1 TABLE OF CONTENTS - Iris Punjab · Analysis Of Fan Industry Of Pakistan Executive Summary 1-2 3.2.1.1 Large Scale Manufacturers.....3-38

Analysis Of Fan Industry Of Pakistan Executive Summary

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Table Of Contents1 Executive Summary ..................................................................................................................................... 1-16

1.1 Objectives Of The Research...................................................................................................................... 1-17

1.2 Research Methodology.............................................................................................................................. 1-17

1.3 Key Findings Of The Research ................................................................................................................. 1-18

1.4 Recommendations ..................................................................................................................................... 1-21

2 Introduction.................................................................................................................................................. 2-24

2.1 Small And Medium Enterprise Development Authority ........................................................................... 2-25

2.2 Fan Industry............................................................................................................................................... 2-25

2.2.1 Large Scale Manufacturers.............................................................................................................. 2-27

2.2.2 Medium Scale Manufacturers .......................................................................................................... 2-28

Small Scale Manufacturers ............................................................................................................................ 2-29

Vendors .......................................................................................................................................................... 2-30

2.3 The Research ............................................................................................................................................. 2-31

3 Porter’s Analysis Of Manufacturers .......................................................................................................... 3-32

3.1 Barriers To Entry....................................................................................................................................... 3-34

3.1.1 Economies Of Scale ......................................................................................................................... 3-34

3.1.1.1 Large Scale Manufacturers...........................................................................................................................3-34

3.1.1.2 Medium Scale Manufacturers ......................................................................................................................3-34

3.1.1.3 Small Scale Manufacturers...........................................................................................................................3-34

3.1.2 Fixed Costs ...................................................................................................................................... 3-35




3.1.3 Brand Identity .................................................................................................................................. 3-36




3.1.4 Switching Costs................................................................................................................................ 3-37


3.1.4.2 Medium And Small Scale Manufacturers.....................................................................................................3-38

3.2 Rivalry amongst competitors..................................................................................................................... 3-38

3.2.1 Industry Growth............................................................................................................................... 3-38


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3.2.2 Over-capacity .................................................................................................................................. 3-39

3.2.2.1 Economic Downturn ....................................................................................................................................3-39

3.2.2.2 Increased Competition .................................................................................................................................3-39


3.2.2.4 Medium and Small Scale Manufacturers......................................................................................................3-40

3.2.3 Diversity of Competitors .................................................................................................................. 3-40


3.2.3.2 Medium and Small Scale Manufacturers......................................................................................................3-40

3.2.4 CONCENTRATION AND BALANCE AMONGST COMPETITORS ............................................... 3-41



3.2.4.3 Small scale manufacturers............................................................................................................................3-42

3.2.5 Product Differentiation.................................................................................................................... 3-42

3.2.5.1 Large Manufacturers ....................................................................................................................................3-42

3.2.5.2 Medium and small scale manufacturers .......................................................................................................3-43

3.2.6 Barriers To Exit ............................................................................................................................... 3-43


3.2.6.1.1 Vertical Integration............................................................................................................................3-43

3.2.6.1.2 High Brand Equity.............................................................................................................................3-43

3.2.6.1.3 Strategic Interlinkages .......................................................................................................................3-43

3.2.6.1.4 Emotional Barriers.............................................................................................................................3-44


3.3 Bargaining Power Of Suppliers................................................................................................................. 3-45

3.3.1 Number Of Important Suppliers....................................................................................................... 3-45




3.3.2 Availability of substitutes................................................................................................................. 3-46




3.3.3 Switching Cost Of Suppliers Products ............................................................................................. 3-46




3.3.4 Suppliers Threat Of Forward Integration........................................................................................ 3-47



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3.3.5 Industry Threat Of Backward Integration ....................................................................................... 3-48




3.4 Bargaining Powers Of Buyers ................................................................................................................... 3-49

3.4.1 Number Of Important Buyers........................................................................................................... 3-49

3.4.1.1 Large Scale Manufacture..............................................................................................................................3-50

3.4.1.2 Medium And Small Scale manufacturer ......................................................................................................3-50

3.4.2 Availability Of Substitutes ............................................................................................................... 3-50

3.4.3 Buyer’s Switching Costs .................................................................................................................. 3-50



3.4.4 Buyer’s Threat Of Backward Integration ........................................................................................ 3-51

3.4.5 Industry Threat Of Forward Integration ......................................................................................... 3-51

3.5 Availability Of Substitutes ........................................................................................................................ 3-51

3.6 Conclusion................................................................................................................................................. 3-52

