Five Star Foam

Situation Analysis It means to analyze that where a company has been, where it is now, and where it likely to end up following the current plans

Company:

Contents of Situation Analysis: 1. Environment 2. Product Market 3. Customer Market 4. Marketing Plans 1.

General Environment:

Economic condition of Pakistan Economic condition of Pakistan is disgusting currently. Pakistan is facing liquidity problem now a day, to cater this problem Govet. is going to contract with IMF. Secondly energy crisis are also big hurdle in the way of progress. The weekly reserves of Pakistan are $6.74 bln and foreign debts are $45 bnl. Inflation rate is 25% now a day. GDP growth rate is 5.8% in 2007-08. due to devaluation of rupee, dollar value is uncontrollable. Now value of dollar is Rs:81.1. markup rate has reached to 13%, which induce to increase cost of doing business. Pakistan is going to spend Rs.576 trillion in 2008 on war against terror. Trade Balance of Pakistan is $2.02 bln, Exports are $1.78 bln and Imports are $3.80bln for the month of September.

Situation of Industry: Due to economic crises of country Foam Industry is currently suffering and inhibiting growth. As foam is produced from crude oil waste which is imported from USA, early imports of raw material made by the industry cost them high, because crude oil price was $100 and above per barrel, which affected the manufacturing cost, as a result cost of doing business increased. Now currency devaluation is major problem for the industry because there import cost varies with value of Dollar. Another problem is they are not able to get average cost of each item. Because crude oil price is $40.83 but currency’s unstoppable devaluation is causing high import cost, which has adverse affect on foam industry. But still it is estimated that the foam industry will experience a growth of 10% per annum for the next five years.

Condition of Company in this industry: Market share of company in this industry is 37% and they are eager to increase it further. Hard target set by the management are causing company to grow day by day.

2. Product Market:  First range Product.

density

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Five star

32

•

Decent

28

•

Eagle

24

•

Rebar

22

 Second Range Product: •

Margala

•

Fancy

•

Vicky

•

Marina

 Third Range product: •

Foamax

•

Super one

•

Marshall

•

Rani

Competitor Product: Master Foam 

Molty Double Plus



Master Molty Flex Plus



Master Molty Foam Plus



Master Molty Flex



Master MOLTYFOAM



Commander Plus



Master Commander



Commander Flex



Master Jet



Jet Plus



Jet Flex

Uni Foam: 

Uni Foam



Latex Suprem



Princess

Diamond Foam:



Supreme double



Supreme plus

Sale volume and trends: Since majority of the population lie in lower and middle class and over the last decade the trend toward foam is increasing day by day. Secondly as the furniture market grows our sale volume will also grow. The company has sale outlet in more than 300 cities of the country. Company has sale volume growth more than 20%.

Market share: Al-Khair group has 37% market share in the industry, which they are trying hard to improve, in the same context the company is extending its operation in south of the country especially in Karachi. This will be done through advertising campaign. The advertisement is done through electronic media i.e. T.V. channels like on Express and Geo T.V. are major channel of advertisement.

3. Customer market: Target market: Al-Khair target the •

Upper class

•

Middle class

Life style patterns and usage pattern:  Activity The season of marriages is potential opportunity for us because as demand of furniture increases, trend toward foam purchasing also increases. Winter season is also good opportunity for us.

 Interest: The target audience prefers comfortable bed rooms now a day. Secondly foam mattresses have become symbol of standard.  Opinion: That mattress should be of good quality at reasonable price.

Usage Patterns and Behaviors: Foam is part and parcel of daily life of our target audience according to the Director of the company spend more and less 22 hours a day with foam. For example we sleep on foam when we drive car we sit on foam office chair is also made with foam.

Customer preferences: Customers of Al-Khair group are Quality and price conscious but majority are price conscious.

4. Marketing program: Advertising and promotion program Al-Khair group spend 10% of their total sales on advertisement and promotional programs.

Pricing practices: They set their prices by analyzing the total production cost per unit and price strategies of their competitor especially Master foam. Other competitors are Mahran foam, Diamond foam, Cannon foam, and united foam. They also offer discount prices up to 23% depended upon competitors.

Relationships with dealers/wholesalers/retailers: They have the friendly relationship with their dealers, wholesalers and retailers and provide maximum satisfaction to their customer by providing

•

Offer reasonable profit margin

•

Credit facility

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Returnable claim

SWOT analysis

Strengths  “Aram full time Guaranty life time” By adopting this positioning they are getting advantages on their competitors.  Key staff has 25 years experience  Quality product  Latest technology  Customization(according to customer preferences it is not online)  Efficient Production controlling mechanism  Attentive Marketing research department  Products have required credibility in market  Friendly and fair attitude with employees  Management is committed and confident for success of the company.  Good quality product at competitive  Strong relationship with dealers and retailers.  Centralize system of production.  Experiential marketing.  Effective supply chain management.  We have largest production unit in Pakistan. It manufacturers the full range of low and high density foam.

Weaknesses  Lack of promotional programs  Due to long distance between the head office and production unit its difficult to control employed labour  No plan for exports of foam.  No use of e-business  No use of direct marketing.  No separate research and development department.

Opportunities  There is positive response of people toward foam usage.  Due to low price of crude oil they are getting raw material at low prices and Profit margin will be high  Exemption on sale tax  No District Tax is payable on Foam Products manufactured in Azad Jammu & Kashmir for 5 years.

Threat  Worse economic condition of the country is giant threat to the company and industry as well, because an excellent strategy of the company can be failed.  Political uncertainty of Pakistan has worse effects on business environment. Because it cause inconsistent fiscal policy  High inflation rate is reducing the purchasing power of the people. Current rate of inflation is 25%.  Devaluation of Rupee cause high import cost.

 Energy crisis is major threat because if electricity is not available production is not possible at all.  Company feels vulnerable to reactive attack by major competitor like Master foam.

Al-Khair is making use of the latest available MAXFOAM (Computer monitoring Technology.)