The Experts

Muhammad Shahid (10023) Faisal Ahmad (10024) Muhammad Akram (10011) Khurram Baig (10039)

Subject: Marketing Channel

Presented to:

Miss Ayesha Zahid

3rd SEMESTER MBA(Spring)

Superior University

Acknowledgement

There are many people to whom we are grateful for helping us out with this report. But

first of all we would like to thank the Almighty Allah who gave us the courage and

ability to full fill this daunting task. Then we would like to thank Mr. Manzoor Qadir, Mr

Faiz and Mr. Saim Saeed from Pak hero, for their generous display of hospitality and

kindness for bearing with us and giving us advices to overcome any problem that we

faced. We would also like to our parents for providing the endless cups of coffee and

bearing with us for our working entire nights. Last but not the least we would like to

thank our professor Miss Ayesha Zahid for helping us get back on the right track

whenever we deviated from our course and taking time out of his busy schedule to help

us out whenever we needed any assistance. She was the one who made this report

possible in the first place and gave us the chance to increase our practical exposure. It

was his guidance; persistence and belief in us that really made us overcome all barriers

that we faced.

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Executive Summary:

We the students of the students of Superior University and required to submit a report on

"Marketing Channel”. There by we have full filled our requirement and have listed our

findings in the following pages. We were required to choose a company and analyze all

its activities in detail. In order to achieve the objective of this project we had to rely on

our own analytical skills as well the information we received from the major players in

the Industry i.e. mainly the leading manufacturer in the Industry as the likes of Pak hero.

We even went further to compile consumer views about different motorcycles and the

dealer opinions on the different brands available. To full fill the extensive requirements

of this report we broke each and every one of the company’s activities in order to conduct

and procure a more in-depth and more meaningful analysis. For each activity analysis

tools such as Internal Factor Evaluation Matrix, External Factor Evaluation Matrix, In-

Depth Activity Cost Analysis and Competitive Profile Matrix are just some of the tools

used in the following pages to bring a consistent and better analyzed answer. We hope the

following pages will be better able to answer and give thoughtful insight into Pak hero,

its competitors and the Industry in which it operates.

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Company Background

Pakistan is one of those countries of the world where Auto Rickshaws are extensively

used as a public transport. Till 1996, Italian made Rickshaws were used in Pakistan

having 90% market share. In 1996, a young Pakistani businessman and industrialist, Mr.

Muhammad Javed Iqbal introduced “PAK HERO RICKSHAW” in Pakistani market.

Produced within the limited resources this Rickshaw was a masterpiece of quality and

performance which brought about a revolution in the auto industry. It gained extensive

popularity and in a very short period of time, “PAK HERO” became a known name all

over Pakistan. PAK HERO auto rickshaw having similar functions, shape and use as that

of Italian made rickshaw, proved to be a very close substitute for it. It is amazing that Pak

Hero became the market leder in a period of only three year and its demand has been on

the rise ever since.

 PAK HERO is a private limited company; its board of Directors cop rises the following

members

Mr. Javed Iqbal

(Chairman/CEO)

Mr. Abdul Hameed

(Director Marketing & Sales)

Mr. Sabir Sharif

(General Manager Production)

Mr. Syed Shahid Mustafa

(General Manager Finance)

 

Company’s registered office is situated in Lahore, at Lytton Road and its factory is

located at 10km, Raiwind Road, Lahore, Pakistan.

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PAK HERO is a private limited company. Its factory is located at 10 km Raiwind Road,

Lahore. Some of the important industrial units of Pakistan lie in this region, being

declared as “Industrial Zone”. Factory of PAK HERO is spread over four and a half acres

of land. The other units of “PAK HERO is its warehouse and lies adjacent to the factory.

Factory has a capacity to produce 12,000 auto rickshaws, 45,000 motor cycles and 5,000

scooters per annum. PAK HERO established itself by manufacturing the high quality

products. PAK HERO has a separate quality control department for a check at every

stage of the production, from receiving raw material to completion of final product. To

have a complete control over quality PAK HERO is following the international quality

standards as per requirements of ISO 9000 to fulfill the needs of its valuable customers.

