The CMD's Objectives
Upgrade the living standards of the employees at the same time creating the environment for a satisfied workforce enabling even minimum wage earner of a company to access necessities and luxuries of life.
The Features of Scheme
- ZERO DOWN PAYMENT
Down payment is the amount which is required to be paid initially for signing a hire purchase agreement. All the companies providing installment plans require a certain amount to be paid at the start of the agreement. After receiving this amount, the companies issue installment plans with specific rate of interest depending upon the period in which the total cost is to be paid. The amount of monthly installments varies according to the amount paid as down payment. PEL provides a wonderful facet of ZERO down payments to its precious customers. This eases the customers to start paying installments without investing any amount in beginning of the agreement. PEL believes “Customers are real profit.”
- ZERO INTEREST FOR 12 MONTHS.
The wonderful feature of the scheme is that for the first twelve months of the installment plan, no interest has been levied on the customers easing the plan of payment for them. PEL is actually cutting its own cost by providing interest free installment package to customers. Providing appliances on installments means that PEL will receive payments in future and it is its right to receive monetary benefit for amounts receivable. But to facilitate its consumers, it is bearing the cost of one year interest itself sacrificing its profits.
- LOWEST PRICE.
The competition is too high. National and International brands are seeking and striving hard for market portions. They are using each and every possible way to gain the market halves. There is a pursuit of being market leader. The strategy adopted by PEL is to provide international quality and standard products at a price lower than that of competitors are offering. But it is pertinent to mention that PEL, while offering lowest possible prices, has never compromised on the quality of the products. It is still having good repute in the market.
- FINANCING WITH LOW MARKUP
As mentioned earlier, the first year in the installment plan does not ask for any interest at all. The subsequent years require some amount of interest to be paid alongwith the principle amount. The financing is provided in collaboration with The Bank of Punjab which arranges loans for customers to buy products. Low markup rate is offered by the BOP on the amount of loan provided to the customers. This facility is provided to PEL customers by joint effort of The Bank of Punjab and Pak Elektron Limited (PEL).
- LOW PROCESS FEE
The process of finalizing the deal is a backbreaking and includes a lot of groundwork i.e. gathering preliminary information from the customer, assessing the authenticity, legitimacy and genuineness of the customer, consulting with the relevant financial institution, preparation of agreement, signing of MOU (Memorandum of Understanding) agreement, preparation of suitable/feasible installment plan for customers, delivering the goods to the destinations i.e. doorsteps of the customers etc. In all the other installment agencies, this processing fee is on higher side whereas PEL offers low processing fee for fulfilling all the pre-requisites required for the agreement.
- LOWEST INSTALLMENT BASE
The Overview of Scheme
Since their inception, the demand of appliances products especially refrigerators which is growing at a rapid pace is augmented mainly by increased role of consumer financing through financial institutions and the conventional hire purchase schemes by the retailers.
Products and Appliances
PRODUCTS
Capital Electric Goods
Transformers, Energy Meters and Switchgears
APPLIANCES
Refrigerator
Window type Air conditioners
Split Type Air Conditioners
Microwave Ovens
Televisions.
Operational Requirements
"MOU" TO BE SIGNED BETWEEN PEL, BANK OF PUNJAB AND EMPLOYER
A Memorandum Of Understanding (MOU) is a legal document describing a bilateral agreement between parties. It expresses a convergence of will between the parties, indicating an intended common line of action, rather than a legal commitment. It is a more formal alternative to a gentlemen's agreement, but generally lacks the binding power of a contract.
The MOU is required to be signed between three parties of the agreement i.e.
- PEL
- The Bank of Punjab
- Employer
On the consent of the applicant, PEL signs an agreement with the employer of that particular applicant with an undertaking that on prescribed date of each month, a certain amount will be deducted from the salary of the applicant and submitted to the agency financing the scheme. All the three parties agree on the point that PEL will deliver the goods and receive monthly installment amount, Banks and financial institutes will receive their benefits in shape of interest on amounts given as advances/loans and Employer will deduct the amount from salary of the applicant and submit that amount into the account of PEL. Diagrammatically, it can be displayed as under:
DEDUCTION OF INSTALLMENTS MONTHLY & REMITTING TO BOP
As described earlier, upon showing willingness to purchase PEL appliances, the applicant allows it employer to deduct regular installment amount from the salary of the applicant and its disbursement into the PEL account opened with bank financing the scheme.
MARKING OF LIEN ON TERMINAL BENEFITS TO ENSURE ADJUSTMENT OF LOAN IN CASE OF NON-PAYMENT DUE TO ANY REASON
A lien is a form of security interest granted over an item of property to secure the payment of a debt or performance of some other obligation. The owner of the property, who grants the lien, is referred to as the lienor and the person who has the benefit of the lien is referred to as the lienee. Lien is marked regularly to ensure adjustment of amount in case the applicant could not pay the amount due to some reason. PEL has tried to provide maximum facilities to its customers and has succeeded quite beautifully in doing so.
Process
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Batch wise set of applications shall be forwarded to PEL offices.
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Accounts of the applicants shall be opened in the nearest Bank of Punjab branch and loan shall be disbursed in the same branch.
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Marking lien on employee’s terminal benefits that should cover full Principal amount applied for.
Installment Payments
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Monthly installment amount shall be deducted from the salary of the applicants.
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The respective department shall make transfer to amount.
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Once the funds are credited, instructions for transfer of installment in applicants’ accounts shall be forwarded for the recovery of monthly installment amount from their personal accounts.
