The Experts

Muhammad Shahid (10023)

Faisal Ahmad (10024)
Muhammad Akram (10011)
Khurram Baig (10039)

Subject:
Marketing Channel

Presented to:
Miss Ayesha Zahid

3rd SEMESTER MBA(Spring)

Superior University
 Acknowledgement

There are many people to whom we are grateful for helping us out with this report. But
first of all we would like to thank the Almighty Allah who gave us the courage and
ability to full fill this daunting task. Then we would like to thank Mr. Manzoor Qadir, Mr
Faiz and Mr. Saim Saeed from Pak hero, for their generous display of hospitality and
kindness for bearing with us and giving us advices to overcome any problem that we
faced. We would also like to our parents for providing the endless cups of coffee and
bearing with us for our working entire nights. Last but not the least we would like to
thank our professor Miss Ayesha Zahid for helping us get back on the right track
whenever we deviated from our course and taking time out of his busy schedule to help
us out whenever we needed any assistance. She was the one who made this report
possible in the first place and gave us the chance to increase our practical exposure. It
was his guidance; persistence and belief in us that really made us overcome all barriers
that we faced.

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 Executive Summary:

We the students of the students of Superior University and required to submit a report on
"Marketing Channel”. There by we have full filled our requirement and have listed our
findings in the following pages. We were required to choose a company and analyze all
its activities in detail. In order to achieve the objective of this project we had to rely on
our own analytical skills as well the information we received from the major players in
the Industry i.e. mainly the leading manufacturer in the Industry as the likes of Pak hero.
We even went further to compile consumer views about different motorcycles and the
dealer opinions on the different brands available. To full fill the extensive requirements
of this report we broke each and every one of the company’s activities in order to
conduct and procure a more in-depth and more meaningful analysis. For each activity
analysis tools such as Internal Factor Evaluation Matrix, External Factor Evaluation
Matrix, In-Depth Activity Cost Analysis and Competitive Profile Matrix are just some of
the tools used in the following pages to bring a consistent and better analyzed answer.
We hope the following pages will be better able to answer and give thoughtful insight
into Pak hero, its competitors and the Industry in which it operates.

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 Company Background

Pakistan is one of those countries of the world where Auto Rickshaws are extensively
used as a public transport. Till 1996, Italian made Rickshaws were used in Pakistan
having 90% market share. In 1996, a young Pakistani businessman and industrialist, Mr.
Muhammad Javed Iqbal introduced “PAK HERO RICKSHAW” in Pakistani market.
Produced within the limited resources this Rickshaw was a masterpiece of quality and
performance which brought about a revolution in the auto industry. It gained extensive
popularity and in a very short period of time, “PAK HERO” became a known name all
over Pakistan. PAK HERO auto rickshaw having similar functions, shape and use as that
of Italian made rickshaw, proved to be a very close substitute for it. It is amazing that Pak
Hero became the market leder in a period of only three year and its demand has been on
the rise ever since.
PAK HERO is a private limited company; its board of Directors cop rises the following
members
Mr. Javed Iqbal
(Chairman/CEO)
Mr. Abdul Hameed
(Director Marketing & Sales)
Mr. Sabir Sharif
(General Manager Production)
Mr. Syed Shahid Mustafa
(General Manager Finance)

Company’s registered office is situated in Lahore, at Lytton Road and its factory is
located at 10km, Raiwind Road, Lahore, Pakistan.
PAK HERO is a private limited company. Its factory is located at 10 km Raiwind Road,
Lahore. Some of the important industrial units of Pakistan lie in this region, being

