Academic Report on United Refrigeration Industries [Dawlance Refrigerators]
Academic Report on United Refrigeration Industries [Dawlance Refrigerators]
THE HISTORY OF THE FIRM
The UNITED REFRIGERATION INDUSTRIES LIMITED is a branch of all famous Dawood Group, who are pioneer industrialists in the country. The firm was established in 1980 to manufacture White Westing House Air-conditioners and Dawlance Refrigerators Zannussi SPA of Italy under a technical know how agreement. The production started in May 1981. However the demand for the DAWLANCE refrigerators soared and No-Frost models were imported from Korea to be distributed under the brand name of Dawlance and also to give the customer a vast variety of refrigeration models.
In 1989 company opened its new branch in Hyderabad and started the assembling of Deep-Freezers. In 1994 another factory was setup in Landhi to manufacture the range of Chest Deep freezers only and Hyderabad factory was allocated for the production of Refrigerators only. In 1994 the company became an unquoted public limited company from being a private limited company. After then the company has been expanding its operational diameter throughout the Pakistan.
For this purpose the company opened its sales offices all over the country and Karachi was nominated as the head office for the firm. Since 1993 the company started to increase their product line as well and now is supplying 5 products with various product lines.
The company chosen are the manufacturer/assembler of five main products. The Products are
- Refrigerators (Direct Cool and No frost models)
- Deep Freezers (One door and two door models)
- Microwave ovens
- Washing Machines
Their prime product is Refrigerator in which they are the market leaders and the same generates around 63% of their total revenues. So we have decided to do our report on United Refrigeration Industries Limited’s Refrigerators.
The sales turnover of this product is around 1.2 billion rupees per annum with a deviation of around 7%.
PAN PAKISTAN TERRITORIAL DEMARCATIONS AND BASE TOWNS
There are 11 main branches of the firm that operate independently of others. The main branch or the headquarters is the Karachi branch which is also called the central desk for all branches. The complete list of particulars of all branches is followed to the next page,
MARKET COVERAGE POLICY
All sales personnel must be aggressive in sales. Sales personnel are expected to chase orders and not to wait for the dealers to give them the orders. This can only be achieved when:
- They make their daily targets of sales and collection. The target should be discussed with sales manager before each visit. Review of the visits should be made the same day by the meeting between the visiting sales officer and sales manager. It is important to learn any new and/or bad experience in the market and should be sorted the same day so that the officers are better equipped the next day.
- Sales officer must have full knowledge of the stock he has to sell. He must be able to communicate the company’s policy and also make commitments on behalf of the company such that company optimizes from the commitment.
- Dealers must be visited daily in addition sales officer must hold atleast two detailed meetings daily with the dealers who have objections and have outstanding receivable. Preparation of visits and meetings should be made before hand. Strategy should be outlined clearly and must be communicated to the sales manager. It is a must that the visits must be according to a pre-planned schedule until and unless required.
- Information about dealers is a necessity for the sales officer. He should not be dependent on the dealer to be communicated of the dealer’s need.
- Visiting officers must make sure that the Dawlance display is appropriate, notable and prominent. Officers have the authority to take the corrective action on their initiative.
- Importantly the relationship among officers and dealers should be of friends. Both must enjoy equal level of confidence. For this sales officer should be better equipped to solve the dealer problem within the company’s policy and at the same time should not be kept pending.
- Officers should be constantly analyzing the market and screening out the competitor’s strategy. Their judgment should not only be based on dealer’s feedback but should be a sum factor of all variables. Manager should be updated regularly of his actions based on his judgments.
- Sales officers will be termed successful if they control the dealers rather than dealers controlling them.
Basically the consumers are scattered all over Pakistan. They are first to venture in the rural areas, they made new dealers in the rural areas and provided them a very flexible credit policy so that they can make purchase of their product which has enabled these small dealers to actually invest and sell the product. Consumers are also provided with installments facilities to purchase the product. This has increased the demand of their product manifold.
The customers in the urban areas are being classified very conventionally. Here customers are obligated to purchase on hard cash, no credit facilities are being provided. Simple criteria of need and affordability is followed in selection of the customers.
