strategic management project on pel
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Dedications
TO Our Honorable Teachers Parents and
Friends who showered their wisdom and
knowledge enabling us to come to grips with
the worldly life and attain our Objectives.
Introduction PEL was founded in 1956 and has since been serving the Power utilities, industries, individual customers, housing and commercial projects by providing reliable, customized and cost effective solutions. Backed by the innovative genius of Saigol Group, PEL is now technology forerunner and market leader in providing new products and services to meet ever changing and technology intensive needs of its customers. Our EPC contracting division delivers custom designed and built HV and EHV grid stations, electrification of housing projects, industrial parks and optimum solutions for power utilization to all kinds of industries and commercial customers. We aim to maintain this competitive edge and at the same time keep striving to improve it further by continuous R&D, creating new knowledge and adapting to global developments in technology and product design. Ever increasing local market share, growing export orders, numerous successful power projects and greater than ever base of satisfied customers are evidence to these aspirations.
In October 1978, PEL was taken over by SAIGOL GROUP OF COMPANIES, which is the largest and well-know industrial and commercial group in Pakistan. The Saigol Group belongs to the Saigol family that is an old business family and has contributed a lot towards Pakistan’s industrial and believes in continuous development and growth. The result is a global business activity monitored through the various offices worldwide. Meeting Saigol’s traditions, since its takeover by the group, PEL is also a Company on the go”. The high growth rate proves the complete success of the professional management and provides sufficient confidence to trust in its future development schemes.
Works of PEL are spread at two facilities in Lahore, the historical city and cultural hub of Pakistan. The two facilities cover an area of 1,033,200 Sq ft and 614,252 Sq ft respectively. Both are equipped with latest technology, state of the art testing facilities and environment friendly production process. At the heart of our operations is our human resource. PEL invests heavily on professional development, skill improvement and well being of its human resource. Our employees are our most valuable asset and we keep them very dear.
History and background
Pak Elektron was setup in 1956 as a Public Limited Company with the object of
initially producing transformers, switchgears, and electric motors. AEG experts
and PEL personnel carried out the designing and production of this equipment
jointly. After the conclusion of joint venture agreement with AEG Saigol Group
acquired the PEL COMPANY in October 1978.The company floated its shares to
the general public and was listed on Karachi Stock Exchange (KSE) and Lahore
Stock Exchange (LSE).
In 1980, Appliances Division was established and in 1981 it started the production
of Window Type Air Conditioners with the technical collaboration of General
Corporation of Japan. These air conditioners were well received in the market for
its quality. Subsequently in 1987 the production of Refrigerators and Deep
Freezers was started.
In 1993 the company has started the assembly of Compressors for Refrigerators
and Deep Freezers under technical collaboration with Messrs. NECCHI
COMPRESSORI of Italy.It was in early 70s that PEL became known in overseas
markets due to its quality. The company started its export to countries like Saudi
Arabia, Abu Dhabi, Qatar etc. Later on PEL supplied electrical equipments to
various other countries in the Middle East, Far East and Africa with great success.
PEL (Pak Elektron Limited) is the flag holder of the Saigol Group of Companies.
Pak 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.
In the year 1980 the company expanded into consumer products with the
introduction of Window Type Air Conditioners and today also manufactures Split
Air Conditioners, Refrigerators, Microwave ovens, Deep Freezers and
Compressors etc. PEL products right from the beginning have been of a high
standard and the name PEL is synonymous with QUALITY all over Pakistan.
Since its inception, the company has been acting as an institution 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 and training programs.
In October 1978, the company was taken over by the SAIGOL GROUP, which is
one of the leading industrial groups in PAKISTAN, having diversified business
activities in the fields of: Textile, Engineering, Banking & Finance, Fuel &
Energy, Trading, Automobiles.
Vision Statement
To excel in providing engineering goods and services through continuous
improvement.
Mission Statements
To provide quality products & services to the complete satisfaction of our
customers and maximize returns for all stakeholders through optimal use of
resources
To focus on personal development of our employees to meet future
challenges
To promote good governance, corporate values and a safe working
environment with a strong sense of social responsibility.
