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Blue diamond_consumer durables
Blue diamond_consumer durables
Blue diamond_consumer durables
Blue diamond_consumer durables
Blue diamond_consumer durables
Blue diamond_consumer durables
Blue diamond_consumer durables
Blue diamond_consumer durables
Blue diamond_consumer durables
Blue diamond_consumer durables
Blue diamond_consumer durables
Blue diamond_consumer durables
Blue diamond_consumer durables
Blue diamond_consumer durables
Blue diamond_consumer durables
Blue diamond_consumer durables
Blue diamond_consumer durables
Blue diamond_consumer durables
Blue diamond_consumer durables
Blue diamond_consumer durables
Blue diamond_consumer durables
Blue diamond_consumer durables
Blue diamond_consumer durables
Blue diamond_consumer durables
Blue diamond_consumer durables
Blue diamond_consumer durables
Blue diamond_consumer durables
Blue diamond_consumer durables
Blue diamond_consumer durables
Blue diamond_consumer durables
Blue diamond_consumer durables
Blue diamond_consumer durables
Blue diamond_consumer durables
Blue diamond_consumer durables
Blue diamond_consumer durables
Blue diamond_consumer durables
Blue diamond_consumer durables
Blue diamond_consumer durables
Blue diamond_consumer durables
Blue diamond_consumer durables
Blue diamond_consumer durables
Blue diamond_consumer durables
Blue diamond_consumer durables
Blue diamond_consumer durables
Blue diamond_consumer durables
Blue diamond_consumer durables
Blue diamond_consumer durables
Blue diamond_consumer durables
Blue diamond_consumer durables
Blue diamond_consumer durables
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Blue diamond_consumer durables

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a study on the consumer durables industry. conducted at IMT-Ghaziabad.

a study on the consumer durables industry. conducted at IMT-Ghaziabad.

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  • 1. Strategic Management-I Consumer Durable Industry in India Guided by: Rear Admiral Dr Rakesh Chopra, VSM, MBA, PhDSubmitted by: Group 2Puneet Aggarwal (10DM-108)Puneet Mehta (10DM-109)Puneet Pratap Singh (10DM-110)Rabindra Narayan (10DM-111)Rahul Kumar (10DM-112)Rahul Padia (10DM-113)
  • 2. Table of ContentsIntroduction ............................................................................................................................................ 5Rationale for the Study ............................................................................................................................ 5Problem Formulation .............................................................................................................................. 7Industry Analysis ..................................................................................................................................... 8 Key findings globally: ........................................................................................................................... 8 Top five emerging nations in Consumer Durable industry .................................................................... 8 Indian Consumer Durables- Overview .................................................................................................. 9 PEST Analysis ..................................................................................................................................... 10 Political Factors ............................................................................................................................. 10 Economic Factors ........................................................................................................................... 10 Social Factors ................................................................................................................................. 11 Technological Factors .................................................................................................................... 11 SWOT Analysis of Consumer Durable Industry ................................................................................... 12 Growth Drivers .................................................................................................................................. 13 Major Hurdles ................................................................................................................................... 13 Porter’s Five Force Model: Consumer Durable Industry ..................................................................... 14 Supply Chain Management: Consumer Durable Industry ................................................................... 15 Importance of SCM ........................................................................................................................ 15 Objectives of SCM .......................................................................................................................... 15 Benefits of SCM ............................................................................................................................. 15Corporate Analysis ................................................................................................................................ 16 Overview ........................................................................................................................................... 16 LG India ............................................................................................................................................. 16 Company background .................................................................................................................... 16 Product profile............................................................................................................................... 16 Developments ............................................................................................................................... 17 Samsung India ................................................................................................................................... 17 Company background .................................................................................................................... 17 Product profile............................................................................................................................... 18 Developments ............................................................................................................................... 18 2
  • 3. Whirlpool of India.............................................................................................................................. 18Company background ........................................................................................................................ 18 Product profile............................................................................................................................... 19 Developments ............................................................................................................................... 19Videocon Industries Ltd ..................................................................................................................... 19 Company background .................................................................................................................... 19 Product profile............................................................................................................................... 19 Developments ............................................................................................................................... 20Voltas Ltd .......................................................................................................................................... 20 Company background .................................................................................................................... 20 Product profile............................................................................................................................... 20 Developments ............................................................................................................................... 21IFB Industries Ltd ............................................................................................................................... 21 Company background .................................................................................................................... 21 Product profile............................................................................................................................... 21Detail Analysis Whirlpool Electronics of India..................................................................................... 22 Whirlpool Vision ............................................................................................................................ 22 Product management strategy ....................................................................................................... 