44373870 marketing-project-on-indian-luggage-industry

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44373870 marketing-project-on-indian-luggage-industry

  1. 1. [MARKETING MANAGEMENT] December 15, 2007 Visit hrmba.blogspot.com for more project reports, presentations, notes etc. Travel Equipment MarketIBS Page 1
  2. 2. [MARKETING MANAGEMENT] December 15, 2007AcknowledgementExecutive Summary 07Indian Luggage Market 09Critical View of the Luggage Industry 11Per 1997 12Post 1997 13Environmental Scanning 14 1.1 Technological Environment 14 1.2 Social Environment 14 1.3 Economic Environment 14 1.4 Political Environment 15Porters Model 16Major Players in the Organized Sector 22V.I.P 23 1.5 Product Portfolio 24 1.6 Objectives 28 1.7 Segmentation 29 1.8 Distribution Network 29 1.9 Product Differentiation 30 1.10 Positioning 30 1.11 Strategy 31 1.12 SWOT Analysis 36IBS Page 2
  3. 3. [MARKETING MANAGEMENT] December 15, 2007Competition from Samsonite & the Unorganized Sector 38 1.13 Critical Aspects 42Samsonite 43 1.14 Brand Portfolio 44 1.15 Products Lines and Width 45 1.16 Distribution Network 48 1.17 Positioning 49 1.18 Segmentation 49 1.19 Product Differentiation 49 1.20 Business Strategy of Samsonite 50 1.21 Swot Analysis of Samsonite 50SAFARI 52Products & Pricing 52 1.22 Packs 52 1.23 Luggage 52 1.24 Business Gear 53 1.25 Shoulder Bags 54IBS Page 3
  4. 4. [MARKETING MANAGEMENT] December 15, 2007 1.26 Tote Bags 54 1.27 Places and Promotions 55 1.28 Push strategy 55 1.29 Pull Strategy 55References 56 Executive SummaryBrief Insight into Indian Luggage IndustryThe luggage industry in India is currently undergoing aconsolidation phase. Competition in the sector is expected tointensify with the entry of foreign players like Delsey of France.Companies with good research and development facilities areIBS Page 4
  5. 5. [MARKETING MANAGEMENT] December 15, 2007expected to survive while others may end up as contractmanufacturers for the bigger players. The luggage marketcomprises of three segments namely the premium segment with15% of total market share, the popular segment and the standardsegment. Samsonite (International) and VIP are the dominantplayers in the premium segment with a market share of 52% inthe popular segment. V.I.P. industries and Universal dominate thelow-end standard segment. The luggage market is dominated by the unorganized sector with 50%market share. Northern and western India are the biggest markets in the country.V.I.P. and Samsonite are focusing on developing their distribution networks. Bothplayers are also into exports. V.I.P.’s export touched Rs.134 million in 1997-98and is mainly targeted at Gulf and West European Markets. Samsonite posted anexport turnover of Rs.150 million for the year ended December ’98. Luggagemanufacturers, particularly V.I.P. have slashed prices following decline in pricesof raw materials. The organized sector (8%) is growing at a lesser pace when compared to theunorganized sector (25%). The organized sector will have to face the reality thatplayers in this sector may become organized and come out with branded productsemerging as competitors to the existing players in the organized sector. Theorganized sector has to be cautious of the developing grey market.IBS Page 5
  6. 6. [MARKETING MANAGEMENT] December 15, 2007 Indian Luggage MarketThe Indian luggage market is worth nearly one thousand crores. A considerableportion of the market is unorganized. The table below gives the distribution of themarket between the branded sector and the unbranded sector. Market Size: Rs. 900 croresIBS Page 6
  7. 7. [MARKETING MANAGEMENT] December 15, 2007 Organized Sector 60% Unorganized Sector 40%The market for luggage in India can be subdivided into three segments,comprising of the premium, regular and economy segment. The current growthrate of each of these segments shows that the premium segment is the fastestgrowing one - five times as fast as the economy segment, and two and a halftimes as fast as the regular segment.Growth Rates (Organized Sector) Premium 25% Regular 10% Economy 5%The organized sector is dominated at present by the Piramal fleet of companies -VIP Industries and Aristocrat. Between them, they account for 85% of theorganized sector market. Their chief competitor is the Rs.41 crore SafariIndustries, whose share in the branded market is nearly 14%. The rest of themarket is comprised of other brands like Encore, Unilite, Genius, Club andNovex. But the entry of Samsonite India, the 60:40 joint venture betweenSamsonite and the Bombay-based Rs.28 crore Tainwala Chemicals, wouldchange the whole scenario. Organized Sector Company MarketIBS Page 7
  8. 8. [MARKETING MANAGEMENT] December 15, 2007 share VIP 70% Aristocrat 15% Safari 14% Others 1% MARKET DISTRIBUTION UNORGANISED SECTOR SAFARI OTHERS ARISTOCRAT 8% 1% VIP 9% UNORGANISE D SECTOR ARISTOCRAT 40% SAFARI VIP 42% OTHERS Critical View of the Luggage IndustryThe luggage Industry can be traced into a triangle with the MNC giant SamsoniteInternational trying to steal the limelight, the $50 million Indian giant VIPIndustries at one of the vertices and the triangle completed with the $120 millionunorganized sector at the third end. The other small companies find placesomewhere in between. This then is the Indian moulded luggage industry in anutshell.IBS Page 8
  9. 9. [MARKETING MANAGEMENT] December 15, 2007Going back in time, the history of Rs. 10 billion Indian moulded luggage industrycan be observed in two phase’s viz., the pre-1997 phase and the post-1997.Pre-1997During this period, the companies were more interested in volume sales rather thansatisfaction. The Indian market was dominated by both the small and big players.It had still to witness the onslaught of the multinationals. American Tourister,currently the world’s second largest luggage manufacturer was there on the scenesbut, had to retreat in 1985 due to poor sales.IBS Page 9
