All About Brands1

BRANDING EXPORTS

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Chapter

1 All About Brands By: M. Munawar

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Brand The word brand literally means a mark burned into anything with a hot iron [1]. American Marketing Association defines brand as a name, term, sign, symbol, or design, or a combination of them, intended to identify the goods and services of one seller from those of competition. Hence every new product introduced in the market can be considered as a brand. It is essentially significant to know what a product is. A product is anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or need [2]. A brand is therefore a product, but one that adds other dimensions that differentiate it in someway from other products designed to satisfy the same need. [3] These differences may be rational or tangible like product features and performance, or something symbolic, emotional or intangible like pride, trust, satisfaction, pleasure, love etc. [4] Hence a brand is personification of a product. Brands are not created in fact; brands are born just like all of us. They grow over a certain period of time, reach their youthful maturity and ultimately die. It all depends on how brands are branded and the strategies adopted by their creators that some brands are still young and promising even after a century while others are unable to celebrate their first birthday. Branding has become the core of the marketing process. In today’s dynamic world selling concept is being replaced by marketing concept with main emphasis on branding as purchase decisions are made on the basis of brands; not on the persuasive skills of the salesperson.

Why are brands important? In today’s consumer economy, brands have cemented their positions in our lives as important individual. There are many brands that are synonymous with their generic product names as we say ‘Gimme my Nokia!’ instead of ‘Gimme my cellular phone’ or ‘Google this topic’ in place of ‘Search this topic on internet’ or Make the Xerox of these documents and not ‘Make the photocopies of these documents’ . Brands act as a facilitator to both consumers and manufacturers in many ways. A brief list of these functions is shown in below: [5] For Consumers • Identification of source of product • Assignment of responsibility to product maker • Risk reducer • Search cost reducer • Promise, bind, or pact with maker of product • Symbolic device • Signal of quality For Manufacturers • Means of identification to simplify handling or tracing • Means of legally protecting unique features 2

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Signal of quality level to satisfied customers Means of endowing products with unique associations Source of competitive advantage Source of financial return

Can anything be branded? This is one of the frequently asked questions or perhaps the frequently raised doubts in the marketing classes all over the globe. The answer is a sure YES! Since branding gives a personality to a product with whom people can relate themselves and emphasizes on the differentiating factor of a product, there is nothing left in this world that cannot be branded. People are often perplexed with the issue of branding of commodities, but commodities have successfully been branded. Twenty years ago, does any one thought of commodities like common salt, spices, chicken, wheat flour, or even water to be branded? But look at the shelf now! Hubsalt, Shan masaala, K&N’s chicken, Ashrafi aata and Aquafina are all brands. In this killer competitive consumer world, firms do not fight for consumers, but brands fight. Brands have now become warriors.

Misconceptions about brands It is a general perception that branded products are expensive than their unbranded counterparts. This belief is not always true. Although brands have their own value in terms of monetary unit (in millions of US$) developed over a period of time, but generally the additional price that a consumer pays for a branded product is for the superior product quality and satisfaction associated with the brand. In the aftermath of attack on Afghanistan, a movement of boycotting foreign products was initiated. Numerous local brands popped up with mass marketing and trying to take the place of the international brands. Colas like makkah cola and amrit cola started a huge promotional scheme well supported by the negative propaganda against Pepsi and Coca Cola. After a few months of failure they were on the back foot and today they can hardly be found. Analysing the case deeply, it was noted that the price difference was Rs. 5 on the 1.5 litre bottle (Makkah Cola Rs. 40 and Coca Cola Rs. 45) but the consumers opted for the latter and paid Rs. 5 extra to get the better taste with best quality. Hence brand represents the image of the product and its related attributes in the minds of the consumers. To prove my point that brands are not always expensive, I would like to give the oft repeated example of Hindustan Lever selling sachets worth over a billion US$ per year [6]. Who bought those sachets? Neither Mittal [7] nor the elite class of Mumbai; but the common folk! A huge number of which lives behind the poverty line. An argument was raised that brands cause a social disparity. Here again I would advocate for brands by quoting another example. Roshni dikhata hai, Dance bhi karata hai, Subah ko jagata hai Bolo Kaun?Mera Nokia! This is the tag line of the Nokia TVC aired nowadays. One of the previous TVC of Nokia sounded like Mama hum bhi Nokia le lain....! In both of the TVCs, common folk is shown reaping the benefits of Nokia cell phone with joy and satisfaction. I can find a second hand Nokia for Rs.1000 while the affluent can purchase a Nokia for Rs. 75000. Both of us bought Nokia, a brand! Where is the disparity? It’s gone! As a matter of fact brands reduce social disparity as if a rich and affluent can purchase a shampoo bottle; at least I can afford a single sachet of that product. Hence the difference is gone as both are now using a branded shampoo! Brands are as innocent as a new born and as attractive as youth; brands are not good or bad but there are the people behind those brands that makes them good or bad.

