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Report onElectronic Assembling & Retail(focusing on Walton)

BRAC University

Submitted To:Shamim Ehsanul Haque

Senior Lecturer,

BRAC Business School

Submitted By:Reazul Islam Ridoy 12104049

Solaiman Bin Samad 12204030

Adib Shakil 12104242

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Date of submission: 19-08-2014

Letter of Transmittal:

15th August, 2014

Shamim Ehsanul Haque

Faculty of Business School

BRAC University

Subject: Submission of report on Walton

Dear Sir,

With due respect, we are here to submit the following report on

Walton Bangladesh according to the instructions given by you.

This report examines the current Political and environment

situation of Walton in Bangladesh. In addition, Government

policies and tax structure, competition, prospects and Labor and

employment policies are described in details in this report that

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will help you to understand our objectives of the report

furthermore.

We hope you find this report satisfactory.

Sincerely yours,

AdibShakil

Reazul Islam Ridoy

Solaiman Bin Samad

Acknowledgement:

At first we desire to express our deepest sense of gratitude of

almighty Allah.

With profound regard we gratefully acknowledge our respected

course instructor Shamim Ehsanul Haque at BRAC University for his

generous help and day to day suggestion during preparation of the

report.

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We like to give thanks especially to our friends for their

enthusiastic encouragement and helps during the preparation of

this report us by sharing ideas regarding this subject and for

their assistance in making the report healthy.

Executive Summary:

This report was commissioned to analyze and evaluate the current

Political and environment situation of Walton in Bangladesh. In

addition, Government policies and tax structure, competition,

prospects and Labor and employment policies.. The research

reveals that in a continuously growing market, Walton has become

a reliable name for customers. Countrywide network, inclination

towards quality and dedicated team of employees are the main

causes of its success. Though it had started business with home

appliances, yet it has always been committed to satisfying

customer demand by introducing new products. Recent production

and selling of motorcycle and air-conditioner testifies that

position of Walton.

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Walton Company follows the tax structure and policies of

Bangladesh Government. Its labor and employment policy also

remarkable good in electronics market of Bangladesh.

Since its target market is middle-income people, the price of

their products is comparatively lower than those of competitors.

Walton has a goal to double overall market share in the next 5

years. It has successfully positioned itself as a customer

friendly and eco-friendly Company.

The report has found the prospects of Walton promising in its

current position. Favorable government policy will help it expand

domestic and international markets in the future.

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Table of Contents:

Topic Page Number

Introduction 6-7

Report Content 7-16

Objective of Report 16

Methodology 17

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Limitations 17

Conclusion 18

References 19

Introduction:

The Electronics Market in Bangladesh is an ever-rising industry.

The appropriate market size has never been determined as it is

ever changing. Walton is one of the major players in the

electronic appliances market. It is the pioneer in manufacturing

of multi-staged Refrigerators, Freezers, Air Conditioners,

Televisions and Automobiles, Smart Phones and Home Appliances in

Bangladesh.

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Walton is the first Bangladeshi company which produce lots of own

countries products, and quality goods at a lower price than any

other company product. The position of Walton Company is better

than any other company in Bangladesh. They provide good product

and service for Bangladeshi people. Day by day they are

developing the value of product. The demand of this product is

not only in our country but also all over the world. Walton put a

positive impact on the lifestyles of the people of Bangladesh.

Walton has crossed at 30% million with 35% market share at the

end of 2011. There are the 120 outlets of Walton throughout the

country so that customers everywhere can buy Walton products.

The brand Walton is owned and operated by R.B. GROUP head

quartered in Dhaka, Bangladesh. Its principal activities are

designing, manufacturing, exporting, retailing of consumer

electronics, home appliances, mobile phones and automobiles. The

manufacturing and product design operations are carried out at

Walton Hi-Tech Industries Limited (WHIL).

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R.B. GROUP has several subsidiary companies under it for

distributing Walton products spread across Bangladesh and

International Market.

Established in 2006, WHIL has achieved a considerable market

share within the industry. It is the pioneer in manufacturing

most comprehensive range of products including Multi-Staged

Refrigerator, Freezer, Air Conditioner, Automobile and Home

Appliance. WALTON products are recognized for their quality, ease

of use and innovative technology.

