analysis of pakistani industries term report
TRANSCRIPT
Mobile Industry & its role in Economy of Pakistan 2014
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Name: Ali Hussain
Student I.D.: BB-2155
Course: Analysis of Pakistani Industries
Course Code: Eco- 411
Submitted To: Sir Muhammad Waqas
Topic: Mobile Industry & its role in Economy of Pakistan
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Table of Content
1. Acknowledgement
2. Abstract
3. Introduction
4. Background Study
5. Literature Review
6.
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Acknowledgement
In our university ‘Institute of Business & Technology’ (I.B.T.) I am having a course
named ‘Analysis of Pakistani Industry’ teach by Sir Muhammad Waqas. While
studying this course a term report assign to our class which was an individual work.
The requirements and conditions of this term report was that each student has to
research on any industry of Pakistan. This term report was related to my course which
is very helpful in learning about Pakistani economy and industry. I experienced
various things during this research. Observed things happening in any of the Pakistani
industries and important in the economy of Pakistan. This term report took 45 days
minimum to its completion but it took long time about to get data for this term report.
This term report made me realize that how important industries are playing an
essential part in Pakistani economy.
Special Thanks to my Sir Muhammad Waqas for his co ordination, support and
encouragement throughout the semester.
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Abstract
The purpose of this paper is to investigate the buying behavior of consumers in
Pakistan and compare the consumers’ behavior of urban consumers and rural
consumers in Pakistan. The data are collected from 600 consumers from all over the
Pakistan through a structured questionnaire. SPSS 17 is used to analyze the results. To
check consumer preferences while making a purchase decision we used AHP (analytic
hierarchy process). We prioritize factors through AHP. This describes better results.
Our findings indicate that rural consumers more focus on the functions of mobile
phone and they are price conscious on the other hand urban consumers more focus on
style of mobile phone and brand image of mobile phone. This paper serves as a
valuable guideline for management to review their advertisement campaigns and
modify their mobiles according to the needs of consumers.
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Introduction
Now a day’s mobile phones become a basic element of individual communication
across the globe in the past ten years, consumer research has dedicated little precise
concentration to motives and choice underlying the mobile phone buying decision
process. At the time of separation Pakistan was a largely a rural country. Even as the
rural population still represents about two-thirds of the total population. Population in
urban areas is continuously increasing as a result of the structural alteration of the
economy. Peoples move toward urban areas in search of employment opportunities to
make higher income. The growing competition between the telecom service providers
has augmented demand for both mobile telecom services as well as the handsets.
According to estimate by the Govt. of Pakistan 40% peoples’ lives in urban areas and
60% peoples’ lives in rural areas of Pakistan. There is a wrong believe about the rural
markets in Pakistan. One is that rural Pakistan is poor and there is a lack of sufficient
infrastructure. Second, rural Pakistan depends upon agriculture as an exclusive source
of survival. But if we see the reality of rural Pakistan it is different from the general
perception. It is important to differentiate the buying behavior of consumer’s lives in
urban areas and the consumers live in rural areas. The main object of this study is to
compare the buying behavior of rural and urban consumers and find out their priorities
while making a purchase decision regarding mobile phone.
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Background Study
Pakistan is one of the fastest growing telecommunications market. In terms of cellular
subscriptions, we have witnessed a phenomenal annual growth of 119% during the
period of 2000 and 2007. It is also encouraging to observe that between fiscal year
2006-07 and 2007-08, mobile phone penetration also increased by 15.5%. Mobile
phone penetration in Pakistan in year 2007-08 was 55.6% which is 34.9% higher than
India’s for the same period. Whether Pakistan’s telecommunications industry would
be able to maintain this growth trend in the future as well is a question that remains to
be answered. To understand the issues at hand, we need to analyze the current
economic situation and its direct impact on telecommunications industry.