4 Porter’s Analysis Of Vendors...................................................................................................................... 4-53

4.1 Entry Barriers ............................................................................................................................................ 4-54

4.1.1 Economies Of Scale ......................................................................................................................... 4-54

4.1.2 Sales Tax Rule And Its Impact ......................................................................................................... 4-54

4.1.2.1 Greater Control Over The Business .............................................................................................................4-55

4.1.2.2 Increased Purchasing Power.........................................................................................................................4-55

4.1.2.3 Increase In Overhead Costs..........................................................................................................................4-55

4.1.2.4 Forgone Revenues........................................................................................................................................4-55

4.1.2.5 Lesser Benefits Of Learning Curve..............................................................................................................4-56

4.1.3 Proprietary Product Differentiation ................................................................................................ 4-56

4.1.3.1 Lesser Technological Innovations................................................................................................................4-56

4.1.3.2 Specifications Of Products Supplied By The Buyer.....................................................................................4-56

4.1.4 Brand Identity .................................................................................................................................. 4-57

4.1.4.1 Low Capacity Of Individual Vendors ..........................................................................................................4-57

4.1.4.2 Lesser Product Differentiation .....................................................................................................................4-57

4.1.4.3 Willingness To Pay ......................................................................................................................................4-57

4.1.5 Switching Costs................................................................................................................................ 4-57

4.1.5.1 Capital Requirements ...................................................................................................................................4-57

4.1.5.1.1 Machinery..........................................................................................................................................4-57

4.1.5.1.2 Raw Material .....................................................................................................................................4-58

4.1.5.2 Access To Distribution.................................................................................................................................4-58


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4.1.6 Absolute Cost Advantage ................................................................................................................. 4-58

4.1.7 Government Policies........................................................................................................................ 4-58

4.1.8 Expected Retaliation........................................................................................................................ 4-59

4.2 Industrial Rivalry....................................................................................................................................... 4-59

4.2.1 Industry Growth............................................................................................................................... 4-59

4.2.2 Fixed Costs/Value Added................................................................................................................. 4-59

4.2.3 Over-Capacity.................................................................................................................................. 4-60

4.2.4 Product Differences ......................................................................................................................... 4-60

4.2.5 Brand Identity .................................................................................................................................. 4-60

4.2.6 Switching Costs................................................................................................................................ 4-61

4.2.7 Concentration And Balances ........................................................................................................... 4-61

4.2.8 Informational Complexity ................................................................................................................ 4-61

4.2.9 Diversity Of Competitors ................................................................................................................. 4-62

4.2.10 Exit Barriers .................................................................................................................................... 4-62

4.3 Buyers Bargaining Power.......................................................................................................................... 4-62

4.3.1 Concentration .................................................................................................................................. 4-62

4.3.2 Switching Cost ................................................................................................................................. 4-63

4.3.3 Buyer’s Information......................................................................................................................... 4-63

4.3.4 Backward Integration ...................................................................................................................... 4-64

4.3.5 Substitute Products .......................................................................................................................... 4-65

4.3.6 Price/Total Purchases...................................................................................................................... 4-65

4.3.7 Impact On Quality ........................................................................................................................... 4-66

4.3.8 Brand Identity .................................................................................................................................. 4-66

4.3.9 Buyer Profit ..................................................................................................................................... 4-66

4.4 Substitution Threat .................................................................................................................................... 4-67

4.4.1 Relative Price Performance Of Substitutes...................................................................................... 4-67

4.4.2 Switching Costs................................................................................................................................ 4-67

4.4.3 Buyers Propensity To Substitute ...................................................................................................... 4-68

4.5 Conclusion................................................................................................................................................. 4-68

5 Strategic Groups In Fan Industry .............................................................................................................. 5-69

5.1 Strategic Groups Based Upon Price And Quality...................................................................................... 5-70

5.1.1 Strategic Group Comprising Large Scale Manufacturers ............................................................... 5-70

5.1.2 Strategic Group Comprising Medium Scale Manufacturers............................................................ 5-71

5.1.3 Strategic Group Comprising Small Scale Manufacturers................................................................ 5-71

5.1.4 Mobility Barriers ............................................................................................................................. 5-72

5.1.4.1 Technological Capability .............................................................................................................................5-72

5.1.4.2 High Brand Equity .......................................................................................................................................5-72


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5.1.4.3 Financial Resources .....................................................................................................................................5-72

5.2 Strategic Groups Based Upon Product Line And Distribution Channel.................................................... 5-72

5.2.1 Strategic Group Using Retailers/Dealers ........................................................................................ 5-73

