Assignment

on

A Comparison of pricing strategies between competing brands

(Minister vs Walton)

Submitted to
Koushik Prashad Pathak
Assistant Professor, DU
Adjunct faculty, Department of Marketing
Bangladesh University of Professionals

Course
Pricing Strategies and Practices

Submitted by
Tanaz Masaba (16251013)
Shazbah Shafi (16251023)
Syed Ashiqul Islam (16251037)
Danny Dipto Bayen (16251041)
Nafis Islam Sahil (16251051)

Date of submission

21.10.2018
 Letter of Transmittal

October 20, 2018

Koushik Prashad Pathak
Assistant Professor, DU
Course Name: Pricing Strategies in Marketing
Faculty of Business Studies
Bangladesh University of Professionals

Subject: Submission of assignment on “A Comparison between the Pricing Strategies of

Competing Brands: a study on home appliances sector of Bangladesh.”

Dear Sir,

We are pleased to submit to you the assignment you have assigned us as part of our course
requirement. We have tried our best to carry out all necessary research and present the
information we have gained in cohesive and eloquent manner. Working on this assignment
has made us better understand the pricing strategies of competing brands in the home
appliances sector and evaluate the impact of such strategies. We hope you find this report
satisfactory and that it meets all of your expectations.

Sincerely,
Tanaz Masaba (ID: 13)
Shazbah Shafi (ID: 23)
Syed Ashiqul Islam (ID: 37)
Danny Dipto Byen (ID: 41)
Nafis Islam Sahil (ID: 51)

Section: A
Department of Marketing
Faculty of Business Studies
Bangladesh University of Professionals
Table of Contents
Content Page Number
Executive Summary 1
Chapter 1: Company Introduction 2–5
1.1: Evolution 2
1.2: Vision 3
1.3: Mission 3
1.4: Major Customer 3
1.5: Industry Position 4
1.6: Major Achievements 4
1.7: Product Line 5

Chapter 2: Methodology & Literature Review 6–9

2.1: Methodology 6
2.2: Literature Review 7–9

Chapter 3: Findings 10 – 14
3.1: Target Market Segmentation 10
3.2: SWOT Analysis 11
3.3: PESTEL Analysis 12
3.4: USP of Minister 13
3.5: Porter’s Five Forces 14

Chapter 4: Analysis of Findings 15 – 21

4.1: Pricing Strategies & Justification 15 – 18
4.2: Final Pricing Determinants 19 – 20
4.3: Role of Pricing in Profitability 21

Chapter 5: Recommendations 22 – 23

Bibliography 24
Table of Figures & Images

Content Page Number

Image: Minister Logo 2

Figure: Sales Chart 4

Figure: Product Line 5

Figure: Porter’s Five Forces 14

Image: Minister M 242 15

Image: Walton WFE-2H2-RXXX 16

Image: Components of Refrigerator 19

Executive Summary

Minister Hi-Tech Park Ltd. is one of the fastest growing electronics company in
Bangladesh. MyOne Electronics was the first company founded by M.A Razzak Khan,
followed by Minister BD. This paper solely focuses on the refrigerator product line of
Minister BD, the task being comparing its pricing strategies with its competitor(s).

In order to complete this task, the first chapter introduces the company’s missions,
visions and industry position to the reader. Then the complete product lines are given
in the later section of the chapter.

The next chapter is about the research methodology and relevant literature reviews.
This paper features both qualitative and quantitative analysis based on primary and
secondary data sources.

Continuing from the previous chapter, we go through various analytical tools like
SWOT Analysis, PESTEL, Porter’s Five Forces and Segmentation. These tools helped
us to find out necessary data to deduct decisions and analyze them.

We analyzed Minister’s pricing strategies, pricing determinants and their roles to find
out their pricing patterns. This led to the recommendation chapter right after
performing proper justification of their existing strategies.

All the findings and analysis were based on our course and relevant sources to achieve
maximum accuracy. For further analysis, the sources are cited in the appendix and
bibliography.

Page | 1
Chapter 1: Company Introduction

1.1 Evolution
Electronics commodities has been playing an important role in our daily life and at
present has become a basic need for everyone. Considering this importance, Minister
Hi-Tech Park Ltd. have established their electronic industry at Dhirasrom Gazipur in
2002. From the very beginning they have tried to provide customer with highest quality
services, satisfactory after sales service with their quick channel distribution, strong
network of dealers and modern showroom management technics.