DEALERS/ RETAILERS PROFILE:
The dealers are chosen on their past performances. They are initially rewarded the status of spot sellers and are given monthly targets to achieve. They are not given any credit facility. Their performance as a spot sellers qualifies them for the dealership. There are around 700 small and large dealers and spot sellers of the firm. These dealers are divided within 11 sales branches all over Pakistan which are under the supervision of National Sales Manager. The dealers are obligated to sell on the price tag and not to under cut the pricing policy.
The dealers are given credit facility of 75% to 100%. The dealers are given special incentive schemes so as to motivate them to sell Dawlance brands. The incentives are both cash and non-cash. The most popular incentive among the dealers is Umrah and World Tour schemes which dealers qualify by achieving 50% more of their targets.
PRIME PRODUCT LINE FEATURES
UNITED REFRIGERATION INDUSTRIES LIMITED offers a wide variety of products in this very line. As mentioned earlier they offer both Direct cool and No Frost models. They are available in different sizes colors and designs. The major USP of the product is the quality which is backed by strong brand name of Dawlance.
Another important aspect of the product is competitive prices. Although they are higher than normal market prices but the difference is nominal. The key feature that sells the product is the company’s rapport in the market, dealers and the consumers. Recently they have improved their after sales services as well which has added another strong feature to the product.
MARKET SHARE OF THE PRODUCT
The company is the market leader in refrigerators. It has a wide variety comprising of imported and locally assembled refrigerators which gives them the edge over other products. The interim 1999 product survey showed that the market share of Dawlance Refrigerators has increased to 62% approximately. The total market of the refrigerators has also increased by 5%.
We interviewed the following people in order to make this report:
Mr. Bashir Dawood
Managing Director and Proprietor
Mr. Bedar H. Siddiqui
Executive National Sales Manager
Mr. Mohammed Hanif
Following Data was provided:
- Handouts of the Branch Managers Meeting on 29th September, 1999.
- Standard Operating Procedure of the United Refrigeration Industries Limited’s Sales Department.
The major competitors for refrigeration products are:
- Small competition is also being rated from imported brands of
- is the newest entrant in the market and have a strong and competitive pricing policy with their products having better quality then many other competitors. However the major problem with LG. is that they don’t have a sound reputation in the market and also many scandals associated within their firm is doing no good for their low rapport in the market.
PEL is a old player in the market and has given the toughest time to the firm, but since their product line is very large which includes other small agencies of consumer electronics including irons, sandwich makers and toasters etc. they are facing losses in their investment portfolio which is also effecting their good name in the market and also diverting their focus to such small agencies. Dawlance seize the opportunity and further exploited the fact to their own advantage.
Whirlpool was actually headed by Phillips, however due to continued losses in all SBUs Whirlpool was sold and is now operating independent of Phillips. They have however not expanded their operations so far in Pakistan and is actually consolidating it’s rapport and building a name for its self in the market. However the management thinks that whenever they will start their full fledge operations in Pakistan because of their technology and very competitive prices, they will give them an edge over other competitors.
The imported refrigerators are very highly priced and cater to only 3-5% of the market. Affordability for these product is very low, however their main strength is their durability and quality.
NUMBER OF KEY ACCOUNTS ON PAN PAKISTAN BASIS
The company has around 430 dealers and twenty of which comes in the category of Top Twenty dealers of Pakistan and they are regarded as Key Accounts.
The list of which is given in the next page.
RESPONSIBILITIES FOR HANDLING THESE KEY ACCOUNTS
The key accounts are given special consideration, any problems concerning these accounts are directly handled by the branch sales manager. The sales manger of the area is initially authorized to tackle the problems of these key accounts otherwise his queries and problems are administered to the central desk and the ENSM takes special interest to sort out their problems. Each and every visit to the branch rather routine or situational follows a visit to these key account holders. These account holders are given special discounts and rebates. On the basis of their past performances these dealers are taken to the annual World tour even if they fall nominally short of their targets.