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declared as “Industrial Zone”. Factory of PAK HERO is spread over four and a half acres
of land. The other units of “PAK HERO is its warehouse and lies adjacent to the factory.
Factory has a capacity to produce 12,000 auto rickshaws, 45,000 motor cycles and 5,000
scooters per annum. PAK HERO established itself by manufacturing the high quality
products. PAK HERO has a separate quality control department for a check at every
stage of the production, from receiving raw material to completion of final product. To
have a complete control over quality PAK HERO is following the international quality
standards as per requirements of ISO 9000 to fulfill the needs of its valuable customers.
PAK Hero’s trained workforce and experienced engineers devote their energies for the
improvement of its products. Experts within the country and abroad are also consulted to
assure the quality. Therefore its quality is, beyond doubt, the best. Although PAK HERO
has entered into automobile market only a few years
ago, even then it has snatched the major market share
from its competitors. PAK Hero is now considered to
be one of the major automobile industries because it has
built a good reputation in quality and performance.
PAK HERO manufactures its products in accordance
with customer needs.
In Pakistan, most of the people use motor cycle as a
private conveyance. Motor cycles of different models
and companies are available in the market such as:
YAMAHA YB 100, KAWASAKI GTO 100, SOHRAB,HONDA CG 125, HONDA CD
70. In Pakistan, the ratio of the people using 70CC motor cycles is higher than the users
of other motor cycles. PAK HERO introduced PH 70CC motor cycle to fulfill the
demand of people who wish to have 70CC motor cycle. PH 70CC is cost effective and
has capacity to travel 70 km per liter.

Features
• Pak Hero Company has 150 Dealers in all over the Pakistan.
• It can offer Rs 3000 margin per bike to their dealers.

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 • Pak Hero Bikes are exported in Bangladesh, Srilanka and Kenya.
• It contain 25 own showroom in Lahore.
• Pak Hero have local supplier for their production material.
• Pak Hero has their own distribution channel.

Channel Structure

Domestic Plant
Manufacturer
(Supplier) (Process)

Finished
Goods

Warehouse

Loaders

Distribution
Centers

End
Authorized
users(Custom
dealers
ers)

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Product Levels

V. POTENTIAL PRODUCT
(Future product innovation & featuring)
Safety measures device installation in bike

IV. AUGMENTED PRODUCT

(Value added product and services)
Good quality, rider comfort, after sales service, image
and status improvement, new design and graphics,
high III.
resale value, low maintenance
EXPECTED PRODUCT cost
(What the customer expects)
More mileage, better acceleration, fuel
economy, and engine durability and
reliability
II. BASIC PRODUCT
Motorcycle
I. CORE PRODUCT
(Needs)
Transport (i.e. conveyance
and mobility)

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 Manufacturing Process

Auto Rickshaw and Motorcycle

Procurement of Spare Parts

Denting and Fabrication of Metal Parts

Spot Welding and Machining of Fabricated Parts

Painting

Composition of Sub Assemblies (such as frame sub assembly)

Fitting and Assembly Line

Quality control

Finished Goods

Rating Against Customer Buying Criteria

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QUALITY & PRICE
Yamaha Suzuki Chinese
Pak hero

Non Price WEIGHTAGE

Attributes affecting %
Customer Choice

PRODUCT RELATED 90%

1. Fuel Consumption
(Price to Consumption 40 8 8 7 7
Ratio)
2. Resale Value 20 8 5 3 0
3. Quality 20 7 7 3 1
4. Durability/Reliability 8 6 6 4 1
5. Image Enhancement 2 4 2 1 0

SERVICE RELATED 10%

1.After Sale Service 7 6 4 0 1

2.Technical Help/Training
3 4 0 0 0

TOTAL 100 % 43 32 18 10
Has quality gone up /down (+/ -) in
Past 4Years Gone Up Gone up Same Going

Relative price today Rs. 40,000 Rs. 58,500 Rs. 59,200 to Rs. 32,000
to 45,000 to 61,300 67,000 to 40,000
Relative Price 4 Years Ago Decreased Decreased Decreased Decreased

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 Description of Members

The member that also support the marketing channel system. In these member include

seller member, order booker, merchandiser, sale promotion officer, tritely officer and sale

areas managers. These members promote the channel system and also work.

 Sale member (who sell the product)

 Order booker (who order the product)

 Merchandiser (who merchandising the product)

 Sale promotion officer (who promotion the product)

 Sale area manager (who observe all activities all member

Area sale
Manager

Terity Officer

Sale promotion
officer

Merchandiser

Order broker

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 Sale manager

Allocation of channel function and flow

Physical flow

Suppliers of Transporter &

warehouse Manufacturer
input

Distributor

Authorized
End users Transport
Dealer

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 Promotion flow

Manufacturer Promotion

End User
Dealer

End Users

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Sales Trends of Motorcycle Industry

For the period of 2004-2005 to 2007-08

(in Number of Units)

Model 2004/05 2005/06 2006/07 2007/08

PAK HERO 300,000 400,000 500,000 600,000

YAMAHA 60,000 79,000 105,330 140,400

SUZUKI 20,000 20,800 21,632 22,500

CHINESE 120,000 142,000 194,800 237,100

TOTAL 500,000 641,800 821,762 1,000,000

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 Key Success Factors
Quality

The major success factor in the Motorcycle industry is of providing quality products at
premium prices. The leading motorcycle manufacturers use the latest technology and
hence provide products that are very effective and give bikes more resistance against
attacks from harmful natural deterioration. The overall motorcycle industry is ISO 9000
CERTIFIED which further provides quality assurance of the motorcycle.