At first, they came in business with Myone Electronics and after understanding the
value of local brands they have established Minister Hi-Tech Park Ltd. in 1st June
2013. They have TV, Air Conditioner, Induction oven, Toaster, Blender, Rice Cooker,
Washing Machine and many more products coming under their product line. By
keeping the purchasing power of mass people in mind they set the price of their
products with best quality features. They are also trying to export product all over the
world following the appropriate rules and regulations of global marketing and also
trying to provide an eco-friendly product to implement highest level of corporate and
social relationship.

On the other hand, Walton is one of the largest electronics brands with well-equipped
R&D facilities in the world carried out its production through different subsidiaries
under the banner of Walton group. Walton entered into electronics industry in 1994
and has all kinds of electronics items including TV, Air Conditioner, Sandwich maker,
Blender, Rice cooker, Induction oven, Electric Oven, Automobiles and other
appliances in their product line. They are coming up with products as per the
requirements of customers and setting the price range thinking about the affordability
of mass people. They have their presence in 20 country in the world as is aiming for
expanding business to every country in world by 2020 with their supreme quality and
innovative product design.

Page | 2
1.2 Vision

Our vision is to manufacture products locally and to build Bangladeshi proud. We are
providing Made by Bangladesh product and it includes latest technology and highly
innovative digital products which are obviously better than the competitors. Our design
is export oriented and will touch the heart of the People`s desire from around the world.

1.3 Mission

Our aim to be the leading manufacturer and distributor of high-quality electronics

products in the Bangladesh and in the world, our highly innovative digital products will
be a part of people’s everyday life.

1.4 Major Customer

The major customers of Minister Refrigerator are middle class, lower middle class and
lower-class people. Basically, this consists more than 85% of our population.

Page | 3
1.5 Industry Position

The industry position of Minister Refrigerator is not that much in comparison to other
brands. But it is growing steadily. The lower class and lower middle-class people of
our country are actually showing interests for buying Minister Refrigerator due to its
cheap price and innovative designs.

Sales

6%
14%
32%

18%

30%

Hitachi Sharp Walton Minister Others

1.6 Major Achievements

 In 9th May 2018 Minister have won the world Greatest Brand and Leaders award
as per Indo US Business Social Forum
 Due to innovation and overall attractiveness Minister Hi-Tech Park Ltd. won the
2nd price in Dhaka International Trade Fair in 2018

Page | 4
 1.7 Product Line

The Product Line of Minister is given below:

Minister

Air Home Refrigerator Television

Conditioner Appliances
Microwave CRT TV
CASSETTE AC Freezer
Oven
Freezer M-179 CRT TV Model:
CASSETTE 3
Blue GREAT 2115
TON
Washing
CASSETTE 4 Freezer M-179 MODEL: GREAT
TON Machine Orange 1477
Washing
CEILING AC Machine-6031 LED TV
Refrigerator
CEILING 3 Washing 19” GLORIOUS
M-305 Black
TON Machine-60699 LED TV
Poppy
CEILING 4 24” SMILE LED
Induction M-300 RED V TV
TON
Cooker 32″ SOUND
M-222 BLACK
SPLIT AC MI-RTS2057
POPPY
SYSTEM SMILE
Blue LED TV
SPLIT 1 TON
M-242 SMART LED
MI-RTS2057 NATIONAL
SPLIT 1.5 TON Red
TV
FLAG
SPLIT 2 TON 32” Android
Toaster Curved LED TV
43″ Smart LED TV
Product Width Product Length Product depth
55″ 4K UHD LED
TV

Page | 5
Chapter 2: Methodology & Literature Review

2.1 Methodology
Several methods were used in this assignment to get a clear idea of consumer demand
and perception. This paper is based on both qualitative and quantitative analysis.
Qualitative in the sense that we used information from our study materials and other
related sources to draw conclusions from available data we had in our disposal, and
also to provide necessary feedback. And Quantitative in the way that we measured
the pricing, the determinants, their impacts on profitability and the profit margin
Minister gets from the pricing strategies. We deducted necessary decisions from such
data to conclude the assignment handed to us.