22 Products introduced ...................................................................................................................... 22 Target Customer Segment ............................................................................................................. 23 Pricing Strategy.............................................................................................................................. 23 Sales channel strategy ................................................................................................................... 23 Growth over the years ................................................................................................................... 23 SWOT ............................................................................................................................................ 25 Plant Locations .............................................................................................................................. 26 Whirlpool installed capacity ........................................................................................................... 26 Whirlpool Regional Distribution Hubs ............................................................................................ 27 Whirlpool Sales office and Warehouse ........................................................................................... 27 Whirlpool Distribution Network ..................................................................................................... 28 Perspective from Mr. Shantanu Das Gupta (V.P. Corporate Affairs & Strategy): Refrigerators ........ 28 Whirlpool Sales and Market Analysis Graphs.................................................................................. 31 Whirlpool: Stats at a glance ........................................................................................................... 35 3
  • 4. Perspective from Mr. Shantanu Das Gupta: Washing Machines ..................................................... 35 Washing Machine Statistics in charts and Graphs ........................................................................... 37 Product Matrix:.............................................................................................................................. 40 Profit and Loss Account of Whirlpool ............................................................................................. 41 Profit & Loss account of Whirlpool of India. ..................................................................................... 41 Future:........................................................................................................................................... 42Scenarios ............................................................................................................................................... 43 Identifying the high impact and high uncertainty factors affecting the industry. ............................ 43 Building Scenarios .......................................................................................................................... 43Conclusion............................................................................................................................................. 45 Infrastructure Development .............................................................................................................. 45 Raw Material, Components & Machinery........................................................................................... 46 Building a Global Supply Chain Network ............................................................................................ 47LEARNINGS FROM A STRATEGIC POINT OF VIEW ................................................................................... 48 Growth Drivers for Consumer Durable Products ................................................................................ 49Recommendation .................................................................................................................................. 50Limitations of the Project ...................................................................................................................... 50 4
  • 5. Consumer Durables Industry in IndiaIntroductionIndia’s Economy is expected to grow by around 8% in the next decade making it one of the fastestgrowing major economies in the world. The Indian consumer durables industry has witnessed aconsiderable change in the past couple of years. Changing lifestyle, higher disposable income coupledwith greater affordability and a surge in advertising has been instrumental in bringing about a seachange in the consumer behavior pattern. Apart from steady income gains, consumer financing andhire-purchase schemes have become a major driver in the consumer durables industry.In the case of more expensive consumer goods, such as refrigerators, washing machines, colortelevisions and personal computers, retailers are joining forces with banks and finance companies tomarket their goods more aggressively. In addition, change in policy, such as the WTO FTA in 2005resulted in zero customs duty on imports of all telecom equipment, thereby improving the pricing andaffordability of imported goods.In the early 1990s, foreign companies were not permitted to start independent ventures in India.Foreign companies used to come to India in a JV with other Indian Companies. Examples are LGElectronics and Samsung.It was not until 1992, when the Indian market first began to open up post liberalization, that the MNCsstarted taking a closer look at the purchasing power of country’s middle class. Inevitably, the first thingthey saw was the massive volume of this potential market, rather than its cultural idiosyncrasies. Studieshave found that the penetration level of various appliances in India is fairly low. Refrigerator use isabout 18 per cent of the total population, washing machine 6 per cent, air-conditioner less than 2 percent and microwave ovens about 1 per cent, which translates into a great potential to tap newconsumers. Light Electrical Industry, particularly the large home appliances sector attracted a number ofleading MNC’s to either start joint ventures or start their fully owned subsidiaries in India.The Indian consumer durables segment can broadly be segregated into consumer electronics (TVs, VCDplayers and Audio systems etc.) and consumer appliances (also known as white goods) like Refrigerators,Washing Machines, Air Conditioners, Microwave Ovens and Vacuum Cleaners.Rationale for the StudyWith the successful completion of the Uruguay Round of negotiations, which marked thecommencement of WTO regime of international trade relations, countries as well as industry/firms areconstantly investing their knowledge/intelligence to evolve strategies to remain competitive in theglobal market. In this pursuit of excellence, no country or industry can afford to remain laggard as thechampions are promised huge economic gains, where as the losers face the dire risk of going out ofbusiness. In essence, competitiveness has emerged as the determinant of winner or loser in themanufacturing scene. 5
  • 6. Since, India has been trailing behind Asian neighbors in terms of production, quality and export of LightElectrical Industry products, performance levels of most of factors of production such as qualitymanpower, capital investment, infrastructure, technology etc., need to be enhanced through consciouspolicy interventions and managerial action to boost competitiveness of this sector. In this context, anattempt has been made to understand the productivity and competitiveness of light electricalmanufacturing in India with a view to document identify and recommend policy solutions to make thesector internationally competitive. The study also attempts to identify the factors hindering the progressof the sector and suggest measures for enhancing the competitiveness of the sector.A wide range of products such as air conditioners, refrigerators, washing machines, microwave ovens,vacuum cleaners, dish washing machines apart from household electrical appliances, electrical fans,electrical lamps, storage batteries, dry cells and others are covered within the ambit of Light ElectricalIndustry sector. Besides these items, light electrical industry also covers electric wires and cablesindustry, transmission line towers, cranes, lifts & escalators, dairy machinery industry, food processingmachinery, packaging machinery industry, water pollution control equipment, air pollution controlequipment etc.Domestic electrical appliances are now increasingly being used in the household and, therefore, it is veryimportant that safety and quality aspects of these products need special attention.Government has introduced compulsory Bureau of Indian Standards (BIS) marking with respect tocertain electrical appliances like stoves, plugs and sockets. Greater consumer awareness about thequality and safety of these goods will go a long way in ensuring that manufacturers adhere to thesestandards. Since the industry covers a large number of diverse product categories