PAK Hero’s trained workforce and experienced engineers devote their energies for the

improvement of its products. Experts within the country and abroad are also consulted to

assure the quality. Therefore its quality is, beyond doubt, the best. Although PAK HERO

has entered into automobile market only a few years

ago, even then it has snatched the major market share

from its competitors. PAK Hero is now considered to

be one of the major automobile industries because it has

built a good reputation in quality and performance.

PAK HERO manufactures its products in accordance

with customer needs.

In Pakistan, most of the people use motor cycle as a

private conveyance. Motor cycles of different models

and companies are available in the market such as:

YAMAHA YB 100, KAWASAKI GTO 100, SOHRAB,HONDA CG 125, HONDA CD

70. In Pakistan, the ratio of the people using 70CC motor cycles is higher than the users

of other motor cycles. PAK HERO introduced PH 70CC motor cycle to fulfill the

demand of people who wish to have 70CC motor cycle. PH 70CC is cost effective and

has capacity to travel 70 km per liter.

Features

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Pak Hero Company has 150 Dealers in all over the Pakistan.

It can offer Rs 3000 margin per bike to their dealers.

Pak Hero Bikes are exported in Bangladesh, Srilanka and Kenya.

It contain 25 own showroom in Lahore.

Pak Hero have local supplier for their production material.

Pak Hero has their own distribution channel.

Channel Structure

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Domestic(Supplier)

Manufacturer Plant(Process)

Finished Goods

Loaders

DistributionCenters

Authorized dealers

End users(Customers)

Warehouse

Product Levels

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V. POTENTIAL PRODUCT(Future product innovation & featuring)

Safety measures device installation in bike

IV. AUGMENTED PRODUCT(Value added product and services)

Good quality, rider comfort, after sales service, image and status improvement, new design and graphics,

high resale value, low maintenance cost

III. EXPECTED PRODUCT(What the customer expects)

More mileage, better acceleration, fuel economy, and engine durability and

reliability

II. BASIC PRODUCTMotorcycle

I. CORE PRODUCT (Needs)

Transport (i.e. conveyance and mobility)

Manufacturing Process

Auto Rickshaw and Motorcycle

Procurement of Spare Parts

Denting and Fabrication of Metal Parts

Spot Welding and Machining of Fabricated Parts

Painting

Composition of Sub Assemblies (such as frame sub assembly)

Fitting and Assembly Line

Quality control

Finished Goods

Rating Against Customer Buying Criteria

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QUALITY & PRICE Pak hero Yamaha Suzuki Chinese

Non PriceAttributes affectingCustomer Choice

WEIGHTAGE%

PRODUCT RELATED 90%

1. Fuel Consumption(Price to Consumption Ratio)

40 8 8 7 7

2. Resale Value 20 8 5 3 0

3. Quality 20 7 7 3 1

4. Durability/Reliability 8 6 6 4 1

5. Image Enhancement 2 4 2 1 0

SERVICE RELATED 10%

1.After Sale Service 7 6 4 0 1

2.Technical Help/Training3 4 0 0 0

TOTAL 100 % 43 32 18 10Has quality gone up /down (+/ -) in Past 4Years Gone Up Gone up Same Going

Down

Relative price today Rs. 40,000 to 45,000

Rs. 58,500 to 61,300

Rs. 59,200 to 67,000

Rs. 32,000 to 40,000

Relative Price 4 Years Ago Decreased Decreased Decreased Decreased

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Description of Members

The member that also support the marketing channel system. In these member include

seller member, order booker, merchandiser, sale promotion officer, tritely officer and sale

areas managers. These members promote the channel system and also work.

Sale member (who sell the product)

Order booker (who order the product)

Merchandiser (who merchandising the product)

Sale promotion officer (who promotion the product)

Sale area manager (who observe all activities all member

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Area sale Manager

Terity Officer

Sale promotion officer

Merchandiser

Order broker

Allocation of channel function and flow

Physical flow

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Sale manager

Suppliers of input

Transporter & warehouse

Manufacturer

Distributor

Authorized Dealer

End users Transport

Promotion flow

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Manufacturer

End User

End Users

Dealer

Promotion

Sales Trends of Motorcycle Industry

For the period of 2004-2005 to 2007-08

(in Number of Units)

Model 2004/05 2005/06 2006/07 2007/08

PAK HERO 300,000 400,000 500,000 600,000

YAMAHA 60,000 79,000 105,330 140,400

SUZUKI 20,000 20,800 21,632 22,500

CHINESE 120,000 142,000 194,800 237,100

TOTAL 500,000 641,800 821,762 1,000,000

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Key Success Factors

Quality

The major success factor in the Motorcycle industry is of providing quality products at

premium prices. The leading motorcycle manufacturers use the latest technology and

hence provide products that are very effective and give bikes more resistance against

attacks from harmful natural deterioration. The overall motorcycle industry is ISO 9000

CERTIFIED which further provides quality assurance of the motorcycle.