5.2.2 Strategic Group Using General Mass Distribution ......................................................................... 5-73

5.2.3 Strategic Group Using Limited Dealership And Company Owned Outlets ..................................... 5-73


5.2.4.1.1 VOLUMES........................................................................................................................................5-74

5.2.4.1.2 Managerial Capability .......................................................................................................................5-75

5.2.4.1.3 Financial resources ............................................................................................................................5-75

5.3 Strategic Groups Based On Market Penetration And Product Line .......................................................... 5-75

5.3.1 Strategic Group Comprising Firms With Rural Presence ............................................................... 5-75

5.3.2 Strategic Group Comprising Firms With Regional Presence.......................................................... 5-75

5.3.3 Strategic Group Comprising Firms With National Presence .......................................................... 5-76

5.3.4 Strategic Group Comprising Firms With International Presence ................................................... 5-77


5.3.5.1 Financial Resources .....................................................................................................................................5-77

5.3.5.2 Technological Capability .............................................................................................................................5-77

6 SWOT Analysis Of Strategic Groups......................................................................................................... 6-78

6.1 SWOT of Large Scale Manufacturers ....................................................................................................... 6-79

6.2 Manufacturing ........................................................................................................................................... 6-79

6.2.1 Strength............................................................................................................................................ 6-79

6.2.1.1 Technology...................................................................................................................................................6-79

6.2.1.1.1 VERTICAL INTEGRATION............................................................................................................6-79

6.2.1.1.2 Raw Material .....................................................................................................................................6-79

6.2.1.1.3 Vendor Relations ...............................................................................................................................6-79

6.2.1.1.4 Quality ...............................................................................................................................................6-80

6.2.1.2 Weakness .....................................................................................................................................................6-80

6.2.1.2.1 High Production Cost ........................................................................................................................6-80

6.2.1.2.2 Flexibility ..........................................................................................................................................6-80

6.2.1.3 Opportunity ..................................................................................................................................................6-80

6.2.1.3.1 Technology ........................................................................................................................................6-80

6.2.1.3.2 Mass Production ................................................................................................................................6-81

6.2.1.4 Threat ...........................................................................................................................................................6-81

6.2.1.4.1 CONSOLIDATION...........................................................................................................................6-81

6.2.1.4.2 Vendor Capability..............................................................................................................................6-81

6.2.2 Marketing......................................................................................................................................... 6-81

6.2.2.1 Strength ........................................................................................................................................................6-81

6.2.2.1.1 Broad Product Range.........................................................................................................................6-81

6.2.2.1.2 Innovative ..........................................................................................................................................6-82


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6.2.2.1.3 Branding ............................................................................................................................................6-82

6.2.2.1.4 Distributor Network...........................................................................................................................6-82

6.2.2.1.5 Exports...............................................................................................................................................6-82

6.2.2.2 Weakness .....................................................................................................................................................6-82

6.2.2.2.1 Lack Of Control.................................................................................................................................6-82

6.2.2.2.2 Low Margin .......................................................................................................................................6-83

6.2.2.2.3 Feedback............................................................................................................................................6-83

6.2.2.3 Opportunity ..................................................................................................................................................6-83

6.2.2.3.1 Electricity Prices................................................................................................................................6-83

6.2.2.3.2 Export ................................................................................................................................................6-83

6.2.2.4 Threat ...........................................................................................................................................................6-83

6.2.2.4.1 Imports...............................................................................................................................................6-83

6.2.3 Finance ............................................................................................................................................ 6-84

6.2.3.1 Strength ........................................................................................................................................................6-84

6.2.3.1.1 Relation With Banks..........................................................................................................................6-84

6.2.3.1.2 Management Control System.............................................................................................................6-84

6.2.3.2 Weakness .....................................................................................................................................................6-84

6.2.3.2.1 Sub-Optimal Capital Structure...........................................................................................................6-84

6.2.3.2.2 Rudimentary Tools ............................................................................................................................6-84

6.2.3.3 Opportunity ..................................................................................................................................................6-84

6.2.3.3.1 Capital Market ...................................................................................................................................6-84

6.2.3.4 Threat ...........................................................................................................................................................6-85

6.2.3.4.1 Stringent Credit Policies ....................................................................................................................6-85

6.2.4 Human Resource.............................................................................................................................. 6-85

6.2.4.1 Strength ........................................................................................................................................................6-85

6.2.4.1.1 Skilled Management ..........................................................................................................................6-85

6.2.4.1.2 Labor Relationship ............................................................................................................................6-85

6.2.4.2 Weakness .....................................................................................................................................................6-85

