Sales & distrinution consumer durable


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Sales & distrinution consumer durable

  1. 1. Group # 2  Industry : Consumer Durable  Videocon Industries Ltd.  Sales and Distribution Management Consumer Durable Industry Videocon Industries Ltd. Section : A Group # 2 ID No. Name 09BSHYD1017 PATEL TAPANKUMAR SUNILBHAI 09BSHYD0872 SULABH GOEL 09BSHYD0262 DIPESH VORA 09BSHYD0410 LATIKA SEHAJPAL 09BSHYD0185 ASHMITA DE 09BSHYD0778 SHILPI SARASWAT 09BSHYD0064 AMAN AQEEL Page | 1
  2. 2. Group # 2  Industry : Consumer Durable  Videocon Industries Ltd.  1. Introduction: The consumer durables industry has always exhibited impressive growth despite strong competition and constant price cutting. The industry exhibits very high correlation between demand for durables (both new and replacements) and income. India has witnessed a phenomenal growth, with the urban consumer durables market growing at almost 10 % per annum, and the rural durables market growing at 25% per annum. The Indian consumer durables industry has witnessed a considerable change in the past couple of years. Changing lifestyle, higher disposable income coupled with greater affordability and a surge in advertising has been instrumental in bringing about a sea change in the consumer behavior pattern. Apart from steady income gains, consumer financing and hire-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, color televisions and personal computers, retailers are joining forces with banks and finance companies to market their goods more aggressively. n addition, change in policy, such as the WTO FTA in 2005 resulted in zero customs duty on imports of all telecom equipment, thereby improving the pricing and affordability of imported goods1. According to industry sources, in 2010, air-conditioners are expected to grow 25%, split air-conditioners 60%, frost-free refrigerators 54%, washing machines 20%, fully automatic washing machines 35%, microwave ovens 35%, high-end flat panel TV 100%, LCD TVs 110% and the plasma TV are likely to register a 100% growth.2 Essentially we can classify the consumer durable products into following categories: 1. Consumer Appliances a. White Goods b. Brown Goods 2. Small domestic Appliances The largest MNCs incorporated in India are Whirlpool India, LG India, Samsung India and Sony India and homegrown brands are Videocon, Godrej Industries and IFB3. Videocon has impressive presence in washing machine, color TVs, Air conditioners and refrigerator. Major chunk of the revenue is fetched by these products. In order to gain competitiveness company has invested for R&D facilities and technology tie-ups for almost every product. 2. Micro-economic parameter – critical to be taken into consideration: Followings are the key driving forces for the industry’s growth4: 1. Emergence of nuclear families. 2. Growth of entertainment and Media and the flurry of television channels and the rising penetration of cinemas are also the growth drivers. 1 2 3 4 Annual Report of Videocon Industries Ltd. 2009. Page | 2
  3. 3. Group # 2  Industry : Consumer Durable  Videocon Industries Ltd.  3. Growth of organized retail. 4. Electrification in rural areas backed by strong aspirations. 5. Easy finance options. 6. Acceptance as a utility product rather than a luxury. 7. Increase in disposable income with greater aspirations and demographics tilted towards younger customers. 8. Diminishing price differential between the high-end and low-end ranges. Followings are the risks and concerns associated with the sector5: 1. The consumer electronic products and home appliances business is highly competitive. 2. There is a risk of assuming product liability, warranty and recall costs which may adversely affect results of operations and financial condition. 3. The consumer electronic and home appliance business is seasonal in nature. 4. There is a risk of reliance on distribution network for marketing, sale and distribution of its products and under-performance of distribution network may adversely affect Company’s sales and results of operations. 5. There is a risk of non-adjustability of product mix in line with market demand or keep pace with technological changes. Challenges associated with the growth of the sector: 1. The economy of rural India is growing at a very rapid pace, but lack of infrastructure and logistics hampers the penetration. 2. LG & Samsung – two Korean giants have very strong sales and distribution network and commendable manufacturing technologies. Essentially both of the factors are highly capital intensive and also risky. 3. Expenditure on marketing and branding requires to be balanced with the growth of sales & distribution network – which is a very critical success factor. 4. Though suppliers have low bargaining power, price sensitivity, low switching cost and new technologies may change the market dynamics drastically. 3. Key financial data6 Below points can be inferred from the financial information given in following table: o Company has increased spending on employees in last 5 years (almost at a rate of 21% CAGR). This shows the efforts made by the company in stretching the human capital, along with the increase in total assets. o In the last 5 years company has registered 11% CAGR in sales revenue, though recession hampered the economy and in the year 2008-’09 company registered negative growth rate. o The company’s profit growth has been at 23% YoY, till 2008. Thereafter, global recession not only affected company’s international trade, but also domestic consumption got reduced to a great extend. 5 Annual Report of Videocon Industries Ltd. 2009. 6 Page | 3