For Data, we used both primary and secondary sources. We spoke with an industry
expert who has ample knowledge in refrigerator sector. Taking his information, we
conducted our task and completed the research and analysis part, which gradually led
to a conclusion based on our knowledge and the expert’s perception. Also, we
conducted a survey titled “ফ্রিজ ভ োক্তো সমীক্ষো” to directly get our hands on consumer
perception of existing fridge companies and the possibilities that came with the
industry.

Various other sites and articles were also used for data extraction and necessary
ideation. This is the secondary source of our data. Most of this data came from direct
company sources, which ensures that there is very little possibility to get inaccurate
information. All the data sources are either attached to the appendix or referenced in
the bibliography for further inspection.

Page | 6
2.2 Literature Review

Product Mix and Product Line

It is important to distinguish between product mix and product line. A product line as a
group of products that are closely related because they function in a similar manner,
are sold to the same customer groups, are marketed through the same types of outlets
or fall within given price ranges (Kotler, 2012). On the other hand,

“The product mix is the full list of all products offered for the sale by the company” (Stanton,
1964).

Target Market Segmentation and Market Demographics:

Segmentation and targeting involve dividing the entire market into smaller
sections/segments and then choosing what sections/segments will be the most beneficial to
pursue (Kotler and Armstrong, 2013).

It is a crucial step when a company decides to introduce a new product or service, and
therefore this paper examines the how Minister Hi-Tech Park Ltd. have segmented
and targeted their markets and positioned themselves in their target markets. The
paper also examines the basis on which Minister segmented their market. Markets are
usually segmented by:

 Geographic- Geographic segmentation involves dividing the market by

locations. This includes nations, regions, states, countries, cities, and even
down to rural and suburban neighborhoods (Kotler and Armstrong, 2013)
 Demographic- Demographic segmentation involves dividing the market by
demographics. Demographics can be defined by and include age, gender,
family size, life-cycle, income, occupation, education, religion, race, generation,
nationality (Kotler and Armstrong, 2013)
 Psychographic- The variables that make up psychographic segmentation are
social class, lifestyle, and personality (Kotler and Armstrong, 2013).
 Behavioral- Behavioral segmentation variables consist of occasions, benefits,
user status, user rates, loyalty status, readiness stage, and attitude toward
product/service (Kotler and Armstrong, 2013).

Page | 7
SWOT analysis

SWOT analysis entails a distillation of the findings of an internal and external audit
that draws attention, from a strategic perspective, to the critical organizational
strengths and weaknesses and the opportunities and threats facing the organization
(Kotler and Armstrong, 2011). In this paper, a SWOT analysis of Minister Hi-Tech Park
Ltd. have been conducted to better understand the company’s performance in the
market.

SWOT is an acronym for strengths, weaknesses, opportunities, and threats and it is a tool
used in strategic planning (Chermack & Kasshanna, 2007).

PESTEL analysis
Along with SWOT analysis, it is important to conduct a PESTEL (Political, Economic,
Social, Technological, Environmental, and Legal) analysis to identify and understand
the impact of external factors on the company’s performance.

PESTEL is an important tool used for market and environmental analysis and to support
strategic decision making (Narayanan and Fahey, 2001).

Porter’s Five Forces

Porter’s Five Forces model of competitive analysis is an illustration of how the five
competitive forces can be used to explain low profitability and viable entries to an industry
(Hill & Jones, 2007).

Threat of new entrants, buyer power, supplier power, threat of substitutes, and rivalry
among the already established firms are the five forces. The average expected level
of profitability in an industry and their thorough understanding, both individually and in
combination, is highly determined by the intensity of these forces. It is beneficial in
deciding what industries to enter, and in assessing how a firm can improve its
competitive position (McGanan.A.N, 1997)

Page | 8
Pricing Strategies

For Pricing Strategies to be discussed, first we need to know what product line is. A
product line is defined as a grouping of products that are closely related in use, in
method of distribution, in price range or in attracting similar customers. There are many
different kind of pricing strategies:

1. Product-Line Pricing
2. Optional-Product Pricing
3. Captive-Product Pricing
4. By-Product Pricing
5. Product Bundle Pricing

Bundle Pricing

Bundle Pricing is a type of pricing where companies bundle 2 or more related products
in a lower total price than what those would cost individually. This leads to more sales
on products that are not exactly very popular among customers. This is often used in
imperfect competition markets where sales drive profits.