6.2.4.2.1 Decision Making................................................................................................................................6-85

6.2.4.3 Opportunity ..................................................................................................................................................6-86

6.2.4.3.1 Consolidate ........................................................................................................................................6-86

6.2.4.3.2 International Presence........................................................................................................................6-86

6.2.4.4 Threat ...........................................................................................................................................................6-86

6.2.4.4.1 Training Institution ............................................................................................................................6-86

6.3 SWOT Of Medium Scale Manufacturers .................................................................................................. 6-86

6.3.1 Manufacturing ................................................................................................................................. 6-86

6.3.1.1 Strength ........................................................................................................................................................6-86

6.3.1.1.1 Indigenous Machinery .......................................................................................................................6-86

6.3.1.1.2 Raw Material .....................................................................................................................................6-86

6.3.1.2 Weakness .....................................................................................................................................................6-87

6.3.1.2.1 Technology ........................................................................................................................................6-87


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6.3.1.2.2 Vertical Integration............................................................................................................................6-87

6.3.1.3 Opportunity ..................................................................................................................................................6-87


6.3.1.4 Threat ...........................................................................................................................................................6-87

6.3.1.4.1 Consolidation.....................................................................................................................................6-87


6.3.2 Marketing......................................................................................................................................... 6-88

6.3.2.1 Strength ........................................................................................................................................................6-88

6.3.2.1.1 Regional Focus ..................................................................................................................................6-88

6.3.2.2 Weakness .....................................................................................................................................................6-88

6.3.2.2.1 Product...............................................................................................................................................6-88

6.3.2.2.2 Innovation..........................................................................................................................................6-88

6.3.2.3 Opportunity ..................................................................................................................................................6-88

6.3.2.3.1 Exports...............................................................................................................................................6-88

6.3.2.4 Threat ...........................................................................................................................................................6-89

6.3.2.4.1 Competition .......................................................................................................................................6-89

6.3.2.4.2 Forward Integration ...........................................................................................................................6-89

6.3.3 Finance ............................................................................................................................................ 6-89

6.3.3.1 Strength ........................................................................................................................................................6-89

6.3.3.1.1 Relation With Bank ...........................................................................................................................6-89

6.3.3.2 Weakness .....................................................................................................................................................6-89

6.3.3.2.1 Financial Practices.............................................................................................................................6-89

6.3.3.2.2 Management Control Systems ...........................................................................................................6-90

6.3.3.3 Opportunity ..................................................................................................................................................6-90

6.3.3.3.1 Subsidized Loan ................................................................................................................................6-90

6.3.3.4 Threat ...........................................................................................................................................................6-90

6.3.3.4.1 Stringent Credit Policy ......................................................................................................................6-90

6.3.4 Human Resource.............................................................................................................................. 6-90

6.3.4.1 Strengths ......................................................................................................................................................6-90

6.3.4.1.1 Labor Relationship ............................................................................................................................6-90

6.3.4.2 Weaknesses ..................................................................................................................................................6-91

6.3.4.2.1 Low Wages ........................................................................................................................................6-91

6.3.4.2.2 Skilled Management ..........................................................................................................................6-91

6.3.4.2.3 Lack Of Supervision..........................................................................................................................6-91

6.3.4.3 Opportunities................................................................................................................................................6-91

6.3.4.3.1 Training Institute ...............................................................................................................................6-91

6.3.4.4 Threats..........................................................................................................................................................6-91

6.3.4.4.1 Shifting Of Technical Labor Employed On Contract ........................................................................6-91

6.4 SWOT Small-Scale Manufacturer............................................................................................................. 6-92

6.4.1 Manufacturing ................................................................................................................................. 6-92

6.4.1.1 Strength ........................................................................................................................................................6-92


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6.4.1.1.1 Low-Cost ...........................................................................................................................................6-92

6.4.1.1.2 Flexibility ..........................................................................................................................................6-92

6.4.1.1.3 Lead Time..........................................................................................................................................6-92

6.4.1.1.4 Capital Outlay....................................................................................................................................6-92

6.4.1.2 Weakness .....................................................................................................................................................6-93

6.4.1.2.1 Quality ...............................................................................................................................................6-93

6.4.1.2.2 Dependence .......................................................................................................................................6-93

6.4.1.2.3 Economies Of Scale...........................................................................................................................6-93

6.4.1.2.4 Technology ........................................................................................................................................6-93

6.4.1.3 Opportunity ..................................................................................................................................................6-93

6.4.1.3.1 Consolidation.....................................................................................................................................6-93


6.4.1.3.3 Mass Production ................................................................................................................................6-94