The company faces very conventional external environmental constraints. The points that we gathered from observing the sales department we came across with the following
- The literacy level among the dealers is very low. The sales officers have to answer all their queries structured or structured and at the same not only to satisfy them but also not offending them.
- The households have the same problems. Due to their low exposure to such products they create hassles for the after sales service departments and even for petty things they call the department to help them out.
- The dealers are reluctant to clear the outstanding amounts and some even hire hitmen to scare the company. Company in turn takes police protection to assist their sales and collection department.
- The environment has become competitive. They must provide the constant services to all of their dealers and customer to attain them and avoid brand switching. For this, company offers gift schemes to enhance the moral and motivation of the customers.
- Recently the inflation and other economic crises has lead to increase in expenses in dealers expenditures which cannot be covered by the extensive incentive schemes hence the margins have gone down.
- The dealers resort to price under cutting just to sell the product. This diminishes the per unit product margin and also the interest of the dealers in the that particular product In which they resorted to undercutting. So the company has to keep the checks so that such practices are reduced.
- The competition has increased. There are no quasi profits left to harvest. The companies have to work hard to survive and maintain their positions. That’s why companies give different incentives and gift schemes to consolidate their products.
- Because of new era in technology and information emphasis should be given to first hand knowledge so that companies can strike before their competitors do. For which the sales personnel should keep their eyes and ears open to exploit any development in the market structure.
- Overall the company’s management is centralized. The sales officer is being given limited authority to exercise and thus has less influence in the sales. As written above the sales officer has to report to the sales manager every day and thus has ask for his permission to finalize the sales.
- As compared to prevailing market salary and compensation plans, Dawlance offers a relatively small package. The basic salary for an MBA Graduate ranges from 8000-15000.
- The company have a scarcity of young blood in their sales department. In Karachi Branch there are only three sales officers aging between 25-32 otherwise the remaining five officers are above 40. This creates a gap which does not allow any new ideas to come up.
- The company till recently depended totally upon their advertising agency which was free to do all advertising operations which resulted on a loss of control over advertising activities.
- There is no authentic internal audit system, Branch managers are free to do all if not regularly scrutinized.
- The company imports the units to be assembled and due to constant rupee devaluation they face fluctuating raw material cost and ultimately per unit cost, hence their sales margin also fluctuates.
- The company’s main target are the dealers. They try to maximize dealers interests in order to optimize their own. In order to accommodate the increasing expenses of the dealer the dealer margins will undoubtedly be increased.
- Since the economy is reshaping and rupee is gaining against dollar so it is probable that the company will not face any further import price fluctuation and ultimately stabilize their sales margins.
- The rural areas are expanding vast and fast. The demand for consumer electronics is increasing. It is very probable that the company might choose to operate sub-branches in small rural-areas as well.
- The company has been ISO 9000 certified and thus has enhanced it’s brand equity.
SUGGESTIONS FOR IMPROVEMENT:
- There must be a slightly decentralized system however it should entail the audit of the branch manager at the same time. For this the company must explore the dimensions of Information Technology.
- Fresh graduates with handsome salary packages should be included in the sales force and that too at a regular interval.
- Dealer preference must be slightly deviated to the end customer preference. They should also be given incentives and entertained by gift schemes so that overall market demand can be increased.
- The company should also concentrate on mass marketing. The advertising department should be made more effective and also mass media (TV and Print) should be targeted to reach the potential customer.
- The company have not yet explored institutional selling, although there were many lucrative offers but they all were turned down as company has limited technology to cater their enhanced product specifications.
- Spot-sellers are given no incentives. They must be entertained so that the company can actually can increase their potential sales.
SALES PERSON’S EVALUATION SYSTEM
Every sales officers would be given performance objectives at the beginning of the year, or when taking over a new position. These would be discussed and mutually agreed between the supervisor and the employee. They will be used for annual appraisals.
- At the end of the each year human resource department will send the two page performance appraisals form to supervisors/managers for the employees working under them.
- The supervisors would appraise the each employee against the objectives given at the start of the year.