Cost-Based Pricing Strategy

This is a pricing methods where a fixed sum or percentage of the total cost is added
to the final market price of the product. Companies undertake this type of pricing to
tackle competitive markets by providing a wholesale option. This strategy also leaves
a margin for profit, after covering the costs.

Page | 9
Chapter 3: Findings

3.1 Target Market Segmentation and Market Demographics:

The STP process begins with segmentation—which involves dividing the market into
several segments; targeting—which involves selecting one or more of the segments;
and finally positioning—in which the company decides how they want their company
and their offerings to be perceived by their targeted buyers. From the research we
have conducted, we can conclude that Minister Hi-Tech Park Ltd segments their
market on the following basis:

 Demographical segmentation (includes factors such as age, family size, life

cycle, occupation)
 Geographical segmentation (refers to geographical locations such as states,
regions, countries)
 Psychographic segmentation (includes factors such as lifestyle, values,
personality, and social class).

Demographic Segmentation:

Minister demographically segmented their market and targeted small, mainly nuclear
families from the middle class background who are very price sensitive. This is
reflected in their pricing structure, as they use discounting to communicate to their
customers that they are receiving value.

Geographical Segmentation

Minister geographically segmented their market on the basis of all the districts in
Bangladesh. They have 98 showrooms spread across districts such as Gazipur,
Chuadanga, Jashore, Narail, Jhenaidah, Faridpur, Rajbari, etc.

Psychographic Segmentation

The targeted customers of Minister share some common values such as desiring good
quality products at lower prices, and tend to prefer local products over foreign products
as they are budget sensitive.

Page | 10
3.2 SWOT Analysis

A SWOT analysis is a planning tool used to examine the strengths, weaknesses,

opportunities, and threats involved in a project or an organization.

Strengths:

Minister’s greatest strength is its ability to offer relatively good quality products at a
low price to its target market. It has garnered recognition when it won World’s
Greatest Brand in Asia and GCC Award in the home appliance category earlier this
year. Furthermore, they have a wide range of products, and have a strong
understanding of the markets they are operating in.

Weaknesses:

Minister’s greatest weakness is its lack of awareness when compared to its

competitor, Walton. While Walton has been able to build a strong brand awareness,
but Minister has not been able to do so due to lack of successful promotional
efforts. Furthermore, there is a lack of skilled workforce and good customer service.

Opportunities:

Due to the rapidly growing market, Minister has the opportunity to increase their sales
through better promotional activities and creating more awareness.

Threats:

Foreign competitors and local companies such as Walton are Minister’s greatest
threats. Without the implementation of successful IMC, product differentiation and
better after-sales service, Minister will not be able to survive in the market.

Page | 11
3.3 PESTEL Analysis

Political Factor:

1. Random unstable political situations

Economic Factors:

1. Increase in per capita income

2. Growing GDP high disposable income
3. Increase in Spending Power

Socio-cultural Factors:

1. Manufacturing Eco-Friendly product

2. Changing lifestyle of middle income people

Technological Factors:

1. Improvement in Technology made electronics cheaper

2. Increased quality of production

Environmental Factors:
1. Manufacturing energy efficient refrigerators to solve the problem of energy
crisis in Bangladesh
2. Despite the use of innovative technology, the release of harmful CFC gases
when refrigerators reach the end of their life cycle and are discarded is still a
growing concern for the environment

Legal Factors:
1. High Import Duty imposed on Home Appliance Products that are imported
2. Bangladesh Government’s Export promotion schemes
3. Tax Incentives imposed on Import of Plants
4. Constant Support of the Government

Page | 12
3.4 USP of Minister Hi-Tech Park Ltd.

A Unique Selling Proposition or Unique Selling Point contains the one feature of the
product that most stands out as different from the competition, and is usually a feature
that conveys unique benefits to the consumer (Blythe, 2005). According to the
chairperson of Minister Hi-Tech Park Ltd, Minister’s USP covers the following:

 Replacing imported goods with locally made goods that are of better quality at
a reasonable price
 Ensuring that all of their products are environment friendly and energy efficient

Rosser Reeves, who developed the term USP, set down three basic rules for
developing a USP in his book “Reality in Advertising”:

1. Each advertisement must make a proposition to the consumer—not just words,

product puffery, or show-window advertising. Each advertisement must say to each
reader: "Buy this product, for this specific benefit."
2. The proposition must be one the competition cannot or does not offer. It must be
unique—either in the brand or a claim the rest of that particular advertising area does
not make.
3. The proposition must be strong enough to move the masses, i.e., attract new
customers as well as potential customers.

