Case: This case is for a comparative analysis about the effectiveness of marketing strategies of LG and Dawlance particularly about their refrigerators in Pakistani market. It is also important to determine the strategic marketing with respect to blue ocean strategy or red ocean strategy.
Local manufacturers of refrigerators are: Dawlance, Waves, Pel and Singer. These manufacturers roughly cater 80% need of the market. Imported manufacturers of refrigerators are: LG, Super, General, Hair, Sam Sung, Indesit, Semins, are all that import refrigerators from their principals and market the same in Pakistan. Actually these all parties contribute only 20% of the market requirement. Dawlance Industries was established in 1980 and its factory is located in Hyderabad. Present market share of Dawlance refrigerators is 65%. Haniska International is a multinational company, based in Korea. LG is an agent of Haniska International in Pakistani market. It imports products from Korea. Present Market Share of L.G refrigerators is 4%. In the overall perspective, for refrigerators’ market, LG and Dawlance are the two main competitors in Pakistan.
With respect to product strategy, Dawlance is locally assembled brand targeting middle and upper middle income class of the society. Whereas LG targets upper middle and upper income class of the society. Dawlance provides three years ‘compressor warranty. LG ensures durability of its brand as an imported brand and provides five years’ compressor warranty.
With respect to pricing, Dawlance has selective pricing strategy for its different models of refrigerators. Some models are for upper income class which are relatively higher priced and some models are for middle income class which are relatively lower in price and features. Dawlance has dealers all over the Pakistan and ensures same prices and product delivery to dealers all over the Pakistan. Dawlance bears freight charges itself. Whereas the LG pricing strategy is cost + fixed mark up to cover import duties. Since they cater to upper middle and upper class, therefore their 90% dealers are in big cities only. With respect to promotion, Dawlance promotion budget is around 1.75% of their turnover. It also gives customers’ incentives and promotions in the form of price reduction. As LG is a MNC, it can divert funds from strong markets and spend more on weaker markets. LG provides handsome incentives to dealers for effective product promotion.
With respect to distribution, Dawlance has got 800 distributors in the country and assures distribution of the product at the dealers’ doorstep. Dawlance has categorized its dealers and gives them incentives accordingly. Normal time of delivery from warehouse to dealers is two to three hours. If warehouse is out of stock, then supply is directly provided from the factory located in Hyderabad. Whereas distribution of LG is from its principal located in Korea and some products are imported from China. As LG Pakistan imports the products therefore it does not maintain the loose stock. LG requires its dealers to maintain at least 6 weeks’ stock. LG has around 300 dealers from all over the Pakistan and they try to maintain similar price throughout the country. Warehouses are located only in big cities. Both the companies are making significant attempts for quality assurance as they believe that high quality products cause customer satisfaction. Dawlance is also ISO 9000 certified company. Dawlance strongly believes in effective after sales services and has foreign qualified engineers. Dawlance has its own 51 after sales service workshops throughout the country. Whereas in case of LG, as it has its presence only in big cities, so it has only eight company owned after sales service centers mainly in the big cities. Spare parts are imported from Korea by LG. Spare parts of LG are relatively expensive. One of the reasons for these parts to be expensive is that LG's local agent has to pay almost 70% of the product cost towards import duty, sales tax and other import costs. So within its limitation, LG is trying its best to provide after sales services. In the overall perspective, Dawlance is stronger in capturing the market and has no real threat from local and multinational brands. While L.G refrigerator is an imported brand. Every year because of weakening Pakistani Rupee, US $ cost of import is going up and thus LG refrigerator is becoming costly year after year. Therefore, they have a big challenge before them to maintain their market share and also to maintain their reasonable growth against local manufacturers. Hence it can be concluded that Dawlance brand is dominating the Pakistani market through its marketing strategies, customer services and due to its relatively lower prices. LG is suffering due to governmental taxation policies and decreasing value of Pakistani rupee versus US dollar. So it not just a matter of marketing strategies but governmental policies (taxation, import duties etc.) that also stand in front of a brand’s success while marketing internationally.
After through study of the case, you are required to do a SWOT Analysis of LG and Dawlance. Mention at least two strengths, two weaknesses, two opportunities and two threats of each brand.
Further you are required to indicate that if LG wants to remain in competition with Dawlance and with other local manufacturers in Pakistan after bearing all the high import related costs and wants to break the existing competition in appliances and refrigeration industry then is it following red ocean strategy or it is following blue ocean strategy?
Note: Remember that strengths and weaknesses are the internal factors of an organization. And opportunities and threats the external factors of an organization.
Notes and articles on blue and red ocean strategy are available in the download section of LMS.
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