MARKETING STRATEGIES OF

DAWLANCE AND LG
A Comparative Study.

By ANNIE IDREES MEMON (MITM)

Department of Management Sciences
Isra University Hyderabad.
June 10 - 16, 2002

The study is based on the comparison of marketing strategies applied in LG. and Dawlance. In this study,
the main focus to see the effectiveness of the marketing strategies applied by both the companies
Dawlance and LG, for selling their products particularly Refrigerators.

Just to understand the marketing strategies in general and refrigeration market in particular, one should
know that what marketing strategies ought to be? Who are the main players in the market? What kind of
other products do they produce? How do they promote and supply their products? What type of
competition is going on in the market? And finally what are the marketing strategies being applied by both
the companies? These are the questions to be addressed, but the main theme is the marketing strategies
of Dawlance and LG Refrigerators. This paper is mainly divided in to four sections.

The first section deals with the marketing strategies in general. The second section focuses on the main
players of Refrigerators in the Pakistan market. The third section sheds light upon the marketing
strategies of Dawlance and L.G. Though the marketing strategies of all the products may be the same.
But mainly it has been focused on the refrigerator marketing strategies here. Finally, the paper is
concluded in the last section.

All the information that is presented in this paper has been acquired and extracted from various primary
and secondary sources. In this study, best possible efforts have been made to collect the correct and
uncovered information. For this, the information has been collected by both primary and secondary
sources. Primary data is based on the interviews from the top officials of both the companies based on
the semi-structured questionnaire. The secondary data is based on the published reports and Internet.

1. MARKETING STRATEGIES IN GENERAL

Fluctuating customer requirements and competitive forces are putting more pressure on marketing and
are demanding superior marketing strategy and tactical execution. The cycle time from product creation,
to product launch, for a winning go-to-market strategy, leaves no margin for error.

Marketing puts the customer at the center of the organization. The organizations, which do so, reap the
profits. The idle marketing ought to be or the key steps to a successful strategy can be summarized as:

1.1 BE CLEAR ABOUT MISSION

The common, customer-orientated thread running through all the activities of the organization and how
we define the kind of market oriented organization we want to be.

1.2 MARKETING RESEARCH

In marketing strategy some one should do know about the marketing potential for his the product and
should find out through research that:

WHO ARE OUR CUSTOMERS?

What do we really know about their needs, preferences, behavior and their life styles?
What can we offer them... at a price... that other companies do not?
How do we perform in comparison to our competitors?
How are we currently performing for our customers?
Where are the gaps, the weak points, the fudges, and the point of excellence... the USPs
(Unique Selling points)?
How are we different?
Why are we different?
How can we better delight?
How do we change?
What do we change?
How clever are we with our market intelligence?
How well is our market research working?

1.3 Set Strategic Aims

Market Penetration
Market Development
Product Development
Entering new Market
1.4 Segment the Customers

Consider groups who share a similar need and who will respond in a similar way.

1.5 Design a Marketing Strategy

To achieve specific marketing objectives, based (e.g.) on the Marketing mix.
1.6 Set Tactical Plans, Budgets, Programs
Assign individual responsibilities to achieve the objectives.
1.7 Monitor Progress

MEASURE AGAINST STANDARDS AND CONTROL.

2. Main Players of the Refrigerators in Pakistan Market

Just to understand the refrigeration market, first of all we should know who the main players in the market
are? Actually there are two types of marketers: those who manufacture refrigerators locally and those
who import and market the same in Pakistan.

Local Manufacturers of Refrigerators are: Dawlance, Waves, Pel and Singer. These manufacturers
roughly cater 80% need of the market.

Imported Manufacturers of Refrigerators are: LG, Super, General, Hair, Sam Sung, Indesit, Semins,

Parties import refrigerators from their principal and market the same in Pakistan. In-fact these all parties
contribute only 20% of the market requirement. The above all are direct competitors of Dawlance and LG.
electronics.
3. "Marketing Strategies of Dawlance and L.G Refrigerator"

Before discussing the marketing strategies of Dawlance and L.G, first we will go through the profiles of
the companies in brief.

