changes your life

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Changes your Life

Table of Contents

Table of contents ………………………………………………………………….. 1

Executive Summary ………………………………………………………………. 3

Introduction ………………………………………………………………………...4

PEL profile ………………………………………………………………………….4PEL air conditioner ----------------------------------------------------------------------- 5

PEL refrigerator--------------------------------------------------------------------------- 5

PEL micro wave Owen------------------------------------------------------------------- 5

PEL television ----------------------------------------------------------------------------- 6

Power division ------------------------------------------------------------------------------ 6

Industrial Analysis ------------------------------------------------------------------------ 7

PEST analysis ------------------------------------------------------------ 7

Political environment---------------------------------------------------- 7

Economical environment ----------------------------------------------- 8

Social environment ------------------------------------------------------ 8Buying pattern ----------------------------------------- 9

Standard of living ------------------------------------- 9Technological environment -------------------------------------------

9

Cooling system ---------------------------------------- 9Testing and adding accessories -------------------- 9

Future Environmental Analysis -------------------------------------------10

Future Trend of Political environment ----------------10

Future look of economic environment ---------------10Future look of technology environment --------------11

Future look of social environment 11

Competitors Analysis

Competitors of PEL 12

DAWLANCE 12

The Vision 12

Corporate Belief 12

Corporate Responsibilities 12Business 13

Market Position 13

Customers 13

History 13

WAVES: 14

Reason for Growth: 14

SWOT analysis of PEL: 15

STRENGTHS: 15

WEAKNESSES: 16OPPORTUNITIES: 17

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THREATS: 17

Porter Model

Bargaining power of buyers 18

Concentration: 18

Product Differentiation: 19Switching Cost: 19

Profit. 19

Impact on Quality/Performance: 19Buyers Information 19

Supplier’s power 20

Suppliers 20

Concentration 20Presence of Substitute inputs 20

Importance relative to customer 20

Switching Cost 21

Rivals Industry Growth: 21

Fixed Cost: 21Product differentiation: 22

Concentration and Balance:22

Switch cost: 22

Exit Barriers 22 New entrance 22

Substitute:

Switching Cost: 23Price, Performance 23

Industrial Structure 23

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EXECUTIVE SUMMARY:

Pak Elektron Limited (PEL) is the flag bearer of the Saigol Group of Companies.

The products manufactured by PEL have always been of high standard and the name

'PEL' is synonymous with QUALITY all over Pakistan. Since its inception, the company

has been 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 & training programs.

The company comprises of two divisions:

• Appliances Division: This Division of PEL consists of home appliances

manufacturing particularly Refrigerators

• Power Division: PEL Power Division is one of the major electrical equipment

suppliers to WAPDA & KESC. The company manufactures transformers, energy

meters, switchgears, kiosks, compact stations and shunt capacitor banks

Other than this, the company has developed a very good repute in the world of credit due

to which most of the Financial Institutions like National Bank, Faysal Bank, PunjabModarba have provided especial credit limits to the Company in order to support its

operational activities. While working with PAK ELEKTRON LTD, I got very broader

visions about company financial and marketing activities more than those that I had

learned during my MBA program.

In 1956, the Saigol Group of Companies purchased major shares of PAK Elektron

Limited. At this junction, the company was only manufacturing transformers and

switchgears. With the Saigols in management, PEL expanded into Refrigerators & Air

Conditioner manufacturing and now it has become a Giant in the World of Appliances.

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INTRODUCTION:

Pak Elektron Limited (PEL) is the flag bearer of the Saigol Group of Companies. The

products manufactured by PEL have always been of high standard and the name 'PEL' is

synonymous with QUALITY all over Pakistan. Since its inception, the company has been

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 & training programs. PEL has been continuously

adding new products to its range. As a result, PEL has registered a significant increase in

its sales volume, during the last ten years.

PEL PROFILE:

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 and by

producing hundreds of engineers, skilled workers and technicians through its

apprenticeship schemes and training programs.