Analysis of mission statement
Core competency
Technology
Philosophy
These are the three things which are not mansion in the mission
statement of PEL.
Slogan
Change your Life
Home Appliances Division:
Home Appliance Division includes the products like WRAC (Window Room Air
Conditioner), Split Air Conditioner, Refrigerator, Fridge, and Microwave Oven.
Power Division:
Power Division includes the products like Transformers, Switchgear and Energy
Meters.
The present range of power products includes Transformers up to 33KV 5MVA
capacity, Switchgears up to 33KV, Cage Induction Motors up to 40HP, Single
Phase Energy Motors, Small Generators, Shunt Capacitor, Banks and Recloser etc.
PEL-LG Strategic
Partnership
Pak Elektron Limited, held a press conference (April 21, 2009) to announce the
strategic alliance between Pak Elektron Limited & LG Electronics. An agreement
in this regards was signed at the ceremony by Mr. Murad Saigol, Director
Operations, Pak Elektron Limited & Mr. E. D. Choi, General Manager, LG
electronics, Pakistan Liaison Office. Mr. Saigol announced this to be the biggest
partnership in the history of home appliances and air conditioners in Pakistan and
this strategic alliance will expand in the times to come. PEL has been appointed the
official distributor for LG Air Conditioners, Refrigerators, Microwave ovens,
washing machines and vacuum cleaners from June 2009. The addition of LG for
Pak Elektron will now mean Pak Elektron will have two leading brands, PEL and
LG, in both the categories of home appliances and Air conditioners.
This synergy of brands will bring technologically better products to the customer at
competitive prices. PEL will be offering innovative products made from cutting
edge technology of LG. LG Electronics has 30 R&D centers globally and spends
hundreds of millions of dollars on R&D making it one of the leading brands in the
world. This will be possible as LG has a wealth of global expertise in terms of
designing the right product for the consumer. LG will also enhance the production
capabilities of Pak Elektron through technology transfer which will translate into
more smart and sophisticated designs, with competitive cost of production.
As the facility is upgraded it will be fully capable for export of LG products thus
improving the foreign exchange earnings for Pakistan. Pak Elektron will benefit
from economies of scale as a result maximizing return to all stakeholders
PESTLE ANALYSIS
Political environment
Pakistan is facing the situation of great political instability and uncertainty since last couple of year. according to the economist com survey Pakistan is at the 11 th
number of top most vulnerable countries of the world. due to this problem business activates in Pakistan are severely affected. The foreign direct investment also decreased dramatically due to current insecurity.
The government decided to increase the minimum wage rate of workers from 4500Rs to 6000Rs which is increases the cost of production and inflation
There are few incentive to the manufacture of Pakistan by the government as compare to up coming giants of china. the cost of manufacturing is high due to electricity rate and overhead. So most of the time manufacture hesitate to do manufacturing in Pakistan and prefer to import finished goods are only assemble good in Pakistan
Economic environment
Due to global environment economic crises, Pakistan is also facing a lot of problem. Although Pakistan economy is not directly hit by the crises yet the economic situation in server in Pakistan
To resolve the power sector issue, removing subsidies and concurrent transfer of international oil price changes also likely to risk a further slow down in economic activities at least in the near future.
In Pakistan there is a strong black economy due to the circulation of black money illegal business like smuggling
Economist are expected better condition for Pakistan economy due to the loan of IMF.
The consumer in Pakistan is spending most of their income of food and basic needs of life.
Social Environment
Now a day’s people are becoming more price conscious due to inflation and crises of Pakistan. Their primary focus on food and daily use good and thus people have lessened their interest in electronic good.
Now consumer prefers the split air conditioner over window air conditioner because split ACs are considered as energy severs. That is why window ACs are almost obsolete because of high consumption and split ACs are becoming more popular because of low electricity.
In countries like Pakistan the usage of air conditioner is great because of extended summer season of nearly 8 month. In Pakistan air conditioner are used for middle and upper class.
The company are becoming more socially responsible these days as they have introduce CFC free refrigerant, anti bacterial and dust filter.