Political and Economic Environment:

Political Environment:

Political factors influence organizations in many ways. Political

factors can create advantages and opportunities for

organizations. Though the rules and legislation for promotional

activities are very flexible in Bangladesh, some obstacles like

taxation policy, uncertainty of political situation and changes

of laws are high in Bangladesh which is not flexible at all.

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The taxation policy of Bangladesh is both good and bad for

Walton. The good side is that the Government reduces import duty

on raw materials to help local companies to sustain and compete

in international market. As Walton is highly dependent on import,

it gets advantaged by this policy. The bad point of taxation is

that recently the minister also declared that the government

would impose high import duty on electronics products which are

now manufactured in Bangladesh. So, it’s a great threat to Walton

which is trying to produce more products which will be fully

manufactured and decorated in Bangladesh. MizanurRahman, Walton

director and international marketing expert has already declared

that Walton is going to manufacture some other electronics

products at its own factory in the country very soon,

Walton has a great support from Bangladesh Government. We can

found strong support on the voice of Industries Minister Dilip

Barua. He said Bangladesh has gained the reputation of an

exporting country of refrigerators and motorcycles thanks to

companies like Walton.

Economic Environment:

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Effects on markets and communications: Industrial and consumer

markets are directly and indirectly affected by the state of the

economy. Closer to home, exchange rates, interest rates,

unemployment, levels of disposal income etc. All affect how much

money is around, how much will be spent and, in a sense, the size

of many markets or industries.

First of all, WALTON has economic advantages except any other

electronics companies. The main reason is that, the maximum

customer of Bangladesh is low or middle income people. So, they

have lack opportunities and money to buy expensive electronics

products like smart phone, refrigerator, AC etc. In that case,

Walton captures the market by giving products at surprising low

cost. Another reason is that they can successfully encourage the

people by using the slogan of ‘Made in Bangladesh’.

Walton faced lots of competition in Bangladesh after getting into

market. They found difficult to survive where the market is

leading by many big and foreign companies like Samsung, HTC,

Hitachi, Toshiba etc. In this situation they make bigger their

company and produced low cost products. They also used the

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strategy of highly advertisement and broadcasting. By this way,

they become successful to bit their competitors. Walton left

behind the Samsung in selling Mobile phone at Bangladesh.

Govt. policy and Tax structure:

The tax system of Bangladesh includes several tax revenue

measures under the two broad headings of direct taxes and

indirect taxes. The major policy objectives behind the tax

expenditure measures in Bangladesh are to accelerate the process

of industrialization, to attract foreign currency through

increasing export and foreign direct investment (FDI) and to

ensure social security and welfare of low-income groups. Tax

expenditure measures exist in sectors such as public services,

agriculture, labor and employment affairs, transport and

communication, social security and welfare etc

In Bangladesh we have taxes divided on two broad aspects which

are as following,

         I.            Direct Tax

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       II.            Indirect Tax

The general rate of Value Added Tax (VAT) in Bangladesh is 15%.

Concessionary rates are applicable to agro-processing, textile

and leather industry, educational institutions, hospitals,

privileged persons, etc. 15% supplementary duty is applicable to

sugar and kerosene. Tariff rate on any mobile is Tk. 1,500. 7.5%

import duty is applicable to chemical color for textile

industries. Incentives are also given to these sectors, which are

complying with the international and bilateral agreements and

conventions.

In case of Bangladesh as it is export led country, so the tax on

exported goods is zero and tax on imported goods in general is

high. Till to the November of FY 2010- 2011, the total collected

import tax had amounted to 10,326.59 Taka which was 17.41% higher

than that of previous FY 2009- 2010.

Wholesale tax holiday facilities will no longer remain from this

year except few fields including power sector, he said adding the

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government this year would continue its support for the local

manufacturing sectors like Walton.

Assemblers (Walton) have to pay 15 percent VAT at the assembling

stage. On the other hand, there is only 10 percent VAT on imports

of mobile phones. With a view to removing the "uneven

competition" between local assembling industries and imports,15

percent VAT on mobile phones at the import stage is imposed.

Taxes on import of different necessary parts, needed for

assembling the mobile phones, is very high such as 61 per cent

duty on batter import and 37 per cent duty on some other parts

including charger, they sought withdrawal of the taxes to

encourage the companies to assemble handsets and strengthen the

potential industry in Bangladesh.

