Decision to be taken:

In 2005, ArshadFarooq, son of Mian Mohammad Farooq, the founder and owner of Daikool
Air conditioners got a notice in which Daikin in Pakistan have forsaken them. Arshad was in
a dilemma to either enter introduce a new brand in the air conditioning sector where they
have an experience of over 25 years. The second option was to collaborate with another
international brand whose units could be imported and sold as sole distributers in the country.
This was done when they were the sole distributers of Daikin.

Background:

AAA now known as Daikool is a private limited company in the private sector which was
established in 1980 by Mian Muhammad Farooq. Farooq was very keen to have his own
business; he tried penetrating into textile industry. However, it did not do well as he had
expected, therefore he decided to wind up his business in 1975.

He was also interested in the development of air conditioning units. Therefore, he decided to
open a factory in SITE area of Karachi. The plan was to import products from abroad,
assemble it in the factory and further sell it whole sellers. The hot and humid weather
conditions of Karachi and areas of Sindh made it an ideal choice to target it. Therefore, after
months of contemplating over the business plan, consequently, they started approaching
international vendors to import relevant raw materials to start the assembling process. It was
then that also start developing relationships with wholesalers and retailers in the industry.

After 1 year of persistent struggle, he finally succeeded in making an agreement with one of
the famous Japanese brand of the time in air conditioning sector named ‘Daikin AC’ and
became his sole distributor in Pakistan.The market was not crowded at the time; therefore it
was not difficult for them to penetrate. Furthermore, because Daikin already had a reputable
international name in the international market, it was relativelyeasier for AAA Company to
not only enters the market also it did not take long for them to gain excellent market
reputation and gain a respectable market share in the Pakistani market. At that time, PEL was
the market leader having more than 75% of the market share followed by General Air
Conditioner.

ArshadFarooq introduced Daikin window Air conditioner in Pakistani market and received
and overwhelming response from the public. After several years, they also introduced Daikin
split units which further added value to the business.
By 1992, Arshad requested their Japanese service provider to allow them to manufacture
Daikin Air Conditioning units locally. However, his request was declined straightaway as it
did not fell under the policy of the companyi.e; the company does not authorize any of their
contractors to manufacture products locally.

Launching of the Brand ‘Daikool’:

The company continued to perform well till 2005 till was got accused of a crime. The
company was charged to have been the perpetrators in the making of explosive materials in
the site area by the government of Pakistan. It got black listed and Daikin cancelled their
agreement with the company, as it did not want to affiliate itself with such organization.

After a year of struggle, and strong connections in the top management in the government,
they were able to clear their name. He tried approaching Daikin once again to import and
locally assemble their product. Nevertheless, Daikin did not want to associate itself with the
group.

Having a considerably good experience of over 25 years in the development of Air

Conditioning units, it inclined Arshad to introduce a new brand of Air Conditioners in the
market by the name of ‘Daikool’. They focused more towards entering corporate sector,
hence they imported more corporate products.

There are total six big players in the industry;

 Haier
 Gree
 Orient
 Dawlance
 Pel
 Daikool
 10%
9% 30%

17%

9% 25%

Haier Gree Orient Dawlance Pel Daikool

Market Conditions:
The air conditioning industry is coming up with more innovations as the competition is
increasing day in and day out and many competitors like LG, Samsung, Euroaire, Gree and
Haier etc are competing in the market and endeavoring to survive in the market. There is an
intense competition in this market since many competitors as mentioned above are coming up
with significant advanced features. Because the rivalry is intense and companies can attract
customers with aggressive price cut and high impact marketing campaigns. Therefore,
Daikool is having a focus on edge to compete with rivals that are operating locally and the
import based rivals.

There are many suppliers in the market resulting into low bargaining power of the supplier.
As the companies in the industry has many choices to choose from, it is much easier to switch
to cheaper alternatives.

The market consists of huge number of buyers and the same can be said for the companies
that exist in the industry. Hence, buyers have more choices and it is comparatively easier to
switch from one competitor to other due to plenty of options. Every company endeavors to
decrease their price by some margin to gain their market share, Thus, this gives power to the
buyer to choose the alternative option. The buyers also look for the quality rather than
cheaper products with cheap quality. In this case buyers’ power is high since they can buy
other companies offerings if product quality is good.

The company does not face many potential threats in terms of substitutes. However, air
coolers that are placed in household in Punjab and certain rural areas across Sindh were
potentially a threat to their business. Then there is a conventional use of pedestal fans in rural
areas across the country.

Problem Statement

Daikool was accused of having their involvement in the making of explosive materials in
their site area, therefore the company got black listed by Pakistani government and his
Japanese supplier Daikin AC cancelled their agreement with them.

Ever since Daikin agency has left them, Arshad Farooq has been in a dilemma to either
engage in talks with a new vendor or to introduce his own brand. He tried approaching
Daikin and tried getting them on board to restart their operations. Nevertheless, Daikin
refused to go with them, stating they did not want to associate them with them after what
previously had occurred.