6.4.1.4 Threat ...........................................................................................................................................................6-94


6.4.2 Marketing......................................................................................................................................... 6-94

6.4.2.1 Strength ........................................................................................................................................................6-94

6.4.2.1.1 Higher Margins..................................................................................................................................6-94

6.4.2.1.2 Rural Markets ....................................................................................................................................6-94

6.4.2.2 Weakness .....................................................................................................................................................6-95

6.4.2.2.1 Reach .................................................................................................................................................6-95

6.4.2.3 Brand Awareness .........................................................................................................................................6-95

6.4.2.3.1 Product Range ...................................................................................................................................6-95

6.4.2.4 Opportunity ..................................................................................................................................................6-95

6.4.2.4.1 Exports...............................................................................................................................................6-95

6.4.2.4.2 Buying Power ....................................................................................................................................6-95

6.4.2.5 Threat ...........................................................................................................................................................6-96

6.4.2.5.1 Quality Awareness.............................................................................................................................6-96

6.4.2.5.1.1 Innovative Products........................................................................................................................6-96

6.4.2.5.1.2 Energy Prices..................................................................................................................................6-96

6.4.3 Finance ............................................................................................................................................ 6-96

6.4.3.1 Strengths ......................................................................................................................................................6-96

6.4.3.1.1 Low Stakes ........................................................................................................................................6-96

6.4.3.2 Weaknesses ..................................................................................................................................................6-96

6.4.3.2.1 Access To Banks ...............................................................................................................................6-96

6.4.3.2.2 Management Control Systems ...........................................................................................................6-97

6.4.3.2.3 Financial Practices.............................................................................................................................6-97

6.4.3.3 Opportunities................................................................................................................................................6-97

6.4.3.3.1 Government Support..........................................................................................................................6-97

6.4.3.4 Threats..........................................................................................................................................................6-97

6.4.3.4.1 Tax Structure .....................................................................................................................................6-97


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6.4.4 Human Resource.............................................................................................................................. 6-98

6.4.4.1 Strength ........................................................................................................................................................6-98

6.4.4.1.1 Temporary Labor...............................................................................................................................6-98

6.4.4.2 Weakness .....................................................................................................................................................6-98

6.4.4.2.1 Skill Level .........................................................................................................................................6-98

6.4.4.2.2 Weak Management ............................................................................................................................6-98

6.4.4.3 Opportunity ..................................................................................................................................................6-98

6.4.4.3.1 Training Institute ...............................................................................................................................6-98

6.4.4.4 Threats..........................................................................................................................................................6-98

7 Value Chain Analysis Of Fan Industry ...................................................................................................... 7-99

7.1 Primary Activities.................................................................................................................................... 7-103

7.1.1 In Bound Logistics ......................................................................................................................... 7-103

7.1.1.1 RECEIVING ..............................................................................................................................................7-103

7.1.1.2 Warehousing/Inventory Control.................................................................................................................7-103

7.1.1.3 Vehicle Scheduling ....................................................................................................................................7-104

7.1.1.4 Returns To Suppliers..................................................................................................................................7-104

7.1.2 Operations ..................................................................................................................................... 7-105

7.1.2.1 Production Stages For Ceiling Fan.............................................................................................................7-105

7.1.2.1.1 Sheet Cutting ...................................................................................................................................7-105

7.1.2.1.1.1 Machines Involved .......................................................................................................................7-106

7.1.2.1.2 Rotor Casting Or Filling ..................................................................................................................7-106


7.1.2.1.3 Rotor Roughing ...............................................................................................................................7-106


7.1.2.1.4 Stator Turning..................................................................................................................................7-107


7.1.2.2 Winding Section.........................................................................................................................................7-107

7.1.2.2.1 Machines Involved ..........................................................................................................................7-107

7.1.2.3 Lathe Or Turning Section...........................................................................................................................7-107


7.1.2.4 Drilling And Tapping Section ....................................................................................................................7-108


7.1.2.5 Fitting And Assembling .............................................................................................................................7-108


7.1.2.6 Painting ......................................................................................................................................................7-108


7.1.2.7 Final Testing And Packaging .....................................................................................................................7-109


7.1.2.8 Blade Making.............................................................................................................................................7-109



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7.1.2.9 Quality Checks ...........................................................................................................................................7-110

7.1.2.9.1 High Voltage Test............................................................................................................................7-110

7.1.2.9.2 Final Quality Checks .......................................................................................................................7-110

7.1.2.9.3 Power Consumption test ..................................................................................................................7-110