Distribution

The distribution system serves as an effective key success factor. Every leading

manufacturer follows its own distribution structure. This is mainly because the major

manufacturers in the industry believe in establishing a strong distribution network that

will distinguish them from competitors. The overall industry mostly follows a company

to exclusive dealer network.

Pricing and Resale Value

Pricing serves as a key success factor for the motorcycle industry. This is because

majority of the players (Chinese motorbikes manufacturers) charge low prices. The price

acts as a main restraint in final purchase of the motorcycle.

Chinese motorbikes manufacturers are in the market with low pricing compared to

Pakistani manufacturers, in order to attain high market share and high sales growth.

However, fact should be remembered that whether a customer pays less or more, he

wants value for money too; he wants good quality at all levels.

In addition, customer especially those from rural areas, also want high resale value for a

bike.

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Brand image

The motorcycle industry relies on the important key success factor which is the brand

image in the consumers mind.

Research & Development

Continuous research & development is undertaken by the major players in the industry.

This gives them an edge over other industry players, by providing new and improved

products, designed to meet customer needs and choices, at a faster pace.

Durability/reliability

The motorcycle durability and reliability stands out as the second main key success factor

(after resale value) for the rural market. The customers mainly from low income group

and rural areas, who will keep bikes for long period, want durability and reliability

assurance. A motorcycle should be durable for longer experience.

Cheap maintenance

There maintenance expenses of the motor cycle industry are not much high. Maintenance

costs are cheap and parts are easily available.

Discrimination free environment

The overall industry follows a positive work force environment and a well adapted

discrimination free organizational culture.

Strong asset position

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The motorcycle industry has a very high strong asset position in the market. This lets

them easily acquire latest technology upgrades which are necessary to produce newer and

better bikes. The motor cycle industry has a strong asset power in case of investments due

to high visible growth.

Strong fuel economy

It is so economical that the almost whole industry claims says that “in 1 litre you can

drive up to 60 km. This way the industry is offering best fuel average as compared to the

rising petrol prices. This economical advantage to the customers attracts mostly rural

areas and underdeveloped regions having poor infrastructure, which are facing price rise

in petrol as a highly essential threat.

Drive Comfort

This KSF is in relation to the quality of the motorcycle. Industry is offering attractive

drive comfort measures which act as a very essential key success factor. It is an important

feature for customers who are traveling on long routes (like sales people); they acquire

comfortable drive for smoothness in road grip of the bikes.

Training programs :

Extensive training programs to customers, dealers, mechanics and other important

employees. This relates mainly to the awareness increase program in form of training

provided to internal employees as well as external customers. The training increase

knowledge about the product features, functionality and necessary safety

measures/techniques. The training programs have been very successful in improving

customer satisfaction and internal motivation of quality assurance of the product of the

motorcycle industry.

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SWOT Analysis

Strengths

Product

Brand name image

Market leadership – Enjoying 56% share

Efficient performance

Durability/Reliability

Quality – ISO Certification

Easy availability of Spare Parts

Price

Reasonable price of genuine parts

Cheap maintenance

Place

Well established dealer network

Accessibility to major towns and cities; improving delivery to nearly all parts of

Pakistan

Promotion

Successful Promotional campaigns via TV and Newspaper channels enjoying

extensive viewer ship

People

Management/non-management work as a single unit, as a team

Highly loyal, committed and motivated employees

Hardworking, experienced and qualified staff

Technological and managerial know-how

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Job evaluation which is totally performance based, gives staff incentive to work

harder each time

Processing

TQM principles practiced in work processes

Kaizen (continuous improvement) principle in all processes

State of art plants and equipment

ISO 9002 certified

Physical Environment

Frank and congenial work environment

Positive work climate and organization culture – single code of dress supports to

maintain discrimination free work environment

Weaknesses

After sales customer service not up to the level actually expected by the customer.