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Chapter

2 Branding Exports By: M. Munawar

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Branding of export goods The exports of Pakistan were US$ 16.97 in the fiscal year 2006-07. [8] According to the statistics there was a 3 % decline in the exports as compared with the previous fiscal year of 2005-06 and a 9 % short fall of the target set by the TDAP. Besides other factors, one of the overlooked reasons for the decline is the lack or absence of branding of the export goods from Pakistan. Ironically TDAP advertised for the post of the marketing consultant of international level [9] instead of a branding expert. With a variety of export sectors we chose those ones keeping in mind the future scope of increased exports. These sectors are: Sector Textile garments Leather products Surgical Instruments Sports goods Cement

Exports (US$) [10] 3346000000 972000000 3000000 97000000 475000

% Share in total exports 19.71 5.73 0.0176 1.7 0.0027

This variegated choice of industries helped us to have a better insight of the exports of the country with main focus on the selected sectors as mentioned above.

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Chapter

3 Leather Products By: M. Munawar

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The leather industry enjoys the status of being the 3rd largest foreign exchange earning sector after the textiles and agriculture. In the fiscal year 2005-2006, the leather industry as a whole achieved landmark exports of more than US$ 1 Billion [11] that is well above the target set by the Government. Some of the countries to which Pakistan exports to are Hong Kong, Italy, South Korea, China, Germany, Japan, South Africa etc. [12] There is a huge communication barrier between the producer the end user of the product. The TDAP was quite swift in their response by mailing me the list of leather goods exporters in a single day. A formal request along with a questionnaire was sent to most of the exporters but only one reply has been received. Quite a few email addresses have been closed while most of the URL addresses were under construction. How come branding is possible with such a poor communication network in this dynamic cyber age? The leather garments sector the most significant and largest sub-sector of the leather sector. Leather garments are fashion apparel and naturally, the demand for leather garments fluctuates. With the entry of China into mainstream leather garments manufacturing, the prevalent trend has been that large orders are being taken by China and we serve as the residual market. [13] Therefore, China is too big for us to be a competitor. The reason for this is that the Chinese leather industry has the capability to fulfil large orders at one go, whereas, the same order will have to be given to a number of manufacturers in Pakistan. Our main competitors are Italy, Hong Kong and India who are making technological advancement in this field. On the other hand in our country the number of LGMUs (Leather Garment Manufacturing Units) is on a decline and entrepreneurs are shifting towards new businesses. The number of LGMUs is around 350-400 out of which only 150 are registered members of PLGMEA (Pakistan Leather Garment Manufacturer’s and Exporters Association). [14]

Pakistan’s Share in the Global Market Although Pakistan has failed to acquire a good international market share but its share has been quite constant with a few seasonal fluctuations. The country’s global market share is depicted in the following illustrations [15]: Global share in Exports (value in $000') of Finished Leather 2001 % 2002 % Country

2003

%

2004

%

2005

%

Italy

3,753,219

21.70

3,649,049

21.38

3,925,248

21.27

4,216,484

20.73

3,913,849

20.05

Hong Kong

1,866,255

10.79

1,824,871

10.69

2,310,426

12.52

2,690,922

13.23

2,773,502

14.21

China

896,442

5.18

956,705

5.61

1,144,073

6.20

1,399,063

6.88

1,562,326

8.00

Brazil

872,388

5.04

955,896

5.60

1,057,071

5.73

1,290,193

6.34

1,394,313

7.14

USA

884,142

5.11

843,859

4.94

877,566

4.76

1,190,805

5.85

1,082,539

5.55

Korea

1,240,654

7.17

1,116,413

6.54

1,012,903

5.49

983,547

4.83

855,721

4.38

India

464,223

2.68

506,480

2.97

548,811

2.97

582,734

2.86

638,178

3.27

Pakistan

245,754

1.42

240,459

1.41

250,988

1.36

284,976

1.40

306,662

1.57

Others

7,070,904

40.89

6,972,366

40.86

7,324,227

39.69

7,705,500

37.88

6,993,320

35.83

Total

17,293,981

100.00

17,066,098

100.00

18,451,313

100.00

20,344,224

100.00

19,520,410

100.00

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Global Share (Value in $ 000') Exports of Leather Garments Country

2001

%

2002

%

2003

%

2004

%

2005

%

China

2,775,146

41.73

3,030,219

46.06

3,945,465

50.25

3,321,319

44.33

3,364,730

41.63

Italy

621,682

9.35

628,227

9.55

650,485

8.29

727,086

9.70

769,819

9.52

Hong Kong

643,532

9.68

565,784

8.60

587,190

7.48

648,292

8.65

709,764

8.78

Pakistan

395,487

5.95

305,832

4.65

393,694

5.01

422,850

5.64

590,601

7.31

India

405,843

6.10

300,918

4.57

432,869

5.51

452,095

6.03

514,742

6.37

Others

1,807,808

27.19

1,748,416

26.57

1,841,343

23.45

1,920,406

25.63

2,132,654

26.39

Total

6,649,498

100.00

6,579,396

100.00

7,851,046

100.00

7,492,048

100.00

8,082,310

100.00

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Pakistan’s Competitive Advantage A major anomaly exists in the Pakistan Leather Industry. Whereas 80% of skin leather traded in the world is of sheep, approximately 90% of Pakistan’s leather consists of goatskin. Of the total leather exports from Pakistan, 53% of total exports are that of skin leather. This is opposite to the world trend where skin leather constitutes only 11% of the total leather exports. Our only competitive advantage is the availability of raw material i.e., finished leather, but instead of cashing on it our tanners are exporting it, hence making it as our competitive disadvantage. [16]