These people in Pakistan have started considering spilt air conditioner as a status symbol and feel disgraced if split unit is installed in every room in their house. That is why people purchase home appliances on installment from the dealers.
Technological environment
With the introduction of spilt air conditioner, it made the air conditioner more affordable and easy to install and maintain.
The efficiency of air conditioner depends upon its outer unit. The bigger is the outer unit the more efficient will its inner unit. so companies are more big unit to get more efficient.
In split air conditioner the rotator compressor are used which are soundless and do not heat up in extreme situation.
Companies are introducing refrigerator with cool bank which remain working for 5 hours even after switch off.
The multinational national companies are using information technology to coordinate and communicate with in companies as well as extreme parties. The electronic management system are used to reduce the cost of handling the inventory order.
Legal
Legal factors include description law employment law, and earth and safety. These factors can affect how a company operates, its costs, and the demand for its products
Environmental analysis
Environmental factors include ecological and environmental aspects such as weather, climate, , which may especially affect industries such as tourism, farming, and insurance. Furthermore, growing awareness of the potential impacts of climate change is affecting how companies operate and the products they offer, both creating new markets and diminishing or destroying existing ones.
Five force model
Bargaining power of supplier
The bargaining power of supplier is low because of availability of a number of chine’s brand in the market.
Bargaining power of buyer
The bargaining power of the buyer is high because,
1 They have choice of different in the market
2 they have choice of models and features
3 they have choice of product in different prices
Threats of substitute
Threats of substitutes high because
1the gas generators and ups are the substitute of Pel’s diesel and petrol generator
2 the major substitute of air conditioners are
Room air cooler
The room air coolers are available at are low price starting from 6000
Electric fans are also very cost effective and its major company GFC fans ,Younas fans ,Royal fans .
Threats of new Entrants
PEL has low level of threats of new entrants in the industry as the electronics industry has different barrier to entry
1 requires huge capital to get entry in the industry.
2 High manufacturing costs.
3 high advertisement cost.
4 high cost of raw material.
Rivalry among competitor
There is intense competition with in the industry to capture the market in term of share of market. The companies are introducing product with new and advance technology to attract and capture the customers. They are using advertisement and technology as a weapon to increase market share in related market.
Value Chain Analysis
Inbound logistics
When the company purchase the raw material.it used ship and transportation because it purchase raw material from china and germany.
Operation
PEL production operation done in the domestic level wheather in abroad that’s why its also opportunity for company.
Outbound Logistics
When the company have prepare the products like ACs,air coolers etc and to take them into market through the transportation.
Marketing
I. ProductCompany produces different types of products which sells in the market
II. PriceCompany used different pricing strategies to increase their sale
III. PlacePEL targets all the markets to sell their products in all over the countries.
IV. PromotionCompany promote their products through the seminars, sponsorship, coupon rates and through the print media and electronic media.
Services
Company provide different types of services through having all over the countries repairing workshops and through the replacement of products and also give their customers guarantee and warrantee.
Procurement
Procurement department have the rght to purchase all the machinery or rew materual for the production department.
Technology
Technology is more important in these days for every kind of production and in all the departments.PEL also used advance technology for production for reduce the cost and time.
Human resource management
HR department suppose to hire well experienced and qualified staff and labor for maximum productivity. PEL also have qualified human resources.
Company infrastructure
Company has a large infrastructure which is as follows
Organizational Structure
Chairman
Appliances Division
Managing Director
Director Operations
Power Division
Marketing
Sales
Customer
Services
Quality Control &
Assurance
Product Develop
ment
Manufacturing
Human Resources
Finance & Accounts
Industrial Relations
Internal Audit
IT
The objectives and mission for which the company is established are as following:
To carry on the business or businesses of manufacturing, selling, installing,
maintaining designing and dealing in all kinds of electrical equipment.
To carry on any business whether manufacturing or otherwise which maybe
found convenient to undertake in connection with or in addition to any of these
objectives mentioned above?
To do all such things that is incidental for the attainment of the above
objectives or any of them.
To produce high quality and standard products.
To produce equipment to be used in numerous projects of national importance.
To secure a high share / quota of WAPDA’s demand for power products.