DAWLANCE:

Dawlance United Refrigeration Industries Ltd. was established in 1980. It is the Largest Company in
Pakistan engaged in appliance business. Dawlance stands for durable & reliable household appliances.
Its refrigerator Factory is located in Hyderabad. The main Objectives are to provide dependable and
reliable product at reasonable price to majority of Pakistanis and to enhance their quality of Life. Present
Market Share of Dawlance product is: refrigerators 65%, Washing Machines 35%, Microwave Oven 40%,
Chest Freezers 45%, Air Conditioners 15%,

L.G.

Haniska International is a multinational company, located in Korea. LG is an agent of Haniska

International in Pakistan market. LG is an importer of home appliances in Pakistan. It imports
Refrigerators, Air Conditioners, Washing Machines & Microwave Ovens from Korea and China. LG has
got around 300 dealers all over the country. Marketing objectives of L.G are: to provide world class
product to upper and upper middle class to enjoy real luxury in their life. Present Market Share of L.G
product is: Refrigerators 4%, Washing Machines 2%, Microwave Oven 3%, Chest Freezers nil, Air
Conditioners 25%.

3.1. MARKETING STRATEGIES

The marketing mix is the organization's overall offer, or value, to the customer. 'The basic marketing mix
is often nick named "the 4Ps" (product, place/distribution, pricing, promotion); these are elements in the
marketers armory aspects that can be manipulated to keep ahead of the competition'. Here I've
explored the marketing strategies of Dawlance in terms of marketing mix have been explored.

3.1.1 PRODUCT STRATEGY

The object of Dawlance is to provide refrigerator to all people who fall in lower middle, middle, and upper
middle class in this country such that most of the families should have refrigerators in their home because
they enhance better quality of life. Dawlance has got products, which are as per international standards
and carry all the basic features, which need in any such type of appliances.

Dawlance believe that whatever they provide to their customers should be durable and reliable. All the
products, which Dawlance market, are durable enough and customer can keep on using them for quite
many years without any problem. It provides its refrigerators, 3 years compressor guarantee and 1 year
chest freezer, and free service in spare parts under normal use.

Whereas, LG's objective is to provide world class product to upper class and upper middle class to enjoy
real luxury in their life. Since LG is a Korean brand and being imported from Korea, it has very advanced
features, which are normally demanded by in developed countries.

LG also insures that whatever product they market should be durable enough which last quite many years
and give trouble free service to their customers. It provides its refrigerators, five years compressor
guarantee and one year free service in spare parts under normal use.

3.1.2 PRICING STRATEGY

Dawlance has got around 52 models in their refrigerator product line. From the price list and discussion
had with their management, it appears that they have position their product pricing in such a way that
their main focus is middle and upper middle class. However, they have some selected range for upper
class as well. Product-wise price list enclosed in appendix for reference.

Dawlance has got a policy that their all product price should be the same in all cities and town in Pakistan
market. Dawlance bear freight cost and make their product available to their dealers irrespective of where
they are located. For this, they give uniform margin to their dealers irrespective of whether he is big or
small.

Dawlance consider pricing as one of an important element of marketing mix. It believes that their retail
prices should be uniform all over the country irrespective of whether customers buy from Peshawar or
Karachi. In order to maintain a uniform price all over the country, Dawlance bear transportation charges
and make the product available at cost price at dealer premises.

Whereas the LG pricing strategy is cost + fixed mark up to cover their GP. Since they cater to upper
middle and upper class, therefore their 90% dealers are in big cities only. Product-wise price list enclosed
in appendix for reference. LG follows pricing policy in which their normal formula is import cost +
reasonable gross profit to cover their marketing expenses and also give them reasonable profit.

3.1.3 PROMOTION STRATEGY

Dawlance promotion budget is around 1.75% of their turnover. 40% spending of their budget is Print
Media, 20% goes on TV, 20% on Out door activity and balance 20% on Sales Promotion activity. They
believe that print media and out door activity help them to reach to their target customer. Due to satellite
transmission and having multi-channels, it does not pay one unless you have very huge budget to spend
on this media. On promotion, their spending is more on consumer incentive schemes. Since it pay them
and there is direct relationship between sales and consumer. Further, it gives customer a direct benefit in
shape of price reduction.