A decade ago, the cost of a mobile device was so high that only a handful of people
could afford to indulge in the luxury of using a mobile device. However, over time,
rapid technological advancements and increasing demand for mobile devices made it
possible for mobile phone manufacturers to produce low-cost mobile devices. Intense
competition between mobile service providers also led to cheaper call rates, both
locally and internationally. As a result, mobile phone usage has proliferated among
masses to the extent that even the low-tier workers such as electricians, plumbers and
shopkeepers own a mobile phone now. Many wage workers use their mobile phone as
a means of conducting business more efficiently and providing better and faster
services to customers. This shows that a mobile phone has become an essential part of
people’s lives. A direct, positive correlation exists between mobile phone penetration
and GDP. According to PTA, Pakistan’s telecom sector is contributing 2% to the GDP
directly, while indirect contribution to the economy is 5%. In effect, as more people
opt to use mobile phones, greater business opportunities are created to produce goods
and services in the economy.
The Government recently imposed a flat rate of Rs. 750 on all mobile devices being
imported in the country, regardless of their price. This regulation came into effect after
the Government categorized all mobile phones as luxury items. The increased taxation
has added to the retail price of mobile devices and has eventually resulted in lower
sales of all mobile phone manufacturers such as Nokia, Samsung, Sony Ericsson and
LG. Decline in profitability has even forced certain mobile phone makers to close their
operations in Pakistan. In consequence of declining sales, import of mobile devices
has gone down by approximately 33.5%, from $670.17 million (2006-07) to $445.8
million (2007-08).
The mobile phone consumption patterns reveal that 67% of Pakistani market uses
entry-level phones. Entry-level phones are the ones that are priced below $50. They
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are used by almost all income groups but most predominantly by the low-income
group. The urban population has almost 100% mobile penetration, so the new growth
market for the mobile phone manufacturers operating in Pakistan is the rural
population. Most of the people in rural areas are wage earners who save money over a
period of time to buy a mobile phone. As the price of mobile phones increases, the
total cost of ownership has risen for the low-end segment of the market, making it
difficult for the mobile device makers to grow in this segment.
Results and Findings To compare the results of rural and urban consumers we use descriptive analysis by
using SPSS 17 to check the importance of different motivating factors in the mind of
consumers we use AHP (Analytic Hierarchy Process).
Brand name of Phone
Results shows that consumers live in rural areas use China mobile more as compare to
the peoples live in urban areas. Peoples live in urban areas use apple mobiles more as
compare to the consumers live in rural areas.
Urban consumers purchase Nokia phones more as compare to the rural consumers.
Urban consumers purchase Samsung mobiles greater as compare to the rural
consumers.
Information Source
In this table data suggests that bigger source of information for urban consumers are
Internet (18.98%). And for Rural consumers bigger source of information is TV.
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30.85% consumers use internet as a source of information out of which 18.98%
consumers are from urban areas and others are from rural areas (11.86%).
Help in Decision Making
This table data suggests that consumers (urban and rural) prefer opinion by friends
while making purchase decision regarding mobile phone. Companies have to design
such advertisement campaigns which focus on the group of peoples. A favorable
satisfaction level of group will motivate other consumers to purchase a mobile phone.
Urban consumers give more weight to the opinion of their family as compare to the
rural consumers. More Rural consumers select mobile phone based upon their own
decision as compare to the urban consumers. Reference groups are mostly used in
urban areas as compare to the rural areas. A favorable opinion by reference groups
will lead to increase in sale of certain mobile phone.
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Weight given to different motivating factors by Urban
Consumers
Table IV suggests that style is more influencing factor for urban consumers while
making a purchase decision regarding a mobile phone. Urban consumer consider style
as most influencing factor followed by Brand image, Functionality, Quality, Price,
Promotions and sales and service provided by cell phone company. Mobile phone
provided with innovative styles will provide favorable increase in sales of mobile
phone in urban areas because style of mobile phone is the most important factor for
the mobile phone users in urban areas of Pakistan. Results reveal that for urban
consumers brand image of mobile phone is also the important factor if a company
focuses on building strong brand image it will provide favorable increase in sales of
mobile phone in urban areas. Consumers consider functions provided by mobile phone
as important determinant while making a purchase decision. Quality of mobile phone
is also the important determinant for mobile phone users in urban areas. Price,
Promotions and sales and service provided also matter while making purchase
decision.