The Branding Issues The following are the main branding issues regarding the leather products of Pakistan:

• Insufficient Production Facilities In most of the production units the production facilities are limited and the manufacturers cannot cater to large orders like China. As a result the orders that come to Pakistan are less profitable with a least profit margin. In this situation our exporters are in no position to dictate their terms but in fact are begging for orders in the international market. Since beggars are not choosers and when they do, they end up as losers!

• Lack of vision Most of the Pakistani exporters are still following the obsolete selling concept. They put their energies in getting the order and that’s it! Once the order is shipped, the quest for new order begins. Most of the businessmen are interested in getting easy profits and that is the reason why a huge portion of finished leather is exported. The investors fear investing money in the countries due to the long reining political and social instabilities.

• Lack of innovation Although we have mastered the art of copy-paste in every field of life, innovation and encouragement of innovation in the missing link to the prosperity of the country. Most of the designs made by our manufacturers are copied from international magazines and they cannot launch them as their products due to strict intellectual property right enforced globally [17]. The creative designers are not appreciated in the industry and the heart-broken designer move abroad for a better scope for their innovative abilities.

• Dishonesty is the best policy 9

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Many of the exporters of short term vision follow this policy by selling for one time [18]. Due to non-compliance to the specifications and other requirements a proportion of exporters are banned every year by many international buyers. How can such a non-professional attitude be acceptable in branded products? •

Image of the Country Every country has its own unique perceptions. If the product offered by the country is in sync with the image that it carries, the brand can become a global brand [19]. Unfortunately, the image of the country has been regularly tarnished by our own people since sixty years. After the 9/11 the media is also targeting Pakistan. Dishonesty, lack of commitment, adoption of illegal and unethical practices, and the terrorism hoax have created an ugly picture that international consumers do not consider our products at all. As a result, many Indian and Chinese entrepreneurs are importing Pakistani products to Dubai and putting their brand name over it and making a huge profit over it.

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Chapter

4 Textile Garments By: Tabish Karimi

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Ever imagined which country dresses Hollywood stars? Where all the branded clothes come from? Did you assume they came from high-tech industrial units studded along the coastal trade zones of the Americas or from the fashion capitals of Europe? But what if you found out those clothes came from the back yard of Pakistan i.e. Lahore, Karachi and Faisalabad. [20 – 26]According to Mr. Nadir Farooq, Director, Ibex,

“With apologies to our westernized brand-loyal lot, it’s all ‘Made in Pakistan’ for which these customers pay hundreds of dollars a piece. These snobs pay the extra dollar for an embroidered logo or the invisible tag of some international brand.” This suggests that Pakistan is capable of manufacturing high quality textile products that can easily compete in the International Market. Pakistan also has competitive advantage of producing world’s best quality cotton and adding to this a strong textile industry to bolster the manufacturing. Even after the entire constructive, Pakistan is not able to deliver in the International Market. The Exports Statistics shown by the Trade and Development authority is as Follows: S.NO.

COMMODITY

VALUE 2006-07

1 2 3 4

TEXTILE & GARMENTS BED WARE COTTON CLOTH READYMADE GARMENTS

ACTUAL DEC. VALUE %

3,287,890 843,275 826,193

(190,894) (56,947) (67,921)

(5.81) (6.75) (8.22)

585,938

(17,495)

(2.99)

These figures clearly show that Pakistan exports have plummeted to overall 6% in the textile and garment industry. Even tough Pakistan has the lowest price as compared to competition, best quality cotton and skilled labour, but it still loosing its magnetism as a BPO (Business process outsourcing). The major reasons for this are:

• Negligence on the quality Pakistani Exporters in past have been involved in compromising of quality. This had badly affected the product of Pakistan in the international market. This created a very depressing image of Pakistan and the potential buyers had shifted to India, China and Bangladesh. This also badly affected the image of exporters who never compromised on the quality.

• Lack of sense of Branding and Forward integration Most of the textile units of Pakistan are owner controlled or seth based and they have the selling perspective rather than the marketing perspective. This leads to lack of branding of Pakistani products in the International market.

• Lack of Infrastructure and Law and order Situation: What Pakistan really lacks is the negligence on building infrastructure and the law and order situation of Pakistan. The western countries are very specific on timely deliveries of the shipment which Pakistan is not able to do because the lack of Infrastructure i.e. electricity and also the Law and order situation i.e. strikes and riots.