.

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PEL AIR CONDITIONERS:

PEL window-type air conditioners were introduced in 1981 in

technical collaboration with General Corporation of Japan. Ever

since their launch, PEL air conditioners have a leading position in

the market. PEL air conditioners cooling performance has been

tested and approved by Copeland and ITS USA and today PEL holds approximately 45%

of air conditioners market share.

PEL REFRIGRATORS:

The manufacturing of refrigerators started in 1986-87 in technical

collaboration with M/s IAR-SILTAL of Italy. Like the air conditioner, PEL's

refrigerators are also in great demand. Today, PEL Crystal has 30% market

share. Its cooling performance is tested and approved by Danfoss Germany

and its manufacturing facility is ISO 9002 certified by SGS Switzerland.

PEL MICROWAVE OWEN:

PEL the trustful company name in home appliances all over the country

now introduced all new models of "PEL Power Wave" Microwave

Ovens. Now PEL customers can have four models of PEL Power Wave

in which they can enjoy the grilling feature as well. PEL Microwave

Ovens are available in different sizes, inner cavities (steel & painted) and features.

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PEL TELEVISION:

PEL introduced Color Television under the brand name of "PEL

DIGITAL LIFE". PEL has introduced four models (flat & semi flat).

Now PEL customers can enjoy a Multi System, Multi Sound, DVD

Input, AV In/Out, Clock, Timer and Auto Degauss Technology all in

PEL Digital Life Color Television. PEL provides strong back up of customer services all

over Pakistan with 5 years picture tube and

1 year parts warranty.

POWER DIVISION:

PEL Power Division manufactures energy meters, transformers, switchgears, Kiosks,

compact stations, shunt capacitor banks etc. All these electrical goods are assembled

under strict quality control and in accordance with international standards.

PEL is one of the major electrical equipment suppliers to Water and Power Development

Authority (WAPDA) and Karachi Electrical Supply Corporation (KESC), which are the

largest power companies working in Pakistan. Over the years, PEL electrical equipment

has had been used in numerous power projects of national importance within Pakistan.

PEL has the privilege of getting its equipment approved and certified from well-reputed

international consultants such as:

• Preece, Cardew and Rider, England

• Harza Engineering Company, USA

• Snam Progeti, Italy

• Societe Dumezm, France

• Miner & Miner International Inc. USA

In spite of stiff competition from emerging local and multinational brands, PEL Group's

appliances and electrical equipments have remained in the spotlight due to constant

innovation. Strategic partnerships with Copeland, Danfoss, Samsung and others have

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enabled the PEL Group to incorporate new technologies into existing product

ranges, thus giving the Pakistani market access to innovative, affordable and quality

products.

Industrial Analysis:

Pest Analysis:

Political environment:

• The political condition of the Pakistan is not stable, mean when the government

changes the polices are also change the new comer in politics. He tries to run the

country with his own ways which are entirely different from the previous

government.

• From the previous some years we have seen that the Government of the Pakistan

encourages to import and export polices. And also encourage the foreign investors

to invest in Pakistan.

• There are no many difficult formalities to import or export, any dealer can import

in Pakistan and sell by the fulfilling the certain formalizes required by the law.

• Different countries provides to the different countries there services by the using

of labor of that country. As china is performing this job by the providing theservices to the Pakistan. In this case during the manufacturing of the product the

cost becomes reduce, like the electricity bills, government taxes, other factory

overheads etc, so that’s why Pakistan prefer to outsourcing mostly from China.

• The required demand is fulfilled in Pakistan by the importing from China.

Because 17% subsidies are given to the exporters in China.

• If the Government reduces the import duties on the raw materials the purchasing

power can be increased of HVACR (Heating, Ventilation, Air conditions and

Refrigerators).

• Eng. Abdul Rasheed Director General Pakistan National Accreditation Council

(PNAC) said we can save energy with quality management practice and by

evolving a national quality infrastructure based on technical regulation,

standardization and conformity assessment.