Less of a proactive approach to different matters, reactive approach applied more

Limited investment in high technology equipment

Price higher than prevailing competition in market, which gives customer

thoughts about nearest substitutes available

Opportunities

Growing motorcycle market – Estimated bikes 500,000 by the end of 2005

compared to 300,000 in 2004/2005

Improving economic scenario of Pakistan by contributing more through increased

selling – GDP estimated at 6.8% in 2004/2005. Good crop expected next year.

Customers realizing quality matters, as problems are already cropping up in new

entrants models

Initiatives and proposals in process for coping with increased demand of bikes

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Newer segments introduced with entry of new models, design, which still have

huge potential for growth

Threats

Many new features inherent in latest bike models increasing customer

expectations a great deal for the future

WTO (World trade Order) opening local markets for global competition

Competitors launching newer models with stress on reduced price for our price-

sensitive economy proving serious threat in near future

Gap analysis:

There are two types of gaps, demand side and supply side gaps. During the audit

of the channel of Pak hero Pvt Ltd., we found both of these types of gaps. These gaps

have been identified by the analysis of the Automobile manufacturing industry. For the

purpose of data collection we used the questionnaire method. These questions were then

asked from the Plant manager of Pak Hero Pvt. Ltd. and then on the analysis of the

interview the following demand side and supply side gaps were identified:-

Credit purchases

Timely delivery

Stock waiting time

Relying on dealers heavily

o Credit purchases is the supply side gap, because the company

purchases the raw material on credit bases and makes payment

very late due to which the supplier of raw material suffers, thus it

may result in the imbalanced relationship of supplier and the

company.

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o Sometimes the vehicles are not in the position to deliver the

products, thus resulting in late delivery of the products to the

Dealer.

o Stock waiting time is the demand side gap, because when the

dealer orders for the company’s products then he has to wait for

minimum of 30 days and there is no fixed time delivery that

creates uncertain situation for the authorized dealers of the

products.

o Another demand side gap is that the company is relying heavily on

the dealers for their sales volume which creates the demand side

gap for the firm.

Power and Conflict Characteristics

Power

In the marketing channel of Pak Hero private limited company the main power is

in the hand of company. There are four types of power used in the marketing channel of

Pak Hero private limited company :

Reward power

Coercive power

Expert power

Legitimate power

o The power of reward is in the hand of company because the

company gives the discounts and allowances to dealers.

o The company can hire a new dealer or to fire an old dealer so the

coercive power is also in the hand of company.

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o Company have its secrete ingredients and formula so the expert

power is in the hand of company

o Legal documentation between the company and dealer can create a

power for both the dealer and the company is legitimate power.

Conflict

Pak Hero Company has two kinds of conflicts.

1. Goal conflict

2. domain conflict

Most conflict is rooted in differences in channel member's goals, their perception of

reality and what they consider to be their domain or area, where they should operate with

autonomy.

Goal Conflict:

In Pak Hero Company wants higher margin for self but the dealer want higher margin for

self. The company wants higher price to dealer while lower price to end user. Company

wants that dealer purchase more inventories of their products but the dealer wants to hold

less inventory.

Domain conflict:

Manufacturer of Pak Hero wants to sell their product to multiple segments but the

authorized dealer of Pak Hero want to sell the company's product to the target segment.

Manufacturer desire for mass coverage of his product in the market, while on the other

hand the dealer likes to sell their product in selective market

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Suggestions

1. Stock waiting time is the demand side gap, because when the dealer orders for

the company’s products then he has to wait for 30 days and there is no fixed

time delivery that creates uncertain situation for the dealer of the products.

a. Dealer must be made aware of the products delivery time from the

manufacturer to the dealer so it will reduce the uncertain situation of

the dealer, thus creating their commitment and satisfaction.

2. Communication between the channel members should be improved.

3. Trust and mutual understanding should be developed through out the channel.

4. The profits must be distributed equally based on the value that each channel

member creates.

5. The company may create alliances through the vertical integration to boost

their sales volume up.

6. Try to in touch with customers

7. Also focus other than major cities

8. Develop a system of feedback

9. Focus on advertisement

10. Incentive for dealers

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