To produce skilled workers and technicians through its apprenticeship schemes
and training programs for engineers and technician
Non financial goal
To add a new product to its range in every third year for increasing the sales volume
To set on image as the best quality of local home appliances
To set an image the best quality of local power division product
Financial goal
To obtain a real (inflation and adjusted) growth in earning per share 10%per year over time.
To increase the market share of split unit to at least 20%-25%by the end of 2009.
Competitor Analysis
DIRECT COMPETITORS
The direct competitors of PEL are Dawlance, Waves, LG, and Haier etc. The Dawlance is market leader in the refrigerator and PEL is still on second number. But in window room air conditioner (WRAC) the PEL is market leader
REFRIGERATORS.
Total market sale of refrigerator in 2009 was 756300 units. Last year sale was
656900 units. These figures show 30% market growth. But the average growth
was 13% to 17%. And the PEL sale growth is 70%, which is a great achievement.
Dawlance is a market leader in refrigerator with 46% share.
PEL has 32% market share.
Waves has 11% market share.
11% shares are others.
WINDOW AC.
PEL is a market leader with a market share of about 60% in local manufacturing
industry. And overall has 35% market shares for this product.
LG has about 32% market share and stands on number two.
And rest of the manufacturers have 23% marker share.
Indirect Competitors:The indirect competitors for PEL in this industry are Samsung, Orient,
Mitsubishi, Sabro, Nobel and others Chinese brands available in the market.
The PEL has no big threat from all these companies. But the Sabro pioneer for
introducing the split air conditioner in Pakistan. Now days the sabro has lost
its market share to other companies for the business of Split AC.
SWOT Analysis of PEL
The rapid changes in governments will become threats for the companies because
every government adopts its own policies for the industries. So it increases the
uncertainty for the investors who want to invest heavy amount in their new
projects. That’s become the major threat for the companies and decreases the
profitability. Due to fear of politically instability companies will also SWOT
Analysis is a strategic planning method used to evaluate the Weaknesses,
Opportunities, and Threats involved in a project or in a business venture. It
involves specifying the objective of the business venture or project and identifying
the internal and external factors that are favorable and unfavorable to achieving
that objective.
Strengths
PEL has the following strengths and is in more competitive position in these areas
than its competitors. Following are the main strong points of PEL:
Strong brand image
Strong dealer network
Good product quality and service
Number 2 in refrigerators in Pakistan
Firm grip in home appliances
Strong Management
Distribution of Authority
Free customer service
Strong Brand Image
PEL has created the strong brand image in the mind of the customers through
higher quality and low price. The customers of the PEL always prefer to buy the
PEL home appliances like WRAC split AC and refrigerators whenever they
wanted to buy.
Strong Dealer Network
It is also the plus point for the PEL that it has also developed the strong dealer
network in the market. The dealers are always trying to sell the PEL appliance to
the customers because they know there are high margin in the PEL products.
Strong Quality, Sale and Service
PEL is also in a strong position that it provides the superior quality to your
customers. It makes sense in the mind of the customers that PEL products are
better in quality than the other companies’ products. PEL also provides the after
sale service to their customers which delight the customers satisfaction.
Number 2 in Refrigerators In Pakistan
After the Dawlance refrigerators PEL has a second position in refrigerators market.
PEL always continuously strives to pursue the strategies adopted by the
competitors.
Firm Grip in Home Appliance
So PEL is one of the companies, which is having a strong grip in the home
appliance i.e. WRAC, Refrigerators, micro wave Oven etc that is a strong point for
the company.
Strong Management
It is another plus point that PEL has a strong management. Its employees are more
competent and fully skill and knowledge. They always co-operate the top
management in achieving the goals that are assigned to them.
Distribution of Authority
Top management of PEL delegates the power to the subordinates for achieving the
marketing objectives in a specified time period. So every manager has an authority
that use in achieving the Goals.
Free Customer Service
PEL provides free customer service for one year to its customers. So the customers
always buy the PEL products due to its free service and it becomes loyal customer
for the PEL. PEL always provides help to their customers for repairing the WRAC,
Refrigerators and other items. PEL always make efforts to satisfy the customers.