  10. 10. [MARKETING MANAGEMENT] December 15, 2007Quality of the Indian luggage at that time was suited mostly for the low end massmarket and not for the premium end quality conscious customer. Innovations werevery few. People had got used to the old type of luggage which had a top, a bottomand a lock to keep it intact. The manufacturing process concentrated more onvolumes than on quality. And surprisingly, nobody was complaining. The reason:lack of quality awareness among the customers.Then came the discounts war in the 90’s. Customers were availing 50-60%discount on the maximum retail prices. Even as the sales soared companies startedto bleed. At this juncture, the aggressive Piramal group took over Universalluggage and its brand Aristocrat. This gave a body blow to all competition. Thebattlefield now comprised VIP Industries, Universal as part of the Piramal group)and Safari to name a few until the entry of world number one the $737 millionSamsonite International, in late 1996. Till then competition was restricted to sales.Service and customer satisfaction didn’t assume importance. In short, it was moreof selling than marketing.Post-1997This was the period when the industry witnessed a paradigm shift in terms ofquality and service. Liberalized baggage rules, presence of multinational and freerimport of luggage helped the Indian consumer to access international qualityluggage. In fact it ushered in a phase where even the domestic companies showedthe keenness to compete with the foreigners instead of following them. SanjeevIBS Page 10
  11. 11. [MARKETING MANAGEMENT] December 15, 2007Aga, former CEO, VIP Industries says. “A few years back we were not aware ofour own strengths. We assumed that the best was Samsonite or Delsey and wetried to come close to their standards. But now, we feel that we must do better tooutsmart them in the market.’ The company already seems to have moved in thatdirection. While between 1990 and 1996 VIP had registered only eight newdesigns in the next two years (1997 and 1998) the company registered 16 designpatents. The Indian consumer today has more choice than before. Environmental ScanningPolitical Environment:Government has placed the raw materials required for the industry under OGL(Open general license). Raw materials can be freely imported. There is noIBS Page 11
  12. 12. [MARKETING MANAGEMENT] December 15, 2007restriction on the export of finished product and very little barriers were there forforeign firms to enter into Indian market.Excise duty, Import duty, Custom duty, Sales tax have a substantial bearing on thecost structure of the final product. International prices of raw materials are highlyflexible. There is no policy to control the burgeoning grey market.Social Environment:Luggage sales show a peak during the marriage season. This season witnesses aspate of purchases of luggage.Brands are promoted as status for consumers & tourists.Economic Environment:The luggage industry’s growth rate is dependent on the level of business & leisureactivity in the country. The positive signal in the growth of the economy workswell for the luggage industry. The growth in the tourism industry affects theperformances of the luggage industry which shows peak sales during the months ofSeptember-January. The potential market growth @ 8-10% is making India a basefor the Multinational Companies.Technological Environment: -The luggage industry has graduated from the tin trunks; plywood suitcases to thenewly developed technologically superior plastic moulded suitcases with a lot offeatures added on to cater the requirements of the customers. The luggage now isdeveloped for aesthetics, comfort & convenience in use. Technology is alsoIBS Page 12
  13. 13. [MARKETING MANAGEMENT] December 15, 2007developed in the manufacturing of the luggage with specialized mouldingmaterials used to mould the plastic material. The features like the locks, wheels,handle etc. have been developed over the years. The industry has about 300models in various segments. Technology has made it possible for companies to gofor a large production (VIP is 12000 per/day (286 models) & Samsonite is 1500per/day (85 models)).The amount of Research & Development investment being done by the companiesis also on the rise. This is more prominent in the organized sector with VIPspending @ 7% of its turnover & Samsonite spending @ 9% on Research &Development Internationally. The unorganized sector spends very little amount onResearch & Development spending is towards product development, capacityutilization, distribution network & communication. PORTERS MODELThreat of Entry:IBS Page 13
  14. 14. [MARKETING MANAGEMENT] December 15, 2007The industry is Oligopolistic in nature moving towards Duopoly with twocompanies enjoying the market share a bit over 80%.1) Barriers To Entry:-a) Economies of Scale:- Existing distribution channels. Brand awareness of existing players.b) Product Differentiation:- The existing players in the industry have managed to differentiate their product from each other depending on the segments they are in.c) Capital Requirements:- Total project cost=25 cr. Payback period is 3-5 yr. Access to Distribution Channel:- Existing competitors have tie ups with wholesalers & retailers for marketing their products based on the long term relationship, high quality services or exclusive relationship. A new entrant will have to invest heavily to develop a distribution channel.d) Cost disadvantages independent of scale:-IBS Page 14
  15. 15. [MARKETING MANAGEMENT] December 15, 2007 No demographic survey to demarcate buyer profile & helps to focus marketing efforts. This translates into greater costs in product development & selling & distribution.e) Possibilities of a new entrant getting into a Joint Venture with the players in the market are less. [Given an Oligopolistic nature of the market, this is becoming duopoly in nature]. This would mean that the new entrant would not be able to take advantage of the existing player’s strengths (production or distribution) & will have to start fresh.f) Favorable access to Raw Material.2) Expected Retaliation:- Expanding of the distribution network by the existing player. Accessibility of product. Price cuts & discount.3) Entry determining price :- Given the strong brand & market presence of the existing players & their well established distribution network the new entrant will have to plan for heavy initial investment in order to make his presence felt. This will have to be done under the prevailing price structure taking into account retaliation from the existing playersIBS Page 15