Distribution

The distribution system serves as an effective key success factor. Every leading
manufacturer follows its own distribution structure. This is mainly because the major
manufacturers in the industry believe in establishing a strong distribution network that
will distinguish them from competitors. The overall industry mostly follows a company
to exclusive dealer network.

Pricing and Resale Value

Pricing serves as a key success factor for the motorcycle industry. This is because
majority of the players (Chinese motorbikes manufacturers) charge low prices. The price
acts as a main restraint in final purchase of the motorcycle.
Chinese motorbikes manufacturers are in the market with low pricing compared to
Pakistani manufacturers, in order to attain high market share and high sales growth.
However, fact should be remembered that whether a customer pays less or more, he
wants value for money too; he wants good quality at all levels.
In addition, customer especially those from rural areas, also want high resale value for a
bike.

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Brand image

The motorcycle industry relies on the important key success factor which is the brand
image in the consumers mind.
Research & Development

Continuous research & development is undertaken by the major players in the industry.
This gives them an edge over other industry players, by providing new and improved
products, designed to meet customer needs and choices, at a faster pace.

Durability/reliability

The motorcycle durability and reliability stands out as the second main key success factor
(after resale value) for the rural market. The customers mainly from low income group
and rural areas, who will keep bikes for long period, want durability and reliability
assurance. A motorcycle should be durable for longer experience.

Cheap maintenance

There maintenance expenses of the motor cycle industry are not much high. Maintenance
costs are cheap and parts are easily available.

Discrimination free environment

The overall industry follows a positive work force environment and a well adapted
discrimination free organizational culture.

Strong asset position

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The motorcycle industry has a very high strong asset position in the market. This lets
them easily acquire latest technology upgrades which are necessary to produce newer and
better bikes. The motor cycle industry has a strong asset power in case of investments
due to high visible growth.
Strong fuel economy

It is so economical that the almost whole industry claims says that “in 1 litre you can
drive up to 60 km. This way the industry is offering best fuel average as compared to the
rising petrol prices. This economical advantage to the customers attracts mostly rural
areas and underdeveloped regions having poor infrastructure, which are facing price rise
in petrol as a highly essential threat.

Drive Comfort

This KSF is in relation to the quality of the motorcycle. Industry is offering attractive
drive comfort measures which act as a very essential key success factor. It is an
important feature for customers who are traveling on long routes (like sales people); they
acquire comfortable drive for smoothness in road grip of the bikes.

Training programs:

Extensive training programs to customers, dealers, mechanics and other important

employees. This relates mainly to the awareness increase program in form of training
provided to internal employees as well as external customers. The training increase
knowledge about the product features, functionality and necessary safety
measures/techniques. The training programs have been very successful in improving
customer satisfaction and internal motivation of quality assurance of the product of the
motorcycle industry.

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SWOT Analysis
Strengths

Product
• Brand name image
• Market leadership – Enjoying 56% share
• Efficient performance
• Durability/Reliability
• Quality – ISO Certification
• Easy availability of Spare Parts

Price
• Reasonable price of genuine parts
• Cheap maintenance

Place
• Well established dealer network
• Accessibility to major towns and cities; improving delivery to nearly all parts of
Pakistan
Promotion
• Successful Promotional campaigns via TV and Newspaper channels enjoying
extensive viewer ship
People
• Management/non-management work as a single unit, as a team
• Highly loyal, committed and motivated employees
• Hardworking, experienced and qualified staff
• Technological and managerial know-how

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 • Job evaluation which is totally performance based, gives staff incentive to work
harder each time

Processing
• TQM principles practiced in work processes
• Kaizen (continuous improvement) principle in all processes
• State of art plants and equipment
• ISO 9002 certified
Physical Environment
• Frank and congenial work environment
• Positive work climate and organization culture – single code of dress supports to
maintain discrimination free work environment