Since Walton Ltd also offers customers high quality locally made products at a lower
cost, Minister Hi-Tech Park Ltd may find it necessary to develop and clarify their
USP more in order to differentiate themselves from competitors.

Page | 13
 3.5 PORTERS Five Forces
• Similar product
• Ability to change to other
• Expensive to enter in the
brands by people
market
• Low due to easy availability
• Moderate barriers to
of other brands
entry
• Low due to cheap price of
other competitive Threat of • Economies of scale
• Low due to requirement
refrigerators new entry
of high investment.

Bargaining
power of
Bargaining buyers
power of Porter's
• Ability to
suppliers 5 forces substitute
• Very large
orders
• Homogenous
product
• High because
Degree of Threat of of other
branded
rivalry substitutes product.

• Some cross-product
substation
 Intense rivalry due to known • Ability to improve
brand like Sharp, Hitachi and • High because of popular
Walton. Local and foreign brand.
 Low customer loyalty
 Brand image

Figure: Porter’s Five Forces

Page | 14
Chapter 4: Analysis of Findings
4.1 Pricing strategies & their justification
From the resources it has been found that, the cost of a refrigerator can be break down
in to following steps. Here the final price or the selling price in the stores of a minister
fridge (242 liter) is 26, 900 BDT.

Image: Minister M 242 – National flag

Cost component Amount (tk)

Manufacturing cost 10,000

Others (utilities, wages, maintenance 5,000
etc.)
Dealer price 22,000
Final price 26,900

So here for this particular model, the manufacturer makes a profit of 7,000 BDT as
they sell it at 22,000 where their manufacturing cost is in total 15,000. Here the cost is
the total of some fixed costs like the wages, storage facilities sales administrations etc.
and some variable costs like utilities (e.g. in time of Eid-ul-Adha, the production rate
goes very high, according to the industry insiders, in that period they can produce a
fridge within 45 seconds)

According to the information given above we made the finding that Minister actually
follows Full-cost pricing strategies.

Page | 15
 Price computations Cost
1. Direct labor 2,000
2. Direct material 10,000
3. Production overhead (150 % of 3,000
1) 15,000
4. Subtotal (1+2+3)
5. A, S, D overhead (10% of 4) 1,500
6. Total cost (4+5) 16,500

7. 25% markup (m) 4,125

8. selling price (total) 20,625
22,000 (round figured dealer’s payment)

Now moving on to the Walton counterpart. For this, we kept the price range same so
that we can focus on the differentiating features. We took the Walton WFE-2H2-RXXX
model fridge (260 liter), which costs 25,990 bdt in the retail stores.

Image: Walton WFE-2H2-RXXX

Now, the main thing here is, the cost break-down is almost similar in case of Walton
and Minister (from industry insider). But at the same price point, minister is offering a
242-liter fridge where Walton is offering a 260-liter fridge. It clearly indicates that,
Walton has a far more effective and most importantly efficient production line than
Minister. Walton’s production overhead and A, S, D overhead is absolutely lesser than
Minister’s. These factors help Walton to keep the price so low and to gain the
competitive advantage.

Page | 16
Now, here are some necessary information, which are considered before setting a
price in case of fridge industry in Bangladesh. The thumb rule is, manufacturer wants
to keep the production cost in 50% of the total price, 25% cost goes to advertising.
Advertising plays a huge role in sales. And the rest of the 25% is profit. This is a
general idea, now to maximize the profit companies try their level best to keep the
production cost as low as possible, and compensate that by increasing advertising
cost. Walton in this is very much successful. But minister is giving them a very hard
competition though Walton owns the 70% share in the fridge market in Bangladesh.

But Minister gives more focus on the pricing of the services to create more value. They
provide 12 years of warranty on the compressor whereas Walton provides 10 years.

In case of setting prices in services, there is term called result-based pricing. This
strategy is used when the service is important and the uncertainty is high. Minister as
a younger brand than Walton they know that their brand value is not that high as
Walton, so the potential consumers may think the risks are high in minister’s products.
So that is why to set the price based on customers satisfaction (contingency pricing)
and to give money back, or extended warranties are very good strategies, and minister
is following this strategy very carefully.