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Weight given to different motivating factors by rural consumers
This data table suggests that Function provided by mobile phones is most preferable
for rural consumers. Rural consumers consider functionality of mobile phone as most
influencing factor while making a purchase decision followed by Price, Promotions,
Sales and Service, Style, Quality and Brand image. Mobile phone provided with
greater functions will provide favorable increase in sales of mobile phone in rural
areas because functionality of mobile phone is the most important factor for the
mobile phone users in rural areas of Pakistan. Results reveal that for rural consumers
price of mobile phone is also the important factor if a company focuses on price means
that they set low prices then it will provide favorable increase in sales of mobile phone
in rural areas because consumers in rural areas are price conscious. Consumers
consider promotions as important determinant while making a purchase decision.
Consumers want to know about new innovations. Due to lack of knowledge about
products they hesitate to purchase new products. Companies have to focus on rural
areas because two third majority of people’s lives in rural areas. Sales and Service,
Style, Quality and Brand image of mobile phone also matter for consumer while
making a purchase decision brand image is the last criteria for consumers in rural
areas.
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Investment according to P.T.A Cell phone service provider in
2006-2007
The exceptionally good response of market and ever increasing potential has kept the
foreign investors still eyeing for opportunities to invest in Pakistan. China mobile the
largest mobile operator in Asia has just entered Pakistan mobile market by investing
almost US$ 704 million and has bought Paktel limited. China Mobile’s takeover of
Paktel is promising move that is believed to bring the life back to the company.
Similarly Singtel who has been trying to enter Pakistan telecom sector has finally got
successful by buying 30% shares of Warid Telecom and has invested almost US$ 758
million. Although Warid has been making good investments from its own resources
(both local and foreign) however it was grappling with low ARPUs that could only be
managed through big foreign backing. Similarly local operators have also been able to
access funds from international capital markets and Mobilink has been fairly
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successful in this regard, when the company completed US$ 250 million bond offering
in late 2006. It seems to be altogether an uphill task for Etisalat in managing the giant
PTCL therefore it is still weighing its options for decanting more investments in its
inherited Ufone. Telenor, keeping the tradition of best practices is investing in the
right areas and is closing the gap with market leaders.
Mobile sector has alone invested US$ 6 billion in Pakistan in last four years where
Telenor invested US$ 761 million (29%) while Moblink has invested US$ 591 million
(23%) in the year 2007. Mobilink planned to invest US$ 500 million in 2007-08 while
Telenor plans to invest US$ 750million in next two years.
Subscriber Share in Mobile Market by Operator for 2005 to 2007
The subscribers of Mobilink grew by 50% only during this year however, Telenor
added almost 7 million subscribers to its network during the reported year. In fact the
company has been focusing on attracting both low-end and high end users and high
data-usage customers by offering its extensive data oriented services. As for warid, the
company attracted good over five million customers during 2007. Mobilink's new
subscription during 2007 was only 9 million which is low as compared to last year's
performance where the company had a new subscription of more than 10 million.
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Mobilink is still attracting and targeting high end users whereas everyone is now
aware that most growth in the future will come from low-end segment. Ufone
subscriber base grew by 85% in 2007 as the company is maintaining satisfactory
quality of service in addition to attractive consumer oriented schemes like free airtime.
Paktel and Instaphone's subscription growth remained stagnant during the year.
During the reported year share of each company in mobile market tended to change,
except for Ufone whose subscriber share more or less remained unchanged. Mobilink
kept on losing its share for another year in favor of Telenor and Warid mainly,
whereas Paktel and Instaphone share in the market also dropped as both companies are
struggling with transitional phase.
Cell Phone Manufacturers Market Share in Pakistan
2006 - 2007
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With the exponential growth in mobile sector, there has been similar growth in
handsets market. Although Pakistan handset market comprises of number of
authorized dealers, still large portion of handsets come illegally via smuggling,
individual carrier of new/ used/ refurbished sets from European and Middle Eastern
Markets and other routes. Number of handsets imported through transparent channels
via authorized dealers has increased over the years owing to the after sales service
facility, warranty and insurance by dealers. Nokia remained significant player in local
handset market and contributed to approx 53% of the total handsets shipments during
year 2006-07. Rest of the market has been covered by vendors like US player
Motorola, European player Sony Ercisson and two Korean market players LG &
Samsung. Very recently few players from China, like ZTE and Huwaei have started to
sell their handsets in Pakistan market. Since the local market is extremely price
sensitive mostly low to mid tier sets become very popular in the masses, in the
reported year sets including Nokia 1110/1112, Samsung E250, Sony Ericsson K750i
and Motorola Razor V3 turned out to be the most popular in the local market.
