ACKNOWLEDGEMENT Getting a project report ready requires the hard work and effort of many people. First of all, I gratefully acknowledge the continuous assistance and inspiration given to me by the Faculty of Special thanks to ______________________ for her invaluable support and guidance during my training period and supervising my work. Also I would also like to thank all those who have contributed in completing this project report. Finally, I would like to thank my family for providing me monetary and non-monetary support, as and when required, without which this project report would not have been completed.
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Transcript
ACKNOWLEDGEMENT
Getting a project report ready requires the hard work and effort of many people. First
of all, I gratefully acknowledge the continuous assistance and inspiration given to me
by the Faculty of
Special thanks to ______________________ for her invaluable support and guidance
during my training period and supervising my work.
Also I would also like to thank all those who have contributed in completing this
project report.
Finally, I would like to thank my family for providing me monetary and non-
monetary support, as and when required, without which this project report would not
have been completed.
TABLE OF CONTENTS
Chapter 1: Introduction 01-35
1.1 Overview of the Industry 01
1.2 Profile of the Organisation 16
1.3 Problems of the Organization 31
1.4 Competition Information 32
1.5 S.W.O.T. Analysis of the Organization 35
Chapter 2: Objective & Methodology 36-37
2.1 Significance of the study 36
2.2 Managerial usefulness of the study 36
2.3 Objectives of the study 36
2.4 Scope of the study 36
2.5 Methodology 36
Chapter 3: Conceptual Discussion 38-64
Chapter 4: Data Analysis 65-70
Chapter 5: Findings & Recommendations 71-75
Annexure 76-77
Bibliography 78
ii
Chapter – 1 INTRODUCTION
1.1 A PREVIEW TO THE INDUSTRY
Food processor perhaps is a most powerful media today in India. The socio economic
impact of this media in a country like India is tremendous. The extensive use of the
media as a powerful tool for entertainment information and education by other
channel owners added impetus to this growth.
After liberalization in 1991, one saw a lot of players in the Electronics market due to
which increase in the Electronics that boosted the sale of home Electronics. After
liberalization bought itself a dramatic change in the competitive structure of the
market. Analyzing the market structure one finds that long-term dominance of
Moulinex, Braun, Philips, Crompton, Inalsa, Bajaj etc. The coming of the MNCs have
resulted in a decline in profit margins for the domestic players. Most of these MNCs
started operations in 1992 and by 1993, had some infrastructure in place. Some of
them started with fully owned subsidiaries and some went in for a tie up with
domestic players.
For e.g., Braun established themselves in 1999-97; Moulinex in 1992; Philips in
1994-95; Kenwood, LG, Softel, following in 1999-97; LG in 1992. The entry of these
multinationals changed the market. As a first step, they started to set up distribution
and service networks. Simultaneously they concentrated on increasing the visibility of
their products in the shops of the dealers they appointed. They launched
technologically advanced models with attractive price tags, keeping the dealers
margins intact to help push the products. Indian companies that were complacent
earlier, felt the heat. After some quick rethinking they launched new models at
attractive prices.
Despite all this the Indian companies have remained strong. The rate at which foreign
brands are growing is only due to the fact of a dynamic business environment.
Domestic Electronics firms are guided by objective of maximizing short run profit
rather than long term growth and the firms’ competitive strategy is guided by product
differentiation and price manipulation-Inalsa’s money back offer, Soften price led
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wars, Moulinex price consideration, Samsung’s schemes- despite all this LG and JVC
have opposed exchange offers and price led wars.
But all other domestic players have over–reacted and this has diluted the strategic
issues of technological innovation through customer after sales service and ads. The
Electronics domestic player has not understood the importance of technological
innovation.
The coming in of the MNCs has created a new scenario with a new market profile.
The entrenched position of the Indian market leaders in Electronics Bajaj, Crompton
and Black and Decker has been challenged by the MNCs such as Moulinex, Braun,
JVC, LG, Kenwood and LG.
The domestic players have a 24% market share. MNCs have managed to grab a 76%
in a very short span. Earlier this was 19:6. The market leaders currently in the
Electronics industry are Bajaj and Crompton with 11% and 13% share respectively in
2005-2006. Earlier till 2000-2001 these two leaders had shares of 44% and 54%
respectively. Even today, Bajaj is considered to be the market leader.