which cannot becovered in a single study, present study limits its scope to large home appliances only. Among the largehome appliances, the study focuses on five large home appliances such as Refrigerators, AirConditioners, Washing Machines, Microwave Ovens and Vacuum Cleaners. The biggest attraction forlight electrical industry manufacturers in the world is the growing middle class in India which is, equatedby many, to the size of European market in terms of purchasing power.With Domestic Electrical Appliances (DEA) characterized by low household penetration, internationalbrands have an edge over their Indian counterparts in terms of superior technology combined with asteady flow of capital, while domestic companies compete on the basis of their well-acknowledgedbrands, extensive distribution network and an insight into local conditions. Sales of household domesticelectrical appliances in India posted strong growth in the recent years as the Indian economy recordedsterling growth and personal disposable income levels increased. Intense competition amongmanufacturers, influx of Chinese brands, and rationalization by manufacturers to offer products to caterto the middle and lower-middle class has kept up pressure on unit prices - particularly for airconditioners and refrigerators. Appliance manufacturers, having understood the need to localizeproducts for the Indian household strived to introduce new features and technologies that would appealto the Indian consumer. Refrigerators with a separate compartment for onions and fresh herbs, washingmachines that utilize less water, and Microwave ovens designed for Indian style cooking are becomingmore common. 6
  • 7. Problem FormulationAny new entrant into the Consumer Durable Industry in India needs to have a thorough understandingof the Industry wise best practices. So, when a company of large stature wants to make an entry into theCDIT space in India, it requires a lot of information beforehand pertaining to supply chain of the Industryas a whole, the plant location information, the warehouse locations, the distribution network and aftersales service. Hence, we are working to study the CDIT in India. 7
  • 8. Industry AnalysisKey findings globally:The key findings and drivers of Consumer Durable industry worldwide are summarized below: Asia-Pacific region is the most lucrative area for the consumer electronics industry, as most of the markets are still untapped. MP3 players continue to drive the audio market worldwide. Wi-Fi networking is expected to become a key enabler for the delivery and redistribution of content in homes, particularly for retail consumer electronics hardware. Mobile camera phone market has emerged as the single largest market for image sensors, surpassing the entire consumer electronics segment, including digital still cameras worldwide. The strongest growth in consumer electronics segment is expected to come from China by 2012, as the demand for consumer electronics is rising with the rapid pace of economic development and low cost consumer electronics manufacturing. On the back of this strong demand, China will become the second largest market for consumer electronics, after US.Top five emerging nations in Consumer Durable industryThe top five emerging nations in Consumer Durable Industry are CHINA, INDIA, BRAZIL, MEXICO andSOUTH AFRICA. Key points regarding the top five emerging nations are: The Top 5 Emerging countries contributed $37.6 billion to the global consumer electronics industry in 2007, with a CAGR of 10.9% between 2003 and 2007. In 2012, the market is forecast to have a value of $51.2 billion, with a CAGR of 6.4% over the 2007-2012 periods. China is the leading country among the Top 5 emerging nations, with market revenues of $21.6 billion in 2007. 8
  • 9. Indian Consumer Durables- Overview Pre liberalization, only a few companies like Kelvinator, Godrej, Allwyn, and Voltas were the major players in the consumer durables market, accounting for no less than 90% of the market. Post liberalization, foreign players like -LG, Sony, Samsung, Whirlpool, Daewoo, Aiwa came into the picture. Today, these players control the major share of the consumer durables market. Demand for consumer durables has increased significantly. Characterized by the emergence of MNCs. Major target is the growing middle class of India. Bargaining power of suppliers in consumer durables sector is limited due to threat of imports and intense competition. Some of the entry barriers in consumer durables sector are distribution network, capital, and ability to hire purchases. Demand is seasonal and cyclical. Competition among players is on the basis of difference in prices and well-acknowledged brands. 9
  • 10. PEST AnalysisPolitical Factors Anti-dumping duty on imported color picture tubes. FDI (100%), High Tax Incidence. Resolution to reduce emission of carbon footprints in the atmosphere. Effect of GST and DTC  Reduction in overall tax incidence (14-16% from 20- 25%).  More disposable income.  Prices of goods to reduce in the medium term.Economic Factors Growth of retail sector – expected to reach 16% by 2011-12 from 4% in FY07. Easy fin schemes to consumer. Economic reforms by the government –higher purchasing power. Emergence of organized retail market with large players like Croma, next, reliance digital etc. leading to lower prices and higher varieties. Indian incomes are likely to grow three-fold over the next two decades. 10
  • 11. Social Factors Disposable Income roughly doubled since 1985. Changing perception of luxury to necessity. Rural market – constraints. Demand of the consumer durables is seasonal. Decrease in average household size.Technological Factors Power efficient Higher quality products Technological advancements 11
  • 12. SWOT Analysis of Consumer Durable Industry Weaknesses Strengths 1. Demand is seasonal and is high 1. Presence of established during festive season distribution networks 2. Demand is dependent on good 2. Presence of well-known brands monsoons 3. In recent years, organized sector 3. Poor government spending on has increased its share in the market infrastructure vis a vis the unorganized sector. 4. Low purchasing power of consumers Opportunities Threats 1. Penetration level of white goods is 1. Higher import duties on raw lower as compared to other developing materials countries. 2. Unexploited rural market 3. Rapid urbanization 2. Cheap imports from Singapore, China 4. Increase in purchasing power of and other Asian countries. consumers 3. Poor infrastructure 5. Easy availability of finance 12
  • 13. Growth Drivers• Rise in disposable income• Availability of newer variants of a product• Product pricing• Availability of financing schemes• Rise in the share of organized retail• Innovative advertising and brand promotion• Festive season salesMajor Hurdles • Threat from new entrants, especially global companies • Rivalry and competition • Potential markets remaining yet untapped • Threat from substitute products/services • Customer power with respect to availability of choice 13
  • 14. Porter’s Five Force Model: Consumer Durable Industry Threat of New Entrants Supplier Power • Most current players are global players Indigenous supply base limited - most raw materials are imported • New entrants will need to invest in Brand, Technology and Distribution Competitive Rivalry •Number of well established players, with new players entering •Good technological capability •Many untapped potential markets Customer Power Threat of Substitutes Multitude of brands across price points - wide Technological Enhancement variety of choice for customers 14
  • 15. Supply Chain Management: Consumer Durable IndustryImportance of SCMSCM plays a very important role in Consumer Durable Industry and it is due to the following reasons:• Product Proliferation• Multiple players• High competition• Benchmarking and TQM• Production Demand mismatch• Ever Increasing Targets• Bargaining power of RetailersObjectives of SCM• Efficient Sourcing• Demand Planning• Inventory Optimization• Order Management• Tracking• High Inventory for High Demand Periods• Reverse LogisticsBenefits of SCM• Reduced vendor payments due to better on-time delivery and improved availability• Increased revenues from improved availability of high fast moving inventory• Working capital reduction due to improved inventory management and reduced order cycle times• Fixed capital reduction due to effective asset utilization 15
  • 16. Corporate AnalysisOverviewThe project needed us to have a thorough understanding of the Consumer Durable Industry in India andthe major players in Indian market. Below are some of the facts and figures of the companies involvedwith our project.LG IndiaCompany backgroundLG India, a wholly-owned subsidiary of LG Electronics, South Korea, began its operations in India bytrading goods imported from South Korea. In 1998, the company set up a manufacturing facility atGreater Noida where it manufactures CTV, semi-automatic washing machines, A/C, Microwaves, PCBAssemblies, Sub Assemblies, and Refrigerators. In 2004, the company set up another facility at Pune,Maharashtra where it manufactures GSM Mobile Phones, Plasma TV and all the other products whichare also manufactured at Noida plant.Product profileThe company has introduced high-end products in each of its categories such as scarlet – New range ofLCD TVs, Artcool ACs, Dios refrigerators, Top loading washing machine, PDP TVs, LCD TVS, GSM phones,R-200 notebook, etc. 16
