analysis of pakistani industries term report

Mobile Industry & its role in Economy of Pakistan 2014

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. Acknowledgement2. Abstract3. Introduction4. Background Study5. Literature Review6.

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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 FindingsTo 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 UrbanConsumers

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 phoneas 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.pdf2. http://www.pta.gov.pk/annual-reports/annrep0607/chapter_4.pdf3. 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%2FmVzyXjN9CkOgAp9lIkUPkwILuhHUPW3OV6og%3D%3D&crl=c

5. http://www.journalofbusiness.org/index.php/GJMBR/article/download/688/621

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analysis of pakistani industries term report

Services

industry of pakistan

mobile industry

economy of pakistan

rural areas of pakistan

rural consumers

reality of rural pakistan

mobile devices

mobile phone penetration