  16. 16. [MARKETING MANAGEMENT] December 15, 2007 Thus the returns may not be as soon as expected which itself may form a barrier to enter into the industry.4) Bargaining Power Of Suppliers:- Dominance of few suppliers & lack of substitute products. Although there is an additional capacity of the raw materials required for the moulded luggage, there is limited to the quality of the available material. There is no substitute raw material to the material used at present i.e. Polypropylene & ABS. This shifts the bargaining power towards the suppliers of the raw materials. Raw materials make up for 50% of the cost. Although Reliance has the process to supply quality raw material the volumes of the luggage industry do not justify their production & supply.5) Suppliers:- Raw materials used for moulded luggage are mainly Polypropylene & HDPE Acrylonitrile Butadine Styrene (ABS). These are by products of petroleum. There are plenty of suppliers. Moreover the materials can be imported as PP is under the OGL because of which companies like Samsonite & VIP imports their raw material. There has been no shortage in the supply of the material. Due to the excessive capacity & the South East Asian Crisis theIBS Page 16
  17. 17. [MARKETING MANAGEMENT] December 15, 2007 prices of the raw material have dropped by about 46% in the last two years. Thus in the scenario of enhanced competition in the moulded luggage industry the diversity of suppliers & over capacity without the scope of forward integration has limited the bargaining power of the suppliers. The unorganized sector sources its raw materials (recycled plastic) from a number of local sellers.6) Bargaining Power Of Buyers:- The organized sector has few buyers compared to the suppliers of raw material, which is available in plenty. The raw material forms 50% of the total cost of the product. There is no restrictive sale policy by the government as regards to the raw materials. Hence buyers can have resource to the international market. The raw materials are under the open general license which can import freely. In the unorganized sector the suppliers of the raw material (recycled plastic) are many & this shifts the bargaining power to the buyers. There is no scope of backward integration by the buyer because of the number of suppliers & the free import policy. There is no product differentiation of the raw materials.IBS Page 17
  18. 18. [MARKETING MANAGEMENT] December 15, 20077) Intensity of rivalry among existing competitors :- The moulded luggage industry can be divided into 3 segments:- Standard Popular Premium In each segment there are 2-3 competitors. VIP is the leader overall but in each segment there is intense competition as each company tries to maximize its market share.8) Slow Industry Growth:- The growth in the moulded luggage industry has been sluggish & the competition is getting intense. Compared to the growth rate of soft luggage market or 25% the growth rate of moulded luggage is about 8-10%, which is relatively slow.9) Differentiation & Switching Cost:- There is a lack of switching costs in this industry leading to intense competition levels. Product differentiation exists amongst the players in the standard and popular segments.10) Diverse Competitors:- Diversity in terms of strategy origins triggers off intense rivalry. In this industry the competitors are into the market with different means of capturing the market. This leads to intenseIBS Page 18
  19. 19. [MARKETING MANAGEMENT] December 15, 2007 competition especially during the season of marriage & travelling which are considered periods of peak sales.11) Exit Barriers:- Exit barriers may be economic strategic or emotional in nature. The specialized machinery used in the manufacture of luggage the investment companies make in terms of production human resource, building up distribution network are enormous & makes it difficult for the company to exit. This then intensifies the rivalry among competitors with each player trying to optimize utilization of assets.12) Substitute Products:- The presence of substitutes which perform functions essentially similar to the existing one & offering price advantages put a capacity on the profits of the industry. The luggage industry can be divided into the hard moulded luggage & the soft luggage. The soft luggage is a perfect substitute for the moulded luggage. With a growth rate higher than the moulded luggage there is a capacity to the extent the hard luggage market growth. Also the flexibility of the soft luggage in terms of size design price etc. makes it a potential threat to the hard moulded luggage market.IBS Page 19
  20. 20. [MARKETING MANAGEMENT] December 15, 2007 MAJOR PLAYERS IN THE ORGANIZED SECTOR • V.I.P. • Samsonite • Aristocrat • Safari • Giordano • Delsey • American Tourister • Rimowa • Kipling • Jansport • Blue & Blues • Jang • Fiorelli • OthersIBS Page 20
  21. 21. [MARKETING MANAGEMENT] December 15, 2007 V.I.P.VIP Industries Ltd. is the flagship company of the DG PiramalGroup. Established in 1971, it is a leading luggage manufacturingcompany, which manufactures strollys, suitcases, executivecases, backpacks and other hard and soft-sided luggage. It ownsreputed brands such as VIP, Alfa, Footloose and Buddy. It has twomanufacturing units in India and various subcontract operationsin China and Indonesia. Currently, it has a workforce of nearly2000 people.VIP is a well-known and reputed brand name in India.VIP has beenincreasing its presence in world markets in the luggage industry.The company has operations across the globe in five continents.It has offices in the USA, South Asia, Middle East, Africa andEurope, Worldwide, VIP products are sold across 1300 retailIBS Page 21
  22. 22. [MARKETING MANAGEMENT] December 15, 2007outlets in 27 countries. Currently, it exports its product to WestAsia, Europe, the USA, and select African and South East Asiancountries.Product PortfolioThe product portfolio of VIP Industries Ltd. today includes adiverse range of hard-sided and soft-sided luggage. The rangeincludes strollys, suitcases, duffles and overnight travel solutions,executive cases, backpacks, and even school bags. VIP IndustriesIBS Page 22