  • 17. Color television: LG India has a wide variety of products across all categories such as conventional, flatand slim TVs, LCDs and Plasma. LG 1942S is an ergonomically- designed LCD monitor, which is primarilybeing targeted at business users. The monitor offers the ability to tilt the screen by up to 30 degrees,and features a 5ms response time for crisp content as well as an 8,000:1 contrast ratio.Refrigerators: The Company offers about 20 models across all segments like direct cool, frost free andDIOS. The company launched Swarovski DIOS, a high end model with high performance in digital cooling.It also launched frost-free models. The futuristic technologies that are currently in the pipeline of LGIntellocool refrigerators are four-way cooling, patent protected door-cooling, computer controlledcooling and the latest green ion door cooling.Air-conditioners: The Company has launched its color series window ACs. It indigenously developedadvanced sensor based IntelloEye technology to address the needs of convenient and comfortablecooling. Within the room air-conditioner segment, the company offers ACs in categories such asinverters, floor standing, split, multi-split and window ACs.Washing machines: The Company has launched the latest front loading TROMM series, which ensuresthat once you press the start button smart automatically detects the laundry load and water level. Thecompany has presence in all the categories of washing machine market such as semi-automatic, frontloader and top loader.DevelopmentsLG worldwide is adopting the blue strategy and the company is planning to launch some path breakingproducts and technologies as part of its strategy. Under the blue ocean strategy, the company will beentering new segment and market, and will aim to create uncontested market space. The blue oceanstrategy will focus on creating high growth and profit by focusing on 5 key areas of the company:product, business models, work, system and people.Samsung IndiaCompany backgroundSamsung India commenced its operations in India in December 1995, today enjoys a sales turnoverof over US$ 1 billion in just a decade of operations in the country. Samsung design centers arelocated in London, Los Angeles, San Francisco, Tokyo, Shanghai and Romen. Samsung India has itsheadquartered in New Delhi and has a network of 19 Branch Offices located all over the country.The Samsung manufacturing complex housing manufacturing facilities for Color Televisions, ColorMonitors, Refrigerators and Washing Machines is located at Noida, near Delhi. Samsung ‘Made inIndia’ products like Color Televisions, Color Monitors and Refrigerators are being exported to MiddleEast, CIS and SAARC countries from its Noida manufacturing complex. Samsung India currentlyemploys over 1600 employees, with around 18% of its employees working in Research & Development.To differentiate its products from competition, Samsung followed a deliberate strategy of bringing inthe world’s best design and technologies to India from its parent country. It launched its products inIndia around the same time as the global launch of products. 17
  • 18. Product profile The company is already the market leader in premium product categories like LCD TV and side-by-siderefrigerators. In 2007-08, the company is looking at consolidating its No 2 slot in air conditioners andaiming for the top slot in frost-free refrigerator and fully automatic washing machine segments.Samsung was the first to introduce the following in India at the same time as the global launch: DLPtelevisions, fuzzy logic based washing machines, silver nano refrigerators, flat screen TVs andmicrowave ovens.Color televisions: Samsung offers a wide portfolio of flat and slim models in 15- inch, 21-inch, 25- inchand 29 - inch screens.Refrigerators: Samsung has its presence in both frost-free and direct cool segment. It has around 42models in frost-free (230L- 730L) and around 15 models in direct-cool segment (180L-195L). Samsunglaunched 4- star rated frost-free refrigerators in January 2007, ahead of Bureau of Energy Efficiencyguidelines. In March 2007, the company launched nine models including the world’s first quarto coolingrefrigerator (which allows customized cooling in each section of the refrigerator).Air conditioners: Samsung has around nine models in split-ACs and seven models in window acsegment in 1 tonne to 2 tonne capacity range. Samsung launched its three new advanced seriespremium split air conditioners equipped with ultra tropical rotary compressor and micro plasma iontechnology under brands Vivace, Moderato and Forte.Washing machines: Samsung is present in the semi-automatic segment with around eight models andwith around 16 models in the fully-automatic segment. For the semi-automatic segment of Samsungwashing machines, Samsung has introduced for the first time in India a feature called super dry. It ispresent in three of Samsung’s semi automatic models and dries clothes better than the rest.DevelopmentsFocus sectors: Enhancing contribution from high-end products like LCD televisions, plasma televisionand ultra slim televisions would be the focus business strategy during 2007-08.Rural initiative: The Company also plans to carry out around 225 Samsung Dream Home road shows, allover the country to educate consumers on its new products and technology.Retail initiative: Samsung aims to expand brand shops from 115 in 2007 to over 200 by year end. By2010, Samsung targets around 10-12 per cent from organized retail store for which it is in the processof developing a dedicated team to tap the new retail opportunities.Whirlpool of IndiaCompany backgroundWhirlpool of India, formerly known as Kelvinator India was started in 1960 in collaboration withKelvinator International Corporation, USA. Whirlpool Incorporation, USA, and Sundaram Clayton Ltdstarted TVS Whirlpool Ltd as a joint venture in 1987.In 1995; Whirlpool Inc took over TVS Whirlpool Ltd, 18
  • 19. and also acquired DC manufacturing facility of Kelvinator India. Finally in 1996, Kelvinator of India andWhirlpool washing machines Ltd were combined to form Whirlpool of India. Whirlpool India has itsrefrigerator manufacturing facility at Faridabad (Haryana) and Ranjagaon and washing machines areproduced at its Thiruphuvani (near Pondicherry) plant.Product profileRefrigerators: Whirlpool refrigerators have 28 models in both direct cool and frost-free segment. Thecompany’s direct cool segment is marketed under brand name Genius (180L to 200L) and Fusion (200L,230L, and 260L). Frost-free refrigerators are under the brand of Iceberg (310L-340L) and Ice-magic(400L-450L). The Refrigerator category witnessed the launch of 2 new ranges Whirlpool Mastermindand Whirlpool Professional, both in the fast growing Frost Free segment. Whirlpool Professional, whichis a range of high-capacity top mount refrigerators, was enabled by the investment in a new line inRanjangaon specially made for producing high-capacity refrigerators that has high potential for boththe domestic and export markets.Air conditioners: Whirlpool has presence in split and window air conditioners under the brand Magic-cool. It offers windows AC models from 0.8 to 2 ton.Washing machines: Washing machines are available in the complete range of semi-automatic and fully-automatic segment (front and top load).DevelopmentsA range of Built-In appliances was launched in 2007.These products are an integral part of modularkitchens which are seeing a boom, especially with the growth in high-end housing. This is currently aniche market but with strong potential for growth in the years to come. The range of products areimported from factories in Europe which are known for both performance and styling.Videocon Industries LtdCompany backgroundVideocon Industries Ltd, the flagship company of the Videocon Group, was incorporated in 1985 by NMDhoot. It manufactures TVs and audio appliances primarily at its Chittagong plant in Aurangabad,Maharashtra, but the company has assembly operations at around 17 manufacturing locations acrossthe country. The company’s glass panels and glass funnels (collectively known as glass shells) facility isin Bharuch (Gujarat), with an installed capacity of 4.5 million units and 7.5 million units, respectively.Videocon industries also markets electronic appliances particularly white goods like refrigerators andair conditioners manufactured by Videocon Appliances Limited (VAL), another Videocon Groupcompany.Product profileProducts like, color televisions, washing machines, air conditioners, refrigerators, microwave ovens andmany other home appliances, fall under its Consumer Electronics, Home Appliances and Compressordivisions. The companys in-house compressor manufacturing technology in Bengaluru supports 19
