the both firms under the electronic product lines. So the suppliers power is not high.
Importance relative to customer.:
There are different suppliers for one product, and PEL is important for the suppliers because the PEL is also improving gradually. In this case we are getting the raw material of refrigerator’s door and structure, which can import from different international suppliers. But for the specifying PEL is getting the raw material from china
Changes your Life and that is important for the china. After the DAWLANCE the PEL is a big firm which is getting the huge material. So in this case the suppliers are not powerful.
The switching cost is low so that’s why PEL is getting the material form china because the chinease firms are providing the material according to the requirement of the Pak Electron limited. The supplier’s power is low.
Rivals Industry Growth:
According to the annual financial report this industry is growing quickly, by the quickly growing there are less chances for the more rivalry. Gross Sale. And the gross profit is also 442 to 582 from the year 2005-06 to 2006-7
Changes your Life The Fixed cost of this industry is very high, the installation of machinery to produce the raw material, development cost for dies and mould, assembly line machine, distribution cost, transportation cost, R&D cost etc. Its high fixed cost is threat for the new entrance.
The products and services are commodity of the home appliances industry and have closer the product. So that’s why this industry is buying the products form the china.
Concentration and Balance:
There are many firms making the home appliances but form those there are few firms which have the maximum market share in the market nominated by DAWLANCE and PEL. Which have the 45% and 37% market shares respectively in refrigerators. Switch cost: The switching cost is not high because the industry is getting the affective price form the china than other suppliers as japan, Malyasia at the same quality and less price. And if the china starts the implementation on installing the plants in Pakistan then the cost will reduce more.
There can be two main exit barriers which the fixed installed machinery which are very expensive. And the inventory is also a big exit barriers for any firm because it is most difficult to get ride or sale out, because the positioning of the firm becomes poor in the mind of the consumers and they are no ready to buy that product which may b a big loss for the firm.
• • High cost of production is one of the main barrier of entering the refrigerators industry The huge advertisement cost. 22
Changes your Life • • • • • The far away Break Even point as it will take time to set an image in the eyes of consumers and sell them their product. Establishing dealership network. High costs of raw materials and other inputs (costly electricity and custom duties on imports of the said units or raw material). Government polices are involved if the existing firm approve the patent from the government then the new entrance can b stopped. Brand identity is also a threat for the new entrance because it takes time for the positioning in the mind.
Switching Cost: The substitutes are the waves triplet, deep freezer of dalliance if the switching cost is high then the people will not get it and if the switch cost is low then people will get it. The deep freezers are expensive than refrigerators and need more place to stay the freezer. Which is considered a high switching cost. Price, Performance: The substitute offer a better price in sense of performance, performance wise the deepfreezes are better but those which are technology wise differ giving the facility of both refrigerator and freezer which is available in double door freezer. Industrial Structure The structure of the industry is falling under the category of oligopoly because there are 5-6 firms but the major firms are 3-4 which have a good place in the market.
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Pak electron limited www.pel.pk.com www.pakistaneconomist.com www.dowlance.com