  23. 23. [MARKETING MANAGEMENT] December 15, 2007Ltd. has renowned brands like VIP, Alfa, Footloose, and Buddycovering the entire spectrum of travel products. VIP IndustriesLtd. has a license and markets Delsey products in India andSAARC countries.These products reach over 8000 retail outlets across the country.Outside India, we have a network of over 1300 retailers across 27countries. Our range includes injection moulded PP cases;vacuum formed ABS cases as well as soft-side luggage in nylon,polyester and EVA material. Luggage Hard suitcase, soft Polypropyle suitcase, ne, hard upright, soft polycarbon upright, cabin ate, ABS luggage. nylon. Travel Totes, travel bag, Nylon, Bags trekking leather bag, trolley tote. Backpac School bag, Nylon ks trekking bag, laptop backpack. Executiv Briefcase, soft Nylon, e bag / executive bag, synthetic Portfolio laptop bag, Laptop (foam), trolley, polyurethan messenger bag e, leather.IBS Page 23
  24. 24. [MARKETING MANAGEMENT] December 15, 2007 Belts Pure Leather Leather Reversal belt with reversible buckle & regular buckle Regular belt with fancy buckle & regular buckle Casual belts Wallets Pure Leather Leather 3 to 10 credit card holder with pockets for coins and identity card Card holder with pockets for coins Zip pockets, 2 fold wallet with pockets for coins and cards 3 fold wallets with pockets for coins and cards Credit card holder with 10 to 20 pockets Travel Security leg wallet, Accessor hip money belt, ies neck safe pouch,IBS Page 24
  25. 25. [MARKETING MANAGEMENT] December 15, 2007 secret wallet, shoe bags, passport control with 7 compartments, hands free CD case, MP3 player case, iPod case, eye glass holder, cell pouch, foldable bag, key lock, number lock, luggage tag, travel pillow, toilet kit, luggage strap, key pouch, travel security with number lock etc Handba Office / Everyday Leather, gs bag, mess bag, Nylon shopping bag, leather bag, leather purses, leather wallets, jewel bag, fancy, vanity hard, vanity softIBS Page 25
  26. 26. [MARKETING MANAGEMENT] December 15, 2007The company entered the nineties with four sub-brands,segmented on form and customer profile. Market Positioning : • Skybags - soft luggage range, for the business traveler. • Alfa - economy range, for the first-time buyer or the up grader to the branded segment. • VIP range - priced twice as much as Alfa, for the stereotypical Indian luggage customer. • Odyssey - for the exclusive, lifestyle buyer.VIP Industry is Asia’s largest luggage manufacturers & world’ssecond largest luggage manufacturer. It has some of the finestbrands & has been ranked second in the recent brand awarenesssurvey. The growth rate and sales in each of these brands in 1992indicate the skewed growth towards the upper end of the market. BRAND Contribution Growth Rate (%) to sales (%) Skybags 10 35 Alfa 40 3 VIP range 35 10 Odyssey 15 30IBS Page 26
  27. 27. [MARKETING MANAGEMENT] December 15, 2007These all brands are found in the lower segment. It hasmanufacturing facilities in Nasik, Nagpur, Jalgaon & Sinner. Itproposes to start manufacturing units in Sri Lanka & other SAARCcountries. VIP manufactures 280 models. The manufacturing long-term objective capacity is 12000 units per day. VIP has a strong4000 dealer network in place.Long Term Objectives: To achieve 50% of the turn over from exports & become a major player in the International market by the year 2005. To get a major chunk of the unorganized sector through their product ‘MANTRA’.Short Term Objectives: To have a volume & value growth of 15%.IBS Page 27
  28. 28. [MARKETING MANAGEMENT] December 15, 2007SegmentationVIP is catering to income group of 5000-10000 for the standard &popular segment product & their premium product is targeted toan income group of 10000+. They are catering to all the fourzones.Distribution NetworkVIP has 21 branches & a strong dealer network of approximately5000. Market Distribution – in India Sales Channel Share (%) Army canteens 30-40% Luggage shops 60% Market Distribution – World over Sales channel Share (%) Department Stores 41 Luggage shops 21 Catalogue stores 16 Variety stores 15 Mail order 2IBS Page 28 Others 5
  29. 29. [MARKETING MANAGEMENT] December 15, 2007Product DifferentiationVIP has made a dent into the unorganized sector as the onlybranded product present in the standard segment. Premium Segment :-There is hardly any differentiation in the product offered by VIP.Product is almost same as to the product of their competitorsSamsonite in features. The differentiation is only in terms ofprices (VIP is @ 20% cheaper than Samsonite.) Popular Segment:-It is the segment where VIP makes money. This segment providesa better margin. The luggage is of the frameless type & thecompany has a large market share. The product is promoted assturdy & enduring hard knocks of travel in India. Standard Segment:-Product has the bare minimum features & is differentiated on lowprices. Product is promoted as value for money.PositioningIBS Page 29
  30. 30. [MARKETING MANAGEMENT] December 15, 2007It positions itself as an A-Z luggage company without diffusion ofthe mother brand.V.I.P. is looking at tapping the lucrative European market wherepeople are buying more luggageStrategyVIP has established itself in the Indian market using productinnovations, stress on quality and brand building. VIP was the firstto introduce “non reversible multi safe lock”, soft grip handle,dual action lock and central locking system. These innovationstogether with brand building made VIP a market leader.Then VIP faced the problem faced by most of the giants: thebrand becoming generic to the category and local brands eatinginto the share of the company.In 1997 came a formidable threat to VIP – Samsonite. With inshort time Samsonite established its presence in the luxurysegment of the market. While VIP was very dominant in the mid-segment, it had no presence in the luxury segment. Samsoniteposed a major threat to VIP and garnered a market share of about35% in the luggage market within a short period of time. Thisforced VIP to seriously reconsider its marketing strategy. Tocounter the threat of Samsonite, VIP launched Elanza range ofpremium luggages. Samsonite meanwhile also wanted to enterthe popular segment (800- 2000 range). It launched the brandIBS Page 30