  • 20. refrigerator manufacturing. The display devices and its components division manufactures color picturetube like slim CPT, extra slim CPT and high definition 16:9 format CPT, which operates in Mexico, Italy,Poland and China. The color picture tube glass manufactured by the company operates through Polandand India. Videocon is also involved in oil and gas exploration and operates from its oil fields in India,Australia and Oman.Color televisions: The Company has introduced three flat television models in the 15 inch, 18inchmodels in 21 inch segment and eight models in the 29 inch segment.DevelopmentsFocus: The Company would be increasing its focus on comparatively better margin products like LCD,plasma TVs, 29-inch TFT and slim color televisions. In the home appliances segment, the focus will be tostrengthen its position in the fully-automatic, front loading washing machine and frost-free refrigeratordivisions.Rural initiative: The Company has formulated marketing strategies with customized products for therural market. It also plans to expand its distribution network to tap the pan India rural market. Further,it plans to aggressively promote its consumer finance schemes in rural markets to enhance consumer’saffordability across product range for penetrating the rural markets.Videocon Retail: The Company plans to invest Rs 800 crores to expand its electronics retail format to1,500 from 200 at present in the next 3 years.Voltas LtdCompany backgroundVoltas Ltd was promoted by Tata Sons Pvt Ltd in collaboration with Volkart Brothers in 1954. It is one ofIndias premier air-conditioning and engineering services. Its operations are organized into foursegments viz., electro- mechanical projects and services, engineering products and services, unitarycooling products and others. Its factories are located at Thane (Maharashtra), Dadra and Sanathnagar(Andhra Pradesh). Its overseas offices are located in Abu Dhabi (UAE), Hong Kong and Singapore. Forturnkey engineering projects they have technical collaborations with international companies likeHitachi (Japan), Standard Refrigeration (USA), Dunham Bush (USA), Hercules (USA), Mitsubishi (Japan)etc. It has six subsidiaries and five joint ventures.Product profileAir conditioners: Voltas has presence in windows and split air conditioner sections under the brandsVertis, Verdant and Vectra. It offers window AC models between 0.6 to 2.0 ton and split ACs from 0.8 to4.0 ton. It was the first to launch sub 1.0 ton AC’s.Commercial refrigerators: Products include chest freezers, deep freezers, upright coolers and chestcoolers. 20
  • 21. DevelopmentsVoltas is planning an aggressive distribution strategy to increase its current channel partners from 3,000to around 4,000 during the year.IFB Industries LtdCompany backgroundIFB Industries Ltd originally known as Indian Fine Blanks Limited started its operations in India in 1974 incollaboration with Hienrich Schmid AG, Switzerland. IFB Industries has its business categorized into fineblanking and home appliances. IFB Home Appliances deals with washing machines, microwaves,dishwashers and drying machines. The engineering divisions of the company are located in Kolkata andBengaluru. Apart from Fine Blanked components, the Bengaluru unit manufactures motors for whitegoods as well as automotive segments.Product profileIFB Industries Ltd (Home Appliances Division) has recently launched top loading washing machines. IFB isthe leader in front loading washing machines in India. Earlier, IFB exclusively manufactured front loadingwashing machines and has a huge market share of the front loading fully automatic washing machines.Washing machines: Earlier, the company was present only in the fully automatic front-loading washingmachine category. Its fully automatic top loading model is now available in capacities ranging from 5-7kg. It has also launched top loaders in the Indian market in the capacity of 6-7 kg.Other appliances: Besides washing machine, the company also offers a comprehensive range ofmicrowave ovens, dryers and dish washers. 21
  • 22. Detail Analysis Whirlpool Electronics of IndiaWhirlpool VisionEvery Home… Everywhere... With Pride, Passion, PerformanceTheir goal is a Whirlpool product in every home, everywhere.They will achieve this by creating:-Pride in their work and each otherPassion for creating unmatched customer loyalty for their brandsPerformance results that excite & reward global investors with superior returnsThey will bring this dream to life through the power of unique global & their Outstanding people…working together… everywhere.Product management strategy TWL was established as an assembly operation, dependent on components that were 80-90% externally sourced. Faridabad(Haryana) Ranjangaon, Pune(Maharashtra) Thirubhuvanai(Puducherry), New line to make high capacity(8kg) washing machine in 2008Products introducedCompact washers i.e. automatic washers initially 22
  • 23. Target Customer Segment Initially high end customers Positioned the brand as a “Partner to the homemaker” and the values were translated into the various elements of the brand identity leading to the well known tagline “You & Whirlpool, The World’s best homemakers.” In fact, Whirlpool is credited with changing the lexicon from “housewife” to “homemaker” in everyday parlance. Engaged a real life celebrity couple Ajay & Kajol to endorse the brand who symbolize the values that brand stands for.Pricing StrategyPremium pricing initiallySales channel strategyTVS also had few connections with appliance retail distribution outlets. Dealers were not interested inbuying products from single-product firms like TWLGrowth over the yearsProduct range includes refrigerators, washing machines, air-conditioners, microwave ovens, 100%dryers and Purafresh.Acquired Kelvinator India Limited in 1995 and marked an entry into Indian refrigerator market as well. Kelvinator had a high cost structure, old factories, diversification into non core business areas like mopeds and excessive staff which brought losses to the company for the first time from 1991 to 1993; by 1994 it lost its position to Godrej. Electrolux retained the Kelvinator brand and Whirlpool was allowed to keep the manufacturing facilities and distribution network. Kelvinator purchase gave Whirlpool access to more than 3000 dealers in India. Kelvinator brand was handed over to Whirlpool on a two year lease till the end of 1996. Whirlpool used the Kelvinator brand as a launch pad for its own line of products. Whirlpool refrigerator was promoted as a refrigerator manufactured by the same company that manufactured Kelvinator. By the end of 1996 Whirlpool successfully established itself as a strong brand making use of Kelvinator’s trade partners and brand name. 23
  • 24. The same year also saw acquisition of major share in TVS joint venture. The removal of FERA restrictions and the liberalization of FDI enabled MNC, who were already operating in India, to raise their equity in their Indian enterprises to 51% or more post 1991 reforms. In 1996, Kelvinator and TVS acquisitions were merged to create Indian home appliance [6] i.e. Whirlpool India Limited which is An 82.3% subsidiary of Whirlpool Inc, USA New line in Ranjangaon, specially made for producing high-capacity refrigerators Product portfolio was expanded with the introductions of a front load fully automatic range in the highly salient <6 kg capacity. A Fully Automatic Dryer was also introduced A range of Built-in appliances was launched in 2007Management at Whirlpool concluded that if the company were to be a major player in the developingglobal major home appliance industry, it needed a presence in Asia to compete with the Japanese andKorean manufacturers. Industry projections suggested that Asia would surpass North American andEurope and represent 40% of world demand for home appliances by 2004. In 1987, Whirlpoolmanagers thought that rising incomes and aspirations among Indias middle class would generatesubstantial demand for home appliances over the next few decades. That same year, Whirlpool metand signed a joint venture agreement with Indias TVS group, for the purpose of manufacturingautomatic washing machines and eventually other appliances. TVS had begun as a bus service anddiversified into auto component manufacturing and other auto-related businesses. Its most recent (andleast successful) diversification into computer components was also its first into non-automotiveconsumer goods. TVS then joined with Whirlpool in forming TWL because it also wanted to takeadvantage of future growth in consumer products in India.Under the terms of the joint venture agreement, TVS provided day-to-day operational management,with Whirlpool providing the technical expertise in automatic washing machines. Unfortunately, TVSknew nothing of either making or marketing major home appliances, and Whirlpool ignored the fact thatthe Indian market had no interest at the time in automatic washing machines! People purchased eithermanual washers or semi-automatic twin-tub washers. Fully automatic machines were affordable only toa tiny segment of the population. TVS and Whirlpools investment of time and money into thedevelopment of their first washer meant that the venture had to sell 5,000 high-priced units per monthto reach break-even. TWL was established as an assembly operation, dependent on components thatwere 80-90% externally sourced. TVS lack of experience with appropriate suppliers, plus the marginalability of suppliers to deliver quality parts on time, caused huge problems in production. TVS also hadfew connections with appliance retail distribution outlets. Dealers were not interested in buyingproducts from single-product firms like TWL when they could deal with companies making a full range ofconsumer durables, like Videocon. Even after two years of operations, only 2,000 to 2,500 units werecoming off TWLs assembly line. By 1993, TWLs equity was reduced to zero, cash flow was weak, and 24