Public Limited Company
Although PEL is owned by the SAIGOL GROUP but its shares can be purchased
and sold in stock exchange market. So every one who is interested in purchasing
the shares of PEL he can purchase. It is also called public limited company.
Weaknesses
Like other companies PEL has some weaknesses in operating the business. If PEL
overcome on these weaknesses then it can become a market leader in the home
appliance. PEL loose some competitive edge in the following points:
Financial Problems
Lack of advertisement
System variations
Lack of Product range
Less Utilization of capacity
Financial Problems
Sometimes PEL faces the financial problems because its stocks are so much piled
up in the stores that create the problem of cash flow because when the stocks are
not sold and the production is in process for 24 hours a day than the company faces
such problems.
Lack of Advertisement
It is a second major weakness of PEL that it never makes advertising on TV. That
creates hurdle in selling the products and customers cannot know the changes,
which are made in products by the company time to time.
System Variations
It is also the main weakness of PEL that there are rapidly a change in polices of
selling the products. That’s creates problems for the selling team how to sell the
products to the dealers because the top management requires the urgent amount of
money.
Lack of Product Range
PEL has introduced more products of consumer items but there are more needs to
develop new consumer items like PEL washing Machines, Vacuum cleaner and
other items.
Less Utilization of Capacity
Due to lack of finance a company cannot utilize all its resources on its full
capacity. It increases the cost of products per unit that decreases the profit margin
of each consumer item
Opportunities
For the PEL there are more opportunities for expansion the business. If PEL realize
that opportunities then it will be more fruitful and profitable for the company. Even
if company does not take advantage of these opportunities then it will loose its
competitive position and high profit. Its `competitors will give PEL tough time to
pursuing the opportunities that are adopted by them. Following are the
opportunities for the PEL.
Exploration of market in Pakistan
Increase in product range
Export opportunity
Exploration of Market in Pakistan
PEL has the opportunity to explore the market in all over the Pakistan. Even
though PEL introduce its products in all cities of Pakistan but there are so many
places that have the capacity to absorb the PEL’s products. These places are tribal
areas in NWFP and northern areas of Punjab and NWFP, central area of SIND. If
company introduces their products in these areas then it can get a large amount of
profit and increase its market shares.
Increase in Product Range
It is the main opportunity for the PEL that it can increase its product range that will
be a more profitable for the company. There are more needs to develop new
consumer items like PEL washing Machines, Vacuum cleaner and other items. Due
to lack of product Range, Company cannot earn more profit because consumers
have high demand of these products. If PEL does not take this opportunity then it
will loose high margin of profit and market share. It will reduce the fixed cost and
increase the efficiency of the employees.
Export Opportunity
PEL Company has also the opportunity to export their products in other
international countries like UAE, SAUDI ARABIA, and other Arabic and African
countries. It will not only reduce the dependence on one market but also increase
the market shares and profits. It will also help the company to spread the fixed cost
on all of its production that will reduce the total cost and company will enjoy the
high profit.
Threats
PEL Company in such a competitive era has many threats as well. These threats
are for the present situations and future. Company should make its policies and
strategies according to these threats. So following are the main threats for the PEL:
PEL facing tough competition.
Mostly companies Give High Credit in market and get current market
High Credit market is big fever for the company
Slow growth rate in Pakistan
Instability of government
Tax department
PEL Facing Tough Competition
There is very strong competition for the home appliance in the market. So every
company tries to come in the number 1 position for achieving the maximum shares
in the market. Every company adopts different strategies for selling of the
products.
Mostly Companies Give High Credit in Market and Get Current
Market
As there is stiff competition in the home appliance market, it will cause the price
war. So every company reduces the prices of its products to increase the sales.
Slow Growth Rate in Pakistan
There is also slow growth rate of home appliance in Pakistan that will increase the
stocks of the company. It becomes the burden for the company that how to sell
these stocks. Its main reason is that purchasing power of the buyer is very low and
it has no income to buy the expensive the home appliance. It is also becoming a
main threat for all the companies.
Instability of Government (political conditions)
Due to the unstable government people low invest in the industry.