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International Textile Brands of Pakistan Pakistan even though has expertise in Textile industry but is not able to get its brand launched worldwide on larger extent. There are few brands of Textile and ready made garments that went world wide as a Pakistani Brand such as Juki, Meca, Kansai and etc. These brands were launched in the western world with the Pakistani tag and Pakistani brand on it. The marketing of such brands was not up to the mark and it did not create any impact in the western market. The main reason for this was the initial cost for setting up the brand image was very high. There are few Pakistani exporters that use their own Brands, but these exporters only cater to a miniscule amount of market. They are earning good profit and higher returns but they are not able to launch their products on the larger scale as their competition is with the settled international brands, which spends millions of dollar on their marketing. As a matter of fact, few Pakistani brands have their outlets in the Western world. One of this is Bareeze which have outlets in UAE and UK. But these brands are of the eastern culture. All of them are catering the needs of Pakistani’s settled abroad not for the western locals.

Problems Faced in Launching the Brand Talking about the Pakistani Brands in textile and garments we see good Example in Pakistan e.g. ChenOne by Chenab Textile or Bed & Bath by Afroze Textile. These companies have performed well playing in Pakistan and have successfully launched their Brands. Now the question arises why these companies are not launching their Brand Internationally?? The main reason for this is that the Initial Cost for launching the Brand is very high. For example the Marketing or Administration expense in UK and US will cost more as compared to Pakistan. And also the risk is higher when competing with local brands with strong brand image. That’s why they do not want to risk their investment in the Western countries Secondly, these companies don’t want to expand their brands to larger market because they know they will not be able to meet the demand. And also the law and order situation in Pakistan also hampers for the timely delivery of the desired product. Thirdly, Great deals of EU customers are satisfied with the quality of Pakistani product but they have high concerned over the timely delivery of the shipment. Markets of European countries are highly fashion oriented and their fashion lasts for few months. So if the shipment delays for a span of time this lead to decline in a particular fashion trend the shipment becomes useless. If a Pakistani launches their own brand they would be highly vulnerable to delay of shipments and would lead to negative impact of the brand. Fourth, and the most important is the Jewish lobby phobia, these companies think that Jewish lobby would never want any other brand supersede theirs. That’s why they don’t even compete. They believe that all their effort will go in vain as the Jewish lobby would never stand Muslims brand to gain momentum.

Opportunities 13

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Pakistan has entered the post textile quota era without a creditable textile brand under its belt that would certainly mean bulk of its exports would remain under valued. This is a severe issue for Pakistan because competing countries rely heavily on branding, an area in which Pakistan lacks expertise. Companies are trying to weave their way into unexplored markets in Japan, Korea and Singapore. Since these countries mostly import apparel made of synthetic fibre, a field in which Pakistan lacks expertise, local companies could not capture them in the past and remained dependant on USA for business. But the trend is changing and Pakistan needs to develop expertise in field of synthetic fibre so that it will be able to cater the needs of Far-East market and can achieve the First mover advantage. Also Pakistan needs to give concerns over brand and before launching products in Far-East they need to brand their product intensely so that the potential buyer is assured of the quality. After the quota free regime, opportunities in the unexplored markets of the Far and Middle East have rose a great deal and hopes for a preferential trade status awarded by the US to Pakistan are enough to pump blood into dejected businessmen who are hibernating nowadays.

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Chapter

5 Surgical Instruments By: Rizwan Salim

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Surgical instrument manufacturing industry originated in the early 1940s in and around the city of Sialkot. The sector manufactures a wide range of medical, surgical and veterinary instruments exporting 80-90 % of its production to over 140 countries around the world. PA K I S TA N ’ S E X P O R T S I N 2 0 0 6 - 0 7 [ 2 2 ]

COUNTRY

SHARE (%)

USA

30.74%

Germany

11.55%

United Kingdom

9.83%

Italy

3.77%

UAE

4.09%

France

3.78%

Japan

2.86%

Rest of the World

33.38%

EXPORT OF SURGICAL INSTRUMENTS [23]

YEAR

Value(US $ in million)

2003-04

132.56

2004-05

182.87

2005-06

163.07

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COUNTRIES SHARES IN WORLD EXPORT [24]

COUNTRY

%AGE

USA

24.71

GERMANY

12.33

NETHERLAND

7.13

MEXICO

5.89

IRELAND

5.29

UK

5.23

FRANCE

5.07

JAPAN

4.57

BELGIUM

4.07

ITALY

3.45

PAKISTAN

0.49

OTHERS

21.74

TOTAL

100

Exports of surgical instruments stood at $183 million in July-May 2007 as against $190 million during the same period last year [25]. The major hostile factor behind this decline is due to lack of brand development. Brand name is an important component in export marketing and carries the respective image of product, quality and business-related services. Branded products usually attract higher price advantage. Surgical instruments from Pakistan have carved a respectable place in the world market. Bulks of Pakistan’s exportable surgical goods are re-marketed by reputed international business houses with their own brand names or labels of different origin. Generally speaking, exporters from Pakistan use detachable labels for their products on the instructions of the importers so that they could replace labels of their choice. Both India and China, only repack or stamp Pakistan made instruments and sell them as their own brands.

