Videocon : analysis by a market perspective of consumer durables

VIDEOCON- CONSUMER DURABLES DIVISION

Akshata Vyas (2009006)

Chetan Kabra(2009016)

Neelay Thaly (2009026

Rima Dhume (2009036)

Sharon Rodrigues(2009046)

Ankit Tandon(2009056)

CONSUMER DURABLES 5th largest market in India (12th in 2007) (Study by McKinsey Global Institute )

Value of industry is above $4.5 billion Divided into 2 sub categories-

Consumer electronics Consumer appliances

Televisions Refrigerators

VCD players Washing machines

Audio systems Air conditioners

Mobile phones Microwave oven

Porters Five Force

Power of buyers:

high

Threat from new

entrants: moderate

Rivalry and competition

: High Power of suppliers:

moderate to low

Threat from substitute

products/services:

High to moderate;

depends on the product

Political Factors: Anti-dumping duty on imported color

picture tubes. Easy credit facility available Resolution to reduce emission of

carbon footprints in the atmosphere

CONTEXT-PEST ANALYSIS

PEST ANALYSIS (CONT’D)…

Economic Factors Growth of retail sector – expected to reach 16% by

2011-12 from 4% in FY07 Reduction in excise duty coupled with rising incomes High Consumer price index Economic reforms by the government –higher

purchasing power Emergence of organized retail market with large

players like Croma, next, reliance digital etc – leading to lower prices and higher varieties

61 % of total urban income comes from households —earning

between US$ 1,493 and US$ 9,955 a year.

Indian incomes are likely to grow three-fold over the next two

decades

PEST ANALYSIS (CONT’D)…

Social Factors :- Disposable Income roughly doubled since

1985. Changing perception of luxury to

necessity Rural market – constraints. Demand of the consumer durables is

seasonal and cyclic. Highly growing consumer durable market Customized products for rural India Decrease in average household size

PEST ANALYSIS (CONT’D)…

Technological Factors :-• Improved electricity consumption• Higher quality products • Technological advancements • True flat televisions, plasma televisions,

fully automatic machines, multimedia televisions and home theatres with advanced HTIB models etc

COMPANY-BRAND LINE

Television

LCD TV

Flat Screen TV

Ultra Slim TV

Conventional TV

Audio/Video

DVD Player

Multimedia Speakers

Microwave Oven

Solo

Grill

Convection

Refrigerators

Frost Free

Direct Cool

Washing Machines

Fully Automatic

Semi Automatic

Front Loading

Air Conditioner

Window A/C

Split AC

STRENGTHS/COMPETITIVE ADVANTAGE

Backward integration

Diversified goods portfolio across Consumer

Durables Sector

Multi brand strategy

Wide range of sales and service network

Global company

WEAKNESSES

Image of low to medium cost company

Diversification into too many sectors

Cannibalisation

Not much international recognition

Too much rebranding/ changing of positioning

CURRENT ADVERTISING STRATEGY New logo. Unveiled on 2nd July, 2009 The new ‘V’ composed of two animated green showing going green, lava-

like shapes called Chouw and Mouw Company positioning to connect with the hearts and minds of young-at-heart

consumers. Shah Rukh Khan as Brand Ambassador

COLLABORATORS

Suppliers Plastic parts and powder and Printed circuit

boards form a major part of the raw materials.

Chinese as well as Indian companies supply these items

Makes compressors and printed circuit boards (PCBs), along with shells for the picture tubes

Distributors Largest distribution networks in the country

Over 4,000 dealers and sub-dealers, and an after-sales service network of over 100 service centers

40000 distribution centers

Alliances 1998-99:- Tied up with Toshiba and Sansui

March 1999 –tied up with Akai Electric of Japan

2000-Took over Philips Color TV plant

June 2005 -Bought out French giant Thomson's colour picture tube business

July 2005 -acquired Electrolux Kelvinator Ltd (EKL), the Indian arm of Swedish appliances major AB Electrolux.

September 2006 - it acquired South Korea’s Daewoo Electronics

It also picked up a 8% stake in IOL Broadband.

It recently acquired Planet M Has recently pitched for Motorola’s handset

business

CUSTOMERS

Market size and growth Fastest growing industry Growing at a CAGR of roughly 25% Expected to reach US$158 billion by 2015. Industry output increased by 2.5% in Q1 2009 Color televisions sales increased by 2% in Jan-Mar

09 Videocon sales declined by 15.5% in the December

2008 quarter, then increased sequentially Sales higher by 4% from June to September 09 Gross sales from the Company’s consumer

electronics and home appliances division grew by 7.3 per cent (y-o-y) during the September 2009 quarter

STATISTICS2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

TelevisionsSales 1,634.12 1,836.15 2,188.98 1,965.95 3,947.24 4,560.85 Total market sales 8,000.00 8,500.00 9,000.00 9,100.00 9,800.00 10,500.00 Market share (volume) 20.43% 21.60% 24.32% 21.60% 40.28% 43.44%

Market size (value) 8,035.10 8,673.80 9,434.80 9,872.80 10,720.30 11,351.80 Domestic consuption 7,926.90 8,369.30 9,113.20 9,542.30 10,389.10 11,046.70

Benefits Competitive price and

high quality Improve standard of

living Convenience of use Increased disposable

incomes Growing aspirations Attractive financing

schemes

Retail channel Showrooms Hypermarkets

Consumer information sources

Word of mouth Dealer’s

recommendations Print ads Television

Buying process Careful comparison High involvement Dealer’s influence Social factors

Decision maker or decision-making unit

Generally Housewife’s in case of convenience of use

Trends Rise in consumption

expenditures Availability of new

models Low switching costs Other population

dynamics

Frequency of purchase Festive seasons

Market segments Urban Market

Mainly bulk of middle class

Rapid urbanisation, 45 % Indians living in urban areas by

2050, up from 30% in 2007-08

Urban and rural markets are growing at the annual rates

of 7%–10% and 25%, respectively

Organised retail expected to garner 10% share by 2010

from a mere 3% share at present.