  • 25. losses were accumulating. Whirlpool purchased TVS stock in the joint venture and implemented aturnaround strategy under the new name of Whirlpool Washers Manufacturing Limited (WWML).Whirlpool initiated its Worldwide Excellence Program in the Pondicherry plant to raise the level ofquality and reduce costs. It worked to develop better relations with its suppliers. Whirlpool replacedTVS managers with its own from the United States but still had to deal with the TVS corporate culture inthe workplace. The reorganized venture reduced its losses and became profitable. Whirlpools marketshare rose from 12.9% in 1994 to 17% by the end of 1995. WWML finally made a book profit in 1995but still had to pay off its accumulated losses of US$50 million. Increasing competition and price warswere making the targeted 1996 market share of 20.6% difficult to achieve.Also in 1995, Whirlpool purchased a 51% interest in Delhi-based Kelvinator of India (KOI), one of Indiasleading refrigerator makers. Even though KOI had 30% market share in India, its refrigerators wereoutdated and the company was unprofitable. Whirlpool began construction of a US$119 million plantto produce state-of-the-art refrigerators. This was on top of its investment, totaling US$120 million, inthe TVS joint venture and in Kelvinator. The company was also considering entering the Indian airconditioning market as well as the fast-growing, Chinese major home appliance market. In themeantime, Whirlpools erratic corporate earnings translated into a decline in its per share stock pricefrom $56 in 1993 to $51 in 1996. Whirlpools plan to become a global appliance manufacturerappeared to be in difficulty.SWOT STRENGTHS a.)Strong R&D backbone b.)Strong Brand Image WEAKNESS c.)Increasing cash flow from operations a.)Low Margins d.)Growth in revenue from Latin b.)Declining Private label sales to Sears America e.)Aggressive marketing campaigns SWOT THREATS OPPORTUNITY a.)Influx of new multinational brands a.)Growing Asian markets b.)High marketing & Infrastructure b.)Growth in housing Investment by competitors c.)Expansion of organized retail beyond c.)Inflation of material costs metros d.)Regulations on energy and d.)Overall low penetration levels in the Sustainability country e.)Import risk due to currency fluctuations 25
  • 26. Plant Locations Whirlpool of India Ltd. Plant Locations Faridabad ,Haryana Puducherry ,Tamil Nadu Maharashtra Ranjangaon Pune  There are 3 factories of Whirlpool which server by providing the following goods  Faridabad----Refrigerators  Pune----------Washing Machines & Refrigerators  Pondicherry----Washing Machines Source: Secondary ResearchWhirlpool installed capacity Whirlpool Trends in capacity utilisation (%) +22% +13% 100% -5% 80% 60% 40% 2010 20% 0% Source: Prowess (CMIE) database 26
  • 27. Whirlpool Regional Distribution Hubs Whirlpool Regional Distribution Hubs ASSAM Faridabad, Haryana Puducherry, (Pondicherry, Tamil Nadu) Ranjangaon, Pune, Maharashtra Source: Prowess (CMIE) databaseWhirlpool Sales office and Warehouse Whirlpool Sales office/Warehouse ASSAM  The company has 18 sales branch offices in India and 1 CFA each. The company markets its products through CFA’s who further provide the goods to the Direct Dealers.  The Direct Dealers can also source the products directly from the company. Another Alternative Channel is selling through Sub-Dealers who in turn source their products from either the Distributors or the Direct Dealers. Source: Prowess (CMIE) database 27
  • 28. Whirlpool Distribution Network Whirlpool Distribution Network 2010  Distributors are being preferred as they increase 40% the company’s reach into rural markets as well reduce 60% the risk exposure of the company by providing credit worthiness Distributors Direct Dealers  Direct Dealers are important as there are some stores where company has to be present so as to have a superior business relationship with the customer  Distributor margin 3.25%(approx.)  Dealer margin 1.25% (approx.) Source: Prowess (CMIE) databasePerspective from Mr. Shantanu Das Gupta (V.P. Corporate Affairs & Strategy): RefrigeratorsOn Protton Refrigerators• Innovative & premium range of frost free refrigerators- Protton world series.• It’s an eco-friendly refrigerator.• Available in 2 formats: • Protton 3 Door: India’s 1st fully automatic refrigerator for systematic and odor free storage of frozen food, fresh food & vegetables separately. ABS (air booster system) vents present in each zone and FBS (freshness booster system) in vegetable drawer ensures lasting freshness for more than a week. 30% faster ice making. Capacity 300L & 400L, in 4 high gloss finishes. Price: Rs.23400- Rs 27500. • Protton 2 Door: New lifestyle features like double decker ice twister, can rack, choco box & fruit crisper. 50% faster ice making. Capacity 410L, 450L & 480L, in 3 high gloss finishes. Largest vegetable basket with freshness booster system.• Protton World series is third sub brand in Whirlpool’s frost free category besides Mastermind & Professional. 28
  • 29. On sales in 2009Sales of 1.53 million refrigerator units in 2009, an increase of 28% over 1.23 million units in 2008On market trends• Direct cool  Good growth driven by low capacity products  Price points attract first time buyers with modest income  Aesthetics- particularly color has become important in addition to durability• Frost free  Good growth will continue with more innovations  Demand for large capacity products will increase  New formats in large capacity products e.g. multi door formats  Smaller innovation cycle  Electronic user panel gaining importance  Innovative space management solutions in high capacity products  Energy efficiency is an additional criterion  Health and freshness benefits soughtOn sales trend• Upward momentum in both segments• Double digit growth over next 3 to 5 years across different population strataOn challenges• Supply/component base not keeping pace with change in market dynamics, necessitating imports• Innovation at low cost given expectation for better and more featured products on one hand and reality of affordability on the other. 29
  • 30. On Opportunities Limited penetration Rise in disposable income, improvement in infrastructure Implementation of GST, 2011 to ease movement of goods across states Expansion of modern retailOn Product range• Direct cool single door – 180L, 200L, 230L, 260L AND 310L• Frost free double door – 220L, 250L, 280L, 310L, 340L, 410L, 450L and 480L• 3 door top mount – 300L, 330LOn price range• Direct cool – Rs. 8200 – 16000/-• Frost free – Rs. 13100 – 48000/-On advertisement and promotional strategies• Mass media such as TV, print & radio• Innovations in advertising e.g. Fusion in direct cool & protton in frost free• Consumer promotions in specific periods e.g. Diwali 30
  • 31. Whirlpool Sales and Market Analysis Graphs Whirlpool Sales : 2009-10 Region wise Sales (%) 15% 31% 18% 2009-10 36% North + central South East West Whirlpool Total sales Trend Total Sales (units) 2009 1533000 2008 1203000 0 500000 1000000 1500000 2000000 31
  • 32. Whirlpool Turnover Trend (Rs. Million) Turnover2009 151142008 11791 0 2000 4000 6000 8000 10000 12000 14000 16000Whirlpool–Direct cool v/s Frost free: (2009-10) 21% 2009-10 79% Direct cool Frost free 32
  • 33. Whirlpool – Direct cool: Capacity wise (2009-10) Sales – 1215000 units 10% 10% 2009-10 80% 184L or less 185L to 225L 226L or more Whirlpool Frost free: Capacity wise(2009-10) Sales – 318000 units 6% 13% 6% 2009-10 53% 22% 225L or less 226L to 270L 271L to 300L 301L to 350L 401L or more 33
  • 34. Whirlpool Market Penetration (2009-10) Market Penetration (%)Urban 34Rural 6 0 5 10 15 20 25 30 35 40 Whirlpool Market Segment: (2009-10) Market segment 30% 2009-10 70% Rural Urban 34
  • 35. Whirlpool: Stats at a glanceSales Target for 2010-11 30-40% growthUpcoming Model Both at mass and premium endManufacturing Plant Faridabad and PuneTotal export 0.17 million unitsInstalled Capacity 2 million units per annumTurnover Sales units (2009-10) 1.54 million unitsTurnover (2009-10) Rs. 15.114 billionNo. of Dealers/ Distributors 2350Perspective from Mr. Shantanu Das Gupta: Washing MachinesOn sales trends• Fully automatic growing at 20% & semi automatic at 10%• Fully automatic top load is fastest growing segment• Color becoming an important aspect• Plastic cabinet gaining salience 35