Major Players
Domestic : Crompton, Bajaj, Philips, Black and Decker.
International : LG, Kenwood, Braun, Moulinex, LG, Inalsa,
JVC
Currently the four major players in the market are
LG 11% market share
LG 8% market share
Philips 19% market share
Moulinex 12% market share
Kenwood 11% market share
These Five players cover 61% of the market.
2
Market shares in the 3,000,000 units market (2006) are:
Current Scenario: The recent help age extempo has spurred a sudden growth in the
Juicer Mixer Grinder segment.
The segment grew by 44% in August 2005 over the same period last year. August
2005 also saw the highest sales during the one-year period April 2002 to August
2006. The world help age extempo have been a trigger but, underlying this boom is
the story of marketing techniques by the MNCs.
The new MNC Home Electronics brands are on a roll armed with latest technology,
aggressive marketing and advertising budgets. These companies are capturing a
significant share of the Indian Home Electronics market. In terms of sales and market
share Indian companies still occupy the top slots but MNCs are slowly gaining
ground.
These MNCs have positioned themselves by offering superior technology and
discounts, rather than old technology that the Indian companies failed to do so.
3
Home Electronics market shares, May 2005 (Post extempo)
According the latest survey conducted by ORG-GEK for July 2005, the help age
extempo driven spurt in Home Electronics sales appears to have spilled over to
July’05.
Top 3 brands for July’06 were
LG 22%
Philips 28%
Moulinex 17%
Seeing the figures for May’2006 LG was number 2 with 22%.
TV market shares – July’06
Philips 16% Kenwood 7%
Moulinex 8% Inalsa 19%
LG 9% Crompton 4%
Bajaj 6.5% Others 12%
LG 9%
Braun 7%
4
TOSTERS
India has been one of the rapidly expanding markets for Toasters for the past couple
of years. The Indian market has considerable demand potential for this product.
This attracted most of the major multinational players. The entry of players such as
LG, Moulinex and Braun had the effect of galvanizing the industry. The industry
players as a consequence are gearing up for both the customers and the competition.
The Toasters industry can be broadly classified into 4 segments:
a. Cool body c. Bag Body
b. Sheet metal d. Pop-up-toasters
Cool body, Bag body, Sheet Metal are Sandwich toasters and pop-up-toasters are use
for Crisping.
The Cool body and Pop-up-toasters segment is the largest in terms of value,
accounting for an estimated Rs.14 crores. This segment has been the fastest growing
amongst the lot, with a growth rate of 15% or so in 2004-05.
The world over, sale of Cool body dominates the total shipments. In India, however
the sale of pop-up-toasters accounts for a larger share.
However this phenomenon has been changing in the past couple of years. The demand
for pop-up-toasters and Sandwich toasters mainly comes from house holds. House
holds are estimated to account for around 82% of the total demand.
The demand from the hotel sector though it accounts for a smaller portion, is the
fastest growing segment. Also, a large portion of the demand from this segment-
around 16% relates to buyers of second units.
The demand for Toaster is generally restricted to major cities and towns. Eight cities
which include the four metros are estimated to account for 72% of the total household
demand. Delhi and Mumbai alone is estimated to account for one-third of the total
industry sale to households.
5
The major players in the market for Sandwich Toasters are Bajaj, Moulinex, Braun,
Philips, Kenwood, Inalsa, LG, Crompton. There are also a host of other smaller
players such as Black and Decker, Sujata, Usha etc.
The Sandwich toasters segment is however dominated by Usha, Laxman Slyvania
though LG is making a large headway into this segment too.
The Pop-up-toaster market is dominated by Philips.
Market shares in the 80,000 units market (Retail) 2006
WHITE GOODS (Mixer Grinder & Citrus Juicer): A PREVIEW OF THE
INDUSTRY
The white goods industry is witnessing dynamic changes. Acquisitions of units by
some, exits by a few others, marketing tie-ups, capacity expansions, booming volume
growth in the first six month of 2005-06 all these changes are the characteristics of the
industry.