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Economic Environment

• Pakistan’s economy continued to perform impressively as it is experiencing

longest spell of growth in its history.

• The outcome of the fiscal year 2006-07 indicates that Pakistan’s economic

momentum remained on track.

• Economic growth accelerated to 7 percent in 2006-07 as a result of robust

growth in agriculture, manufacturing and services and has been notably stable

and resilient. Compared with other emerging economies in Asia, this puts

Pakistan as one of the fastest growing economies in the region.

• Growing per capita income coupled with fiscal revenues approaching a trillion

mark are resulting into increased consumer spending on one side and

increased investment in infrastructure by the government on the other side.

• These prime indicators are providing a healthy canvass for both of our

business divisions i.e. Appliances and Power.

• The per capita income of Pakistan has reached up to $763.

• Growing interest of foreign investors in Pakistan as manifested by the visits of

over 200 foreign investors’ delegation in the last 2 years.

Social Environment:

• Most of the population of Pakistan belongs to middle class who are the potential

buyers of PEL’ products. So the scope of product is high.

• Most of middle class people are price conscious and tend to save money so they

would prefer the products with low electricity consumption.

• In recent times joint family system is vanishing and a product such as

Refrigerator which was used by 5 people is now used by only 2 or 3 so the

demand is increasing day by day.

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Future Environmental Analysis:

Future Trend of Political environment.

By the study of the political environment we come to know that the formalities which

are fulfilled by the both Pak electron industry and the government are completed. And

according to the Eng. Abdul Rasheed Director General Pakistan National Accreditation

Council (PNAC) that the National Quality Policy is almost completed and would be

introduced soon. In future a legal framework is an urgent need for preventing supply of

unsafe products; evolve an effective certification system, rationalization of quality and

conformity system and raising awareness amongst the masses. He said the rules are being

framed so that in future every product is tested by the government agencies. “it will be aregular feature and findings of such testing will be made public. In future for the seek of

the environmental protection there must b rules and regulation by the government

especially the role of PSQCA and EPAs, while standards for home appliances should be

strictly enforced and the government, civil society groups and media should promote

responsible consumption attitudes.

Future Look of Economic Environment

The economy is expected to perform well in the next year however it is exposed to

certain challenges like current account deficit, lower exports, increased competition in the

international market and lack of technological advancement as compared to competing

nations. It is still hoped that national economy will continue to grow and rising prosperity

will bring expanding opportunities for the Engineering Industry and for your Company.

The company will continue to focus on cost effectiveness, quality standards and best after

sales services to our valued customers. And the Pak electron expects to go farther, faster

and higher than they have ever been in serving the interests of their customers,

shareholders and employees.

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Future look of Technological environment

In terms of Freon, several intermediate steps have been taken to minimize CFC emission

as researchers attempt to identify safe coolant alternatives. Refrigerator designs have

been improved to reduce the amount of freon needed; leak detection systems have been

installed; maintenance has been limited to trained, authorized personnel; and refrigerant

is recovered and recycled whenever possible. Moreover, long-term replacements for

freon are being explored. Thus far, the most promising among them is HCFC-22, which,

although still a chlorofluorocarbon, contains an additional hydrogen atom that reduces the

molecule's ozone-depletion capacity by 95 percent. While its cost (three to five times

greater than that of freon) is problematic, HCFC-22 is presently undergoing tests to

determine its toxicity.

CFC-containing insulation may be replaced by the same kind of vacuum insulation that is

used in thermos bottles. Research indicates that vacuum insulation is more efficient in

terms of both space and energy, so, at present, it appears that insulation alternatives will

become viable well before freon substitutes.

Now the new refrigerators are introducing by the Hinoon lab. On the solar energy.

Because there is a problem of electricity in Pakistan which can be solved by the

introducing solar energy technology.

Future look of Social environment:

People will buy the refrigerators and other home appliance by the same previous pattern.