  31. 31. [MARKETING MANAGEMENT] December 15, 2007“American Tourister “to enter this segment posing a major threatto the market leader. More over Samsonite had an internationalcontemporary look and appealed to the new generation than VIPwhich was not perceived as a vibrant brand.In order to attract the new generation and create a new brandidentity, VIP embarked on a rebranding exercise. The usual ads ofVIP was appealing to the middle class and focusing more onemotion. The “Kal Bhi, Aaj Bhi” ads were very powerful andappealed to the middleclass. But since the consumers changed, inorder to succeed, the brand had to have a contemporary look.The new strategy of VIP is focusing on capturing or owning theconcept of “Travel”. The logo was changed to a morecontemporary logo and the ads were changed to communicatethe new positioning. The agency thought of the most appropriatemoments of travel and decided that the “time of departure “arethe most critical constituents of travel. The ads aimed to tie thebrand to Travel. Thus originated the “Bye- Bye “campaign with avery youthful imagery that appealed more the new generationtravelers. The baseline was changed to “Happy journey” thusattempting to own the concept of traveling.The new campaigns were supported by new ranges of products.The sub brands of VIP include Delsey (international brand fromFrance) to capture the premium segment, Footloose: the trendyIBS Page 31
  32. 32. [MARKETING MANAGEMENT] December 15, 2007bags for the youth, Buddy: school bags and Alfa: value for moneysegment.VIP is a market leader that is trying hard to retain its leadershipposition. It had failed to create barriers for competition bykeeping many categories open for competition to enter. Now alsoleather bag category is now seeing lot of action with big playerslike Hidesign taking the lead. VIP does not have a presence in thissegment. But with its strong brand equity and ability to changewith the consumer trends will help VIP in its future battles.Advertising StrategyTheir advertising strategy is to promote image of sturdiness,value for money & toughness. Plan to spend RS 20 cr. for thesame. Its price ranges from RS 225 to Rs.8000. The company hasalso been in fresh talks with French company Delsey, formarketing the latters premium luggage range.Pricing Strategy Market Segmentation Segme Price Market nt range share (Rs) (%) Premiu 1500+ 15 mIBS Page 32
  33. 33. [MARKETING MANAGEMENT] December 15, 2007 Popula 700- 30 r 1500 Standa 300-700 55 rdThe premium segment is at the top of the rung in India. It isfollowed by the popular segment which is slightly larger than thepremium segment but smaller than the premium segment, thelatter segment is the largest and contributes to maximum sales indeveloping countries. In contrast, the standard segment in thedeveloped countries is very small.Such constitution of the customer profile is aiding theunorganized sector in India which manufactures low cost goods.The high quality manufacturers are finding it difficult to penetratethe market due to high production costs. The target customers atthe high end (premium segment) form just 15% of the totalcustomers while the low end standard segment constitutes 55%.The premium segment is controlled by the Apollo group (US)company, Samsonite (I). The popular segment is dominated bythe domestic giant, VIP Industries. The standard segment, thelargest segment, is serviced by VIP Industries and Universal. Theunorganized players price their products at around Rs 300 perpiece.Apart from competition and undercutting by the unorganizedsector, the moulded industry is facing a tough fight from the softluggage segment as well. This segment has caught customerIBS Page 33
  34. 34. [MARKETING MANAGEMENT] December 15, 2007fancy in the last few years. Even though the soft luggagesegment forms just 15-20% of the total industry. It is growing atthe rate of 25% which is much higher than the moulded luggagesegment growth.The industry majors differ in opinion on the growth rate of hardluggage or moulded luggage. VIP Industries optimistically putsthe growth rate at 10% while the multinational Samsonite saysthe hard luggage market has shrunk by 4%. But, both thecompanies are not ready to ignore the hard luggage market forsoft luggage. Abroad, most of the luggage manufacturers are intoboth hard and soft luggages. In India too, VIP and Samsonitemanufacture both soft and hard luggage.Universally, the luggage business is seasonal in nature. In India,luggage sales depends on two factors—tourism development andon the marriage season. The marriage season extends fromMarch – June and from October – December. These months seegood luggage sales. Also, the domestic tourists usually plan theiryearly trips during the holiday season between April – June.During this period, there is fierce competition among the luggagemanufacturers to grab the market share.However, socio-political turmoil in the last few years has affectedthe Indian tourism industry. Market sources say all such problemshave retarded the cumulative annual growth rate of the mouldedluggage industry to 5%. However the Kargil issue at Kashmir hasworsened the chances of revival of the Indian tourism industry,IBS Page 34
  35. 35. [MARKETING MANAGEMENT] December 15, 2007thereby reducing the chances of improvement in the growth rateof the luggage industry.SWOT Analysis1. Strengths:-• Very high brand awareness (2nd in India).IBS Page 35
  36. 36. [MARKETING MANAGEMENT] December 15, 2007• 52% market share in organized sector (largest in Asia).• 11% through Universal luggage.• Form 31 years it has been in this market.• It has 21 branches & a strong dealer network of about 5000 outlets.• Low raw materials cost.• Real Value for money.• Money power & aggressive management.• All plants are ISO Certified (government recognized R & D unit in Nasik).2. Weakness:-• Less Research & Development expenditure.3. Opportunities:-• Scope to increase exports.• Economy is reviving.• Untapped lower segment area.4. Threats:-• Worsening situation in Kashmir for tourism.IBS Page 36
  37. 37. [MARKETING MANAGEMENT] December 15, 2007• Unorganized sectors are cheaper by 25% due to less amount of excise duty.• Excess capacity in the South East Asian countries.• The players in the unorganized sector getting them organized and coming out with branded products.IBS Page 37