  • 36. On key growth drivers• Low penetration• Aspiration & changing lifestyle• Increase in disposable incomes• Growth in nuclear familiesOn market trends• Industry in 2009-10 is 3-3.5 million units• Growth in 2008-09 is 15-20%• Industry growth pegged at 15-20% over the next three yearsOn emerging technologies• Green technologies offering greater energy efficiency & optimal water use• Plastic cabinets replacing steelOn major challenges and Opportunities• Only 4% penetration at all India level• Lack of proper infrastructure like water & electricity• Changing lifestyles, more working women, longer hours out of home, uncertainty of domestic help present opportunityOn energy efficiency initiatives• Features addressing water issues like eco wash, water saving wash & half load cycle• 6th sense optimizes detergent & water based on wash load• Aqua shower in semi automatic saves 20% waterOn marketing strategies• Short term objective to be at 20% mark by fiscal end• Interesting innovations in both formats prior to Diwali 36
  • 37. • Expanding distribution, 700 towns with population of 50000 to 5 lakhs, adding another 100 distributors• Increasing brand visibilityOn product range• Semi auto, 6-8kg capacity, plastic & metal body• Fully automatic top load, 4 designs, Agipellar & Agitator• Front loaders, only brand locally manufacturing 7kg m/c in India• Will introduce dryers in next 12-18 monthsOn manufacturing facility• Manufacture WMs at plant in Pondicherry• 10% product range is importedWashing Machine Statistics in charts and Graphs Whirlpool: Contribution of Fully and Semi – Automatic WMs (2009-10) Percentage Contribution (%) 40% 2009-10 60% Semi automatic Fully automatic 37
  • 38. Whirlpool : Total Capacity Wise Sales (2009- 10) Percentage Contribution (%) 4% 21% 2009-10 75% 5kg-6kg 6kg-7kg Above 7 kg Whirlpool : Semi – Automatic Capacity Wise Sales (2009-10) Percentage Contribution (%) 29% 2009-10 71% 6kg-7kg Above 7kg 38
  • 39. Whirlpool : Fully Automatic WMs Capacity Wise Sales (2009-10) Percentage Contribution (%) 3% 13% 2009-10 84% 5 kg- 6kg 6kg-7kg Above 7 kgWhirlpool : Zone wise sales, Semi – Automatic WMs (2009-10) Percentage Contribution (%) 14% 23% 11% 2009-10 23% 29% Central North South East West 39
  • 40. Whirlpool : Zone wise sales, Fully – Automatic WMs (2009-10) Percentage Contribution (%) 7.0% 21.0% 3.5% 7.5% 2009-10 61.0% Central North South East WestProduct Matrix:Refrigerator• Direct Cool: 7 models  Capacity 180-230 Lts  Price Range 9290-13930• Frost Control: 12 models  Capacity 180-310 Lts  Price Range 12345-18950• Frost Free: 48 models  Capacity 220-480 Lts  Price Range 15310-80810 40
  • 41. Air Conditioner• Window: 5 models  Capacity .8-1.5 Ton  Price Range 15790-22990• Split: 13 models  Capacity 1-15 Ton  Price Range 23350-36500Dishwashers Capacity 220-230V Price 50000Profit and Loss Account of WhirlpoolProfit & Loss account of Whirlpool ------------------- in Rs. Cr. -------------------of India. Mar 06 Mar 07 Mar 08 Mar 09 Mar 10 12 mths 12 mths 12 mths 12 mths 12 mthsIncomeSales Turnover 1,379.161,626.26 1,974.05 2,097.21 2,683.62Excise Duty 123.55 146.11 173.41 153.88 142.58Net Sales 1,255.611,480.15 1,800.64 1,943.33 2,541.04Other Income 4.46 4.64 0.84 4.35 14.64Stock Adjustments 11.80 16.23 93.81 -16.82 113.53Total Income 1,271.871,501.02 1,895.29 1,930.86 2,669.21ExpenditureRaw Materials 783.77 907.46 1,142.97 1,088.79 1,476.51Power & Fuel Cost 9.52 11.13 12.97 13.56 16.94Employee Cost 92.30 100.07 121.96 133.41 159.64Other Manufacturing Expenses 6.80 8.99 21.18 29.11 41.83Selling and Admin Expenses 286.13 344.13 426.57 443.15 619.77Miscellaneous Expenses 90.32 73.30 71.84 74.38 94.69Preoperative Exp Capitalized 0.00 0.00 0.00 0.00 0.00Total Expenses 1,268.841,445.08 1,797.49 1,782.40 2,409.38 Mar 06 Mar 07 Mar 08 Mar 09 Mar 10 12 mths 12 mths 12 mths 12 mths 12 mths 41
  • 42. Operating Profit -1.43 51.30 96.96 144.11 245.19PBDIT 3.03 55.94 97.80 148.46 259.83Interest 17.10 15.74 17.24 17.32 8.27PBDT -14.07 40.20 80.56 131.14 251.56Depreciation 36.55 34.42 37.35 39.01 39.68Other Written Off 13.66 18.32 15.21 9.43 9.40Profit Before Tax -64.28 -12.54 28.00 82.70 202.48Extra-ordinary items 10.95 6.90 0.81 3.50 4.33PBT (Post Extra-ord Items) -53.33 -5.64 28.81 86.20 206.81Tax -15.23 -0.32 -3.51 15.68 61.78Reported Net Profit -38.10 -5.32 32.32 70.52 145.02Total Value Addition 485.07 537.61 654.52 693.61 932.87Preference Dividend 0.00 0.00 0.00 0.00 72.24Equity Dividend 0.00 0.00 0.00 0.00 0.00Corporate Dividend Tax 0.00 0.00 0.00 0.00 12.28Per share data (annualized)Shares in issue (lakhs) 1,268.721,268.72 1,268.72 1,268.72 1,268.72Earnings Per Share (Rs) -3.00 -0.42 2.55 5.56 5.74Equity Dividend (%) 0.00 0.00 0.00 0.00 0.00Book Value (Rs) 3.29 2.87 5.41 10.77 15.74Future: • Immediate focus is on 700 towns with a population of 100,000-500,000 which we is expected to emerge as major consumption centres in the years ahead. • Plan to add new distributors to expand distribution width, and investment of around Rs 3 billion in India over the next three years • Strategic focus on countries which are less affected by the economic recession, primarily the Oceania region (Australia +New Zealand) and neighbouring markets in the SAARC region 42
  • 43. ScenariosWith easy availability of finance, emergence of double-income families, fall in prices due toincreased competition, government support, growth of media, availability of disposable incomes,improvements in technology, reduction in customs duty, rise in temperatures, growth inconsumer base of rural sector, the consumer durables industry is growing at a fast pace.Identifying the high impact and high uncertainty factors affecting the industry.1. Government policies2. I mprovements in technology3. Increase in raw material cost4. Easy availability of financeBuilding ScenariosScenario 1: No great change.With all the other factors affecting in one direction and increase in raw material prices actingagainst them, the change may be nullified, due to India being a highly price sensitive market.Scenario 2: Market growth despite increase in raw material cost and stringent RBI policies.Indian economy is expected to grow at the rate of more than 8% in future years; this will result inhigher disposable income with the consumers. But the inflation as per the recent data is hoveringaround 9% resulting in the increase in the price of these goods and impacting the demand.Moreover, RBI is tightening the monetary policy to check the inflation and hence the increase ininterest rate. Consumer durables sector which are sensitive to credit conditions in theeconomy, have seen a slowdown in growth to 3.3 percent in the April-June quarter of 2011,down from 19.7 percent yoy as shown in the table given below. 43
  • 44. Thus we believe that the measures taken by RBI will check the inflation rate and hence economymay not grow at the expected rate. This will result in the slower growth rate of consumer durablesector. But as the RBI policy ease out in long run, we expect to higher growth of the consumerdurable sector.Scenario 3: Saturation in urban areas, shifting the focus to rural markets.The penetration level of consumer durables is very low in India, as compared with othercountries. This translates into vast unrealized potential.For example, in case of color televisions (CTVs), the penetration level of various countries is:India 24%Brazil 11%China 98%U.S 333%France 235%Japan 250% 44
  • 45. In a study conducted by Frost & Sullivan and commissioned by India SemiconductorAssociation (ISA), the demand for Electronic Appliances is projected to grow exponentially at acompounded annual growth rate (CAGR) of 30%ConclusionThere are various factors which will influence the rate of growth of consumer durables industryin India.Infrastructure DevelopmentLack of adequate physical infrastructure like transport system, roads, ports, airports etc.adversely affect the competitiveness and productivity of the manufacturing sector. Uninterruptedpower supply is a necessary condition for operation of manufacturing units as power fluctuationscan lead to breakage of entire system. Many of the respondents to the survey have shown theirdissatisfaction with the existing availability and quality of infrastructure.It has been suggested by industry associations that preferential pricing on land, building andinfrastructure etc., are required to save the industry. For example, in China land and power areassured by Government. Industry and industry association has been supported by Government in 45