- Both the appraise and the appraiser are suppose to write their comments on the appraisal forms.
- The HRD is suppose to receive the forms from the supervisor and file them in the employees personal files.
- The HRD will prepare the summary for each department which will be reviewed by the Managing Director.
THE SALES PERSON REPORTING SYSTEM
Following the schedule of meetings that should be held at all branches.
|Type of Meeting
|S/Officer & S/Manager
|Sales & W/H
|SM., W/H Inch. & Br. Accountant
|All sales personnel & Customer services
|S/Officer & S/Manager SM., W/H Inch. & Br. Accountant
Consequently each sales manager that is the Branch Manger has to report to the ENSM at the central desk.
The sales manager is basically obligated for four reports.
- Company sales report
- Company stock report
- Company collection report
- Company outstanding report
The Company sales report actually contains the details of the sold unit and invoice number for reference. It contains the particulars of the sales made during the day. It is prepared daily. The Company stock report has to be prepared monthly containing the particulars of the stock in the branch’s warehouse and its value and the date the present stock was shipped. The company collection report contains the details of collections made during the month from the particular customer. It also gives an immediate picture of the dealers’ current credit limit. The company outstanding report actually reciprocates the above report containing the current outstanding limit of the dealers. Sales manager also has to send monthly reports about their tour programs to the central desk.
RECRUITMENT & SELECTION
Following are the guidelines for Recruitment and Selection of Sales Personnel:
- All vacancies must be budgeted and approved by the M. D. Approval will be given according to the manpower standard modified from time to time.
- Supervisor should fill out the “PERSONNEL REQUISITION FORM”, and send it to Human Resource Department. If vacancy is not approved, HRD will notify the concerned branch through the NSM.
- Human Resource Department will internally advertise the vacant position on the notice boards of all company locations.
- All existing employees fulfilling the recruitment can apply directly to HRD.
- Human Resource Department will scrutinize all applications received from existing employees. Applicant meeting requirements will be interviewed by the supervisor making the requisition. If Applicant is acceptable then applicants supervisor will be informed to prepare replacement.
- If suitable candidate is not available internally, HRD will search its data bank. If no suitable applicant is found in the data bank, the vacancy will be advertised in the newspaper.
- Human Resource Department will prepare the advertisement and get it approved by the initiating manager/supervisor, and place it in the Fridays newspaper. Branch cannot give advertisement in newspaper without the approval of the HRD.
- All applicants will received and scrutinized by Human Recourse Department and short listed applicants will be called for interview.
- Applicants will be interviewed by Human Resource Department or, its nominee (Interview Evaluation Form), and if anyone is found suitable he will be sent to the concerned Manager/ Supervisor for final interview.
- The initiating department will interview the applicant (Interview Evaluation Form is to be used) and inform Human Resource whether the applicant is acceptable or not.
- Human Resource Department or its nominee will inform the applicant about the final decision.
- Human Resource Department will prepare the appointment letter after following documents are received. No appointment will be made without the N. I. C.
- Application Form, completely filled.
- Two passport size photographs.
- Photocopy of National Identity Card, all degrees/ certificates, and experience certificates.
- Interview evaluation form with detail of grade, salary, designation and other benefits finalised.
- HRD will send the appointment letter to the concerned manager / supervisor who will deliver it to the new employee. A copy will be sent to Accounts at the head office for inclusion of new employee in the payroll.
- Joining report is to filled out on the first day. Both the new employee and his supervisor / Manager must sign on it and send it to Human Resource Department along with a copy of appointment letter signed by the new employee as acceptance.
TRAINING AND DEVELOPMENT
Human Resource Department is overall responsible for arranging various types of training to company personnel. However for specific job related training the concerned Head of Department has to ensure it either through his own personnel or through the help of HRD.
ORIENTATION OF NEW PERSONNEL
It is the responsibility of the immediate supervisor/ manager of a new employee to prepare an orientation program for the new employee and give it to him on the first day. Supervisor/ Manager has to make sure that the new employee becomes productive in minimum time by becoming aware of his responsibilities.