And people will mostly prefer to buy the new refrigerators which is introducing by High

noon lab by the solar energy. And with the change of seasons people buying pattern will

also change. The season of marriages is mostly between both two Eid’s. So the buying

power of people will increase in these days. And the people prefer to buy those

appliances which become match with their home settings and designing. This is called the

trend of fashion. People decorate their home according the changing of the trend of

fashion.

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Competitors Analysis

Competitors of PEL

Dawla nce:

• Dawlance is the Leader in household appliances in Pakistan. It’s the largest

company engaged in appliances business. It is rated no.1 in refrigerators and has

the market share of 40%.

• Dawlance has 23 service centers in Pakistan. Sales network has reached 850

dealers nationwide.

The Vision:

"We are committed. Above everything else, Dawlance places its top priority on the

satisfaction of human beings the satisfaction of its customers, partners and employees.

All our policies and approach towards work revolve around our corporate belief."

Corporate Belief:

• Individual must be respected.

• The customer must be given the best possible products and services.

• Excellence and superior performance must be pursued.

Corporate Responsibilities:

• Advancing the standard of living in Pakistan by manufacturing reliable and

affordable electrical products.

• Implementation of first class production engineering.

• Development of our employee not only for the firm's benefit but to contribute to

each employee personal growth.

• Major contributor in restoring Pakistani status and prestige.

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• To reinforce value like harmony, solidarity, discipline and dedication.

Business:

Manufacturing and marketing of domestic appliances

Market Position:

• Leader in household appliances in Pakistan

• Largest company engaged in appliances business

Customers:

Up to Middle Upper Class of Pakistan

History:

• Established 1980

• Refrigerator Production 1981

• Deep Freezer Production 1988

• Deep Freezer Manufacturing Unit 1992

• Launched RAC and No-Frost Ref. 1992

• Launched WM and MWO 1995

• Production of No-Frost Refrigerator 1996

• Production of Aero-Design Series 1996

• Production of Up-Right Freezer 1997

• ISO 9001 Certification 1999

• Production of Washing Machine 2000

• ISO 14000 Certification 2001

• USL Shops 2001

• Electric city # 1 2001

• Signature series USL Shops 2002

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WAVES :

Cool industries are basically deep freezers manufacturer that started its operations in late

80s and added refrigerators in their product line by mid 90’s. in the beginning they didn’t

get a good response for their refrigerators but as time passed, their market share position

is getting better. In year 2003-04, like all other brands, waves got a good growth inrefrigerator market.

They have successfully launched their split air conditioners. They are the pioneers of low

price split AC in Pakistan.

Waves in the beginning, considered to be a low price and low quality product,

were not very much accepted, but later with the re-launch of their refrigerators, got a

good response from the dealers. Currently WAVES is the third largest manufacturer of refrigerators and expected to sell 79,500 units in last year.

Reason for Growth:

There are the following reasons for growth of WAVES

• Improved quality product

• Strong distribution network

•Low prices

• Heavy advertising

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SWOT analysis of PEL:

STRENGTHS:

• As we all know PEL has been serving since 5 to 6 decades, it has captured almost

50% of the Appliances demand and near about 70% of the power products

demand with the passage of time. Due to its strong positioning, its Goodwill has

always been a threat for the new business arrivals and for the small-scale

businesses. And PEL holds a great part of the people trust.

• Technological improvements in the business environment always play a vital role

for the expansion of the Corporations. PEL has sensed the importance of

technology very earlier and has introduced latest equipments to all of its

departments along with the expertise to increase its staff technological know how

as well as their efficiency level. Now people working in PEL are ready to cope

with any of the internal and external threats easily. This technological

improvement has enhanced company’s productivity comparatively more than 60

percent from past and still the company is struggling for more improvements.

• In a competitive environment, where every producer tries to maximize its market

share and profitability, requires a very strong financial backup. Pak Electron

Appliance division has large number of competitors in the market including

National and International firms and they are continuously trying to break PEL’s

market share but due to strong financial backup from its own POWER

DIVISION, from Top class financial institutions and its exclusive distributionnetwork all those companies have become un-able to change its position.