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 -

5,000

10,000

15,000

20,000

25,000

Per capita pvt. Final consumption expenditure

Per capita pvt. Final consumption expenditure

Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

Per capita pvt. Final consumption expenditure 14,138

14,703 15,891 16,971

18,665

20,676 22,899

•Not much impact of Global Liquidity crisis leading to increased purchases•On an average increased by 8% in 2008-09•PFCE expected to be higher by 4.7 per cent in 2009-10.

Rural market

Over 300 million people moving up from the

category of rural poor to rural lower middle class

between 2005 and 2025

Rural consumption levels are expected to rise to

current urban levels by 2017

Overall number of rural households estimated to

grow from 135 million in 2001-02 to 153 million in

2009-10

As per an NCAER report, compared to urban areas,

the ‘lower middle income‘ group in rural areas has

nearly doubled.

COMPETITORS

Television Videocon has a good

foot hold in the CCTV segment.

Leader LG Challenger Samsung Follower Onida Nicher Sony

Source: CRISIL Research, Industry

LG

Sam

sung

Mirc

Vide

ocon

Philips

Sony

othe

rs0

5

10

15

20

25

30

35

40

45

FCTVCCTVHigh end

Washing Machines

Leader -LG Challenger -Whirlpool Challenger- Samsung Nicher- IFB Follower -Godrej

Source: CRISIL Research, Industry

23%

17%

6%20%

6%

15%

14%

Washing machine 2008-09

LGSamsungIFBVideocon *GodrejWhirlpoolOthers

Refrigerator Leader LG Challenger Whirlpool Follower Samsung Follower Godrej

Source: CRISIL Research, Industry

25%

19%

18%

12%

22%

5%

Refrigerator 2008-09

LGSamsungGodrejVideoconwhirlpoolOthers

60%

8%

7%

6%

20%

Nokiasony EricssonSamsungMotorolaothers

5%4%

4%2%1

%

83%

DishTVSun TVTata skyBig TVAirtelCable

Cell phone handset

Leader Nokia

Challenger Sony Ericsson

Satellite TV

Leader cable TV

In DTH leader DishTV

CLOSEST COMPETITOR IN CONSUMER DURABLE - SAMSUNG

Strengths of Samsung Catching the pulse of the consumer, offering

good design and understanding emotions Heavy investment in technology, product design

and human resource Focus on innovative products for the high-end

market Samsung marketing academy

Weakness of Samsung Not targeting mass market Not spreading the brand all over India

PROJECTIONS

2005 2006 2007 2008 2009 2010 (Pro-jected)

Air Conditioners 256.82 432.48 556.02 632.01 619.3698 787.575706547418

Audio, Video, Other Electronic Items

978.13 1756.17 2127.51 2371.2 2323.776 2963.64359271637

TV 2457.44 3947.24 4560.85 5149.48 5046.4904 6145.05462937824

500

1500

2500

3500

4500

5500

6500

Sales

Sale

s in

cro

res

2005 2006 2007 2008 2009 2010 (Pro-jected)

2011 (Pro-jected)

2012 (Pro-jected)

Total In-come

5376.05 7309.54 8483.52 9622.74 9402.65 10887.4987980237

12606.8321246634

14597.6793355234

Total Ex-penses

4637.08 5981.88 6645.06 7363.7 7616.39 8819.15597946105

10211.8604995363

11824.4982972127

Net Profit 427.68 818.5 855.22 982.11 407.02 471.295832639904

545.721983842908

631.90137281987

1,000.00

3,000.00

5,000.00

7,000.00

9,000.00

11,000.00

13,000.00

15,000.00

Net profitR

s.

Cro

res

RECOMMENDATIONS

Videocon can collaborate with some gaming giants like Sega

Continuing with go green and electricity efficient products

For DTH services can tap untapped rural market

Emphasize on LCD and Slim TVs along with CCTV

Relationship marketing through improved sales support

Focus on OEMs as in international market it can provide cost effective products

REFERENCES www.videoconworld.com http://www.ibef.org/economy/consumermarket.aspx http://

us.asiancorrespondent.com/Indianomics/2009/08/27/india%E2%80%99s-gaming-industry-to-be-860-million-and-animation-industry-to-be-1bn-in-2012

www.euromonitor.com/india Indian Council for Research on International Economic

Relations (ICRIER) http://

www.4psbusinessandmarketing.com/24042008/storyd.asp?sid=1877&pageno=2

http://www.businessworld.in/index.php/Videocon-s-Identity-Crisis.html

www.indianbudget.nic.in Databases – CMIE IAS, CMIE EIS, CRISIL, PROWESS,

CAPITALINE

THANK YOU