7.1.2.9.4 Current.............................................................................................................................................7-111

7.1.2.9.5 Revolutions Per Minute Checked ....................................................................................................7-111

7.1.2.9.6 Air Delivery.....................................................................................................................................7-111

7.1.2.9.7 Staff .................................................................................................................................................7-111

7.1.3 Outbound Logistics ........................................................................................................................ 7-113

7.1.3.1 Warehousing ..............................................................................................................................................7-113

7.1.3.2 Delivery......................................................................................................................................................7-113

7.1.3.3 Order Processing ........................................................................................................................................7-114

7.1.3.4 Scheduling..................................................................................................................................................7-114

7.1.4 Marketing And Sales...................................................................................................................... 7-115

7.1.4.1 Advertising.................................................................................................................................................7-115

7.1.4.2 Channel Selection ......................................................................................................................................7-116

7.1.4.3 Pricing........................................................................................................................................................7-116

7.1.4.4 Repairs And Services .................................................................................................................................7-116

7.2 Support Activities.................................................................................................................................... 7-117

7.2.1 Procurement .................................................................................................................................. 7-117

7.2.2 Technology Development............................................................................................................... 7-117

7.2.3 Human Resource............................................................................................................................ 7-118

7.2.3.1 Selection.....................................................................................................................................................7-118

7.2.3.2 Compensation.............................................................................................................................................7-119

7.2.3.3 Appraisal ....................................................................................................................................................7-119

7.2.3.4 Labor Relations ..........................................................................................................................................7-119

7.2.4 Firm Infrastructure ........................................................................................................................ 7-120

7.2.4.1 General Management .................................................................................................................................7-120

7.2.4.2 Finance.......................................................................................................................................................7-120

7.2.4.3 Accounting.................................................................................................................................................7-121

7.2.4.4 Legal ..........................................................................................................................................................7-121

8 Financial Practices In The Industry And The Role Of Financial Institutes. ........................................ 8-123

8.1 Financial Needs And Practices In The Industry ...................................................................................... 8-124

8.1.1 Large Scale Manufacturers............................................................................................................ 8-124

8.1.1.1 Debt To Equity Ratio .................................................................................................................................8-124

8.1.1.1.1 Difference In Financial Practices Of Gujrat And Gujranwala Sector ..............................................8-125

8.1.1.2 Magnitude And Need For Finances............................................................................................................8-125

8.1.1.3 Working Capital .........................................................................................................................................8-126

8.1.1.3.1 Pledge And Hypothecation ..............................................................................................................8-126

8.1.1.3.2 Letter Of Credit ...............................................................................................................................8-126


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8.1.1.4 Capital Investment Decisions.....................................................................................................................8-126

8.1.1.5 Financial Markets And Institutions Used ...................................................................................................8-127

8.1.2 Medium Scale Manufacturers ........................................................................................................ 8-127

8.1.2.1 Debt To Equity Ratio .................................................................................................................................8-127

8.1.2.2 Working Capital .........................................................................................................................................8-127

8.1.2.2.1 Letter Of Credit ...............................................................................................................................8-128

8.1.3 Small Scale Manufacturers And Vendors ...................................................................................... 8-128

8.1.3.1 Magnitude And Need For Finances............................................................................................................8-128

8.2 Role Of Financial Institutions ................................................................................................................. 8-129

8.2.1 Banks ............................................................................................................................................. 8-130

8.2.1.1 Ceilings on the provision of credit. ............................................................................................................8-130

8.2.1.2 Lags In Disbursements ...............................................................................................................................8-130

8.2.1.3 Improper Risk Assessment.........................................................................................................................8-131

8.2.1.4 Lending Criteria Of Financial Institutions..................................................................................................8-131

8.2.1.5 Inadequate Systems Of Commercial Credit Analysis And Provisions .......................................................8-131

8.2.2 Development Financial Institutions............................................................................................... 8-131

8.2.2.1 Operational Inefficiencies ..........................................................................................................................8-132

8.2.2.2 Political Pressure........................................................................................................................................8-132

9 Government Relations ............................................................................................................................... 9-133

9.1 Tax Structure ........................................................................................................................................... 9-134

9.1.1 Income tax...................................................................................................................................... 9-134

9.1.2 Sales Tax........................................................................................................................................ 9-134

9.1.3 Local Taxes.................................................................................................................................... 9-136

9.2 Proposed Tax Structure By Fan Manufacturers....................................................................................... 9-136

9.2.1 Income Tax .................................................................................................................................... 9-136

9.2.1.1 VIP Status ..................................................................................................................................................9-136