Competition:

Bangladesh with its growing population and economic growth has

huge demand for household products. The fact that only about 60%

of the country has electricity available proves that when

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electricity will be available throughout the country, demand will

increase further. As the people of this country are mainly price

sensitive, Walton, being the sole manufacturer of refrigerator,

freezer and motorcycle, is very keen to meet the demand of this

large market by providing competitive prices. Walton’s primary

goal is to capture the local market, as they are still behind

market leader LG-Butterfly. But they are also exporting their

products. Already they have customers in Myanmar, Bhutan and to

expand their market to Africa.

In the field of home appliances such as television, refrigerator,

freezer, air-condition etc. some of Walton’s competitors are:

Competitor

Television Air-

conditionRefrigerator

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LG LG LG

SONY SHARP GENERAL

SINGER SAMSUNG GREE

SAMSUNG PANASONIC SAMSUNG

PANASONIC WHIRPOOL -

Most of these brands have been in this market for a long time.

But none of them were able to match the market growth of Walton

in the last 3 years. Although LG-Butterfly is the no.1 home

appliances brand in the country, Walton is catching up fast.

Walton has started manufacturing major parts for the assembly of

motorcycle. Right now they hold nearly 8% of the market share.

Walton’s main target market has always been middle-income group.

So they have been very careful in setting their price product.

Also the fact that they manufacture their products, it allows

them to set a lower price than their competitors, as they don’t

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have to pay heavy import duty. Below is a comparison of the

prices of different products of different brands-

Table 01: Price comparison of Refrigerator

Model Walton LG TRANSTEC SHARP

10CFT 26,200 35,000 32,000 29,500

10.5CF

T

28,100 38,300 32,500 31,000

11.5CF

T

29,700 40,600 36,600 37,000

Table 02: Price comparison of TV

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Model Walton LG Sony My One

29” color

TV

18,500 28,350 26,350 22,700

37” LCD TV 48,800 65,600 59,500

-

42” LCD TV 75,200 95,000 88,000

-

Table 03: Price comparison of motorcycle

Model Walton Bajaj Hero Honda TVS

125 cc 103,900 175,000 155,000 160,000

110 cc 96,000 148,500 145,000 140500

Cruiser 93,300 120,000 110,000 98,000

In all three products in which we have done market research, it

is evident that Walton is providing the customers with the least

expensive product. It is vital for Walton as price is the only

tool where they have a superior advantage over other brands. But

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it must be noted that consumers in higher income level also look

for quality products. So Walton needs to find a fine balance

between price and quality as they move forward in the coming

years.

Walton would have had a much higher market share since middle

class people are the main target market of Walton. Also, Since

Walton is the sole domestic producer among these brands; it

enjoys some tax reduction that makes it capable of manufacturing

and selling its product at reasonable prices. This facility

provides Walton with a competitive advantage. Hence, Walton plans

to target another 15% of the market in the next 5 years and they

are confident that they will be able to easily achieve that

target.

Table 07: Future growth of Walton HIL

Product  Line Present Market

Share

Expected Market

Share

Main Competitor

Motorcycle 5% 25% Bajaj, Hero

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Honda

TV 8% 30% LG, Sony

Refrigerator 13% 25% LG, Samsung

Air-Condition 2% 10% LG, General,

Gree

Labor and Employment issues related to the industry:

Walton is the pioneer in manufacturing of multi-staged

Refrigerators, Freezers, Air Conditioners, Televisions and

Automobiles, Smart Phones and Home Appliances in Bangladesh. It

is a large team of 12,000 employees and 600 plus highly skilled

engineers and technical personnel. Many of Walton’s 12,000

employees are between the ages of 19 and 35. Their starting

monthly salary is 5,000 taka (about 6,000 yen or $64.40).

Walton’s annual production capacity is 1.4 million Refrigerators

and Freezers, 0.3 million Motorcycles, 0.3 million Air

Conditioners, 1.0 million Televisions. The Walton’s management is

very strict regarding the quality of the products giving highest

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priority to quality assurance system. The company follows a very

strong and strict quality control policy to maintain

international standards of its products. Walton installs the

latest and best quality equipments at its manufacturing plants.