• One another Strength would be the environment, PEL ensures a very neat, clean

environment to its staff which keeps them motivated and committed to their jobs

and that’s why they usually resist to jump for external opportunities.

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• Due to PEL’s reputation and Goodwill many financial institutions have increased

its credit facility limits due to which it has started expanding its businesses into

those areas where access was a bit tough or where it wanted to participate.

Similarly due to this advantage it has started increasing its product’s National and

International Material Supply to achieve production scale as well as the annual

Sales.

WEAKNESSES:

• Other than strengths the internal weaknesses of PEL includes low morale of the

employees due to OLD and RIGID ideologies of the top-level staff. Top level

staff at PEL dislike middle or lower level employees participation in the decision

making, exert excessive, un-necessary pressures, work loads and discourage them

a lot, this significantly reduces employees interests in their work and respect for

the Top-level staff.

• Another weaknesses of the PAK Elektron lies in its marketing strategy where its

continuously trying to rely on the Distribution Network for its Appliances

specially for its microwaves and splits with out proper Advertisement and

promotions. Due to which people un-awareness remains there as it is and they

bother to go for its products.

• As it was mentioned earlier that due to certain reasons PEL’s Cost of Production

fluctuates it simultaneously effect over the sales price level due to which it does

not remain stable through out the year. And if the company does not have a tight

control over cost of production, customer who comes to buy any product after

estimating its own budget when finds a different price from the prior visit or

information faces decisional problems and in this way Company looses its

customer. It is happening with Pak Elektron

• Another weaknesses of PAK ELEKTRON, is its delivery system. Retailers of

PEL use to complain about its delivery patterns and they are un-happy and

moving towards other company’s products.

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OPPORTUNITIES:

Following are the opportunities on the way, which the company can avail in future.

• SAFTA, a free trade agreement between South Asian Countries, is hopefully

going to bring large number of penetration opportunities for the companies like

PEL in January 2006. This will help PEL in achieving Economies of Scale and

further help it in bringing technological enhancements in it all facilities. This will

also make its name stronger in the market.

• Another opportunity is the Sales Tax exemption by the Government over the

Production material and Sales of transformers, switchgears, electric meters, etc by

this year. Due to this PEL soon will enjoy huge profits than before.

THREATS:

• As SAFTA, an agreement between south Asian Countries is on its way so sooner

we will be having all Asian Products and producers such as Chinese, Hong kong,

etc. Competition in all Asian Countries will be so tight we can’t even imagine.

Where it is going to bring large number of opportunities it will also create threats

for the domestic producers like PEL because of their Advance Factors of

production such as technology and because of their Basic Factors of Production

such as cheep labor etc. Further, these factors will give those producers a chance

to charge lower prices than domestic producers for their products and they will

soon be having a competitive edge over companies like PEL due to which its

survival would become difficult.

• Similarly, another threat for PAK Elektron is the increasing preferences of

customers towards other companies’ products like Dawlence, which is speedilyexploring un-identified markets in Pakistan and engage in heavy advertisement of

its products. This has been increasing its brand loyal day by day. It seems that

PEL will be no more dealing in Appliances if it does not take any precautionary

measures for future.

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• Distributors of any product always look forward for the higher

margins. Companies have started offering sufficient amount more than PEL, as

incentives to the distributors soon will take over PEL’s Exclusive Distribution

Network and this will be the huge loss for PAK ELEKTRON.

Porter -5 Model:

Bargaining power of buyers:

Concentration:

In the market of home appliances the buyers are fragmented. Because when people go to purchase the refrigerators and mostly no try to bargain because mostly

people know about the price and quality of the product and they themselves make the

competitive study and decide to buy or not buy the products. So the buyers bargaining

power is not high.

