Dawlance

Industry Analysis

Dawlance Pakistan is the largest manufacturer of home appliances having a market share of

58%. It has the highest market share in refrigerators (65%) and Chest Freezers (45%). It has

three factories nationwide with the total production capacity of 2.4 million units. Hence, it

not only has the largest manufacturing capabilities but an extensive dealer’s network (1800

nationwide) and service centers as well. Its core values encircle around the reliability of the

product and teamwork.

Dawlance Home Appliance products include Refrigerators, Microwave Ovens, Washing

Machines, Split Air-conditioners & Vertical Freezers. Its primary growth strategy is to

innovate and increase reliability based on consumer insights through in-depth research.

Overall the Home appliance industry in Pakistan is competitive with new entrants making

their way through the market. Moreover, dealers have been recently pressurizing for more

margins and looking for alternative manufactures to achieve that. However, for a better

understanding of the industry let’s look at Porter’s Five Forces to see which players have

more power over others.

Supplier

Suppliers have less bargaining power in this industry for the locally manufactured goods.

This is because Dawlance is a large player and enjoys economies of scale, which

automatically gives it more power since it is able to use these low costs to buy greater

volumes from the suppliers and suppliers need those purchase volumes. Moreover, they’ve

worked to establish strong relationship with their suppliers hence investing in relationship

management gives them support from their suppliers. For the imported good however,

suppliers have greater bargaining power since these a large multinational companies and

Dawlance share in that market is low. Since they get low volumes from Dawlance and higher

from the rest of the players hence they exercise more power over Dawlance here.

Buyer

Dawlance has two types of consumers: dealers and the end user. The dealers are the primary

consumers while the end user are the secondary consumer of their products. Dealers have a

moderately strong bargaining power here since they are not exclusive. That is, they carry

brands of other manufacturers too and influence the end consumer in terms of which brand

they should purchase therefore, giving them power. Having said that, Dawlance has a pretty

strong brand name as well being labeled as No#1 with the largest market share, therefore

dealers bargaining power is not too overpowering. Dawlance deals with appliances that

require greater financial investment from consumers end and has a greater product lifecycle,

hence switching costs for the end user is greater. Moreover, the end consumer is dependent

on the manufacturer for warranty and services after the purchase hence Dawlance holds

greater bargaining power over the end users.

New Entrants

This is not an easy market to enter and hence the barriers for entry are high here. This is

because it requires a high capex, not only in terms of manufacturing capabilities investment

but also for research and innovation. Moreover, products in the home appliances market take

time to establish a recognizable and reliable brand name, something that new entrants can’t

establish overnight. Also, dealers are an essential partner in this industry’s value chain and

hence a lot of time and resources are needed into establishing a long term and trustworthy

relationship with them.

Competition

The major players responsible for growth in this industry are Dawlance, Haier, PEL, Orient,

Waves, LG and Samsung. However, since Dawlance has been leading the industry for the

past 2 decades and maintaining its leadership due to continuous innovation, hence it is safe to

say that it has an upper hand over the current competitors. Moreover, a lot of smaller local

brands along with Chinese companies have popped up in the market but they do not yet pose

a threat since end consumers are still vary of them and view these smaller & Chinese brands

as high risk.

Substitutes

There are conventional methods that are still employed by the end consumers and pose a

significant threat to the growth of home appliance products in Pakistan. For one, maids are

used to hand wash the clothes instead of buying a washing machine and conventional stoves

are used instead of microwave oven. For automatic washing machines, people don’t trust

their maids with such an expensive machine hence the market for this is very small. For the

non-automatic washer and twin tub machines, the cost is low and manual work is still

required hence people give these to maids and use themselves also so market for this is

relatively larger. Refrigerators and Freezers are an essential product for people and are used

extensively throughout Pakistan. In the relatively high-income areas, AC’s are bought

especially during the summers however, for the medium and low-income areas, it is

substitutable by having fans. This is because they not only cost a lot but electricity bills also

shoot up and extensive load shedding in Pakistan means you need to have a UPS to keep

them running thus, this has market with only the high income people. Small Kitchen

appliances are substitutable with manual ways but that is time-consuming. Also, these

appliances are a popular dowry item hence that nullifies the power of substitutes to some

extent.