All Sales officers must acquire complete product knowledge before going out in the field or handling any dealer / customer. Regular courses on product knowledge will be conducted by HRD while launching any new product. National Sales Manager will initiate the requirement. In case any changes / modifcations are made to any existing products , it will be the responsibility of the concerned Sales Manager to show it to all the sales officers.
SALES & MARKETING TRAINING
National Sales Manager will be responsible to compile the requirements of sales & marketing training by having meetings with the sales managers and his personal observations. This requirement will be given to HRD, which will design or arrange a training program.
GENERAL MANAGEMENT TRAINING
As a policy, company continues to develop its Human Resource by On-The-Job and class room training. Every department head is responsible to identify training needs of his department and send it to HRD for arranging the same.
United Refrigeration Industries Limited do not have it’s own training facility. As written above most on the training is done on Job, but training programs are arranged by the Human Resource Department in various external institutions that are catering to the needs of such organisations.
The company rely on experienced sales force and fresh graduates are inducted only as sales officers. Annual Meetings under the supervision of Executive National Sales Manager provides the sales staff with information about the key roles that they have to play for the institution.
These meetings are held in Hotels where by the help of proper visual aids, targets and the performance so far is shown. Policies of the firm for the future is also laid down to the sales staff.
METHODS OF TRAINING
ABC PRIORITIES OF AREAS OF TRAINING
The training programs priorities keep on fluctuating according to needs of the company. The training program for the year 2000 lays top priority to the Customer Service aspect, which include giving more profit margin to the dealers and trying to attract more dealers, this should be placed in Category A.
For Category B, Institutional Selling which has not yet been done at a branch level is now to be done by sales officers at a branch level. Therefore technical and incentives knowledge is to be taught to the sales officer in order to work efficiently.
Category C would include all sort of general and specific training that is needed for the improvement and development of sales force.
BUDGET ALLOCATION OF TRAINING
The Basic salary at United Refrigeration Industries Limited is lower than the average prevailing salaries in the market. The detailed salary limits are given designation wise in the next page.
PARAMETERS AND RATE OF REIMBURSEMENT OFFICIAL EXPENSES
All official expense of the sales staff from Executive National Sales Manager to Sales officer is paid by the company. During an official visit the staff gets a fixed amount of TADA and all other extra expense that are exceeding the limit will be paid by the company on approval from their respective supervisor.
The sales staff has to write a report (Included in the Annexure) on the travelling routines and all the expenses incurred during the visit. During official visits the sales force receives daily allowances which are shown in the table below:
|Allowance in Rupees
|National Sales Manager
|Sr. Sales Officer
|Asst. Sales Officer
EXTRA ORDINARY EFFORTS
NAME, ADDRESS OF ADVERTISING AGENCY
NAME, ADDRESS OF STOCKIST
List of addresses for all Warehouses is given in the Annexure with detail of equipment and facilities at these Warehouses.
CRITICAL CONCLUSIVE EVELUATION
Although we still are the sales management students and our knowledge base is very small to evaluate professionals in the field, however the points which we observed lacking were,
- The sales force was highly dependent on the ENSM, they lacked initiative to tackle any problem related to the incentive schemes and each and every call regarding such queries was transferred to the ENSM.
- There was lack of closing. Although Mr. Malik talked about every thing regarding Dawlance but he never motivated the dealer to actually be a part of the New scheme January 2000 scheme, which was quite astonishing. He was lacking call to action in his slaes call.
- The firm seems to be quite arrogant as they are the market leaders in refrigerators and they were reluctant to act upon the customers call and complaints atonce. The things to do card remained pending for the day before we met Mr. Malik and only new thigs were added on to it instead of old being cancelled out.
- The sales persons have to literally ask for any action from their superiors that was something very uncharachteristic for such a large firm earning in billions. It is quite unprofessional however it do enable the sales force to benefit from the experience of the seniors.
- Overall it was a good experience to work a report on such a dynamic firm with very clearly stated sales objectives. Few things needs to be amended and bearucratic management structure has to relaxed, but such is the problems with Saith organisations as they are the proponents of theory X.