So, Walton believes value is low price without compromising the quality and minister
believes that value is all that a customer gets for all that he/she gives. That is why they
focus more on after sale services with contingency and result-based pricing.

But one more thing to add here, though minister’s initial pricing is high, minister’s
fridges actually come with built in voltage stabilizers. So, the consumers don’t actually
need to buy an extra stabilizer for the fridges.

Now a simple mathematical example is given below to show the actual differences
made by production overhead and A, S, D overhead. Suppose the direct material cost
is 10,000 and the direct labor cost is 2,000 for both companies but for minister p.o is
150% and A, S, D overhead is 10% on the other hand for Walton p.o is 100% and A,
S, D is 6%.

Page | 17
Minister (242-liter fridge)
selling price =26,900
Production overhead 150%
Direct labor was 2,000
Therefore, production
overhead = (2000 * 150%)
= 3,000
A, S, D overhead was
10%,
Direct labor cost 2,000
Direct material cost 10,000
P.O 3,000
Subtotal = 15,000
Therefore A, S, D
overhead = (15,000 * 10%)
=1,500
Walton (260-liter fridge)
selling price = 26,950
Production overhead 100%
Direct labor was 2,000
Therefore, production
overhead = (2000 * 100%)
= 2,000
A, S, D overhead was 6%,
Direct labor cost 2,000
Direct material cost 10,000
P.O 2000
Subtotal = 14,000
Therefore A, S, D
overhead = (14,000 * 6%)
= 840
Differences
3000 – 2000 = 1000
1,500 – 840 = 660
Total 1000 + 660 =
1660
Walton’s 260 liter is
26,950
So simply their 242
liters (size equivalent to
minister)
Will be = (26,950 *
242)/ 260 =25,084.
260 liter’s price – 242
liter’s prices = (26,900
– 25,084) = 1,816,
which is very close to
1,660; the amount we
got by the differences
in P.O and A, S, D
overhead.
This proves, Walton is
actually saving its cost
because of low
production overhead
which are actually the
indirect costs and the
low administrative,
selling and distribution
costs.
Page | 18
4.2 Final Pricing Determinants
For the final pricing part, the cost of manufacturing is not the only determinant. Other
factors are thrown into the equation too. The pricing factors for the refrigerator are:

The Fridge (About 40% of price)

Internal External
1) Refrigerant
1) Freezer Component
2) Compressor
2) Thermostat Control
3) Condenser
3) Refrigerator Component
4) Expansive Valve
4) Crisper
5) Evaporator
5) Refrigerator Door Compartment
6) Temperature Control Device
6) Switch
7) Defrost System

Image: Components
necessary for a Refrigerator

Other Factors (40% of price)

Marketing takes a big portion of Minister’s investment to sell its fridges in the
consumer market. About 25% is allocated here.

Utility costs for turning raw materials into the complete product is considered in
the final price. Machine upkeep and maintenance gets added.

Employee salaries and other financial costs are added into final pricing discretion.

Page | 19
The fridge is a big part of the total pricing equation. The cost of raw materials, the cost
of assembling them into a domestic product and also the cost related to research and
other necessary steps is added into the product cost segment. The compressor is one
of the most important components of a refrigerator as it has the biggest impact on the
quality of the fridge. Choosing the right compressor for the right fridge is a challenge.

Then come the design and exterior parts. Each model has different designs and
features. Depending on bodywork and necessary external components, prices vary.
These internal and external components are purchased in bulk amounts to minimize
costs as much as possible, for overall lower market price and also, more profit.

The manufacturing plant, with its maintenance and upkeep costs, is also significant.
Daily production capacity ranges from 400-600 units. So, maintaining machines and
their life cycle is a daily operation for Minister.

Then employee salaries, shareholders’ stakes, taxes and other financial factors come
into consideration. In order to ensure proper working conditions as well as fair
compensation for workers and officers, Minister allocates a big amount of revenue to
this segment, which ultimately translates into the market price.