  38. 38. [MARKETING MANAGEMENT] December 15, 2007 Competition from Samsonite & the Unorganized SectorThe Indian moulded luggage industry at the present juncture iswitnessing a bitter battle among the competitors. However, theunorganized sector is having an upper hand grabbing a largershare whenever the market grows. VIP has money power and anaggressive management. Samsonite has a reliable parentage,money power and R & D support. The unorganized sector relieson low cost products for their good sales. The sufferers are thoselacking in money power which does not allow them to spend onadvertisements and R & D.In the long run, companies with sound R & D are expected tosustain competition. While VIP spends 2-3% of its turnover on R &D, competitor Samsonite does not spend anything in India. Theparent company spends 9% of its turnover in R& D. This will helpSamsonite introduce new products periodically. In fact, Samsoniteproposes to reduce its price range from the present Rs.1500-1700range to the Rs.1000 + category. On the other hand, VIP plans tointroduce products both in the premium and lower end segments.But both the companies are keeping their cards close to theirchest.The fight is expected to become fiercer when the world numberfour Delsey (of France) also makes an appearance in India.Internationally, the companies are trying to enter fast growingareas because of very low growth in the developed markets. TakeIBS Page 38
  39. 39. [MARKETING MANAGEMENT] December 15, 2007the case of Samsonite International. It has witnessed a growthrate less than 0.6% during 1998. Certainly, the internationalmajors cannot ignore the Indian market.In the Budget ’99 however, the finance minister has allocatedRs.1.33 billion for tourism development as against last year’sfigure of Rs.1.19 billion. This excess allocation is sure to benefitthe tourism industry in turn benefiting the tourism dependentindustries (moulded luggage and hospitality industries).Another major area can be looked into by the luggagemanufacturers is making India a manufacturing base in the waySamsonite has cashed on the cheap and skilled manpoweravailable in India. As stated earlier, due to poor product quality,except for VIP and Samsonite none of the local manufacturers arein a position in export. On the flip side there is excess softluggage capacity in countries like China and Taiwan. Marketsources say that these countries have 50% excess capacity whichwill find their way in the international market.Hence the local companies may have to encounter toughcompetition. As such any rise in domestic sales and export saleswill definitely benefit the domestic industry.Thus, the present status of the industry is highly competitive andthe final consumer will be benefiting. Today, he has more options,more designs, and better quality products to choose from. Theconsumer is the king.IBS Page 39
  40. 40. [MARKETING MANAGEMENT] December 15, 2007The Moves:Samsonite was considering launching Oyster (its highest volumesearner worldwide) in the range of Rs.2000, so that it would bepriced above VIP, and its brand image would be strengthened.But, early this year, VIP Industries launched Elanza, a slick brandof premium moulded luggage targeted at the top end of thepremium market. Elanza boasts of two patents, for its bumperand fabric lining. The 79-cm Elanza was priced at Rs. 3750, whilethe 69-cm one sells for Rs. 3250 in India. Moreover, Elanza hasbeen made available through select dealers only, in order tomaintain its premium image. At present, VIP plans to export 90%of its production of Elanzas.This caught Samsonite totally unawares. The branded luggagescores on perceived value pricing, and so at the momentSamsonite is keenly tracking Elanza’s performance in the market.VIP set the price so high to preempt Samsonite’s entry in thesuper-premium segment of the market.VIP plans to make this price permanent, subject to the successfulsales of Elanza. This means that Samsonite would go ahead andlaunch Oyster at Rs. 2000. The market research study clearlyindicates that Samsonite would lose heavily on its brand equity ifits product is cheaper than the existing ones in the market.IBS Page 40
  41. 41. [MARKETING MANAGEMENT] December 15, 2007The options available to Samsonite are ♦ Reduce price and target lower segments - This again is not possible. The high brand image of Samsonite demands a correspondingly high price. It is only the premium segment that Samsonite can target, as it is unknown in the other segments. ♦ Increase price and raise perceived quality - If Samsonite is forced to enter at a higher price, it might take greater amount of time to gain a footing in the Indian market. This might give VIP Industries just enough time to strengthen itself. But this option would ensure that Samsonite retains its major strength - its brand equity.VIP Industries is now concentrating on expanding its productportfolio to plug in any existing holes. It has launched six newproducts in 1995 in the higher end of the market (one of themwas Elanza). Also, VIP is planning to launch more products in thesuper-premium category in order to counter Samsonite at allprice points.IBS Page 41
  42. 42. [MARKETING MANAGEMENT] December 15, 2007The Critical Aspects to the success of the strategyadopted by VIP Industries are: • Elanza must be marketed successfully so as to establish itself in the market. The earlier premium product of VIP Industries, Amadeus, failed to take off in European market channels like Italy. But VIP officials state that Elanza, which is considered to be the most sophisticated and extensively developed product of VIP ever by insiders, is proving to be a success. • VIP must introduce more products in the super- premium category and gain a foothold at all the price points. Unless this is accomplished soon, VIP will find Samsonite’s product range too formidable totackle.IBS Page 42