9.2.1.2 New Assessee.............................................................................................................................................9-137

9.2.1.3 Harassment by Tax Department .................................................................................................................9-137

9.2.1.4 Self Assessment Scheme............................................................................................................................9-137

9.2.1.5 Fixed Tax Scheme For Small Business ......................................................................................................9-138

9.2.1.6 With Holding Tax Rate ..............................................................................................................................9-138

9.2.1.7 Income Tax Deducted By Banks................................................................................................................9-139

9.2.1.8 Concessional Rate Of Taxation..................................................................................................................9-139

9.2.1.9 Appeal Fees................................................................................................................................................9-140

9.2.2 Sales Tax........................................................................................................................................ 9-140

9.2.2.1 Minimum Penalty.......................................................................................................................................9-140

9.2.2.2 Penalty For Delay In Payment....................................................................................................................9-140

9.2.2.3 Rate Of Sales Tax......................................................................................................................................9-140

9.2.3 Wealth Tax ..................................................................................................................................... 9-140


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9.2.3.1.1 Exemption .......................................................................................................................................9-140

9.2.3.1.2 Value Of Properties .........................................................................................................................9-141

9.2.3.1.3 Wealth Tax To Be Abolished ..........................................................................................................9-141

9.2.3.2 Exports Of Electric Fans ............................................................................................................................9-141

9.2.3.3 Excise Duty................................................................................................................................................9-142

9.2.3.4 Zilla Tax.....................................................................................................................................................9-142

9.2.3.5 Miscellaneous.............................................................................................................................................9-142

9.2.3.5.1 Reduction Of Tax Collecting Departments......................................................................................9-142

10 International Markets.............................................................................................................................. 10-144

10.1 Fan Exports From Pakistan............................................................................................................... 10-145

10.1.1 Direction And Concentration Of Pakistan Exports ..................................................................... 10-145

World Markets ................................................................................................................................................ 10-146

10.2.1 Early Entry Markets..................................................................................................................... 10-149

10.2.2 Late Entry Markets ...................................................................................................................... 10-149

10.2.3 Africa ........................................................................................................................................... 10-149

10.2.4 Asia .............................................................................................................................................. 10-149

10.2.5 Central America........................................................................................................................... 10-150

10.2.6 Europe ......................................................................................................................................... 10-150

10.2.7 North America ............................................................................................................................. 10-150

10.2.8 South America.............................................................................................................................. 10-151

10.3 Potential Markets.............................................................................................................................. 10-151

10.3.1 Bangladesh .................................................................................................................................. 10-151

10.3.2 Iran .............................................................................................................................................. 10-151

10.3.3 Sri Lanka...................................................................................................................................... 10-152

10.3.4 Indonesia ..................................................................................................................................... 10-152

10.3.5 Malaysia ...................................................................................................................................... 10-152

10.3.6 Turkey .......................................................................................................................................... 10-153

10.3.7 Yemen........................................................................................................................................... 10-153

10.3.8 Saudi Arabia ................................................................................................................................ 10-153

10.3.9 United Arab Emirates .................................................................................................................. 10-154

10.3.10 Bahrain ................................................................................................................................... 10-154

10.3.11 Oman....................................................................................................................................... 10-155

10.3.12 Qatar....................................................................................................................................... 10-155

10.3.13 Kuwait ..................................................................................................................................... 10-155

10.3.14 Jordan ..................................................................................................................................... 10-156

10.3.15 Lebanon .................................................................................................................................. 10-156

10.3.16 Egypt ....................................................................................................................................... 10-156

10.3.17 Kenya ...................................................................................................................................... 10-157


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10.3.18 Russian Federation ................................................................................................................. 10-157

10.3.19 Kazikistan/Ukraine/Uzbekistan............................................................................................... 10-157

10.3.20 South African CUS.UN ........................................................................................................... 10-158

10.4 Conclusion........................................................................................................................................ 10-158

10.4.1 Existing Export Markets .............................................................................................................. 10-158

11 Detailed Recommendations ..................................................................................................................... 11-160

11.1 Financial Reforms............................................................................................................................. 11-161

11.1.1 Change Of Lending Criteria For Small And Medium Enterprises .............................................. 11-162

11.1.2 Role of Pakistan Electric Fan Manufacturer’s Association......................................................... 11-163

11.1.3 Use Of Formal Contracts With Buyers ........................................................................................ 11-163

11.1.4 Third Party Intermediation.......................................................................................................... 11-163

11.2 Improvement In Operations.............................................................................................................. 11-164

11.2.1 Develop Vendors.......................................................................................................................... 11-164