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Branding Issues Issues related to branding are listed below:

Internal Price War Non-existence of any established brands creates a price war situation among the local manufacturers of surgical instruments. The industry is suffering $800 million financial loss due to internal price war, as the local manufacturers are selling surgical instruments worth $1 billion in $200 million only.

Competition with other developing countries Weak Pakistani surgical brands fails to compete with the giant size industry of China and India because they possess economies of scale and are endowed with superior technological and human resource base. Even if Pakistan markets its surgical instruments in international market it won’t be able to compete lower prices offered by its competition.

Child Labour Pakistani exports of surgical instruments declined in past years due to issues like child labour erected by developed countries. Child labour issue creates a negative impact on the branding of Pakistan’s exports. Many potential buyers deter due to this issue.

Lack of Support by Government Lack of brand development is a major issue concerning this industry. Brand development is an exercise, which cannot be done by a company, as it requires huge resources and expertise. India and China, actually have no manufacturing or technical skills in this field, are still rapidly penetrating the surgical business, only by branding with full support and assistance from their respective governments.

Exports of Forgings & Unfinished Product Since there is a limited and mere existence of Pakistani brands in the International market, export of forgings and unfinished surgical instruments is on rise. As a result of this potential profit is wasted and no contribution is made in development of a brand for international market.

Shortage of Skilled Labour Force Skilled labour force could not be injected into the industry for several years because of which it could not flourish. Low wages do not necessarily give a competitive advantage when labour productivity is also low. It is the unit labour cost which is critical to competitive advantage. Skilled labour force is a source of innovation which strengthens branding.

Damaged Reputation The most significant area of brand building of surgical instruments is to portray Pakistan as a producer of quality goods. Some unscrupulous elements in the export business damaged country's reputation by criminally comprising on quality and dispatched shipments of sub18

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standard goods to make quick money. Beside this other factors that are tarnishing Pakistan image is due to terrible infrastructure and law and order conditions in Pakistan, companies fail to deliver timely shipment to the buyers.

Lack of Acceptance of the Product Some surgical instruments might be excellent and accepted locally but internationally they might be obsolete. This happens due to rapid change in technology. Hence, branding an obsolete product in international market may be a very risky job.

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Chapter

6 Sports Goods By: Shams Saleem Allana

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[31 – 37] The sports good industry of Pakistan has a century old history. It is famous for producing sports items and apparels of fine quality, mainly for the foreign markets. In 2003 there were over 3,000 small and medium sized sports goods industrial units in Pakistan, and some 50 well established industries functioning in and around Sialkot, the hub of the sports goods manufacturing. The number has increased since then.

EXPORT ITEMS & COMPETITORS Among the sports items exported by Pakistan are footballs, hockey sticks, cricket bats and balls, base bats and balls, volleyball, tennis rackets and tennis balls. Presently, Pakistan is competing with India, China, Japan, Taiwan and South Korea in international markets. India and China have an advantage of cheap labour and raw material. Since the entry of Japan, Taiwan and Korea, the industry is tilting towards mechanization and the use of modern equipment, which has resulted in tougher competition for manufacturers and exporters of sports goods in Sialkot.

EXPORT STATISTICS Statistical data revealed a general rise in the export of sports goods until recently. The table below shows a decline of 15.87% the export of sports goods from FY2005-2006 to FY2006-2007.

Commodity Sports Goods

Value FY2005- % share in Total Value FY2006- % share in Total % 2006 (in 000 $) Exports FY2005- 2007 (in 000 $) Exports FY2006- change 2006 2007 311,196

2.08

261,800

1.70

15.87

The decline can be attributed to increasing competition, rising labour and transportation costs, political instability etc. Currently the major importing nations of sports goods of Pakistan include USA, UK, Germany, France, Italy, Spain, Netherlands, Sweden, Denmark, Canada and Belgium.

TWO SYSTEMS OF EXPORTS Although Pakistan exports quality sports goods, it has not been able to establish a name for its sports items in the international market. The truth, in fact is that the sports industry in general has not taken enough steps to begin with, towards creating a worldwide brand image for its products. The sports goods manufactured in Pakistan are sold abroad either bearing popular foreign tags or with their unrecognized actual names. The former system of export usually aims to serve large customer bases while the latter is mostly directed towards small target markets.

1. EXPORT TO POPULAR FOREIGN BRANDS Various sports items manufactured in Pakistan are sold overseas in the name of some of the most reputable global brands. Marketing superior quality of these sports goods with efficient strategies, these well-known foreign brands thereon, are able to generate huge profits and positive equities for their brands. Two noted examples are Kookaburra, a leading brand of cricket balls and Nike, Inc., a distinguished sportswear and equipment maker. A significant fraction of the overall inventory of Kookaburra cricket balls is manufactured in Pakistan. Nike, Inc. also operates on similar lines, whereby it imports a sizeable quantity of hand-stitched soccer balls from Pakistan to sell the same as its own make. 21