As far as Advertising strategy of LG is concerned, it is being planned and executed by LG, Korea through
their Pakistan Office keeping in view their global approach and theme line. Local Agent of LG simply
gives advice and coordinate in its implementation. Since LG is a multi-national brand, their spending on
advertising is in such a way that their all product get promoted. Although for different product they have
got different agent; like for TV, New Electronics/Karachi. For computer monitor, Vision Computer. For
mobile phone, Chimera.

It was not possible to get the exact advertising budget of LG, but it appears from their spending and the
figures collected from Pakistan Advertising Association and from some other sources that their spending
is around 6/7 per cent of their sales in Pakistan territory. Due to being a multi-national company and as a
part of their global Strategy they, most of the time, divert their funds from strong market and spend more
on weak or under developed markets.

Further, as far as Sales Promotion strategy is concerned, it is being designed and implemented by their
respective agent of each product in Pakistan. For the promotion of Home Appliances products: Hanaska
International designs their own strategy. Their major approach and emphasis on promotion through trade.
They offer very handsome incentives to their dealers, who in return push their product among the
customer and thus they get their desired volumes in Pakistan. It has been noted that due to being import
base product they are always high price vis-a-vis other brands in the market and it is one of the reason
why they give so much emphasis on the motivation of dealers.

3.1.4 DISTRIBUTION STRATEGY

Dawlance has got around 800 dealers all over the country. Dawlance ensures that its refrigerators are
available almost in all appliances markets of Pakistan. They have got 80% penetration in dealer sector.
One can get very easily their product in any city or small town of Pakistan.

Dawlance has got various types of dealers according to their potential. Around 25% of dealers are "A-
class" dealers who sell over 1000 units and above per year. "B-class" dealers are those dealers who sell
from 400 units up to 999 units per year. They are around 50% in total dealer and the rest are in best 25%
of "C-class" dealers sell from 200 up to 399 units per year.

In order to provide quick and timely delivery to their dealers: they have got big warehouses located in
almost all big cities and towns. Whenever they get order from the dealer they try to provide supplies to
their dealer from closest warehouse. In case stock is not available in the warehouse then it is delivered
directly from Hyderabad Factory. The maximum delivery time incase stock is delivered from Hyderabad
Factory is four (4) days. However if supply is given from closest warehouse then hardly it takes 2-3 hours
time. They believe that, timely delivery of their product to the dealer, is one of an important element in
their success in Pakistan.

As it has already been stated in earlier that LG refrigerators are imported. Mostly they import from Korea
and some of the models are imported from China as well. LG relatively don't maintain loose stock at their
end. Simply based on historical forecast and feedback of their dealer about the possible demand, they
import from their principal.

They ask their dealer to maintain sufficient stock at-least 4-6 week at their end. Rather they believe in
replenishment of dealer stock based on their sales. It means dealers stock always remain in within a limit,
doesn't exceed beyond 6 week level.

As mentioned above, they have only 300 dealers mostly in big cities and some in small towns. They also
have got a policy that retail price all over the country should be uniformed for the customers, whether
he/she buy from Karachi, Islamabad, or Peshawar.

They also bear transportation cost and thus provide supplies at uniform rate to their dealers. They have
got three big warehouses in Karachi, Lahore and in Islamabad. From these warehouses they feed their
product to their dealers and thus they make their product available to them.

3.1.5 PRODUCT LIFE CYCLE

Dawlance is an ISO 9000 certified company and among its mission statement. It is one of their missions
to provide quality product to their customers. Therefore, they ensure that every product, which is
delivered from their factory, must go through rigorous quality check. So that only perfect product, free
from any defect is delivered to their customers.

Since LG is an international name in home appliances, therefore LG ensures that their product must meet
their rigorous quality standard. So, when it is delivered to the customer, it must meet customer's
expectations.