Weaknesses

• After sales customer service not up to the level actually expected by the customer.
• Less of a proactive approach to different matters, reactive approach applied more
• Limited investment in high technology equipment
• Price higher than prevailing competition in market, which gives customer
thoughts about nearest substitutes available

Opportunities

• Growing motorcycle market – Estimated bikes 500,000 by the end of 2005

compared to 300,000 in 2004/2005
• Improving economic scenario of Pakistan by contributing more through increased
selling – GDP estimated at 6.8% in 2004/2005. Good crop expected next year.
• Customers realizing quality matters, as problems are already cropping up in new
entrants models
• Initiatives and proposals in process for coping with increased demand of bikes

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 • Newer segments introduced with entry of new models, design, which still have
huge potential for growth

Threats

• Many new features inherent in latest bike models increasing customer

expectations a great deal for the future
• WTO (World trade Order) opening local markets for global competition
• Competitors launching newer models with stress on reduced price for our price-
sensitive economy proving serious threat in near future

Gap analysis:

There are two types of gaps, demand side and supply side gaps. During the audit
of the channel of Pak hero Pvt Ltd., we found both of these types of gaps. These gaps
have been identified by the analysis of the Automobile manufacturing industry. For the
purpose of data collection we used the questionnaire method. These questions were then
asked from the Plant manager of Pak Hero Pvt. Ltd. and then on the analysis of the
interview the following demand side and supply side gaps were identified:-
• Credit purchases
• Timely delivery
• Stock waiting time
• Relying on dealers heavily

o Credit purchases is the supply side gap, because the company

purchases the raw material on credit bases and makes payment
very late due to which the supplier of raw material suffers, thus it
may result in the imbalanced relationship of supplier and the
company.

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 o Sometimes the vehicles are not in the position to deliver the
products, thus resulting in late delivery of the products to the
Dealer.
o Stock waiting time is the demand side gap, because when the
dealer orders for the company’s products then he has to wait for
minimum of 30 days and there is no fixed time delivery that
creates uncertain situation for the authorized dealers of the
products.
o Another demand side gap is that the company is relying heavily on
the dealers for their sales volume which creates the demand side
gap for the firm.

Power and Conflict Characteristics

Power

In the marketing channel of Pak Hero private limited company the main power is

in the hand of company. There are four types of power used in the marketing channel of

Pak Hero private limited company :

• Reward power

• Coercive power

• Expert power

• Legitimate power

o The power of reward is in the hand of company because the

company gives the discounts and allowances to dealers.

o The company can hire a new dealer or to fire an old dealer so the

coercive power is also in the hand of company.

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 o Company have its secrete ingredients and formula so the expert

power is in the hand of company

o Legal documentation between the company and dealer can create a

power for both the dealer and the company is legitimate power.

Conflict

Pak Hero Company has two kinds of conflicts.

1. Goal conflict

2. domain conflict

Most conflict is rooted in differences in channel member's goals, their perception of

reality and what they consider to be their domain or area, where they should operate with

autonomy.

Goal Conflict:

In Pak Hero Company wants higher margin for self but the dealer want higher margin for

self. The company wants higher price to dealer while lower price to end user. Company

wants that dealer purchase more inventories of their products but the dealer wants to hold

less inventory.

Domain conflict:

Manufacturer of Pak Hero wants to sell their product to multiple segments but the

authorized dealer of Pak Hero want to sell the company's product to the target segment.

Manufacturer desire for mass coverage of his product in the market, while on the other

hand the dealer likes to sell their product in selective market

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 Suggestions
1. Stock waiting time is the demand side gap, because when the dealer orders for
the company’s products then he has to wait for 30 days and there is no fixed
time delivery that creates uncertain situation for the dealer of the products.
a. Dealer must be made aware of the products delivery time from the
manufacturer to the dealer so it will reduce the uncertain situation of
the dealer, thus creating their commitment and satisfaction.
2. Communication between the channel members should be improved.
3. Trust and mutual understanding should be developed through out the channel.
4. The profits must be distributed equally based on the value that each channel
member creates.
5. The company may create alliances through the vertical integration to boost
their sales volume up.
6. Try to in touch with customers
7. Also focus other than major cities
8. Develop a system of feedback
9. Focus on advertisement
10. Incentive for dealers

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