Telecom Sector Revenue in 2013
The telecom revenues have been reached an all time high of Rs. 440.20 billion in the
FY 2012-13 with a growth of 7.0% achieved over the last fiscal year. The increasing
revenues from the telecom sector indicate the strength and size of the market despite
the economic difficulties and tough competition, especially in the cellular sector.
Telecom operators are now exploring new avenues to earn from, reducing dependence
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on the voice channels alone. It is expected that influx of 3G technology into the
telecom market will further boost the revenues of the sector.
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Discussion & Conclusion
Results from this study suggest that buying behavior of urban and rural consumers is
different. Consumers lived in urban areas most consumers use Nokia mobiles followed
by Samsung mobiles, china mobiles, Apple mobiles, Q mobile, Sony Ericson and
others. While Consumers live in rural areas use Nokia mobiles followed by China
mobiles, Samsung mobiles, Sony Ericson, Apple mobiles, Q mobile, and others.
Results shows that consumers live in rural areas use China mobile more as compare to
the peoples live in urban areas. Peoples live in urban areas use apple mobiles more as
compare to the consumers live in rural areas. Urban consumers purchase Nokia phones
more as compare to the rural consumers. Urban consumers purchase Samsung mobiles
greater as compare to the rural consumers. Major Source of information for urban
consumers is Internet. In urban areas most people are connected with internet that’s
why they use internet as a source of information while making a purchase decision
regarding a purchase of mobile phone. So that is a company want to attract the
consumers in urban areas it must focus on internet ads and it make their website more
informative. While rural consumers are not habitual to use internet the reason is that in
rural areas slow speed internet is available due to this consumer avoid using internet as
a source of information. Rural consumers use TV for source of information. Means
that if a company wants to attract the consumers in rural areas it must focus on TV ads
rather than ads upon internet. Consumers also use Newspaper as a source of
information. Rural consumers use mobile phone retailer as a source of information the
reason behind that is consumers in rural areas are less educated as compare to urban
consumers. So they get information from mobile phone retailer while making a
purchase decision regarding a mobile phone. Pakistani community lives in collective
environment that’s why consumers urban and rural give first preference to the opinion
given by their friends. Urban consumers give second preference to their family
opinion while rural consumers give second preference to their own decision. Rural
consumers give third preference to the opinion given by their family while urban
consumers give third preference to own choice. Urban consumers consider the opinion
of reference groups at fourth media at fifth and other sources as last way of opinion.
While rural consumers consider opinion of media fourth, opinion of reference groups
at fifth and opinion from other sources as a last way. Style of mobile phone and brand
image of mobile phone is most important factor for rural consumers while making
purchase decision price is at fifth means that urban consumer not consider price as a
criteria for mobile phone selection. Price has low impact on buying behavior of urban
consumers. On the other hand for rural consumers’ functionality of mobile phone and
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Price of mobile phone are most important factors. Means those rural consumers are
price conscious. Style of mobile phone and brand image of mobile phone have low
impact on consumer buying behavior regarding mobile phone.
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References
1. http://www.pta.gov.pk/annual-reports/annreport2013_1.pdf
2. http://www.pta.gov.pk/annual-reports/annrep0607/chapter_4.pdf
3. http://bluechipmag.com/the-future-of-pakistans-mobile-phone-industry-bright-
or-bleak/
4. http://search.ebscohost.com/login.aspx?direct=true&profile=ehost&scope=site
&authtype=crawler&jrnl=09755853&AN=87346096&h=V%2BGwnHOv6B3i
%2BBJwvBplsNYsjSA%2B54Mpqy232szx7MP7PacmG%2FmVzyXjN9CkOg
Ap9lIkUPkwILuhHUPW3OV6og%3D%3D&crl=c
5. http://www.journalofbusiness.org/index.php/GJMBR/article/download/688/621
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