  43. 43. [MARKETING MANAGEMENT] December 15, 2007Through its premium pricing of Elanza, Blow Plast has forcedSamsonite to hike up its entry price. By coming in at a higherprice point, Oyster would find it difficult to garner desiredvolumes. By using such a competitive pricing, Blow Plast ishoping to gain time to plug every hole in the market, beforeSamsonite starts breathing down its neck.With Samsonite having invested heavily in the plant at Nasik (it isthe third largest manufacturing plant of Samsonite), it would notgive in a hurry. Whether VIP would be able to ward offSamsonite’s challenge will not be clear for a couple of years. SAMSONITEThe worlds #1 luggage maker, Samsonite offers a broad rangeof luggage and luggage-related products, including suitcases,garment bags, casual bags, business cases and other travelbags. Samsonite also license their trademarks for use onproducts such as travel accessories, personal leather goods,handbags and furniture . Samonsite also makes travel gear forTimberland. Samsonite is the world leader in the luggagemarket, with an emerging presence in Asia. It has set up amanufacturing plant in Nasik, which has started operating.Samsonite products are produced around the world at 14Samsonite-operated manufacturing facilities or by third-partysuppliers. Samsonite benefit from their large size throughIBS Page 43
  44. 44. [MARKETING MANAGEMENT] December 15, 2007volume-driven purchasing and manufacturing economies. It selltheir products in more than 100 countries at approximately27,000 retail locations, including department stores, specialtystores, catalog showrooms, mass merchants and warehouseclubs. In the United States, they sell their products through 195Samsonite-operated stores. Samsonite is the top seller ofluggage in the United States, Europe, and Japan. In addition toits world-renowned Samsonite label, the company also marketsthe popular American Tourister and Lark brands. Under thosenames, Samsonite offers a full line of luggage, includingsoftside and hardside suitcases, garment bags, casual bags,business cases, and other travel bags and accessories.Samsonite started its operation in Denver, Colorado, USA in1910. It entered the Indian moulded luggage market onlytowards late 1996 with plant in Nashik in collaboration with theTainwalas. Samsonite It has selected Denver, Belgium formanufacturing hard luggage & Hungary, the Slovak Republic forthe manufacture of soft luggage.In Nasik, India both the hardand soft luggage is manufactured.BRAND PORTFOLIOThe brands of Samsonite collectively,serve every segment of themarket, reaching customers in all walks of life, all over the world.It meets the discerning needs of the luxury market through theirLambertson Truex and Samsonite Black Label brands, while theinnovative, high-quality offering within our time-honoredIBS Page 44
  45. 45. [MARKETING MANAGEMENT] December 15, 2007Samsonite brand serves both middle- and upper-market customersegments. Its American Tourister brand provides affordable,quality products to value-conscious consumers. Each of ourSamsonites brands has been carefully developed to meet theprecise quality, value and pricing needs of the consumers withinits market. Despite their diversity, all of the brands share acommon philosophy: to deliver durable, high-quality products thatreflect Samsonite’s commitment to excellent craftsmanship,innovative design and exceptional functionality.The brands of Samsonite are: • SAMSONITE • SAMSONITE BLACK LABEL • AMERICAN TOURISTER • LAMBERTSON TRUEX • LARKSamsonite complement their owned brands through their globallicensing program, through which they leverage Samsonite’sluggage expertise to partner with market-leading lifestyle brands,such as Lacoste, with whom they develop handbags and casualbags, and Timberland, with whom they offer travel gear,accessories, backpacks and outdoor items.PRODUCTS LINES AND WIDTHThe products lines of Samsonite Includes:IBS Page 45
  46. 46. [MARKETING MANAGEMENT] December 15, 2007 • Suitcases • Carry-ons • Garment bags • Backpacks/Duffels • Kids Luggage • Business/Computer BagsBASED ON SMALL MEDIUM LARGESIZE (TOTAL 6 (TOTAL 20 (TOTAL 21 PRODUCTS) PRODUCTS) PRODUCTS) Samsonite® Samsonite® Samsonite® Ascella Elevation Elevation 22" Expandable(SHOWN 21" Upright 25" Upright UprightASIDE ISTHE MODELNO. OF TWOPRODUCTSWHICH HAVE 700 Series Samsonite® Pro-DLXTHE LOWEST Samsonite® 28" UprightAND THE Outline® 8 22" Spinner Samsonite® Pro-HIGHEST DLXPRICE 24" UprightRESPECTIVELY IN EACHCATEGORY.) • Golf Travel Bags IBS Page 46
  47. 47. [MARKETING MANAGEMENT] December 15, 2007 • Accessories SUITCASESIBS Page 47
  48. 48. [MARKETING MANAGEMENT] December 15, 2007 BASED ON SOFTSIDE HARDSIDE HARD AND EXTERIORS SOFT (TOTAL 25 (TOTAL 13 PRODUCTS) PRODUCTS) (TOTAL 8 PRODUCTS) (SHOWN American 325 Series 450 Series ASIDE IS THE Tourister® Samsonite Samsonite® MODEL NO. DLite ® FLite Sahora OF TWO 25" Exp 28" Upright Spinners Hybrid PRODUCTS Upright 24" Upright WHICH HAVE THE LOWEST AND THE HIGHEST PRICE RESPECTIVE 700 Series LY IN EACH Samsonite® Samsonite 600 Series CATEGORY.) ® Samsonite® Pro-DLX Outline® 8 Carbon EXP™ 29" Spinner 29" Spinner 29" Hybrid Upright Upright SuiterIBS Page 48
  49. 49. [MARKETING MANAGEMENT] December 15, 2007 DISTRIBUTION NETWORK Samsonite is present in 150 items with 450 outlets. They are not interested in mass appeal & would like to concentrate on the top 23 cities. Samsonite is distributed primarily through: • Samsonite Outlet Stores • Samsonite Black Label Stores (Boston, New York, Short Hills, San Francisco, Chicago, Dallas) • Samsonite Classic Stores (King of Prussia,PA ; Detroit,MI ; Arlington,TX ; Tampa,FL ; Concord,CA ; Nashua,NH • Department Stores like Macys in the USA and John Lewis Partnership in the UK • Online retailers like Ebags.com and KJ Beckett • Warehouse Clubs like Costco • Military Stores like AAFESPRODUCT PRINCIPAL MAIN DISTRIBUTIONCATEGORY PRODUCTS CHANNELS Hardside and softside Direct retail stores, specialty Luggage luggage, garment stores and high–end bags, carry on bags department stores Mid–level department stores, specialty stores, national chains, warehouse clubs, direct retail stores National chains, mass merchants, specialty stores, IBS Page 49
  50. 50. [MARKETING MANAGEMENT] December 15, 2007 direct retail stores Duffel bags, tote Specialty stores, departmentCasual and bags, backpacks, stores, national Outdoor shoulder and hip chains,warehouse clubs, sport Bags bags,school bags, and outdoor retailers handbags National chains, mass merchants, specialty storesBusiness Briefcases, business Direct retail stores, specialty and cases, computer stores and high–endComputer cases department stores Cases Department and specialty stores, office superstores, OEMs, warehouse clubs Mass merchants Positioning: High Quality / High Price Samsonite positioned itself as Internationally acclaimed quality product with visible benefits. Segmentation: The top premium segment i.e. Rs. 1500-7500 is the main area of attention of Samsonite where it already has 60% of the market share. IBS Page 50