Tax Department
Tax department is another major threat for the companies that will restrain the
business expansion. There is more complicated tax procedure for the companies,
which are interested to increase the investment in their businesses.
Corporate governance
corporate governance is the set of processes, customs, policies, laws, and institutions affecting the way a corporation (or company) is directed, administered or controlled. Corporate governance also includes the relationships among the many stakeholders involved and the goals for which the corporation is governed. The principal stakeholders are the shareholders, the board of directors, employees, customers, creditors, suppliers, and the community at large.
Corporate governance is a multi-faceted subject.[1] An important theme of corporate governance is to ensure the accountability of certain individuals in an organization through mechanisms that try to reduce or eliminate the principal-agent problem. A related but separate thread of discussions focuses on the impact
of a corporate governance system in economic efficiency, with a strong emphasis on shareholders' welfare. There are yet other aspects to the corporate governance subject, such as the stakeholder view and the corporate governance models around the world (see section 9 below).
There has been renewed interest in the corporate governance practices of modern corporations since 2001, particularly due to the high-profile collapses of a number of large U.S. firms such as Enron Corporation and MCI Inc. (formerly WorldCom). In 2002, the U.S. federal government passed the Sarbanes-Oxley Act, intending to restore public confide
We talk a good talk when it comes to corporate governance. We research and draw conclusions on the principles of governance, but how do we, as internal auditors, relate to those principles? And what is our role in governance — especially in regard to the unprecedented financial crisis that not only has crippled the U.S. economy, but has the potential of devastating the global economy?
Before we can analyze these questions, we must first step back and define what corporate governance. The Insitute of Internal Auditors (IIA) defines governance as “the combination of processes and structures implemented by the board in order to inform, direct, manage, and monitor the activities of the organization toward the achievement of its objectives.” Corporate governance then implies relationships among an organization’s management, the board, the stakeholders, and other bodies that have indirect involvement with the company. It also provides a generalized structure from which the organization’s objectives emerge. The publication, Internal Auditing: Assurance & Consulting, identifies the key components of governance oversight as the board of directors, stakeholders, risk management (senior management and risk owners) and assurance (internal and external auditors). Regulatory agencies also serve as an indirect/influencing stakeholder. Effective corporate governance program depends upon a clear understanding of the respective roles of each of these components and their relationships with others in the corporate structure.
Opportunities weights rates Weighted average score
Exploration of market 0.25 3 0.75
Increase product range 0.15 2 0.3
Export opportunity 0.17 2 0.36
ThreatsTough competition 0.12 4 0.48
Slow growth rate 0.13 2 0.26
Instable government 0.08 2 0.16
High tax rate 0.10 3 0.3
Total 1 2.61
CRITICAL SUCCESS FACTOR
Weights
Rates Weighted average score
Rate Weighted average score
Rate Weighted average score
Strong brand name
0.25 4 1 3 0.75 3 0.75
Strong dealers network
0.2 2 0.4 2 0.4 4 0.8
Product quality 0.12 3 0.36 3 0.36 2 0.24
Customer services
0.14 4 0.56 3 0.42 3 0.42
Strong management
0.09 2 0.18 3 0.27 2 0.18
Strong home appliances
0.2 4 0.8 2 0.4 3 0.6
total 1 3.3 2.6 2.99
SPACE MATRIX
description PEL HAIER DAWLANCE
Internal factor evaluation
strength weight rate Average weight score
image Strong brand 0.15 4 0.6
Strong dealer network
0.12 3 0.36
Good product quality
0.14 4 0.56
Firm grip home appliances
0.10 4 0.4
Strong management
0.11 3 0.33
Distribution of authority
0.07 3 0.21
Free customer services
0.09 3 0.27
weakness
Financial problem 0.03 1 0.03
Lock of advertisement
0.09 1 0.09
System variation 0.07 2 0.14
Lock of product range
0.02 1 0.02
Less utilization of capacity
0.01 1 0.01
Total 1 3.02
BCG MATRIX (BOSTAN CONSULTING MATRIX)
BCG stands for Boston consulting group. It is a portfolio planning method
that evaluates the company’s strategic business unit .Using this model an
organization classifies each of its separate business units (SBU) according to two
factors:
Market share relative to competition and growth rate of the industry in
which SBU operates
When these factors are divided into high and low categories, a 2 x 2 grid is
created as displayed in following figure:
STAR:
Star is a business unit that has large market share in fast growing industry. Such
unit requires more investment to generate more cash. If due to more investment it
will become successful and become cash cow and it will reach at maturity stage.