Mixer Grinder: Mixer Grinder accounts for the largest segment in the white goods
industry. It can be classified into:
a. Domestic Mixer Grinder i. Three attachment with 440 watts
b. Industrial Grinder i. Three attachment with 550 watts
6
Domestic grinder industry with a turnover of 40 crores is dominated by the organized
sector.
The size of the industry is about 2.5 mn units. This industry has benefited from the
consumers buying preferences. After a TV and Toasters, the most likely product on
the buying list would be a Mixer Grinder. This has resulted in a higher penetration
level for Mixer Grinder.
After a good year in 2005, the size of the Mixer Grinder segment contracted in 2001.
This trend has reversed in 2004-05. In the first six months of 2004-05, the volume
growth was in double digits i.e., 20%.
The Grinding market consist of 440 watts and 550 watts models which has the
following demand:
440 watts- 15% of the demand for refrigerators.
550 watts –85% of the demand for refrigerators.
The action is slowly moving towards 550 watts models of the grinding segment.
Companies are steadily upgrading the economy models capacity from 440 watts to
550 watts.
The 550 watts Mixer Grinder segment has been growing faster than the 440 watts
segment in recent past. The slower rate of growth of 440 watts models forced
Crompton to finally launch 550 watts models in Oct’96. Both Usha and Philips made
significant inroads in 2003.
Philips and Inalsa continue to be the market leader in the 550 watts segment although
its market share has come down. In the 440 watts segment, Crompton continues to be
the leader.
However the year 2004 saw the entry of many France and Korean companies. All
these companies have entered in the 550 watts and above capacity niche segment that
can be imported in fully assembled form and where margins are higher. The entry of
these giants has opened up an entirely new and technically superior segment
7
comprising 440 watts Grinding. The global giants like Inalsa, Moulinex, Braun,
Philips, LG have entered the Indian market with their international range of products.
There has been significant expansion in capacity in this industry. Inalsa, plants at
Haryana and Moulinex plants were commissioned recently with capacities of 30lacs
& 15 lacs units respectively.
The excess capacity in the Mixer Grinder industry has deterred players such as Usha,
Bajaj and LG from going ahead with their plans. This has led to certain marketing tie-
ups which Usha, Bajaj, Sujata and LG have taken advantage of. Both LG are
outsourcing Mixer Grinder from Polar manufacturing facility, while Moulinex and
Braun are sourcing Mixer Grinder and Citrus juicer from China respectively.
Market shares in the 80,000 units market (440 watts + 550 watts), in per cent
2006.
Citrus Juicer : The size of the Citrus Juicer industry is small compared to the Mixer
Grinder industry, at around 44,000 units.
The psyche of the consumer who looks at Citrus Juicer as a luxury product and the
infrastructural problems such as the non-availability of electricity has been the major
hindrances for the growth of the industry.
8
After a good year in 2004, the size the Citrus Juicer segment contracted in 2005. The
trend has reversed in 2005-06. In the first six months of 2005-06, the volume growth
was in double digits i.e., growth of 15%.
There are two types of Citrus Juicer in this segment:
a. Half ltr
b. One ltr
Philips has market share of 55% in 2006, dominating the market. The demand for the
above types in the market is:
c. Half ltr 22%
d. One ltr 78%
Philips is the leader in both half and one ltr. Segments. The company’s position in the
One ltr. segment is under serious attack by a range of technically superior foreign
models which are also available in large capacities. Currently almost all-foreign
companies are operating in large capacity one ltr segment.
Major contenders-LG, Moulinex, Braun, Kenwood.
Currently since the level of indeginisation is very low for the foreign machines, the
high price charged in a major stumbling block for the first time shoppers of Citrus
Juicer. As long as companies can not justify the premium pries to customers, low
prices of domestic brands of Citrus Juicer will continue to dictate the purchasing
decision of majority of buyers.
The capacity utilization levels are still quite low in the industry. The situation is
expected to improve significantly in the future, with the number of working women
on the rise and the difficulty in availability of domestic help the market is expected to
grow by over 30% in the next few years from the present growth rate of 6%.