Walton has a very well equipped quality control division

comprising all types of testing devices required to maintain

global standards of its products. Walton receives International

Standardization Certification (ISO) 9001:2008 for quality

management systems. It has more than 100 service centers under

the Walton Service Management System with highly skilled and

efficient technical personnel. The company has also received

another International Standardization Certification--ISO 14001:

2004 for following a comprehensive, planned and systematic

environmental management system. It manufactures all its products

in compliance with international environmental rules and

regulations. Walton brand of products acquire a significant local

market share as the brand wins the hearts of millions of

customers of Bangladesh. Its products are also being exported to

different countries of the world for their outstanding quality,

designs and durability. It has proved that Walton is very careful

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about its employee satisfaction and follows zero tolerance in

terms of its labor policies.  

Prospect s of the sector:

The high skill, low cost labor resource of the electronics sector

in Bangladesh offers companies great returns on investment.

Whilst the global market for semiconductors is worth in excess of

$200bn and is dominated by the Asian economies, Bangladesh has

significant financial and economic factors in its favor that make

it the best choice for many companies. Key challenges in this

sector are technical assistance and proper technology orientation

of the industry. Developing the significant capacity and skill in

assembly and manufacture of a wide range of electronic components

and parts is crucial.

As Bangladesh does not have any telecommunication equipment

industry in private sector yet so the idea of diversification and

modernization among the entrepreneurs, government and

professionals is obvious. The govt. is very much interested to

facilitate this sector. Being motivated with this Walton has a

plan to manufacture 3 million compressors of refrigerators and

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air conditioners every year in future. The company will

manufacture high quality compressors at a separate plant and

export them after meeting the national demand. Country’s

electronics goods manufacturing, assembling and marketing

companies will be able to use these compressors to manufacture

their respective brands of refrigerators and freezers at Walton

factory. Besides, Walton will manufacture both Smartphone and

feature phones of various configurations, designs and prices.

Walton Smartphone is likely to have the latest mobile operating

system with more advanced computing capability and connectivity.

They will also have high resolution touch screens and web

browsers that display standard web pages.

Moreover, Walton has also planned to manufacture desktop, laptop,

tablet pc and notebook computers. They have already launched an

initiative of market survey to know about the demand, supply and

size of the market of laptop, tablet pc and notebook computers in

Bangladesh.

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Objective of report:

Broad objective:

In broadly the main objectives of this report is to learn proper

approach to Business Environment in Bangladesh. It also helps to

incorporate the theoretical education with practical experience.

Specific Objectives of the Study:

To find out how the political and economic environment

affecting the Walton company.

To learn about the Government policy and tax structure of

Electronics products in Bangladesh.

To find out the competition level in current market

situation.

To find out the labor and employment policy of Walton.

Finally to learn about the prospects of Walton in

Bangladesh.

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Methodology:

Data Collection: Primary data is the information that we collect

first-hand and secondary data is the information collected by

others and used by us. For data collection, we searched about

Walton on the Internet and found some important information

regarding their company background, product lines and promotional

programs.

Limitations:

Though we tried our best to make a hundred percent perfect

report, a few limitations held us back. The main limitations that

we faced, were –

a. As many of the common products were barred, we had to choose

one from a limited number of options.

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b. When we went to collect information from the Walton outlets,

they were not fully able to cooperate with us, as our required

information was confidential.

c. There was not enough data in the websites.

Conclusion:

Undoubtedly it can be said that day by day Bangladesh is emerging

like a next hub for electronic assembling and retail sector.

Anticipating this truth Walton has started its operation and

continuing in an outstanding way. For Bangladesh, it has become a

company to be proud of in the export arena. Walton has truly

redefined Bangladesh from being a consumer country to a producer

country for home appliances. Walton promises it will continue to

build on top of its achievements with new technology and

expertise to further its competitiveness and prove that “Made in

Bangladesh” is the mark of ultimate confidence.

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References:

www.bangladesheconomy.wordpress.com

http://www.boi.gov.bd/

http://www.waltonbd.com/

http://www.waltonbd.com/index.php?route=pavblog/blog&id=440

http://www.nbr-bd.org/valueaddedtax.html

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