11.2.1.1 Role Of Large-Scale Manufacturers ...................................................................................................11-164

11.2.1.1.1 Incentive ........................................................................................................................................11-164

11.2.1.2 Role Of Medium/Small-Scale Manufacturers .....................................................................................11-165

11.2.1.2.1 Incentive ........................................................................................................................................11-165

11.2.2 Government Support .................................................................................................................... 11-166

11.3 Promotion Of Exports....................................................................................................................... 11-166

11.3.1 Availability Of Information Regarding Export Markets .............................................................. 11-166

11.3.2 Development Of Current Export Markets .................................................................................... 11-166

11.4 Government Regulations .................................................................................................................. 11-167

11.4.1 Fixed Tax Schemes ...................................................................................................................... 11-167

11.4.2 Consistent Government Policies .................................................................................................. 11-167

11.4.3 Rebates......................................................................................................................................... 11-167

11.4.4 Reduction In Import Duties.......................................................................................................... 11-168

11.4.5 Incentive For Installation Of Modern Plants............................................................................... 11-168

11.5 Role of Pakistan Electric Fan Manufacturer’s Association .............................................................. 11-168

12 Methodology ............................................................................................................................................. 12-170

12.1 Objectives ......................................................................................................................................... 12-171

12.2 Research Methodology ..................................................................................................................... 12-171

12.2.1 Secondary Data ........................................................................................................................... 12-171

12.2.2 Primary Data ............................................................................................................................... 12-171

12.2.3 Research Technique..................................................................................................................... 12-172

12.2.4 Survey Type.................................................................................................................................. 12-172

12.2.5 Sampling Plan.............................................................................................................................. 12-172


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12.2.6 Target Population........................................................................................................................ 12-173

12.2.6.1 Manufacturers .....................................................................................................................................12-173

12.2.6.2 Vendors...............................................................................................................................................12-173

12.2.6.3 Distributors/Retailers ..........................................................................................................................12-173

12.2.6.4 Financial Institution ............................................................................................................................12-173

12.2.7 Sampling Method ......................................................................................................................... 12-173

12.2.7.1 Manufacturers .....................................................................................................................................12-173

12.2.7.2 Vendors...............................................................................................................................................12-174


12.2.7.4 Financial Institutions...........................................................................................................................12-174

12.2.8 Sample Size .................................................................................................................................. 12-174

12.2.8.1 Manufacturers .....................................................................................................................................12-174

12.2.8.2 Vendors...............................................................................................................................................12-174


12.2.8.4 Financial Institutions...........................................................................................................................12-175

12.2.9 Data Gathering Instrument.......................................................................................................... 12-175

12.2.10 Questionnaire Design ............................................................................................................. 12-175

12.3 Limitation ......................................................................................................................................... 12-175

13 Appendix A: Questionnaire..................................................................................................................... 13-177

13.1 Detailed interview with Manufacturers and Vendors ....................................................................... 13-178

Detailed questionnaire for distributors............................................................................................................ 13-189

13.3 Questionnaire for financial institutes................................................................................................ 13-192

14 Appendix B. Trade Statistics................................................................................................................... 14-193

15 Appendix C: Interviews........................................................................................................................... 15-211

15.1 Manufacturers................................................................................................................................... 15-212

15.2 Vendors ............................................................................................................................................ 15-217

16 Bibliography ............................................................................................................................................. 16-223


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List Of TablesTable 1Advertising And Promotional Expenditure By Different Segments Of The Industry. ................................ 3-36

Table 2 Share In Different Segments Of The Regional Market............................................................................... 3-41

Table 3 Power Consumption (Watts/Hour) ............................................................................................................. 3-42

Table 4 Distribution Channel................................................................................................................................... 3-49

Table 5 Sales Tax Structure..................................................................................................................................... 4-54

Table 6 Average Number Of Years For The Vendors ............................................................................................. 4-64

Table 7 Quality Control Department ..................................................................................................................... 7-113

Table 8 Sales tax structure..................................................................................................................................... 9-135

Table 9 Quantity Share Of Pakistan Exports To Different Countries.................................................................. 10-145

Table 10 Export of fans from Pakistan (1993 – 1997)......................................................................................... 10-145

Table 11World Exports of fans............................................................................................................................ 10-148

Table 12 Selected World Trade Statistics............................................................................................................ 10-148

Table 13 Top Five Potential Early Markets...................................................

1 TABLE OF CONTENTS - Iris Punjab · Analysis Of Fan Industry Of Pakistan Executive Summary 1-2 3.2.1.1 Large Scale Manufacturers.....3-38

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