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Nike, Inc. is characterized of making its equipments in countries like Pakistan which are in the developing phase, have very cheap labor, authoritarian government and lack of human rights appeal and union movement. The organization’s this practice was first highlighted in a 1996 issue of Life magazine carrying an article on child labor in Pakistan. Nike is criticized for not launching its production directly into the developing country, such as Pakistan, but instead subcontracting it to them by selecting a local firm. Such local firms (SAGA Sports in Pakistan) have to abide by the Nike's international rules and regulations when producing its goods. And it is the duty of the international firm (NIKE) to monitor its subcontracted production units and hold it to tight scrutiny. But this is not what really happens. Both Nike and the local production companies aim to minimize cost and earn the highest amounts of profit. About 80% of international association footballs are made in Pakistan. 75% of these (60% of all world production) are made in the city of Sialkot. Sialkot alone produces over 40 million balls worth $210 million annually employing nearly 60,000-strong highly skilled workforce. Many international brands such as Nike, Adidas, Puma and Derby Star etc are sourcing their supply of balls and other sports items from this export-oriented city and nucleus of the country's cottage industry. Today, almost all international buyers rush to Sialkot to secure their supply chains, building strong and long-term business relations with the local exporters. Pakistan gained 'international celebrity' status in the 1980’s when it produced the 'Tango' ball used in the 1982 FIFA World Cup, which led to further growth of the sports industry. It exported over 55.8 million footballs worth more than Rs.8.5 billion ($185 million) for the Football World Cup held in Germany in 2006.

2. EXPORT AS ORIGINAL LOCAL BRAND NAMES Interestingly, not all manufacturers of sports goods in Pakistan sell their products to their foreign counterparts when exporting. Rather, these producers generally prefer to limit their distribution to an already established group of customers they have in specific cities or countries. For instance, hockey sticks of a renowned local brand ‘Malik’ are readily available in various sports outlets spread across major cities of Holland. Even a number of players on Holland’s domestic and international hockey squad use ‘Malik’ hockey sticks!

BRANDING & PAKISTAN One might wonder what is holding back Pakistan from the branding its sports items despite having a large scale production of fine quality goods and extensive foreign demand. There are a few reasons that address this concern. First, in Pakistan much of the emphasis is on selling rather than marketing of sports goods. This is because marketing of goods in the foreign markets is a strenuous activity that requires long-term planning and a lot of commitment on the company’s part, especially when launching the marketing operations for the first time. Moreover, there is always a risk attached to the money that goes into its management, which avert the companies from walking this path. Second, successfully marketing the products and creating brand loyalties in the foreign markets requires a lot of investment. Unfortunately, sports goods exporting companies in Pakistan lack sufficient funds or an easy access to them in order to undertake the necessary marketing efforts. For example, exporting companies in Pakistan would require heavy funds for advertising its products in the foreign markets in order to compete with popular brands such as Nike and Adidas, as these brands endorse their items with sports’ superstars paying them millions of dollars. Furthermore, endorsements alone would not suffice in order to meet the marketing needs and establish brand loyalties. 22

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Third, lack of basic infrastructures has constricted the exporters of sports goods to go beyond the ‘selling’ thinking and adopt a marketing perspective, which requires substantial finances. Lack of good transport facilities, high export financing duties, rising labour and energy costs and absence of latest technology equipments to achieve economies of scale are some impediments to assuming a marketing orientation. The business community in Sialkot through their joint efforts established the SIAT (Sialkot International Airport) in 2007, which was aimed at easing the foreign trade. It is hoped that this venture will provide impetus to embracing of a general marketing perspective in Pakistan. Last, unstable political climate in Pakistan is very risky to conduct business. Owing to this reason foreign investors substantially limit their investment in the country. Also, local exporters refuse to mend their current ways of doing business and prefer to stick with the ‘do nothing’ strategy.