  51. 51. [MARKETING MANAGEMENT] December 15, 2007Product Differentiation: The main differentiation factors based on the target consumer that wish to cherish exclusivity are: • Reliability • Perceived Value of the Product • International QualityBusiness Strategy Of Samsonite: • Expand Channels of Distribution and Product Offering • Strengthen Marketing and Product Innovation. • Continue Worldwide Expansion. • Improve Distribution Systems in the U.S. SWOT ANALYSIS OF SAMSONITE:Strengths:- • Reliable parentage & money power. • Research & Development support (9% worldwide). • High Quality. • 25% market shares in world (50% in the organized sector).IBS Page 51
  52. 52. [MARKETING MANAGEMENT] December 15, 2007Weakness:- • 80% of raw materials imported • Low brand awarenessOpportunity:- • Increase distribution network opportunity. • Use it as a base for exports. • Economy is revivingThreats:- • Worsening situation in Kashmir • Other MNC’s entering in the market. • 4% decline in the market in 1997-98.IBS Page 52
  53. 53. [MARKETING MANAGEMENT] December 15, 2007 SAFARIProducts & PricingPacks:- 1. Original Packs • Deluxe: We took our traditional Pack and added soft padded leather shoulder straps and a waist belt for comfort on those long portages Prices: Rs.1950-3150 • Utility: These less expensive packs allow occasional campers to have their own rugged gear Prices: Rs. 1350-2150 • Heavy Duty: A heavy duty durable version Prices: Rs. 1100-1900IBS Page 53
  54. 54. [MARKETING MANAGEMENT] December 15, 2007 • Rambler: A versatile gear hauling pack with three outside pockets Prices: Rs. 990-1750 2. Heavy Packs • Heavy Duty: A heavy duty durable version Prices: Rs. 1450-2100 • Monarch: Made of more functionality features and with waist belt and sternum strap Prices: Rs. 1450-2150 3. Child packs • A miniature Pack that makes a great kids pack. Lots of bright colors Prices: Rs. 990 onwardsLuggage 1. Utility Luggage Bags • Premium Bags Prices: Rs. 1600 onwards • Standard bags Prices: Rs. 600 onwards • Trolley Bags Prices: Rs.1300 2. Sportsman Luggage • Sportsman garment bags : Hang your suits or skirts in this classy garment bag.IBS Page 54
  55. 55. [MARKETING MANAGEMENT] December 15, 2007 Rs. 2000-3500 • Sportman Duffel: Meticulously crafted and thoughtfully designed, we know youll love this duffel! Prices: Rs. 1900 onwards • Extended Sportsman Duffel: Zippered end pockets make it simple to find those frequently retrieved items Prices: Rs. 2000 onwards • Boot Duffel: The large top compartment is sealed with a full length zipper, and hidden beneath it is a lined compartment. Rs. 2100 onwards 3. Leather Luggage • Leather Duffel: A real value, our leather duffel is an honest investment in your personal travel comfort and security Rs. 3000 onwards • Pebbled Leather Duffel: Our Leather Duffel available for a limited time in a soft pebbled leather Prices: Rs. 3600 onwards • Leather Bookbag: A stylish messenger bag style bag that will last for generations. Rs. 1500 onwardsBusiness Gear 1. BriefcasesIBS Page 55
  56. 56. [MARKETING MANAGEMENT] December 15, 2007 • Executive Briefcases: These bags are made out of our new velvety soft, full-grain, waterproofed leather. Rs. 3500 onwards • Leather Briefcase: An elegant leather briefcase Prices: Rs. 2300 onwards • Pebbled Leather Bags: Our Leather bags available for a limited time in a soft pebbled leather. Prices: Rs. 2750 onwards 2. Laptop Cases • Laptop Backpack: A very popular Large Standard Daypack, and added a padded protective sleeve for your laptop Prices: Rs.1400 onwards • Canvas Leather Laptop Pouch: A non-bulky padded pouch for your laptop Prices: Rs. 1200 onwards • Leather Laptop Pouch: A non-bulky padded pouch for your laptop Prices: Rs. 900-2000 Visit hrmba.blogspot.com for more project reports, presentations, notes etc.Shoulder BagsIBS Page 56
  57. 57. [MARKETING MANAGEMENT] December 15, 2007 1. Leather Bags • Serengeti Book Bag: These book bags are made out of our new velvety soft, full-grain, waterproofed leather Rs. 1500 onwards • Pebbled Leather Mini-Haversack: Our Leather Mini- Haversack available for a limited time in a soft pebbled leather Rs. 1450 onwards • Lady Slipper Bag: A handcrafted all leather backpack handbag Rs. 900 onwards 2. Shell Bags • Deluxe Bags • Standard Bags • Classic BagsTote Bags 1. Sportsman Tote Bags 2. Zip Top Tote Bags 3. Mini Tote BagsOther Products include • Key Fob • Leather Document Brief • Leather Fold up HatIBS Page 57
  58. 58. [MARKETING MANAGEMENT] December 15, 2007 • Wallet- Trifold wallet • Notepad holder • PDA casePlaces and PromotionsThe company should adopt two strategies for allocating itsproducts.PUSH Strategy:Manufacturers Wholesalers RetailersCustomersPush strategy under which the products can be sold at differentwholesalers, retailers, franchisee shops, etcPull Strategy under which manufacturers promote theirproducts using advertising and promotions. In this strategy theconsumers are persuaded to buy the products directly throughthe intermediaries.The consumers may also buy their products online.They should have their wholesaler at a particular place and theretailers or franchisee shops should be located at public places,malls, etc. Also, retail shop should be near airports, railway-stations, bus stations, public places, etc. This would contribute inimpulse buying too.The promotional activities may include electronic hoardings inairports, railway stations, etc. Conventional methods ofadvertising can also be used such as print media, television, etc. ReferencesIBS Page 58
  59. 59. [MARKETING MANAGEMENT] December 15, 2007 • http://www.la411.com/company-V.I.P.%20Travel %20Values&lid-3600517.htm • www.vipbags.com • www.vipmoderna.com • www.bags-luggage.com • www.google.co.in • www.yahoosearch.com • www.wikipedia.com • www.travelequipments.com • Philip Kotler, Principles Of Marketing (2nd European Edition), Prentice Hall, 1999 • Prof. Karpagam, ICFAI Business School • Prof. Harshita Shrimali, Pacific Institute of Commerce and Management • Visit hrmba.blogspot.com for more project reports, presentations, notes etc. •IBS Page 59

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