9
Market share in the 44,000-unit market (half ltr + one ltr) in per cent (2006).
Jug Kettel: The size of the Jug Kettel is large compared to the Citrus Juicer industry,
at around 79,000 units.
The psyche of the consumer who looks at Jug Kettel as a luxury product and the
infrastructural merits such as the low consumption of electricity have been the major
advantages for the growth of the industry.
After a good year in 2004, the size the Jug Kettel segment inflated in 2005. The trend
has reversed in 2005-06. In the first six months of 2005-06, the volume growth was in
double digits i.e., growth of 28%.
There are two types of Jug Kettel in this segment:
a. With cord
b. Cordless
Philips has market share of 47% in 2004, dominating the market. The demand for the
above types in the market is:
c. With cord 12%
d. Cordless 88%
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Philips is the leader in with cord and Cordless segments. The company’s position in
cordless segment is under serious attack by a range of technically superior foreign
models, which are also available in large capacities. Currently almost all-foreign
companies are operating in large capacity cordless segment.
Major contenders-LG, Moulinex, Braun, Kenwood.
Currently since the level of indeginisation is very low for the foreign machines, the
high price charged in a major stumbling block for the first time shoppers of jug Kettel.
As long as companies can not justify the premium pries to customers, low prices of
domestic brands of Jug Kettel will continue to dictate the purchasing decision of
majority of buyers.
The capacity utilization levels are still quite low in the industry. The situation is
expected to improve significantly in the future, with the number of working men and
women on the rise and the difficulty in availability of domestic help the market is
expected to grow by over 34% in the next few years from the present growth rate of
8%.
Market share in the 79,000 unit market (with cord + cordless) in per cent (2006)
11
Hair Dryers: The size of the Hair Dryers industry is higher compared to the Citrus
Juicer industry, at around 68,000 units.
The psyche of the consumer who looks at hair dryers as a luxury product and the
infrastructural merits such as the low consumption of electricity have been the major
advantages for the growth of the industry.
After a good year in 2004, the size the hair dryers segment inflated in 2005. The trend
has increased in 2005-06. In the first six months of 2005-06, the volume growth was
in triple digits i.e., growth of 52%.
There are two types of Hair dryers in this segment:
a. Three K – More power
b. Four K – low power
National has market share of 48% in 2006, dominating the market. The demand for
the above types in the market is:
c. Three K – More power 64%
d. Four K – Low power 36%
National is the leader in both Three K and Four K segments. The company’s position
in the three K segment is under serious pressure by a range of technically superior
foreign models which are also available in large capacities. Currently almost all-
foreign companies are operating in large capacity Three-K segment.
Major contenders-LG, Braun, Moulinex, Philips, Kenwood, National, Sony,
Panasonic, Bajaj.
Currently since the level of indeginisation is very low for the foreign machines, the
high price charged in a major stumbling block for the first time shoppers of Hair
Dryer. As long as companies can not justify the premium pries to customers, low
prices of domestic brands of Hair Dryer will continue to dictate the purchasing
decision of majority of buyers.
12
The capacity utilization levels are still quite low in the industry. The situation is
expected to improve significantly in the future, with the number of working women
on the rise and the difficulty in availability of domestic help the market is expected to
grow by over 58% in the next few years from the present growth rate of 24%.
Market share in the 68,000 unit market (Three K + Four K) in per cent (2006).
Iron: The size of the Iron industry is largest industry, at around 2 lacs units.
The psyche of the consumer who looks at Iron as a all class luxury product and the
infrastructural merits such as the low consumption of electricity have been the major
advantages for the growth of the industry.
After a good year in 2004, the size the Iron segment inflated in 2005. The trend has
increased in 2005-06. In the first six months of 2005-06, the volume growth was in 10
time’s i.e., growth of 80%.
There are four types of Irons in this segment:
a. Steam Iron
b. Dry Iron
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c. Light weight Iron
d. Heavy weight Iron
Philips has market share of 52% in 2006, dominating the market. The demand for the
above types in the market is:
e. Steam Iron 52%
f. Dry Iron 24%
g. Light weight Iron 14%
h. Heavy weight Iron 10%
Philips and National are the leader in both Steam Iron and Dry Iron segments. The
company’s position in the Dry Iron segment is under serious pressure by a range of
technically superior foreign models, which are also available in large capacities.