Suppliers Competition

Substitutes

New

Entrants

Buyers

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The buyers have sufficient information mostly those having the

research. Because the customer who invest the money can not take any risk. So that’s

why nobody can spend the money by closing their eyes. And here also the buyers have

the high bargaining power.

Supplier’s power:

Suppliers:

Major suppliers of raw material and sub-components/components are Japan, U.S.A, Italy,

South Korea, Singapore and Thailand.

Concentration:

• As concentrate on the quality on the PEL with the comparing to the DAWLANCE

is low because PEL is not compromising with the price to suppliers. So that’s why

the suppliers who give the material to PEL and DAWLANCE and WAVES are

concentrated because if the suppliers don’t want to supply the material to PEL

they are not conscious because they have the good opportunist to sell their raw

material to the concentrated firm in market which is DAWLANCE having 45%

shares of refrigerators in market.

Presence of Substitute inputs:

There is a substitute of refrigerators that is deep freezers which are

offering by the both firms under the electronic product lines. So the suppliers power is

not high.

Importance relative to customer.:

There are different suppliers for one product, and PEL is important for the

suppliers because the PEL is also improving gradually. In this case we are getting the raw

material of refrigerator’s door and structure, which can import from different

international suppliers. But for the specifying PEL is getting the raw material from china

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and that is important for the china. After the DAWLANCE the PEL is a big

firm which is getting the huge material. So in this case the suppliers are not powerful.

Switching Cost:

The switching cost is low so that’s why PEL is getting the material form china

because the chinease firms are providing the material according to the requirement of the

Pak Electron limited. The supplier’s power is low.

Rivals

Industry Growth:According to the annual financial report this industry is growing quickly,

by the quickly growing there are less chances for the more rivalry.

Gross Sale. And the gross profit is also 442 to 582 from the year 2005-06 to 2006-7

Fixed Cost:

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The Fixed cost of this industry is very high, the installation of

machinery to produce the raw material, development cost for dies and mould, assembly

line machine, distribution cost, transportation cost, R&D cost etc. Its high fixed cost is

threat for the new entrance.

Product differentiation:

The products and services are commodity of the home appliances industry and

have closer the product. So that’s why this industry is buying the products form the china.

Concentration and Balance:

There are many firms making the home appliances but form those there are few

firms which have the maximum market share in the market nominated by DAWLANCE

and PEL. Which have the 45% and 37% market shares respectively in refrigerators.

Switch cost:

The switching cost is not high because the industry is getting the affective price

form the china than other suppliers as japan, Malyasia at the same quality and less price.

And if the china starts the implementation on installing the plants in Pakistan then the

cost will reduce more.

Exit Barriers

There can be two main exit barriers which the fixed installed machinery which are very

expensive. And the inventory is also a big exit barriers for any firm because it is most

difficult to get ride or sale out, because the positioning of the firm becomes poor in the

mind of the consumers and they are no ready to buy that product which may b a big loss

for the firm.

New Entrance

• High cost of production is one of the main barrier of entering the refrigerators

industry

• The huge advertisement cost.

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• The far away Break Even point as it will take time to set an image in

the eyes of consumers and sell them their product.

• Establishing dealership network.

• High costs of raw materials and other inputs (costly electricity and custom duties

on imports of the said units or raw material).

• Government polices are involved if the existing firm approve the patent from the

government then the new entrance can b stopped.

• Brand identity is also a threat for the new entrance because it takes time for the

positioning in the mind.

Substitute:

Switching Cost:

The substitutes are the waves triplet, deep freezer of dalliance if the

switching cost is high then the people will not get it and if the switch cost is low then

people will get it. The deep freezers are expensive than refrigerators and need more place

to stay the freezer. Which is considered a high switching cost.

Price , Performance:

The substitute offer a better price in sense of performance, performance wise thedeepfreezes are better but those which are technology wise differ giving the facility of

both refrigerator and freezer which is available in double door freezer.

Industrial Structure

The structure of the industry is falling under the category of oligopoly because there

are 5-6 firms but the major firms are 3-4 which have a good place in the market.

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