  • 46. China. There is need for active government support for the survival of domestic manufacturingin India.It is important that Government should prepare a time bound plan to upgrade physicalinfrastructure to ensure long term competitiveness and sustained development of light electricalmanufacturing sector. Adoption of Private–Public–Partnership (PPP) model can facilitate fasterand cost effective development of infrastructure. Financial incentives are given to manufacturingunits for establishing and maintaining of backup power units and for utilizing non-conventionalenergy sources.While setting up its new plant Arcelik needs to take into account the location close to adistribution hub or a region well connected to other parts of the country.Raw Material, Components & MachinerySome of the raw materials like Polypropylene are being manufactured by a single company(Monopoly) and as a result price is exorbitantly high. Due to the unavailability of good quality ofaluminum, copper tubes, gear boxes and other components several Indian manufacturers areforced to import from countries like China. Domestic component manufacturers may be givenadequate support to overcome these constraints.The manufactures of large home appliances are generally dependent on imported raw material asthe availability of good quality raw material is a serious problem. Due to the unavailability ofgood quality of aluminum, copper tubes, gear boxes and other components and subassembliesare forced to import from the countries like China and assembled in India to produce finishproduct. The Quality of these imported raw materials available in local markets is not fullyreliable.Government can evolve necessary mechanisms such as removal of safeguard duties on certainraw materials such as Aluminum and Polypropylene. An agency may over see the pricing of rawmaterial to ensure abnormal fluctuations in raw material prices.The domestic manufacturers of Air Conditioners reported problems in getting good and qualityCopper Tube in India hence they are relying on imports from China. Even 40 percent of the maincomponent is imported by most of the manufacturers. Even this is same in the case ofcompressors. Rotary compressors which are considered to be more energy efficient thanreciprocating compressors are mainly being imported from China. These compressors are costeffective as well. Only the reciprocating compressors which are used in Refrigerators are beingmanufactured in India. Nowadays, due to the adoption of energy efficiency norms, theproduction of reciprocating compressors is declining in India. Cooling coil and condenser etc., 46
  • 47. cost about 60 percent of the windows and split ACs. Most of the Indian manufacturing unitsproducing reciprocating compressors were reported to be taken over by large MNCs.Weak supply chain network and lack of vendor support also affects the quality, productivity andcompetitiveness of the products. Manufacturing units directly importing raw materials face delayin import clearances which slows down completion of time bound projects as well as exportproduction by these units. Government should ensure hassle free import of raw material andcomponents by streamlining the import policy and systems and through simplification of importprocedures. Maritime Transport is a critical infrastructure for the development of Logistics andSupply Chain Management. It influences the pace, structure and pattern of development.Ministry of Shipping may undertake appropriate action plans for hassle free Handling of rawmaterial and finished products at the ports.The Light Electrical Industry is a highly capital intensive industry and also the obsolescence isvery high. The industry is competing with major players in countries like China, Malaysia,Thailand and South Korea. Thus, there is the imperative to continuously upgrade manufacturingfacilities in line with the latest technological developments. Importing is considered to becheaper than manufacturing locally by many manufacturers in India.It is recommended that the government should promote modernization of units through a specialscheme with fiscal incentives and minimum import duties. Special Financing Schemes need to beformulated for encouraging the entrepreneurs in the manufacturing sector. Depending on theneeds and performance of existing manufacturers, special loans may be granted for technologyup gradation, infrastructure building or expansion of business.Import duties play a key role in deciding whether to import goods or manufacture, with possibleFTA between Turkey and India in the pipeline the consumer durable major, Arcelik can importCBU units from Turkey.Building a Global Supply Chain NetworkThe competitiveness of light electrical industry could be enhanced only through strengtheningthe global supply chain network as the industry is highly dependent on the import of rawmaterials. The cost of the supply network or logistic management network also needs to beassessed through value chain analysis. Unless it is intervened at the right time there will be aspiraling effect (e.g., rise in price of raw materials leading to high cost of production, that wouldresult in either rise in product price or incurring of loss by the manufacturer) that would hinderthe competitiveness of both the product and the firm. However, while calculating cost, theefficiency and reliability of the supply chain also need to be considered, as most of the productsrequire handling with care and to be delivered in time. 47
  • 48. LEARNINGS FROM A STRATEGIC POINT OF VIEWAs students of management this project helped us a lot to learn about: 1) Consumer Durable Industry in India which is expected to grow by around 8% in the next decade. The Indian consumer durables segment can be segregated into 2 consumer electronics groups: White goods Consumer electronics •Air conditioners •Televisions •Refrigerators •Audio and video systems •Washing machines •Electronics accessories •Sewing machines •PCs •Electric fans •Mobile phones •Watches and clocks •Digital cameras •Cleaning equipments •DVDs •Microwave ovens •Camcorders •Other domestic appliances 2) Growth Scenario of Consumer Durable Industry in India- Rising disposable income and declining prices of durables have resulted in increased volumes. An increase in disposable income is aided by an increase n the number of both double-income and nuclear families. Production in the consumer electronics industry has been estimated at US$ 6.7 billion in 2009– 2010. The segment registered a growth of 18 per cent in 2009–2010 from US$ 5.5 billion in the previous year. The consumer electronics segment contributes about 27 per cent to the total hardware production in the country. Air conditioners (including industrial and office conditioners) constituted 38 per cent of the consumer appliances market, followed by refrigerators at 14 per cent, electric fans at 7.5 per cent, washing appliances at 7 per cent and sewing machines at 5 per cent. Consumer durables are expected to grow at 10-15 per cent in 2007-08, driven by the growth in CTV’s and air conditioners. Value growth of durables is expected to be higher than 48
  • 49. historical levels as price declines for most of the products are not expected to be very significant. Though price declines will continue, it will cease to be the primary demand driver. Instead the continuing strength of income demographics will support volume growth.Growth Drivers for Consumer Durable Products Product 2007-2008 over 2005-2006 2008-2009 over 2009-2010 Category % Growth % Growth Driver Driver 20-22 Decreasing 30-40 Reduction in Air Prices, Prices Conditioners changing lifestyle 5-8 High demand 24 low Refrigerators for the frost penetration free level in the segment country and together with the increase in reduction in demand from prices the 5-8 Increasing 30-40 Reduction semi rural and in Color disposable Prices areas urban of Televisions income and LCD,LED declining 8-10 Reduction in prices 30 New models Washing prices of fully launched and Machines automatic reduction in machines prices3) Production facility of some of the top consumer durable companies in India. Example LG Electronics has 9 product lines in Pune plant (50 acre in area) and 7 product lines in Noida plant (47 acre in area).4) Distribution network of the company like the number of warehouses, supply chain process, modern retailers etc.5) Major players in the consumer durable industry. Example LG Electronics who is the market leader followed by Samsung, Whirlpool, Videocon, Voltas, IFB etc.6) Different sales and marketing strategies applied by different companies.7) After sales service. 49
  • 50. RecommendationThe Indian consumer durable industry is ripe for investment and is going to grow at a significantpace in the years to come. Hence, its best advised to enter Indian market with a diverse portfolioof products with substantial capital investment in the form of setting up owned plants.Limitations of the Project  While doing an interview with the industry heads of consumer durable companies they might not be willing to share the necessary data that are very important to the project.  The plant head of a consumer durable company might not be interested in talking about the supply chain process and the plant details like assembly lines and installed machines.  Taxation policy and regulatory environment might differ from one place to another and keeps changing. The data obtained may not be up to date and current.  Very extensive scope of the project, difficult to fit in the time frame of one month  Difficulty in getting company specific information due to company policies 50

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