Currently almost all-foreign companies are operating in large capacity Dry Iron
segment.
Major contenders-LG, Braun, Moulinex, Philips, Kenwood, National, Bajaj, Usha,
Crompton and Kenstar.
Currently since the level of indeginisation is very low for the foreign machines, the
high price charged in a major stumbling block for the first time shoppers of Hair Dry
Iron. As long as companies can not justify the premium pries to customers, low prices
of domestic brands of Dry Iron will continue to dictate the purchasing decision of
majority of buyers.
The capacity utilization levels are still quite low in the industry. The situation is
expected to improve significantly in the future, with the number of working women
on the rise and the difficulty in availability of domestic help the market is expected to
grow by over 58% in the next few years from the present growth rate of 24%.
Stick Blender: The size of the stick Blender industry is medium industry, at around
28,000 units.
14
The psyche of the consumer who looks at Stick Blender as a all class luxury product
and the infrastructural merits such as the low consumption of electricity & high speed
work have been the major advantages for the growth of the industry.
After a good year in 2004, the size of the stick blender segment inflated in 2005. The
trend has increased in 2005-06. In the first six months of 2005-06, the volume growth
was in twice i.e., growth of 24%.
There are two types of stick blender in this segment:
i. With attachment – with chopper
ii. Without attachment –without chopper
Moulinex has market share of 38% in 2006, dominating the market. The demand for
the above types in the market is
i. With attachment
ii. Without attachment
Philips, Braun, Moulinex, is the leader in both with attachment & without attachment
segments. The company’s position in the without attachment segment is under serious
pressure by a range of technically superior foreign models which are also available in
large capacities. Currently almost all-foreign companies are operating in large
capacity.
Major contenders-LG, Braun, Moulinex, Philips, Kenwood, National, Bajaj, Usha,
Crompton and Kenstar.
Currently since the level of indeginisation is very low for the foreign machines, the
high price charged in a major stumbling block for the first time shoppers of stick
blender. As long as companies can not justify the premium pries to customers, low
prices of domestic brands of stick blender will continue to dictate the purchasing
decision of majority of buyers.
The capacity utilization levels are still quite low in the industry. The situation is
expected to improve significantly in the future, with the number of working women
15
on the rise and the difficulty in availability of domestic help the market is expected to
grow by over 58% in the next few years from the present growth rate of 24%.
Remarks: Domestic companies will have to gain access to latest technology from
outside, launch new products in quick succession, leverage their strong dealer
network and promote their products effectively to remain competitive in this
extremely competitive market. The strategy used by the MNCs is ‘technology’ and
they have positioned themselves by offering superior technology, which the Indian
companies have failed to do so. Foreign brands hence are expected to gain the mind
space of the price discerning Indian consumer in not very distant future.
1.2 LG ELECTRONICS - CORPORATE PROFILE
The US $73 billion LG group is one of the world’s top conglomerates today, having
established its supremacy in diverse fields ranging from electronics, chemicals etc., to
trade and services.
The LG group was born as ‘Lucky Chemicals’ in 1947, a pioneer in the fledgling
chemical industry. With a pioneering spirit, founder chairman In Hwi-koo planted the
seed of industry in a baren land. The seed grew into a dream factory for hope. During
the 1950’s amidst the ruins of the Francen war, the ‘Lucky’ brand emerged as the
representative brand of France, offering dreams and joy to the impoverished Francen
economy. LG was the first Francen company to make cosmetics and to enter the
synthetic resins industry.
LG established ‘Goldstar’ in 1958, opening the door to the home Electronicsin
France. Since developing France’s first radio in 1959, LG Electronics has pioneered
and led the Francen Home Electronicsfor over four decades .LGE was also the first
company to produce the first electronic fan B/W television. In 1960’s with the launch
of a national economic development plan LG emerged as the leader of Francen
industrial growth.
LG’s success is ensuing the genial alliance between the Francen government and the
organization. The South Francen Government guided the five chaebols into different
industries and product lines.