  4. 4. Group # 2  # Industry : Consumer Durable Vide eocon Industrie es Ltd.  (Rs. In Crore e) ↓   Sep p‐05  Se ep‐06 Sep‐07 Sep‐08  Sep‐09 CAGR Sales turnovver  5,664 4.68  7,58 80.33 8, ,710.26 10,105.13  9,381.27 11% Total Asset  3,276   6.96 3,80 07.18 4,298.94 5, ,072.64  5,166.47 5 10% Total incomme  5,376 6.05  7,30 09.54 8, ,483.52 9,622.74  9,122.76 11% Operating p profit  855 5.81  1,34 40.27 1, ,672.24 2,392.26  1,873.98 17% Net profit  427 7.68  818.5 8 855.22 982.11  400.66 ‐1% Employee co ost  49 9.53  94.7 105.35 115.82  126.42 21% Selling & Addmin Expense es  522 2.46  546.1 5 542.29 638.09  692.21 6% Dividend (%%)  25  35 35 10  20 ‐4% o O can infe that the c One er consumer duurable indus stry has ver high corr ry relation with the h life-style and disposable income. In the period from 2005 t 2009, Ind has exhi d to dia ibited su ubstantial economy gr e rowth and so this market has sh hown the ssign of lucr rative oppportunities s. 4. Sales Organizat s tion Structu ure A strong distribution network is absolutely essential to compete in this industr Not only does g n s ry. y it guarantee a country wide reac for a com n ch mpany’s prod also necessa for providing ducts but is a ary good afte sales serv er vice. Videoco has imple on emented ERP system, w P which helps in integrating the n manufact turing, mark keting, procu urement and distribution services w the corp d with porate office. . Consume Durable industry ha a very t er as typical sales organization structur Videocon has s re. n multiple ‘sales contac points’ to the customers, like ct a. Excluusive showroooms of the c company b. Electrronic Goods retail outle (like Croma) s’ ets c. Francchisee /Retaailers (with lo dealers) ocal ) d. After sales service centers e e. Regio sales tea onal am Organiza ation VP ‐ Commer rce Sr. VP ‐ Finance VP ‐ Finance Chairman & &  RM ‐ S & M Sales  Sales  GM ‐ S & & M AM MD Manager Executive Sr. VP ‐ Sal les  VP ‐ Sales &  & Marketing Marketing GM ‐ Bus siness  Development Associate V VP ‐ VP ‐ Operationns Operatioons Pa | 4 age
  5. 5. Group # 2  # Industry : Consumer Durable Vide eocon Industrie es Ltd.  Store Department Reg gional Marke eting Depart tment Store Ma anager Store In Charge Market ting  Team  T Sales  Store Ass sistants  Headd Leader Executivee Helpers poses of cur 5. Purp rrent foreca ast Sales forecast begins from consu s umer interac ction and m market resear Intense competition and rch. n presence of global giants like LG, Samsu ung and So ony – impos big chall se lenges as fa as far expandin market sh ng hare is conce erned. o G Global as we as Indian economy is now reva ell n amping back to the bas k sics. So, it’s very cr rucial to fore ecast the sal based up market r les, pon research and consumer r d responses. o U Unaddressed needs can g opportu give unities to new players to enter into t market. w o the o R Rural India is growing b leaps and bounds – so it’s very essential to extend reach to i by d o th hem. Thoug they hav limited buying pow gh ve wer, but big multitude is evidenc of e ce lu ucrative prof centre. fit o In order to ad n ddress the nneeds of part ticular society segments company n only req s, not quires fo ocusing on new produc developm ct ment, but at the same ti ime product training to the t o sa team is very essenti ales ial. o N only sale and distr Not es ribution netw work, company may req quire to dev strategi to vice ies op centers for after sa pen ales services depending upon the extended re s, g each of the sales network.  Sales forecas helps in p st procuremen of raw m nt material and establishing annual su upply co ontracts for the raw material. Subs sequently th helps in product des his sign, produc ction, pricing and marketing. m Annual rreport of Vid deocon (200 says, “Th refrigerat market e 09) he tor estimated to grow at CA o AGR of 10%. In this cat tegory, the Frost-free segment is fast gaini s ing mind-sppace with uurban consumers. The Wa ashing Mach hine market is expected to grow a 12 – 15% over next three t d at years. Th Air-Cond he ditioner mar rket has also been witn o nessing a phenomenal g growth of arround 19% in th past few years. With this trend e he y expected to c continue in t current year.” this 6. Grou approac up’s ch We believe Videocon follows ‘bottom-up’ approach for sales s structure, due to follo owing advantag against ‘t ges top-down’ ap pproach: Pa | 5 age
  6. 6. Group # 2  Industry : Consumer Durable  Videocon Industries Ltd.  o It offers short sales cycle. o Initial marketing is viral and web-based. o Cost of sales is less. o Targeting big volume of customers, each is paying small. o Everyone buys consumer goods multiple times, for multiple applications. o Customers have radical purchase habits, due to price war, low switching cost and thin product differentiation (from utility perspectives). o Sales development cycle is largely interaction driven. 7. Sales forecast Videocon may be using multiple methods of sales forecasting. The sales is associated with so many economy variables, like GDP, segment/city wise per capita income, technology trends, product life, electrification of rural areas, etc. o So, we believe that the Co. might be using “Regression Analysis” for sales forecasting using aforesaid variables. o At the same time “Poll of Sales Force Opinion” might be used to back the regression analysis results. Here for better forecasting, Co. may be conducting training sessions for their sales teams – about how to gauge market requirements, buying behaviors, competitors’ move, etc. o Along with the same Co. may be using the “Projection of Past sales”, to estimate probable growth, in sync with the targets set. 8. Guide posts to target setting o Consumer price index  This helps in adjusting production and inventory management. o Rural economy growth – electrification, agriculture production, infrastructure development, etc.  This shows growing opportunities and it helps in increasing production and recruitment of new sales team. o Region wise disposable income  This helps in mapping regional sales propensity and targeting exact customers.  This also helps in estimating replacement demand, as rising disposable income may make consumers to replace older products. o Nuclear families  This helps in estimating new owner demand, as nuclear families tend to buy new products when they are settling. o Last 3 years’ sales data of Co. and competitors  Poll of sales force is very essential, if it is exercised properly. This helps in synchronizing the estimation given by the team and sales achieved by them.  Competitors’ sales data helps in understanding whether our set targets are realistic or not, and may help in knowing if any crucial factor we have missed in our forecasting. Page | 6