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Chapter

7 Cement Industry By: Ali Hasan Siddiqui

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[37-44] The Cement Industry of Pakistan is dominated by cartels, often having tussles with the government on pricing of its product. Falling prices, excess supply, inventory build-up, and cutting down on capacity utilization in order to reduce financial losses are all part and parcel of the industry that is often a reflection of the overall condition of an economy. Pakistan is fast emerging as a potential player in the world cement export market, but this picture is not without its flaws. There are a considerable number of issues that have been related to exporting cement that somehow never seem to get resolved. Aizaz Sheikh, Chairman of All Pakistan Cement Manufacturers Association (APCMA) blames the government for discouraging cement export by allowing a duty free import with Rs60 freight subsidy on a bag of 50 kg. The industry wants curbs on cement import and the withdrawal of freight subsidy on import. In addition it also demands a zero excise duty and zero sales tax on cement export with a freight subsidy. When retail cement prices peaked at Rs400 a bag, the government, abruptly opened up duty free import with freight subsidy (Nov. 2007). The banking sources indicate more than Rs60 billion loans to cement industry, indicating a growing interest of manufacturers to expand their production facilities given the growing domestic, as well as international markets. The cement barons have taken up an aggressive capacity expansion program in last few years (33 million tons which is likely to go up to 47- 49 million tons in 2009). According to Taurus Securities, the industry faces another challenge `Financial cost and charges are likely to go up dramatically as most of the expansion is likely to become online in the next two years which then direct all financial cost towards profit and loss statement. Increasing fuel cost as imported coal is said to be worth about $70 a ton. While exports are as hyper as political workers these days, local dispatches had taken a "chill pill" during Nov 07 - something manufacturers wouldn't cherish. However, in a much delayed move, manufacturers have started raising cement prices that currently stand at PKR3,900-4,200/ton levels after touching their trough at PKR3,3003,500/ton during Jul-Aug 07 period. Prices are expected to further rise by PKR500-600/ton by the time winters end. Is this price hike justified? Yes. The reason being that the increase would barely be sufficient, to mitigate effect of approximately 15% surge in coal prices, let alone improve margins. The international rates for cement stand at $48-53 per ton for bagged cement. These rates are very low and it will be possible to compete with these countries only if the government gives incentives. Without the incentives the industry is quoting $53 per ton which is very high and does not compel industry people to enter export market with significant quantities. Monopoly Control Authority (MCA) has remained silent over the prices that have risen from Rs. 140 per bag to Rs. 240 per bag (late 2007). This rise in prices have been due to cutting down of capacity utilization in order to cut down excess supply. First it used to export cement to Afghanistan, but now Pakistan is looking to enter the world cement market in a big way. India and North Africa are emerging as major export markets. Lucky Cement, DG Khan Cement and Bestway have started to expand their capacities in order to meet this growing international demand. As of December 2007, 3 million tons have been exported so far, with the Indian cement demand peaking at 5 million tons. Indian cement demand basically arises out of Tamil Nadu (South India) and Madras (northern Punjab). Iraq is also a major market as it is in the process of restructuring, but supply from Pakistan has remained irregular due to port congestion. Cement Manufacturers in the northern areas of Pakistan continue to feed the market of Afghanistan which stands around 2.5 million tons. Pakistani exporters got a cue, when India started to face cement shortage that could have tampered with its on going construction projects. However the Pakistani exporters started to face many non-tariff barriers (NTB). It took four to five months for Pakistani exporters to get registration and certification from the 25

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Bureau of Indian Standard (BIS). A team of BIS experts also visited a number of cement manufacturing facilities. The issue was, however, decided in July during secretaries-level meeting of the ministries of commerce of both the countries. Actual export of cement to India began late September or early October and according to industry sources, around 0.2 million tons have been exported, so far. Exporters complain that railways freight charges for carrying cement from Lahore city to the border are Rs500 per ton ($8 per ton) while it covers only 35 km. Against this, they say on the Indian side, the freight is only $3 per ton for bringing goods from Chundigarh to the border area. There is also huge demand for cement by large Indian state-owned corporations and recently a delegation also visited Pakistan to seek shipment of around two million ton exports on government-to-government basis. Furthermore the cement exporters and manufacturers that the Trade Development Authority of Pakistan (TDAP) had been claiming to support non-traditional items and non-traditional markets, but they did not extend any help to capture the Indian cement market. The TDAP had been giving freight subsidy to many non-traditional items and markets but did not take any interest in this non-traditional commodity which is being exported to a non-traditional market. When it comes to branding cement, Pakistan is left with a huge abyss of problems that seem never ending. First of all, cement is a commodity that needs to be of the best type for it to be used. No exceptions whatsoever. Over the years the quality of this product has undergone immense scrutiny, because the quality of cement has to be ensured before construction can be performed. Quality control procedures in Pakistan are loose and not something that one should be proud of. Each manufacturer performs its own quality initiatives, rather than a close scrutiny by an arbitrary body. Cement as a brand has not yet emerged. There has been no such manufacturer that stands out in the international market. With the amount of (re)construction and development taking place, cement demand is being quenched from the world over. Major Pakistani brands include Falcon cement, D.G. Khan, Attock, Lucky Cement, among others. The major hurdle however for these manufacturers' remains the smuggling that is carried out of Pakistan to countries like Afghanistan and Tajikistan. This has harmed the country's earning potential as well as the market for cement manufacturers who have been passing through a lot of red tape before being given the go ahead to trade with other countries. Following are the statistics [45] that shown Pakistan's potential as being an important cement exporter. Export Commodity Cement 1)Cement White 2)Cement Clinkers 3)Cement, Portland 4)Others