3.1.6 AFTER SALES SERVICES

Dawlance believes that after sales service is one of the most important elements of marketing mix and
thus give due emphasize in providing quality after sale service to its refrigerator customers. Dawlance has
got qualified foreign-trained engineers in its team of after sale service and also properly trained
technicians and supervisors who look after service centers and provide reliable quality after sales service
to its customers.
Dawlance has got 17 its own service centers in different parts of country. Besides, they have got 34
franchise workshops to cover remote areas, where its service center doesn't exist. These are service
centers and franchise workshops cover almost 99% market of Pakistan. Wherever Dawlance dealer is,
there you'll find Dawlance workshop or either franchise workshop to take care of service need.

In order to provide satisfactory after-sales service, Dawlance ensures that in all of its service centers
sufficient inventory of spare parts is maintained, even these are available with franchise workshops.

Dawlance has got the policy first of all to carryout repair, if required at customer place. Incase if
refrigerator problem is not diagnosed at customer premises then it is taken to its workshop. Whenever
they get any complain, they prepare job sheets and puts its record in computer and whenever at later
date if complain is repeated, in that case they also have a history with them of such product in their data
bank. Even after five years if you want to find out from Dawlance service center that how many times
there refrigerators have been referred on account of technical problem to their center, they can dig out
from their computer record. In nutshell, we can say that Dalliance's after sales service workshops are very
well properly organized and they work according to international service standard. As far as service
charges are concerned Dawlance consider that it is not a profit center rather it's a support center for
sales.

As it has been mentioned earlier that LG has got market of refrigerators only in big cities and some of its
big towns in Pakistan. Therefore, they have got relatively lesser number of service centers as compared
to Dawlance. At present LG has got only eight after sales service centers in Pakistan. From these service
centers LG provides after sales service to each customers. They also maintain spare parts of serviceable
items. Since their product is 100% imported, the souring of spare parts is only import based.

Relatively LG refrigerator's parts are expensive comparative to locally made because LG imports spare
parts from Korea and various other LG production centers. One of the reasons for being these parts
expensive is that LG's local agent has to pay almost 70% of the product cost towards import duty, sales
tax and other import cost.

We can say that LG also believe in quality, after sale service to its customers and also considers after
sales service as one of the important element of marketing mix.

CONCLUSION

From the above information, it has been analyzed that there is no comparison between Dawlance and
LG. There are several reasons behind it. For example: Dawlance is a big local manufacturer of
refrigeration industry in Pakistan. It has got all engineering capabilities and very good finance and of
course technical know-how to produce internationally accepted quality refrigerators locally. On the other
hand L.G is a multinational company and has got different agents in some of the big cities of Pakistan. It
is simply an importer and imports refrigerator from Korea and markets the same in Pakistan.

Since Dawlance has very strong industrial base as well as deep-rooted marketing network in Pakistan,
they don't feel any threat from any of their competitors, either local or from importers. In the contrary L.G
refrigerator is an import-based activity. Every year due to weakness of Pak Rupee, US $ cost of import is
going up and thus LG refrigerator is becoming costlier day by day. Therefore, they have a big challenge
before them to maintain their market share and also to maintain their reasonable growth against local
manufacturers.

All Dawlance products are made for middle, upper-middle and upper class. While LG products are made
for upper-middle and upper class. Present market share of Dawlance refrigerators is 65% while L.G's
present market share for refrigerators is 4%.
In the light of above evidences, it could be said that Dawlance is a leading company as compared to LG,
due to its dominance in the market, lower prices, and availability of spare parts and after sale service, etc.
Hence people prefer to buy their products. Dawlance is dominant in the Pakistan market because not of
its marketing strategies but least competition by L.G. L.G being a foreign company suffers because of
government policies by paying heavy import taxes. It means, it is not only the marketing strategies of any
company which plays a dominant role but it the success of product lies in the marketing strategies as well
as the policies of the Government i.e favorable or unfavorable. As far as the case of L.G is concerned, it
is suggested that instead of depending on import it should install its plant in Pakistan so that it may lessen
its burden on taxes.

* Annie Idrees is the final year student of MITM at Isra University Hyderabad. The writer is very grateful to
Professor Dr. Amanat Ali Jalbani, Chairman Department of Management Sciences, Isra University,
Hyderabad, who very kindly has provided full support and guidance for writing this paper, otherwise it
would have been very difficult to complete it.