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.