2003-2004 Value 26966 0 838 26128 0

26

2004-2005 Value 61116 5 1950 59161 0

2005-2006 Value 103681 19 3550 99351 761

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Chapter

8 Conclusions

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Conclusion Branding is the new face of marketing where producers charge a premium price for the promise they made through their brands. Pakistan has a great potential to exploit international branding opportunities with its exports. The image of the country needs to be rebuilt depicting a pleasant and soft image of Pakistan around the globe as peace loving nation. The recent visit of President Musharraf to EU countries and meeting investors and convincing them about investing opportunities in Pakistan is actually is a branding exercise. The President is actually branding Pakistan. The business practices must be made more honest and ethical without exploitation of basic human rights of the workers. In all the sectors except cement, Pakistan is lacking Infrastructure to fulfil international changing demands. We need to have a flexible infrastructure with continual activities of research and new product development so that we can stay at par with the competing nations. It is a valid point [46] that if we cannot brand the entire finish product, at least the components can be branded. This is only possible if we declare our superiority in product quality so that international brands are forced to give us the deserved credit. Although building brands is a difficult exercise and all new entrants are critically evaluated, but we can take a start in the Muslim world and playing the Muslim card cleverly. The government should not be blamed alone. The local exporters lack the initiative of going global because of inconsistency in their manufacturing processes. It is also not wise to cry over lack of facilities all the time as if exporters of Sialkot can build the world’s first privately sponsored airport, then maintenance of roads in industrial sites with public private partnership can be a good option. It is all scattered around us, the resources, the people and the money. A systematic and innovative approach can lead us well in the future and the world can have a true Pakistani brand with a tag Made in Pakistan. Iqbal rightly said: Zara num ho yeh matti bari zarkhez hai saqi

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References 1. Chamber’s Twentieth Century Dictionary 2. Kotler, P. and Armstrong, G., in Principles of Marketing 11/e; p 232 3. Keller, K.L., in Strategic Brand Management 2/e; p 4 4. Keller, K.L., in Strategic Brand Management 2/e; p 4 5. Keller, K.L., in Strategic Brand Management 2/e; p 9 6. Mahajan, V., Banga, K. And Gunther, R., in The 86 Percent Solution; p 2 7. India’s Richest person according to Forbes; www.forbes.com 8. Trade Development Authority of Pakistan; www.tdap.gov.pk 9. Ahmed, T. ; TDAP Receives poor response from marketing consultants, Daily Times;

December, 05, 2007 10. Trade Development Authority of Pakistan; www.tdap.gov.pk 11. Trade Development Authority of Pakistan; www.tdap.gov.pk 12. Ahmed, A.M., Munawar, M. and Khan, O.S., in Leather Garment Industry in Pakistan (un

published; term assignment MBA, IBA) 13. Interview with Mr. Asif Rahim; Secretary, Pakistan Leather Garment Manufacturer’s and Exporters Association. (August 2007) 14. Interview with Mr. Asif Rahim; Secretary, Pakistan Leather Garment Manufacturer’s and Exporters Association. (August 2007) 15. Website of International Trade Centre; www.intracen.org 16. Ahmed, A.M., Munawar, M. and Khan, O.S., in Leather Garment Industry in Pakistan (un

published; term assignment MBA, IBA) 17. Interview with Dr. S. A. A. Tipu; faculty member IBA 18. Class discussion Principles of Marketing; with Ms. Huma Samir Amir; faculty member IBA 19. Ries, Al. and Ries, Laura in The 22 Immutable Laws of Branding; p 145 20. No Boundaries for Quality Fabrics:

http://textile.2456.com/eng/epub/n_details.asp?epubiid=4&id=430 21. Knitting the Brands Together 22. http://www.dailytimes.com.pk/default.asp?page=story_23-4-2002_pg5_4 23. Branding Pakistan 24. http://www.aopp.org/branding.htm 25. Interview With Mr. Ghulam Mustafa , Director G.M. Garment 26. Interview with Mr. Asher Karimi , Proprietor Premio Pak Industries 27. Trade Development Authority of Pakistan; www.tdap.gov.pk 29

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28. Trade Development Authority of Pakistan; www.tdap.gov.pk 29. Trade Development Authority of Pakistan; www.tdap.gov.pk

30. Surgical Instrument Manufacturer Association (SIMA) 31. http://www.dailytimes.com.pk/default.asp?page=2007%5C11%5C01%5Cstory_1-11-2007_pg5_7 32. http://www.blurtit.com/q982277.html 33. http://www.american.edu/TED/nike.htm 34. http://www.stararticle.com/article_110212_Pakistan-exports-558-mn-footballs-for-World-Cup.html 35. http://www.dailytimes.com.pk/default.asp?page=story_2-3-2003_pg5_9 36. http://www.brecorder.com/index.php?id=655160&currPageNo=2&query=sports&search=1&term=2004-1001|2007-12-31&supDate

37. http://www.brecorder.com/index.php?id=667113&currPageNo=1&query=&search=&term=&supDate 38. Outlook for cement industry-by Sabihuddin Ghausi, Daily Dawn ,November 27, 2007 39. Cement industry in a state of recession -by Aamir Shafaat Khan, Daily Dawn, January 25,

2007 40. Problems of cement industry discussed- Daily Dawn, September 4, 2007 41. Pakistan enters world cement market in a big way- By Parvaiz Ishfaq Rana, Daily Dawn, December 28 2007 42. Boosting cement export to regional markets- by Engr. Hussain Ahmad, Daily Dawn, Feburary 19. 2007 43. Cement export prices rise 14pc in three months, Daily Dawn ,May 11, 2007 44. Cartel’ blamed for cement crisis, Business Recorder, November 20, 2006 45. Trade Development Authority of Pakistan; www.tdap.gov.pk 46. Venkatesh, R. and Mahajan, V. , in Products with branded components: an approach for

premium pricing and partner selection; Marketing Science, Vol. 16, No.2, 1997

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