For star product the strategy is called harvest
Refrigerator of PEL is the product having high market share and high annual growth
rate.
Cash Cow:
It is the business unit sometimes known as problem child. It has a large market
share and low annual growth. Each cash cow requires little investment and it
generates more cash that can be used for investment purpose in other business
units. For cash cow the strategy is called HOLD, you must preserve market
Split air conditioners is the product of PEL having high market share and low annual
growth rate.
Question Mark:
It is the business unit that has a low market share and high annual growth. These
business unit requires resources to grow market share but if they succeeded that
will become STAR. For question mark the strategy is called BUILD, you try to
make up the market share.
Washing machine and microwave oven are the products of PEL having low market
share but high annual growth
Question Mark
Star
.
Dog:
Dog is the business unit that has small market share as well as low annual market
growth rate. A company normally would be unwise to invest substantial funds in
SBUs in this category. Marketing strategies for dogs are intended to maximize any
potential profits by minimizing expenditures or to promote a differential advantage
to build market shareAnd the company can diverts or liquidate the dog product
Deep freezer is the product of PEL having low market share plus low annual growth
share.
Cash Cow
Dog
Deep freezer of PEL has low market share in low market growth rate. So it regarded as a dog. So company should drop this product.
Space matrix
Financial stability
Return on investment +4
High working capital +5
Profitability +4/3
. 4.25
Industry stability
Growth rate +5
Increase in demand +5/2
. 5
Competitor advantage
Quality product -4
Market share 30% -3/2
. -3.5
Environment stability
Unemployment -2
Advance technology -5/2
. -3.5
IS+CA
5+(-3.5)=1.5
FS+CS
4.25+(-3.5)=0.75
Internal external matrix
Y-AXIS
4
EFE 3
2
1 4 3 2 1 X-AXIS
IFEIFE=3.6EFE=3.2The strategy for PEL to growth and build
If lie in 1,2,4,QUARDANT
Then the company will use GROWTH AND BUILD Strategy
If lie in 3,5,7,QUARDANT
Then the company will use HOLD AND MAINTAINED Strategy
If lie in 6,8,9,QUARDANT
Then the company will use HARVEST AND DIVEST Strategy
1 2 3
4 5 6
7 8 9
QUANTITATIVE STRATEGIC POSITION MATRIX
strengths weights Attractive score
Total attractive
score
Attractive score
Total attractive
scoreProduct quality 0.15 4 0.6 2 0.3Strong brand name
0.13 3 0.39 2 0.26
Strong brand image
0.19 2 0.38 3 0.57
weaknessesFinancial problem 0.06 2 0.12 3 0.18Lack of advertisement
0.04 1 0.04 1 0.04
Less utilize of capacity
0.05 2 0.10 2 0.1
opportunitiesExplore market 0.18 3 0.54 3 0.54Increase product range
0.15 4 0.6 3 0.45
threatsTough competition
0.02 2 0.04 1 0.02
Slow growth 0.03 2 0.06 2 0.061 2.87 2.52
Marketing Development Marketing penetration
1=Not attractive
2= Some attractive
3= Attractive
4=Very attractive
Strategy evaluation(frame work)
Revised IFE Revised EFE
Significance difference
Measure organization performance
Significance difference
Continue
Stage 1
Stage 2
Stage 3
PEL in the internal and external analysis is strong.
There is no change in previous and revised EFE and IFE
There is no change in the performance of the organization
Strategy of the PEL is successful, sale is increasing so there is no change in strategy.
If there is significance difference when we go for Take corrective action, if there is no change then we have to measure organization performance
If there is no change there we will continue the same strategy
Take corrective
action
References:
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