Course: Sales Management

Lecturer: Mr. Amir Khan

Program: MBA (Regular-Evening)

Report by

1) Ahsan Iqbal (15191)

2) Naveed Ahmed (14983)

Date: 05th April 2015

Introduction

Company

Orient Energy Systems (OES) is the most profitable and fastest growing subsidiary of Orient Group which is the only authorized General Electric equipment dealer in Pakistan. OES was founded as a private limited company on April 6th, 1996 to provide reliable and dependable rental services through GE engines and machinery for all types of business in Pakistan. OES has frequently received national recognition for management quality. Recently OES was also conferred with the most distinguished award of Operational Excellence by the GE Dealership Community for achieving the highest operational standards among all GE Rental Stores worldwide.

The core services of OES are to provide power and heavy machinery equipment to companies requiring prime/standby power and civil works. To further serve the current customers, OES has also successfully introduced logistics services specialized for FMCG companies.

Products

As an authorized dealer of GE range of products, OES provides and operates the following products for its customers:

1. Diesel and Gas Generators 2. Forklifts 3. Telehandlers 4. Skid Steer Loaders 5. Crane Mounted Trucks 6. Lighting Towers 7. Compactors 8. Wheel Loaders 9. Cooling Towers 10. Reach Trucks 11. Trucks All products of OES are delivered and operated by its highly trained operators to ensure reliable services and no liability to the customer. GE products are hailed to be manufactured for un-matched quality and safety controls, giving its dealers an edge over competing services providers as well as competing brands.

Services

The services offered by OES can be broadly classified as follows:

1. Rental Operations 2. Operation & Maintenance 3. Built-Operate-Transfer (BOT)

Market Situation

Market structure

The current market structure of the rental industry can be defined as Oligolpoly. In this structure, a situation exists in which a particular market is controlled by a small group of firms. An oligopoly is much like a monopoly, in which only one company exerts control over most of a market. In an oligopoly, there are at least two firms controlling the market.

The biggest player in the equipment rental industry is Allied Rental Modaraba (ARM) which exerts most of the control over the market whereas OES is a relatively stable and growing market player. Given below is the analysis of the Market Structure according to different criteria.

Market Size

Volume According to volume, approximately 5,000 to 6,000 Gensets are currently deployed at customer sites by OES and all its competitors. This figure includes gensets of different brands, ranging from 13 kVA to 2,500 KVA.

Value = The value of the rental industry can be described in the rental revenue earned by all the market players annually which is approximately Rs. 9 Billion. It should be mentioned that rental revenue

Market Players

The industry consists of a few major players (as explained above) and thus the only significant companies are:

Allied Rental Modaraba (ARM) 50% Market Share Orient Energy Systems (OES) 30% Market Share Greaves (GFG) 10% Market Share R.A. Engineering (RAE) 9% Smart Power 1% Engineering Services Limited 1%

Historical Growth Rate

The growth rate of companies in this industry are measured as the number of asset or Fleet size and the increase in revenue. The fleet size of OES has increased by 25% in the last 3 years which satisfactory compared to the growth of its biggest competitor (ARM). In terms of Rental Revenue, growth has been 13% which is more than the past 5 years. The increase in fleet size can be attributed to the increase in demand for rental equipment by manufacturers and civil contractors, combined with the decrease in the price of purchasing equipment from manufactures. The value of dollar has been considerably low over the past year which encourages companies to buy more equipment, forecasting demand for the next 3 years.

Driving Factors for Market Growth

Strategy The strategy for equipment rental business should include economic forecast as well investments in the manufacturing sector. Demand forecasting is not easy since government confirms solutions to many problems but is not able to deliver on most of them.

Customers In todays era, customers are well informed owing to exponentially increasing online presence and promotion of products as well as organizations. Customers are much more involved in cost benefit analysis of products as well as services. Thus customer feedback and corrective actions are very important to maintain customer loyalty.

Finance A strong budgeting and financial control mechanism is important since business is very dynamic and purchasing of parts and inventory is very fast and allocation of costs is a difficult problem to deal with.

Pricing Strategies For players like ARM and OES, it is important to maintain a price floor since the quality of service is perceived by the price quoted. The important thing to consider here is that the customer does not consider the premium because the losses that can be incurred due to shutdown or poor back-up support can be truly significant.

Current State of the market

There has been a significant rise in product competition due to the sudden availability of low-quality products being introduced by China. Even though the market is flooded by such low cost brands, major players like OES and ARM consider it a short term phase since customers do not care about brand but the reliability and maintainability of back-up and uptime services.

Future Potential

According to current and potential demand, there seems to be a constant growth due to a stable demand of rental services. Assuming that the inflow of low cost equipment will continue to grow but will not sustain due to poor back-up support and warranty, rental services will be in demand for the next 5 years. In case the government is able to resolve the energy crises in the stated time of 2 years, OES will have developed its material handling and logistics products.