Speaking with an industry expert, we’ve come to know that Minister spends around
20-25% for its marketing activities. Missing a day of marketing and advertisement
almost immediately impacts daily sales. That’s why Minister has to provide special
focus in its Marketing Department. More marketing means more reach, which will
offset the cost of extra investments in marketing. This is the goal of Minister here, more
reach.

Page | 20
4.3 Role of Pricing in Profitability

Continuing from the previous section, the info we gathered provided the knowledge
that Minister doesn’t price a fridge just to cover its costs. A percentage mark-up is
applied to the fridge. Calculation showed that it is around 20-25%, meaning 20-25%
of total price is raw profit for the company.

So, for a fridge sold at a dealer for 22,000 tk, the profit margin is around 4,500-5,500
taka. This ensured steady inflow of revenue for Minister. The warehousing cost is for
dealers because Minister takes pre-orders for number of fridges to manufacture. That
particular number of fridges get sent to the dealer’s warehouse, meaning the cost is
for the dealer. From that point, the dealer has some freedom to set the price according
to the market and instructions from the manufacturer. The dealer then marks the price
up and the fridge will usually have a market price of 26,000-27,000 tk.

Page | 21
Chapter 5: Recommendations

1. Minister is currently following cost-based pricing strategies. They have

managed to create a position in the market and also a potential customer
base. But now to compete with Walton, who has a market share of 70% in the
fridge industry in Bangladesh, minister should start to move their focus on
selling strategies a bit. Reducing discounts, recruiting more salespeople,
expand the business in more areas, mainly to focus on increasing the sales in
an aggressive way.

2. Minister’s full name is Minister hi-tech park, so besides new pricing strategies,
minister should also focus on new technically advanced products. The big idea
that we came up with is to introduce a smart fridge that can give the indication
if the food or veggies are rotten. Differentiation is a must here to not only
survive but also to give a hard time to the competitors. Minister should focus
on more to produce technically advanced products in a lower price.

3. Bundle pricing should be considered. There should be options for bundle

pricing, like making a bundle of fridge and toaster, blender etc. as these are
all related with foods. And minster have these products in their product line.
This strategy can easily boost up the sales of those secondary products like
blenders, toasters etc.

4. For those customers who might be unwilling to pay a bit higher than usual for
a quality fridge, Minister can prove to them that “investing” in a green, energy
efficient refrigerator will cost them a bit more than usual, but in the long-term,
the payout/saving will be much greater than a normal fridge. Energy savings
might be a slow way to minimize cost for a consumer, but sustained savings
can lead to significant financial benefits. Minister can capitalize on this
opportunity to gain a more acceptable position in customers’ minds.

Page | 22
5. What most fridge companies lack is after-sales scheduled service. Regular
compressor check-up, refrigerant testing etc. can be done regularly in 6-month
intervals. This will help create the positive image that the company takes care
of its customers after sales.

6. Minister already offers a great deal of warranty services. It has only one thing
left to offer in warranty segment, warranty extension. Foreign companies offer
warranty extension for a modest fee. Minister can adopt this strategy to not
only gain a little more revenue, but also help the customer to be worry-free
regarding product durability and warranties.

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Bibliography

1. Waltonbd.com. (2018). Walton At Every Home. [online] Available at:

http://www.waltonbd.com/ [Accessed 18 Oct. 2018].
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[online] Academia.edu. Available at:
https://www.academia.edu/28016658/Marketing_Strategy_Analysis_of_Walt
on_Bangladesh_Ltd [Accessed 18 Oct. 2018].
3. CustomsDutyFree. (2018). Customs or Import duty for Electric appliances to
Bangladesh - CustomsDutyFree. [online] Available at:
https://customsdutyfree.com/customs-or-import-duty-for-electric-appliances-
to-bangladesh-2/ [Accessed 18 Oct. 2018].
4. Ministerbd.com. (2018). Minister Hi-Tech Park Ltd – Think Positive. [online]
Available at: http://ministerbd.com/ [Accessed 17 Oct. 2018]. (2018).
5. Garden, H., Garden, H. and Appliances, K. (2018). How Refrigerators Work.
[online] HowStuffWorks. Available at:
https://home.howstuffworks.com/refrigerator2.htm [Accessed 18 Oct. 2018].
6. Iiste.org. (2018). [online] Available at:
https://www.iiste.org/Journals/index.php/EJBM/article/viewFile/13364/13622
[Accessed 16 Oct. 2018].

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Appendix