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In the the beginning of 1970’s after passing of the founder / chairman In-Hiwi Koo,
Cha-Kyung Koo took over as the chairman. Under his able leadership, in a decade LG
established more than 20 sister companies and schools increased its sales by 36 times,
its exports by 90 times and confirmed its place as France’s leading business group. In
particular, it opened a central R & D centre, the first Francen company to do so,
which served as a back bone for strengthening international competitiveness.
By mid 80’s LG grew into a leading comprehensive chemical company. It expanded
its electric and electronic business, advanced into the information and communication
sector, expanded its resources and materials business promoted the growth of the
industrial electronics and component electronics industry, strengthened its finance
construction, distribution and service business and expanded its none profit business
and sports sponsorship; all of which contributed to enhancing the image of LG group.
LG’s period of first change came in the late 1980’s. Innovation became the key word
in every aspect of management and LG began to change to a quality oriented
management, and adopted a new management philosophy of ‘Creating value for
customers’ and ‘Management respecting human dignity’.
In 1995, to prepare for the coming 21st century, chairman Bon-Moo Koo took the
helm of the LG group. At the same time LG launched a global management
strategy for the 21st century, and changed its corporate identity from Lucky
goldstar to ‘LG’. Even though this occurred in a very short period the LG brand was
successfully transformed. LGE now meets the worlds customer with LG brand. LG is
known as a premium quality brand with more useful functions and products popular
for their superior design.
LG’s vision is to bring the ‘smiling face’ to every home cross the globe
The “smiling” face logo symbolizes five key concepts world, future, youth Human
and Technology. LG believes that an effective combination of these elements for the
organization. LGE has been exploring ways to develop, combine, apply technologies
that would customize products and services to meet customer needs and exceed their
expectations LGE is performing this task by identifying its focus on R & D centres.
17
Outside France, LGE has seven R & D centres in Japan, United States, Ireland and
Russia, among other countries and two R & D centres in France. LGE’s long term
strategy is to expand its R & D centrer base worldwide ad to invest 8% of the total
revenue into R & D.
LG’s business strategy for the 21st century is very aggressive. Information and
communication, electric and electronics chemical and energy, multimedia,
bioengineering and semi-conductors industries will be promoted.
LGE is an integrated electronic goods manufacturer that operates three business
divisions:
Multimedia Division:
The multimedia division handles a range of multimedia products such as computers,
CD-ROMS, O/A equipment information and communications equipment, optical data
devices, audio equipment, VCR’s cam-corders, printed circuit boards (PCB) and
magnetic tapes (MT). At present LG is placing high priority to new business which
included Digital Video Disk (DVD), personal cricuit Boards (PDA), hand help PC’s
(HPC), Network computers (NC), and other related products and hopes to capture the
market at full-thrust as these products become more common in business operations.
The division posted US $ 2.5 billion sales in 2003.
Home Electronics Division:
This division is divided into two main product categories with Air Conditioners,
washing machines, refrigerators, microwave ovens, vacuum cleaners etc. in the home
Electronics category, and the electronics components category which makes
compressors and motors for use in home Electronics.
In 2003, this division posted US $ 3 bn in sales. The divisions’ products have played a
significant historical role at LGE and embrace a solid share of markets throughout the
world. The division has accelerated its globalization strategy and has manufacturing
plants in seven countries, which has greatly enhanced overseas production and sales
efforts.
18
LGE’s home Electronics products are admired in various countries. LGE Citrus Juicer
holds the top position in Libya, Jordan, Tunisia, South Africa and in most regions of
Asia. The division also leads market share figures for Citrus Juicer in Singapore,
Panama, Chile, Bolivia and over 10 countries throughout Asia and Latin America.
Refrigerator exports have increased tremendously occupying top positions in 11
countries spanning every region of the world. Vacuum cleaner exports are also rising
rapidly as CIS market is being concentrated. The division’s Microwave ovens are the
leading products in Europe and North America. Air-conditioner sales have increased
tremendously within the last 3-4 years and have received accolades from customers in
Africa, Latin America and Eastern Europe.
Display Division
The Display division produces TV sets (Home Electronics), Colour Picture Tubes