Process Flow Diagram
Key Benefits
- Opportunities for low-income base to access necessities & luxuries of life with minimum cost.
- Create harmony between employer and employee.
- Elevation of living standards
- Increased buying power.
- Easy to meet capital expenses.
- Satisfaction in life
Marketing Segmentation of PEL
PEL in the present scenario has divided its market into two major tiers. The first category pertains to Industrial products specifically meant for industrial utilization. This category includes Transformers, Switchgears, Energy Meters and Electric Motors, AC Units, Deep Freezers, Refrigerators, Compressors and Microwave Ovens. The second division is about consumer products including AC Units (both Split & Window Type), Deep Freezers, Refrigerators, Microwave Ovens and Televisions. PEL has again has divided its consumer market segment into further small groups. The upper class of the society can buy PEL products by paying the lump sum amount to any authorized dealer. But there is a huge potential for middle and lower class of the society to purchase PEL appliances on installments. The process has already been discussed in detail.
Marketing Management Orientations PEL follows
PEL is follower and believer or Marketing Concept of Marketing Management Orientation. Its prime objective is neither to earn profits only nor to maximize its production. It is also not using the selling concept which is all about producing and selling the entire range of products. PEL has always identified its market niche. It has observed the needs and wants of its possible customers and then produced its products keeping in view the best interests of its customers. But if we observe its marketing strategies in long run, it’s a strong devotee of Societal Marketing Concept. Its spreading welfare in the market by supplying basic needs of its customers on easy affordable installments.
PEL's Marketing Environment
Micro Environment
Micro Environment includes actors close to the company that affect its abilities to serve its customers—the company, suppliers, marketing intermediaries, customer markets, competitors and public. PEL’s micro environment is briefly shown in the Table following the concepts.
Macro Environment
Macro environment composes of larger societal forces that affect the microenvironment—demographic, economic, natural, technological, political and cultural forces. PEL’s macro environment situation is shown in the Table following the concepts.
| PEL’S MICRO ENVIRONMENT | ||
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Elements | Examples |
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The Company | Pak Elektron Limited. |
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Suppliers | Danfost Germany & Danfost Taiwan etc supply compressors. Other parts are manufactured on own units of PEL including body materials, sheets and other parts. |
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Marketing Intermediaries | Bank Of Punjab, Tranzum Courier Services, OCS, Whole Sellers and Retailers. |
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Customers | Business, Customers, Internal, Resellers, Int’l. |
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Competitors | Dawlance, Waves, LG, Haier, Gree |
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Public | Govt./ Geo, ARY/ UBL, MCB Bank/NGOs. |
| PEL’S MACRO ENVIRONMENT | ||
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Elements | Examples |
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Demographic | 160 Million population, Per Capita Income i.e. US$750 to US$ 800 per annum. |
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Economic Factors | Fiscal and Monetary Policies, Economic Developments & Disasters in the country. |
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Natural Forces | Extreme Nature of weather, suitable working temperature for workers. |
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Technological Forces | Technological Developments have forced PEL to sign agreements of technical collaborations and assistance with Multi National Organizations. |
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Political Forces | Political Instability in the country causing market crashes in the stock exchanges always affect negatively. |
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Cultural Forces | People’s believe to go for best national PEL products rather than to purchase sub-standard Chinese |
PEL's Market Share
PEL has only one major competitor in the market having neck to neck antagonism and its none other than Dawlance. PEL and Dawlance jointly own 89% of market share in consumer products leaving behind all others. See following figure for reference.
PEL's Revenue Utilization
Following diagrams illustrates the profit utilization of PEL:
Recommendations by ABLAZE !!!
Following are some vital recommendations for PEL to make its scheme even better:
- PEL is currently having alliance only with The Bank of Punjab in providing consumer appliances to its target market. We recommend that PEL should sign agreements with others banks as well to not only create a competition between financial institutions for offering loans at easy terms but also for customers to get benefit and more than everything for its own aggregate sales.
- Over the last decade, IRR (Internal rate of Return) has increased more than twice causing substantial increase in the cost consumers have to pay. When the scheme was started in 2003-04, the IRR was 8% which has grown to 18% now making it difficult for PEL and customers to go further.
- State Bank should take action in bringing down the IRR for welfare of needy consumers. It should play its role for making adjustments for IRR against consumer products and luxuries. Although its too high for Luxury products like Auto Financing and Home financing etc. but it should be reduced for basic needs of consumers.
- Having products of international standards, PEL should introduce its products to foreign markets having potential and growth opportunities. With its relatively low cost, enhanced quality and outstanding features, PEL can bring prosperity for Pakistan by exporting PEL’s brands in international markets.
- PEL should introduce such schemes in small cities also so that deserving people can be benefited who are living beyond the minimum living standards.
- PEL should take welfare steps by providing AC Units to schools and other charity organizations at cost price. It will create a brand recognition and icon in minds of children which will certainly be benefited for PEL in future.
- PEL needs to enhance its sales and service network to all parts of country. Presently it is focusing on big cities.
- PEL has already got a significant share in the consumer products market. It can beat its strong rival Dawlance by introducing some innovations in its products or extending its after sales and support policies.
Conclusion
Ablaze bring to a close that PEL without any shadow of doubt is making headway for becoming a market leader. Its marketing strategies are destined for social welfare and are certainly influencing the consumer with its glittering image of a sound lifetime consumer product supplier.
Group: