Blue diamond_consumer durables

Strategic Management-I

Consumer Durable Industry in India

Guided by: Rear Admiral Dr Rakesh Chopra, VSM, MBA, PhD

Submitted by: Group 2

Puneet Aggarwal (10DM-108)

Puneet Mehta (10DM-109)

Puneet Pratap Singh (10DM-110)

Rabindra Narayan (10DM-111)

Rahul Kumar (10DM-112)

Rahul Padia (10DM-113)

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Table of Contents

Introduction ............................................................................................................................................ 5

Rationale for the Study ............................................................................................................................ 5

Problem Formulation .............................................................................................................................. 7

Industry Analysis ..................................................................................................................................... 8

Key findings globally: ........................................................................................................................... 8

Top five emerging nations in Consumer Durable industry .................................................................... 8

Indian Consumer Durables- Overview .................................................................................................. 9

PEST Analysis ..................................................................................................................................... 10

Political Factors ............................................................................................................................. 10

Economic Factors ........................................................................................................................... 10

Social Factors ................................................................................................................................. 11

Technological Factors .................................................................................................................... 11

SWOT Analysis of Consumer Durable Industry ................................................................................... 12

Growth Drivers .................................................................................................................................. 13

Major Hurdles ................................................................................................................................... 13

Porter’s Five Force Model: Consumer Durable Industry ..................................................................... 14

Supply Chain Management: Consumer Durable Industry ................................................................... 15

Importance of SCM ........................................................................................................................ 15

Objectives of SCM .......................................................................................................................... 15

Benefits of SCM ............................................................................................................................. 15

Corporate Analysis ................................................................................................................................ 16

Overview ........................................................................................................................................... 16

LG India ............................................................................................................................................. 16

Company background .................................................................................................................... 16

Product profile ............................................................................................................................... 16

Developments ............................................................................................................................... 17

Samsung India ................................................................................................................................... 17


Product profile ............................................................................................................................... 18

Developments ............................................................................................................................... 18

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Whirlpool of India .............................................................................................................................. 18

Company background ........................................................................................................................ 18

Product profile ............................................................................................................................... 19

Developments ............................................................................................................................... 19

Videocon Industries Ltd ..................................................................................................................... 19


Product profile ............................................................................................................................... 19

Developments ............................................................................................................................... 20

Voltas Ltd .......................................................................................................................................... 20


Product profile ............................................................................................................................... 20

Developments ............................................................................................................................... 21

IFB Industries Ltd ............................................................................................................................... 21


Product profile ............................................................................................................................... 21

Detail Analysis Whirlpool Electronics of India ..................................................................................... 22

Whirlpool Vision ............................................................................................................................ 22

Product management strategy ....................................................................................................... 22

Products introduced ...................................................................................................................... 22

Target Customer Segment ............................................................................................................. 23

Pricing Strategy .............................................................................................................................. 23

Sales channel strategy ................................................................................................................... 23

Growth over the years ................................................................................................................... 23

SWOT ............................................................................................................................................ 25

Plant Locations .............................................................................................................................. 26

Whirlpool installed capacity ........................................................................................................... 26

Whirlpool Regional Distribution Hubs ............................................................................................ 27

Whirlpool Sales office and Warehouse ........................................................................................... 27

Whirlpool Distribution Network ..................................................................................................... 28

Perspective from Mr. Shantanu Das Gupta (V.P. Corporate Affairs & Strategy): Refrigerators ........ 28

Whirlpool Sales and Market Analysis Graphs.................................................................................. 31

Whirlpool: Stats at a glance ........................................................................................................... 35

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Perspective from Mr. Shantanu Das Gupta: Washing Machines ..................................................... 35

Washing Machine Statistics in charts and Graphs ........................................................................... 37

Product Matrix:.............................................................................................................................. 40

Profit and Loss Account of Whirlpool ............................................................................................. 41

Profit & Loss account of Whirlpool of India. ..................................................................................... 41

Future:........................................................................................................................................... 42

Scenarios ............................................................................................................................................... 43

Identifying the high impact and high uncertainty factors affecting the industry. ............................ 43

Building Scenarios .......................................................................................................................... 43

Conclusion ............................................................................................................................................. 45

Infrastructure Development .............................................................................................................. 45

Raw Material, Components & Machinery........................................................................................... 46

Building a Global Supply Chain Network ............................................................................................ 47

LEARNINGS FROM A STRATEGIC POINT OF VIEW ................................................................................... 48

Growth Drivers for Consumer Durable Products ................................................................................ 49

Recommendation .................................................................................................................................. 50

Limitations of the Project ...................................................................................................................... 50

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Consumer Durables Industry in India

Introduction

India’s Economy is expected to grow by around 8% in the next decade making it one of the fastest growing major economies in the world. 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. In 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 goods.

In the early 1990s, foreign companies were not permitted to start independent ventures in India. Foreign companies used to come to India in a JV with other Indian Companies. Examples are LG Electronics and Samsung.

It was not until 1992, when the Indian market first began to open up post liberalization, that the MNCs started taking a closer look at the purchasing power of country’s middle class. Inevitably, the first thing they saw was the massive volume of this potential market, rather than its cultural idiosyncrasies. Studies have found that the penetration level of various appliances in India is fairly low. Refrigerator use is about 18 per cent of the total population, washing machine 6 per cent, air-conditioner less than 2 per cent and microwave ovens about 1 per cent, which translates into a great potential to tap new consumers. Light Electrical Industry, particularly the large home appliances sector attracted a number of leading MNC’s to either start joint ventures or start their fully owned subsidiaries in India.

The Indian consumer durables segment can broadly be segregated into consumer electronics (TVs, VCD players and Audio systems etc.) and consumer appliances (also known as white goods) like Refrigerators, Washing Machines, Air Conditioners, Microwave Ovens and Vacuum Cleaners.

Rationale for the Study

With the successful completion of the Uruguay Round of negotiations, which marked the commencement of WTO regime of international trade relations, countries as well as industry/firms are constantly investing their knowledge/intelligence to evolve strategies to remain competitive in the global market. In this pursuit of excellence, no country or industry can afford to remain laggard as the champions are promised huge economic gains, where as the losers face the dire risk of going out of business. In essence, competitiveness has emerged as the determinant of winner or loser in the manufacturing scene.

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Since, India has been trailing behind Asian neighbors in terms of production, quality and export of Light Electrical Industry products, performance levels of most of factors of production such as quality manpower, capital investment, infrastructure, technology etc., need to be enhanced through conscious policy interventions and managerial action to boost competitiveness of this sector. In this context, an attempt has been made to understand the productivity and competitiveness of light electrical manufacturing in India with a view to document identify and recommend policy solutions to make the sector internationally competitive. The study also attempts to identify the factors hindering the progress of the sector and suggest measures for enhancing the competitiveness of the sector.

A wide range of products such as air conditioners, refrigerators, washing machines, microwave ovens, vacuum cleaners, dish washing machines apart from household electrical appliances, electrical fans, electrical lamps, storage batteries, dry cells and others are covered within the ambit of Light Electrical Industry sector. Besides these items, light electrical industry also covers electric wires and cables industry, transmission line towers, cranes, lifts & escalators, dairy machinery industry, food processing machinery, packaging machinery industry, water pollution control equipment, air pollution control equipment etc.

Domestic electrical appliances are now increasingly being used in the household and, therefore, it is very important that safety and quality aspects of these products need special attention.

Government has introduced compulsory Bureau of Indian Standards (BIS) marking with respect to certain electrical appliances like stoves, plugs and sockets. Greater consumer awareness about the quality and safety of these goods will go a long way in ensuring that manufacturers adhere to these standards. Since the industry covers a large number of diverse product categories which cannot be covered in a single study, present study limits its scope to large home appliances only. Among the large home appliances, the study focuses on five large home appliances such as Refrigerators, Air Conditioners, Washing Machines, Microwave Ovens and Vacuum Cleaners. The biggest attraction for light electrical industry manufacturers in the world is the growing middle class in India which is, equated by many, to the size of European market in terms of purchasing power.

With Domestic Electrical Appliances (DEA) characterized by low household penetration, international brands have an edge over their Indian counterparts in terms of superior technology combined with a steady flow of capital, while domestic companies compete on the basis of their well-acknowledged brands, extensive distribution network and an insight into local conditions. Sales of household domestic electrical appliances in India posted strong growth in the recent years as the Indian economy recorded sterling growth and personal disposable income levels increased. Intense competition among manufacturers, influx of Chinese brands, and rationalization by manufacturers to offer products to cater to the middle and lower-middle class has kept up pressure on unit prices - particularly for air conditioners and refrigerators. Appliance manufacturers, having understood the need to localize products for the Indian household strived to introduce new features and technologies that would appeal to the Indian consumer. Refrigerators with a separate compartment for onions and fresh herbs, washing machines that utilize less water, and Microwave ovens designed for Indian style cooking are becoming more common.

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Problem Formulation

Any new entrant into the Consumer Durable Industry in India needs to have a thorough understanding of the Industry wise best practices. So, when a company of large stature wants to make an entry into the CDIT space in India, it requires a lot of information beforehand pertaining to supply chain of the Industry as a whole, the plant location information, the warehouse locations, the distribution network and after sales service. Hence, we are working to study the CDIT in India.

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Industry Analysis

Key findings globally:

The key findings and drivers of Consumer Durable industry worldwide are summarized below:

Asia-Pacific region is the most lucrative area for the consumer electronics industry, as most of the markets are still untapped.

MP3 players continue to drive the audio market worldwide.

Wi-Fi networking is expected to become a key enabler for the delivery and redistribution of content in homes, particularly for retail consumer electronics hardware.

Mobile camera phone market has emerged as the single largest market for image sensors, surpassing the entire consumer electronics segment, including digital still cameras worldwide.

The strongest growth in consumer electronics segment is expected to come from China by 2012, as the demand for consumer electronics is rising with the rapid pace of economic development and low cost consumer electronics manufacturing.

On the back of this strong demand, China will become the second largest market for consumer electronics, after US.

Top five emerging nations in Consumer Durable industry

The top five emerging nations in Consumer Durable Industry are CHINA, INDIA, BRAZIL, MEXICO and SOUTH AFRICA. Key points regarding the top five emerging nations are:

The Top 5 Emerging countries contributed $37.6 billion to the global consumer electronics industry in 2007, with a CAGR of 10.9% between 2003 and 2007.

In 2012, the market is forecast to have a value of $51.2 billion, with a CAGR of 6.4% over the 2007-2012 periods.

China is the leading country among the Top 5 emerging nations, with market revenues of $21.6 billion in 2007.

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Indian Consumer Durables- Overview

Pre liberalization, only a few companies like Kelvinator, Godrej, Allwyn, and Voltas were the major players in the consumer durables market, accounting for no less than 90% of the market.

Post liberalization, foreign players like -LG, Sony, Samsung, Whirlpool, Daewoo, Aiwa came into the picture.

Today, these players control the major share of the consumer durables market.

Demand for consumer durables has increased significantly.

Characterized by the emergence of MNCs.

Major target is the growing middle class of India.

Bargaining power of suppliers in consumer durables sector is limited due to threat of imports and intense competition.

Some of the entry barriers in consumer durables sector are distribution network, capital, and ability to hire purchases.

Demand is seasonal and cyclical. Competition among players is on the basis of difference in prices and well-acknowledged brands.

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PEST Analysis

Political Factors

Anti-dumping duty on imported color picture tubes.

FDI (100%), High Tax Incidence.

Resolution to reduce emission of carbon footprints in the atmosphere.

Effect of GST and DTC

Reduction in overall tax incidence (14-16% from 20- 25%).

More disposable income.

Prices of goods to reduce in the medium term.

Economic Factors

Growth of retail sector – expected to reach 16% by 2011-12 from 4% in FY07.

Easy fin schemes to consumer.

Economic reforms by the government –higher purchasing power.

Emergence of organized retail market with large players like Croma, next, reliance digital etc. leading to lower prices and higher varieties.

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

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Social Factors

Disposable Income roughly doubled since 1985.

Changing perception of luxury to necessity.

Rural market – constraints.

Demand of the consumer durables is seasonal.

Decrease in average household size.

Technological Factors

Power efficient

Higher quality products Technological advancements

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SWOT Analysis of Consumer Durable Industry

Strengths

1. Presence of established distribution networks

2. Presence of well-known brands3. In recent years, organized sector

has increased its share in the market vis a vis the unorganized sector.

Weaknesses

1. Demand is seasonal and is high during festive season

2. Demand is dependent on good monsoons

3. Poor government spending on infrastructure

4. Low purchasing power of consumers

Opportunities

1. Penetration level of white goods is lower as compared to other developing

countries.2. Unexploited rural market

3. Rapid urbanization4. Increase in purchasing power of

consumers5. Easy availability of finance

Threats1. Higher import duties on raw

materials

2. Cheap imports from Singapore, China and other Asian countries.

3. Poor infrastructure

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Growth Drivers

• Rise in disposable income

• Availability of newer variants of a product

• Product pricing

• Availability of financing schemes

• Rise in the share of organized retail

• Innovative advertising and brand promotion

• Festive season sales

Major Hurdles

• Threat from new entrants, especially global companies

• Rivalry and competition

• Potential markets remaining yet untapped

• Threat from substitute products/services

• Customer power with respect to availability of choice

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Porter’s Five Force Model: Consumer Durable Industry

Supplier Power

Indigenous supply base limited - most raw materials are imported

Threat of New Entrants

• Most current players are global players

• New entrants will need to invest in Brand, Technology and Distribution

Threat of Substitutes

Technological Enhancement

Customer Power

Multitude of brands across price points - wide variety of choice for customers

Competitive Rivalry

•Number of well established players, with new players entering

•Good technological capability

•Many untapped potential markets

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Supply Chain Management: Consumer Durable Industry

Importance of SCM

SCM plays a very important role in Consumer Durable Industry and it is due to the following reasons:

• Product Proliferation

• Multiple players

• High competition

• Benchmarking and TQM

• Production Demand mismatch

• Ever Increasing Targets

• Bargaining power of Retailers

Objectives of SCM

• Efficient Sourcing

• Demand Planning

• Inventory Optimization

• Order Management

• Tracking

• High Inventory for High Demand Periods

• Reverse Logistics

Benefits of SCM

• Reduced vendor payments due to better on-time delivery and improved availability

• Increased revenues from improved availability of high fast moving inventory

• Working capital reduction due to improved inventory management and reduced order cycle times

• Fixed capital reduction due to effective asset utilization

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Corporate Analysis

Overview

The project needed us to have a thorough understanding of the Consumer Durable Industry in India and the major players in Indian market. Below are some of the facts and figures of the companies involved with our project.

LG India

Company background

LG India, a wholly-owned subsidiary of LG Electronics, South Korea, began its operations in India by trading goods imported from South Korea. In 1998, the company set up a manufacturing facility at Greater Noida where it manufactures CTV, semi-automatic washing machines, A/C, Microwaves, PCB Assemblies, Sub Assemblies, and Refrigerators. In 2004, the company set up another facility at Pune, Maharashtra where it manufactures GSM Mobile Phones, Plasma TV and all the other products which are also manufactured at Noida plant.

Product profile

The company has introduced high-end products in each of its categories such as scarlet – New range of LCD TVs, Artcool ACs, Dios refrigerators, Top loading washing machine, PDP TVs, LCD TVS, GSM phones, R-200 notebook, etc.

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Color television: LG India has a wide variety of products across all categories such as conventional, flat and slim TVs, LCDs and Plasma. LG 1942S is an ergonomically- designed LCD monitor, which is primarily being targeted at business users. The monitor offers the ability to tilt the screen by up to 30 degrees, and features a 5ms response time for crisp content as well as an 8,000:1 contrast ratio.

Refrigerators: The Company offers about 20 models across all segments like direct cool, frost free and DIOS. The company launched Swarovski DIOS, a high end model with high performance in digital cooling. It also launched frost-free models. The futuristic technologies that are currently in the pipeline of LG Intellocool refrigerators are four-way cooling, patent protected door-cooling, computer controlled cooling and the latest green ion door cooling.

Air-conditioners: The Company has launched its color series window ACs. It indigenously developed advanced sensor based IntelloEye technology to address the needs of convenient and comfortable cooling. Within the room air-conditioner segment, the company offers ACs in categories such as inverters, floor standing, split, multi-split and window ACs.

Washing machines: The Company has launched the latest front loading TROMM series, which ensures that once you press the start button smart automatically detects the laundry load and water level. The company has presence in all the categories of washing machine market such as semi-automatic, front loader and top loader.

Developments

LG worldwide is adopting the blue strategy and the company is planning to launch some path breaking products and technologies as part of its strategy. Under the blue ocean strategy, the company will be entering new segment and market, and will aim to create uncontested market space. The blue ocean strategy will focus on creating high growth and profit by focusing on 5 key areas of the company: product, business models, work, system and people.

Samsung India

Company background

Samsung India commenced its operations in India in December 1995, today enjoys a sales turnover of over US$ 1 billion in just a decade of operations in the country. Samsung design centers are located in London, Los Angeles, San Francisco, Tokyo, Shanghai and Romen. Samsung India has its headquartered in New Delhi and has a network of 19 Branch Offices located all over the country. The Samsung manufacturing complex housing manufacturing facilities for Color Televisions, Color Monitors, Refrigerators and Washing Machines is located at Noida, near Delhi. Samsung ‘Made in India’ products like Color Televisions, Color Monitors and Refrigerators are being exported to Middle East, CIS and SAARC countries from its Noida manufacturing complex. Samsung India currently employs over 1600 employees, with around 18% of its employees working in Research & Development. To differentiate its products from competition, Samsung followed a deliberate strategy of bringing in the world’s best design and technologies to India from its parent country. It launched its products in India around the same time as the global launch of products.

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Product profile

The company is already the market leader in premium product categories like LCD TV and side-by-side refrigerators. In 2007-08, the company is looking at consolidating its No 2 slot in air conditioners and aiming for the top slot in frost-free refrigerator and fully automatic washing machine segments. Samsung was the first to introduce the following in India at the same time as the global launch: DLP televisions, fuzzy logic based washing machines, silver nano refrigerators, flat screen TVs and microwave ovens.

Color televisions: Samsung offers a wide portfolio of flat and slim models in 15- inch, 21-inch, 25- inch and 29 - inch screens.

Refrigerators: Samsung has its presence in both frost-free and direct cool segment. It has around 42 models in frost-free (230L- 730L) and around 15 models in direct-cool segment (180L-195L). Samsung launched 4- star rated frost-free refrigerators in January 2007, ahead of Bureau of Energy Efficiency guidelines. In March 2007, the company launched nine models including the world’s first quarto cooling refrigerator (which allows customized cooling in each section of the refrigerator).

Air conditioners: Samsung has around nine models in split-ACs and seven models in window ac segment in 1 tonne to 2 tonne capacity range. Samsung launched its three new advanced series premium split air conditioners equipped with ultra tropical rotary compressor and micro plasma ion technology under brands Vivace, Moderato and Forte.

Washing machines: Samsung is present in the semi-automatic segment with around eight models and with around 16 models in the fully-automatic segment. For the semi-automatic segment of Samsung washing machines, Samsung has introduced for the first time in India a feature called super dry. It is present in three of Samsung’s semi automatic models and dries clothes better than the rest.

Developments

Focus sectors: Enhancing contribution from high-end products like LCD televisions, plasma television and ultra slim televisions would be the focus business strategy during 2007-08.

Rural initiative: The Company also plans to carry out around 225 Samsung Dream Home road shows, all over the country to educate consumers on its new products and technology.

Retail initiative: Samsung aims to expand brand shops from 115 in 2007 to over 200 by year end. By 2010, Samsung targets around 10-12 per cent from organized retail store for which it is in the process of developing a dedicated team to tap the new retail opportunities.

Whirlpool of India

Company background

Whirlpool of India, formerly known as Kelvinator India was started in 1960 in collaboration with Kelvinator International Corporation, USA. Whirlpool Incorporation, USA, and Sundaram Clayton Ltd started TVS Whirlpool Ltd as a joint venture in 1987.In 1995; Whirlpool Inc took over TVS Whirlpool Ltd,

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and also acquired DC manufacturing facility of Kelvinator India. Finally in 1996, Kelvinator of India and Whirlpool washing machines Ltd were combined to form Whirlpool of India. Whirlpool India has its refrigerator manufacturing facility at Faridabad (Haryana) and Ranjagaon and washing machines are produced at its Thiruphuvani (near Pondicherry) plant.

Product profile

Refrigerators: Whirlpool refrigerators have 28 models in both direct cool and frost-free segment. The company’s direct cool segment is marketed under brand name Genius (180L to 200L) and Fusion (200L, 230L, and 260L). Frost-free refrigerators are under the brand of Iceberg (310L-340L) and Ice-magic (400L-450L). The Refrigerator category witnessed the launch of 2 new ranges Whirlpool Mastermind and Whirlpool Professional, both in the fast growing Frost Free segment. Whirlpool Professional, which is a range of high-capacity top mount refrigerators, was enabled by the investment in a new line in Ranjangaon specially made for producing high-capacity refrigerators that has high potential for both the domestic and export markets.

Air conditioners: Whirlpool has presence in split and window air conditioners under the brand Magic-cool. It offers windows AC models from 0.8 to 2 ton.

Washing machines: Washing machines are available in the complete range of semi-automatic and fully-automatic segment (front and top load).

Developments

A range of Built-In appliances was launched in 2007.These products are an integral part of modular kitchens which are seeing a boom, especially with the growth in high-end housing. This is currently a niche market but with strong potential for growth in the years to come. The range of products are imported from factories in Europe which are known for both performance and styling.

Videocon Industries Ltd

Company background

Videocon Industries Ltd, the flagship company of the Videocon Group, was incorporated in 1985 by NM Dhoot. It manufactures TVs and audio appliances primarily at its Chittagong plant in Aurangabad, Maharashtra, but the company has assembly operations at around 17 manufacturing locations across the country. The company’s glass panels and glass funnels (collectively known as glass shells) facility is in Bharuch (Gujarat), with an installed capacity of 4.5 million units and 7.5 million units, respectively. Videocon industries also markets electronic appliances particularly white goods like refrigerators and air conditioners manufactured by Videocon Appliances Limited (VAL), another Videocon Group company.

Product profile

Products like, color televisions, washing machines, air conditioners, refrigerators, microwave ovens and many other home appliances, fall under its Consumer Electronics, Home Appliances and Compressor divisions. The company's in-house compressor manufacturing technology in Bengaluru supports

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refrigerator manufacturing. The display devices and its components division manufactures color picture tube like slim CPT, extra slim CPT and high definition 16:9 format CPT, which operates in Mexico, Italy, Poland and China. The color picture tube glass manufactured by the company operates through Poland and India. Videocon is also involved in oil and gas exploration and operates from its oil fields in India, Australia and Oman.

Color televisions: The Company has introduced three flat television models in the 15 inch, 18inch models in 21 inch segment and eight models in the 29 inch segment.

Developments

Focus: The Company would be increasing its focus on comparatively better margin products like LCD, plasma TVs, 29-inch TFT and slim color televisions. In the home appliances segment, the focus will be to strengthen its position in the fully-automatic, front loading washing machine and frost-free refrigerator divisions.

Rural initiative: The Company has formulated marketing strategies with customized products for the rural market. It also plans to expand its distribution network to tap the pan India rural market. Further, it plans to aggressively promote its consumer finance schemes in rural markets to enhance consumer’s affordability across product range for penetrating the rural markets.

Videocon Retail: The Company plans to invest Rs 800 crores to expand its electronics retail format to 1,500 from 200 at present in the next 3 years.

Voltas Ltd

Company background

Voltas Ltd was promoted by Tata Sons Pvt Ltd in collaboration with Volkart Brothers in 1954. It is one of India's premier air-conditioning and engineering services. Its operations are organized into four segments viz., electro- mechanical projects and services, engineering products and services, unitary cooling products and others. Its factories are located at Thane (Maharashtra), Dadra and Sanathnagar (Andhra Pradesh). Its overseas offices are located in Abu Dhabi (UAE), Hong Kong and Singapore. For turnkey engineering projects they have technical collaborations with international companies like Hitachi (Japan), Standard Refrigeration (USA), Dunham Bush (USA), Hercules (USA), Mitsubishi (Japan) etc. It has six subsidiaries and five joint ventures.

Product profile

Air conditioners: Voltas has presence in windows and split air conditioner sections under the brands Vertis, Verdant and Vectra. It offers window AC models between 0.6 to 2.0 ton and split ACs from 0.8 to 4.0 ton. It was the first to launch sub 1.0 ton AC’s.

Commercial refrigerators: Products include chest freezers, deep freezers, upright coolers and chest coolers.

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Developments

Voltas is planning an aggressive distribution strategy to increase its current channel partners from 3,000 to around 4,000 during the year.

IFB Industries Ltd

Company background

IFB Industries Ltd originally known as Indian Fine Blanks Limited started its operations in India in 1974 in collaboration with Hienrich Schmid AG, Switzerland. IFB Industries has its business categorized into fine blanking and home appliances. IFB Home Appliances deals with washing machines, microwaves, dishwashers and drying machines. The engineering divisions of the company are located in Kolkata and Bengaluru. Apart from Fine Blanked components, the Bengaluru unit manufactures motors for white goods as well as automotive segments.

Product profile

IFB Industries Ltd (Home Appliances Division) has recently launched top loading washing machines. IFB is the leader in front loading washing machines in India. Earlier, IFB exclusively manufactured front loading washing machines and has a huge market share of the front loading fully automatic washing machines.

Washing machines: Earlier, the company was present only in the fully automatic front-loading washing machine category. Its fully automatic top loading model is now available in capacities ranging from 5-7 kg. It has also launched top loaders in the Indian market in the capacity of 6-7 kg.

Other appliances: Besides washing machine, the company also offers a comprehensive range of microwave ovens, dryers and dish washers.

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Detail Analysis Whirlpool Electronics of India

Whirlpool Vision

Every Home… Everywhere... With Pride, Passion, Performance

Their goal is a Whirlpool product in every home, everywhere.

They will achieve this by creating:-

Pride in their work and each other

Passion for creating unmatched customer loyalty for their brands

Performance results that excite & reward global investors with superior returns

They will bring this dream to life through the power of unique global & their Outstanding people… working together… everywhere.

Product management strategy

TWL was established as an assembly operation, dependent on components that were 80-90% externally sourced.

Faridabad(Haryana)

Ranjangaon, Pune(Maharashtra)

Thirubhuvanai(Puducherry),

New line to make high capacity(8kg) washing machine in 2008

Products introduced

Compact washers i.e. automatic washers initially

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Target Customer Segment

Initially high end customers

Positioned the brand as a “Partner to the homemaker” and the values were translated into the various elements of the brand identity leading to the well known tagline “You & Whirlpool, The World’s best homemakers.”

In fact, Whirlpool is credited with changing the lexicon from “housewife” to “homemaker” in everyday parlance.

Engaged a real life celebrity couple Ajay & Kajol to endorse the brand who symbolize the values that brand stands for.

Pricing Strategy

Premium pricing initially

Sales channel strategy

TVS also had few connections with appliance retail distribution outlets. Dealers were not interested in buying products from single-product firms like TWL

Growth over the years

Product range includes refrigerators, washing machines, air-conditioners, microwave ovens, 100% dryers and Purafresh.

Acquired Kelvinator India Limited in 1995 and marked an entry into Indian refrigerator market as well.

Kelvinator had a high cost structure, old factories, diversification into non core business areas like mopeds and excessive staff which brought losses to the company for the first time from 1991 to 1993; by 1994 it lost its position to Godrej.

Electrolux retained the Kelvinator brand and Whirlpool was allowed to keep the manufacturing facilities and distribution network.

Kelvinator purchase gave Whirlpool access to more than 3000 dealers in India.

Kelvinator brand was handed over to Whirlpool on a two year lease till the end of 1996.

Whirlpool used the Kelvinator brand as a launch pad for its own line of products. Whirlpool refrigerator was promoted as a refrigerator manufactured by the same company that manufactured Kelvinator. By the end of 1996 Whirlpool successfully established itself as a strong brand making use of Kelvinator’s trade partners and brand name.

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The same year also saw acquisition of major share in TVS joint venture. The removal of FERA restrictions and the liberalization of FDI enabled MNC, who were already operating in India, to raise their equity in their Indian enterprises to 51% or more post 1991 reforms.

In 1996, Kelvinator and TVS acquisitions were merged to create Indian home appliance[6] i.e. Whirlpool India Limited which is An 82.3% subsidiary of Whirlpool Inc, USA

New line in Ranjangaon, specially made for producing high-capacity refrigerators

Product portfolio was expanded with the introductions of a front load fully automatic range in the highly salient <6 kg capacity.

A Fully Automatic Dryer was also introduced

A range of Built-in appliances was launched in 2007

Management at Whirlpool concluded that if the company were to be a major player in the developing global major home appliance industry, it needed a presence in Asia to compete with the Japanese and Korean manufacturers. Industry projections suggested that Asia would surpass North American and Europe and represent 40% of world demand for home appliances by 2004. In 1987, Whirlpool managers thought that rising incomes and aspirations among India's middle class would generate substantial demand for home appliances over the next few decades. That same year, Whirlpool met and signed a joint venture agreement with India's TVS group, for the purpose of manufacturing automatic washing machines and eventually other appliances. TVS had begun as a bus service and diversified into auto component manufacturing and other auto-related businesses. Its most recent (and least successful) diversification into computer components was also its first into non-automotive consumer goods. TVS then joined with Whirlpool in forming TWL because it also wanted to take advantage of future growth in consumer products in India.

Under the terms of the joint venture agreement, TVS provided day-to-day operational management, with Whirlpool providing the technical expertise in automatic washing machines. Unfortunately, TVS knew nothing of either making or marketing major home appliances, and Whirlpool ignored the fact that the Indian market had no interest at the time in automatic washing machines! People purchased either manual washers or semi-automatic twin-tub washers. Fully automatic machines were affordable only to a tiny segment of the population. TVS' and Whirlpool's investment of time and money into the development of their first washer meant that the venture had to sell 5,000 high-priced units per month to reach break-even. TWL was established as an assembly operation, dependent on components that were 80-90% externally sourced. TVS' lack of experience with appropriate suppliers, plus the marginal ability of suppliers to deliver quality parts on time, caused huge problems in production. TVS also had few connections with appliance retail distribution outlets. Dealers were not interested in buying products from single-product firms like TWL when they could deal with companies making a full range of consumer durables, like Videocon. Even after two years of operations, only 2,000 to 2,500 units were coming off TWL's assembly line. By 1993, TWL's equity was reduced to zero, cash flow was weak, and

25

losses were accumulating. Whirlpool purchased TVS' stock in the joint venture and implemented a turnaround strategy under the new name of Whirlpool Washers Manufacturing Limited (WWML).

Whirlpool initiated its Worldwide Excellence Program in the Pondicherry plant to raise the level of quality and reduce costs. It worked to develop better relations with its suppliers. Whirlpool replaced TVS managers with its own from the United States but still had to deal with the TVS corporate culture in the workplace. The reorganized venture reduced its losses and became profitable. Whirlpool's market share rose from 12.9% in 1994 to 17% by the end of 1995. WWML finally made a book profit in 1995 but still had to pay off its accumulated losses of US$50 million. Increasing competition and price wars were making the targeted 1996 market share of 20.6% difficult to achieve.

Also in 1995, Whirlpool purchased a 51% interest in Delhi-based Kelvinator of India (KOI), one of India's leading refrigerator makers. Even though KOI had 30% market share in India, its refrigerators were outdated and the company was unprofitable. Whirlpool began construction of a US$119 million plant to produce state-of-the-art refrigerators. This was on top of its investment, totaling US$120 million, in the TVS joint venture and in Kelvinator. The company was also considering entering the Indian air conditioning market as well as the fast-growing, Chinese major home appliance market. In the meantime, Whirlpool's erratic corporate earnings translated into a decline in its per share stock price from $56 in 1993 to $51 in 1996. Whirlpool's plan to become a global appliance manufacturer appeared to be in difficulty.

SWOT

STRENGTHSa.)Strong R&D backbone b.)Strong Brand Imagec.)Increasing cash flow from operationsd.)Growth in revenue from Latin Americae.)Aggressive marketing campaigns

WEAKNESSa.)Low Marginsb.)Declining Private label sales to Sears

OPPORTUNITYa.)Growing Asian marketsb.)Growth in housingc.)Expansion of organized retail beyond metrosd.)Overall low penetration levels in the country

THREATSa.)Influx of new multinational brandsb.)High marketing & Infrastructure Investment by competitorsc.)Inflation of material costsd.)Regulations on energy and Sustainabilitye.)Import risk due to currency fluctuations

SWOT

26

Plant Locations

Whirlpool of India Ltd. Plant Locations

Faridabad ,Haryana

Puducherry ,Tamil Nadu

Maharashtra

Ranjangaon

Pune

There are 3 factories of Whirlpool which server by providing the following goods

Faridabad----Refrigerators

Pune----------Washing Machines & Refrigerators

Pondicherry----Washing Machines

Source: Secondary Research

Whirlpool installed capacity

0%

20%

40%

60%

80%

100%

2010

Whirlpool Trends in capacity utilisation (%)

-5%

+13%

+22%

Source: Prowess (CMIE) database

27

Whirlpool Regional Distribution Hubs

Whirlpool Regional Distribution Hubs

Faridabad, Haryana

Puducherry,

(Pondicherry, Tamil Nadu)

Ranjangaon, Pune,

Maharashtra

ASSAM


Whirlpool Sales office and Warehouse

Whirlpool Sales office/Warehouse

ASSAM

The company has 18 sales branch offices in India and 1 CFA each. The company markets its products through CFA’s who further

provide the goods to the Direct Dealers.

The Direct Dealers can also source the products directly from the company.

Another Alternative Channel is selling through Sub-Dealers who in turn source their products from either the Distributors or the

Direct Dealers.


28

Whirlpool Distribution Network

60%

40%

2010

Distributors Direct Dealers

Whirlpool Distribution Network

Direct Dealers are important as there are some stores where company has to be present so

as to have a superior business relationship with the customer

Distributor margin 3.25%(approx.)

Dealer margin 1.25% (approx.)

Distributors are being preferred as they increase

the company’s reach into rural markets as well reduce

the risk exposure of the company by providing credit

worthiness


Perspective from Mr. Shantanu Das Gupta (V.P. Corporate Affairs & Strategy): Refrigerators

On Protton Refrigerators

• Innovative & premium range of frost free refrigerators- Protton world series.

• It’s an eco-friendly refrigerator.

• Available in 2 formats:

• Protton 3 Door: India’s 1st fully automatic refrigerator for systematic and odor free storage of frozen food, fresh food & vegetables separately. ABS (air booster system) vents present in each zone and FBS (freshness booster system) in vegetable drawer ensures lasting freshness for more than a week. 30% faster ice making. Capacity 300L & 400L, in 4 high gloss finishes. Price: Rs.23400- Rs 27500.

• Protton 2 Door: New lifestyle features like double decker ice twister, can rack, choco box & fruit crisper. 50% faster ice making. Capacity 410L, 450L & 480L, in 3 high gloss finishes. Largest vegetable basket with freshness booster system.

• Protton World series is third sub brand in Whirlpool’s frost free category besides Mastermind & Professional.

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On sales in 2009

Sales of 1.53 million refrigerator units in 2009, an increase of 28% over 1.23 million units in 2008

On market trends

• Direct cool

Good growth driven by low capacity products

Price points attract first time buyers with modest income

Aesthetics- particularly color has become important in addition to durability

• Frost free

Good growth will continue with more innovations

Demand for large capacity products will increase

New formats in large capacity products e.g. multi door formats

Smaller innovation cycle

Electronic user panel gaining importance

Innovative space management solutions in high capacity products

Energy efficiency is an additional criterion

Health and freshness benefits sought

On sales trend

• Upward momentum in both segments

• Double digit growth over next 3 to 5 years across different population strata

On challenges

• Supply/component base not keeping pace with change in market dynamics, necessitating imports

• Innovation at low cost given expectation for better and more featured products on one hand and reality of affordability on the other.

30

On Opportunities

Limited penetration

Rise in disposable income, improvement in infrastructure

Implementation of GST, 2011 to ease movement of goods across states

Expansion of modern retail

On Product range

• Direct cool single door – 180L, 200L, 230L, 260L AND 310L

• Frost free double door – 220L, 250L, 280L, 310L, 340L, 410L, 450L and 480L

• 3 door top mount – 300L, 330L

On price range

• Direct cool – Rs. 8200 – 16000/-

• Frost free – Rs. 13100 – 48000/-

On advertisement and promotional strategies

• Mass media such as TV, print & radio

• Innovations in advertising e.g. Fusion in direct cool & protton in frost free

• Consumer promotions in specific periods e.g. Diwali

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Whirlpool Sales and Market Analysis Graphs

Whirlpool Sales : 2009-10

31%

36%

18%

15%

Region wise Sales (%)

North + central South East West

2009-10

Whirlpool Total sales Trend

1203000

1533000

0 500000 1000000 1500000 2000000

2008

2009

Total Sales (units)

32

Whirlpool Turnover Trend (Rs. Million)

11791

15114

0 2000 4000 6000 8000 10000 12000 14000 16000

2008

2009

Turnover

Whirlpool–Direct cool v/s Frost free: (2009-10)

79%

21%

Direct cool Frost free

2009-10

33

Whirlpool – Direct cool: Capacity wise (2009-10)

80%

10%

10%

Sales – 1215000 units

184L or less 185L to 225L 226L or more

2009-10

Whirlpool Frost free: Capacity wise(2009-10)

53%

22%

6%

13%

6%

Sales – 318000 units

225L or less 226L to 270L 271L to 300L 301L to 350L 401L or more

2009-10

34

Whirlpool Market Penetration (2009-10)

6

34

0 5 10 15 20 25 30 35 40

Rural

Urban

Market Penetration (%)

Whirlpool Market Segment: (2009-10)

30%

70%

Market segment

Rural Urban

2009-10

35

Whirlpool: Stats at a glance

Sales Target for 2010-11 30-40% growth

Upcoming Model Both at mass and premium end

Manufacturing Plant Faridabad and Pune

Total export 0.17 million units

Installed Capacity 2 million units per annum

Turnover Sales units (2009-10) 1.54 million units

Turnover (2009-10) Rs. 15.114 billion

No. of Dealers/ Distributors 2350

Perspective from Mr. Shantanu Das Gupta: Washing Machines

On sales trends

• Fully automatic growing at 20% & semi automatic at 10%

• Fully automatic top load is fastest growing segment

• Color becoming an important aspect

• Plastic cabinet gaining salience

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On key growth drivers

• Low penetration

• Aspiration & changing lifestyle

• Increase in disposable incomes

• Growth in nuclear families

On market trends

• Industry in 2009-10 is 3-3.5 million units

• Growth in 2008-09 is 15-20%

• Industry growth pegged at 15-20% over the next three years

On emerging technologies

• Green technologies offering greater energy efficiency & optimal water use

• Plastic cabinets replacing steel

On major challenges and Opportunities

• Only 4% penetration at all India level

• Lack of proper infrastructure like water & electricity

• Changing lifestyles, more working women, longer hours out of home, uncertainty of domestic help present opportunity

On energy efficiency initiatives

• Features addressing water issues like eco wash, water saving wash & half load cycle

• 6th sense optimizes detergent & water based on wash load

• Aqua shower in semi automatic saves 20% water

On marketing strategies

• Short term objective to be at 20% mark by fiscal end

• Interesting innovations in both formats prior to Diwali

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• Expanding distribution, 700 towns with population of 50000 to 5 lakhs, adding another 100 distributors

• Increasing brand visibility

On product range

• Semi auto, 6-8kg capacity, plastic & metal body

• Fully automatic top load, 4 designs, Agipellar & Agitator

• Front loaders, only brand locally manufacturing 7kg m/c in India

• Will introduce dryers in next 12-18 months

On manufacturing facility

• Manufacture WMs at plant in Pondicherry

• 10% product range is imported

Washing Machine Statistics in charts and Graphs

Whirlpool: Contribution of Fully and Semi –Automatic WMs (2009-10)

60%

40%

Percentage Contribution (%)

Semi automatic Fully automatic

2009-10

38

Whirlpool : Total Capacity Wise Sales (2009-10)

4%

75%

21%


5kg-6kg 6kg-7kg Above 7 kg

2009-10

Whirlpool : Semi – Automatic Capacity Wise Sales (2009-10)

71%

29%


6kg-7kg Above 7kg

2009-10

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Whirlpool : Fully Automatic WMs Capacity Wise Sales (2009-10)

13%

84%

3%


5 kg- 6kg 6kg-7kg Above 7 kg

2009-10

Whirlpool : Zone wise sales, Semi – Automatic WMs (2009-10)

23%

23%29%

11%

14%


Central North South East West

2009-10

40

Whirlpool : Zone wise sales, Fully – Automatic WMs (2009-10)

7.0%3.5%

61.0%

7.5%

21.0%


Central North South East West

2009-10

Product Matrix:

Refrigerator

• Direct Cool: 7 models

Capacity 180-230 Lts

Price Range 9290-13930

• Frost Control: 12 models



• Frost Free: 48 models



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Air Conditioner

• Window: 5 models

Capacity .8-1.5 Ton


• Split: 13 models

Capacity 1-15 Ton


Dishwashers

Capacity 220-230V

Price 50000

Profit and Loss Account of Whirlpool

Profit & Loss account of Whirlpool of India.

------------------- in Rs. Cr. -------------------

Mar '06 Mar '07 Mar '08 Mar '09 Mar '10

12 mths 12 mths 12 mths 12 mths 12 mths

Income

Sales Turnover 1,379.16 1,626.26 1,974.05 2,097.21 2,683.62

Excise Duty 123.55 146.11 173.41 153.88 142.58

Net Sales 1,255.61 1,480.15 1,800.64 1,943.33 2,541.04

Other Income 4.46 4.64 0.84 4.35 14.64

Stock Adjustments 11.80 16.23 93.81 -16.82 113.53

Total Income 1,271.87 1,501.02 1,895.29 1,930.86 2,669.21

Expenditure

Raw Materials 783.77 907.46 1,142.97 1,088.79 1,476.51

Power & Fuel Cost 9.52 11.13 12.97 13.56 16.94

Employee Cost 92.30 100.07 121.96 133.41 159.64

Other Manufacturing Expenses 6.80 8.99 21.18 29.11 41.83

Selling and Admin Expenses 286.13 344.13 426.57 443.15 619.77

Miscellaneous Expenses 90.32 73.30 71.84 74.38 94.69

Preoperative Exp Capitalized 0.00 0.00 0.00 0.00 0.00

Total Expenses 1,268.84 1,445.08 1,797.49 1,782.40 2,409.38

Mar '06 Mar '07 Mar '08 Mar '09 Mar '10

12 mths 12 mths 12 mths 12 mths 12 mths

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Operating Profit -1.43 51.30 96.96 144.11 245.19

PBDIT 3.03 55.94 97.80 148.46 259.83

Interest 17.10 15.74 17.24 17.32 8.27

PBDT -14.07 40.20 80.56 131.14 251.56

Depreciation 36.55 34.42 37.35 39.01 39.68

Other Written Off 13.66 18.32 15.21 9.43 9.40

Profit Before Tax -64.28 -12.54 28.00 82.70 202.48

Extra-ordinary items 10.95 6.90 0.81 3.50 4.33

PBT (Post Extra-ord Items) -53.33 -5.64 28.81 86.20 206.81

Tax -15.23 -0.32 -3.51 15.68 61.78

Reported Net Profit -38.10 -5.32 32.32 70.52 145.02

Total Value Addition 485.07 537.61 654.52 693.61 932.87

Preference Dividend 0.00 0.00 0.00 0.00 72.24

Equity Dividend 0.00 0.00 0.00 0.00 0.00

Corporate Dividend Tax 0.00 0.00 0.00 0.00 12.28

Per share data (annualized)

Shares in issue (lakhs) 1,268.72 1,268.72 1,268.72 1,268.72 1,268.72

Earnings Per Share (Rs) -3.00 -0.42 2.55 5.56 5.74

Equity Dividend (%) 0.00 0.00 0.00 0.00 0.00

Book Value (Rs) 3.29 2.87 5.41 10.77 15.74

Future:

• Immediate focus is on 700 towns with a population of 100,000-500,000 which we is expected to emerge as major consumption centres in the years ahead.

• Plan to add new distributors to expand distribution width, and investment of around Rs 3 billion in India over the next three years

• Strategic focus on countries which are less affected by the economic recession, primarily the Oceania region (Australia +New Zealand) and neighbouring markets in the SAARC region

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Scenarios

With easy availability of finance, emergence of double-income families, fall in prices due to

increased competition, government support, growth of media, availability of disposable incomes,

improvements in technology, reduction in customs duty, rise in temperatures, growth in

consumer base of rural sector, the consumer durables industry is growing at a fast pace.

Identifying the high impact and high uncertainty factors affecting the industry.

1. Government policies

2. Improvements in technology

3. Increase in raw material cost

4. Easy availability of finance

Building Scenarios

Scenario 1: No great change.

With all the other factors affecting in one direction and increase in raw material prices acting

against them, the change may be nullified, due to India being a highly price sensitive market.

Scenario 2: Market growth despite increase in raw material cost and stringent RBI policies.

Indian economy is expected to grow at the rate of more than 8% in future years; this will result in

higher disposable income with the consumers. But the inflation as per the recent data is hovering

around 9% resulting in the increase in the price of these goods and impacting the demand.

Moreover, RBI is tightening the monetary policy to check the inflation and hence the increase in

interest rate. Consumer durables sector which are sensitive to credit conditions in the

economy, have seen a slowdown in growth to 3.3 percent in the April-June quarter of 2011,

down from 19.7 percent yoy as shown in the table given below.

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Thus we believe that the measures taken by RBI will check the inflation rate and hence economy

may not grow at the expected rate. This will result in the slower growth rate of consumer durable

sector. But as the RBI policy ease out in long run, we expect to higher growth of the consumer

durable sector.

Scenario 3: Saturation in urban areas, shifting the focus to rural markets.

The penetration level of consumer durables is very low in India, as compared with other

countries. This translates into vast unrealized potential.

For example, in case of color televisions (CTVs), the penetration level of various countries is:

India 24%

Brazil 11%

China 98%

U.S 333%

France 235%

Japan 250%

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In a study conducted by Frost & Sullivan and commissioned by India Semiconductor

Association (ISA), the demand for Electronic Appliances is projected to grow exponentially at a

compounded annual growth rate (CAGR) of 30%

Conclusion

There are various factors which will influence the rate of growth of consumer durables industry

in India.

Infrastructure Development

Lack of adequate physical infrastructure like transport system, roads, ports, airports etc.

adversely affect the competitiveness and productivity of the manufacturing sector. Uninterrupted

power supply is a necessary condition for operation of manufacturing units as power fluctuations

can lead to breakage of entire system. Many of the respondents to the survey have shown their

dissatisfaction with the existing availability and quality of infrastructure.

It has been suggested by industry associations that preferential pricing on land, building and

infrastructure etc., are required to save the industry. For example, in China land and power are

assured by Government. Industry and industry association has been supported by Government in

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China. There is need for active government support for the survival of domestic manufacturing

in India.

It is important that Government should prepare a time bound plan to upgrade physical

infrastructure to ensure long term competitiveness and sustained development of light electrical

manufacturing sector. Adoption of Private–Public–Partnership (PPP) model can facilitate faster

and cost effective development of infrastructure. Financial incentives are given to manufacturing

units for establishing and maintaining of backup power units and for utilizing non-conventional

energy sources.

While setting up its new plant Arcelik needs to take into account the location close to a

distribution hub or a region well connected to other parts of the country.

Raw Material, Components & Machinery

Some of the raw materials like Polypropylene are being manufactured by a single company

(Monopoly) and as a result price is exorbitantly high. Due to the unavailability of good quality of

aluminum, copper tubes, gear boxes and other components several Indian manufacturers are

forced to import from countries like China. Domestic component manufacturers may be given

adequate support to overcome these constraints.

The manufactures of large home appliances are generally dependent on imported raw material as

the availability of good quality raw material is a serious problem. Due to the unavailability of

good quality of aluminum, copper tubes, gear boxes and other components and subassemblies

are forced to import from the countries like China and assembled in India to produce finish

product. The Quality of these imported raw materials available in local markets is not fully

reliable.

Government can evolve necessary mechanisms such as removal of safeguard duties on certain

raw materials such as Aluminum and Polypropylene. An agency may over see the pricing of raw

material to ensure abnormal fluctuations in raw material prices.

The domestic manufacturers of Air Conditioners reported problems in getting good and quality

Copper Tube in India hence they are relying on imports from China. Even 40 percent of the main

component is imported by most of the manufacturers. Even this is same in the case of

compressors. Rotary compressors which are considered to be more energy efficient than

reciprocating compressors are mainly being imported from China. These compressors are cost

effective as well. Only the reciprocating compressors which are used in Refrigerators are being

manufactured in India. Nowadays, due to the adoption of energy efficiency norms, the

production of reciprocating compressors is declining in India. Cooling coil and condenser etc.,

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cost about 60 percent of the windows and split ACs. Most of the Indian manufacturing units

producing reciprocating compressors were reported to be taken over by large MNCs.

Weak supply chain network and lack of vendor support also affects the quality, productivity and

competitiveness of the products. Manufacturing units directly importing raw materials face delay

in import clearances which slows down completion of time bound projects as well as export

production by these units. Government should ensure hassle free import of raw material and

components by streamlining the import policy and systems and through simplification of import

procedures. Maritime Transport is a critical infrastructure for the development of Logistics and

Supply Chain Management. It influences the pace, structure and pattern of development.

Ministry of Shipping may undertake appropriate action plans for hassle free Handling of raw

material and finished products at the ports.

The Light Electrical Industry is a highly capital intensive industry and also the obsolescence is

very high. The industry is competing with major players in countries like China, Malaysia,

Thailand and South Korea. Thus, there is the imperative to continuously upgrade manufacturing

facilities in line with the latest technological developments. Importing is considered to be

cheaper than manufacturing locally by many manufacturers in India.

It is recommended that the government should promote modernization of units through a special

scheme with fiscal incentives and minimum import duties. Special Financing Schemes need to be

formulated for encouraging the entrepreneurs in the manufacturing sector. Depending on the

needs and performance of existing manufacturers, special loans may be granted for technology

up gradation, infrastructure building or expansion of business.

Import duties play a key role in deciding whether to import goods or manufacture, with possible

FTA between Turkey and India in the pipeline the consumer durable major, Arcelik can import

CBU units from Turkey.

Building a Global Supply Chain Network

The competitiveness of light electrical industry could be enhanced only through strengthening

the global supply chain network as the industry is highly dependent on the import of raw

materials. The cost of the supply network or logistic management network also needs to be

assessed through value chain analysis. Unless it is intervened at the right time there will be a

spiraling effect (e.g., rise in price of raw materials leading to high cost of production, that would

result in either rise in product price or incurring of loss by the manufacturer) that would hinder

the competitiveness of both the product and the firm. However, while calculating cost, the

efficiency and reliability of the supply chain also need to be considered, as most of the products

require handling with care and to be delivered in time.

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LEARNINGS FROM A STRATEGIC POINT OF VIEW

As students of management this project helped us a lot to learn about:

1) Consumer Durable Industry in India which is expected to grow by around 8% in the next decade. The Indian consumer durables segment can be segregated into 2 consumer electronics groups:

White goods Consumer electronics

•Air conditioners

•Refrigerators

•Washing machines

•Sewing machines

•Electric fans

•Watches and clocks

•Cleaning equipments

•Microwave ovens

•Other domestic appliances

•Televisions

•Audio and video systems

•Electronics accessories

•PCs

•Mobile phones

•Digital cameras

•DVDs

•Camcorders

2) Growth Scenario of Consumer Durable Industry in India-

Rising disposable income and declining prices of durables have resulted in increased

volumes. An increase in disposable income is aided by an increase n the number of both

double-income and nuclear families. Production in the consumer electronics industry has

been estimated at US$ 6.7 billion in 2009– 2010. The segment registered a growth of 18 per

cent in 2009–2010 from US$ 5.5 billion in the previous year. The consumer electronics

segment contributes about 27 per cent to the total hardware production in the country.

Air conditioners (including industrial and office conditioners) constituted 38 per cent of the

consumer appliances market, followed by refrigerators at 14 per cent, electric fans at

7.5 per cent, washing appliances at 7 per cent and sewing machines at 5 per cent.

Consumer durables are expected to grow at 10-15 per cent in 2007-08, driven by the growth

in CTV’s and air conditioners. Value growth of durables is expected to be higher than

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historical levels as price declines for most of the products are not expected to be very

significant. Though price declines will continue, it will cease to be the primary demand

driver. Instead the continuing strength of income demographics will support volume growth.

Growth Drivers for Consumer Durable Products

Product

Category

2007-2008 over 2005-2006 2008-2009 over 2009-2010

% Growth

Driver

% Growth

Driver

Air

Conditioners

20-22 Decreasing

Prices,

changing

lifestyle

30-40 Reduction in

Prices

Refrigerators 5-8 High demand

for the frost

free

segment

together with

reduction in

prices

24 low

penetration

level in the

country and

the increase in

demand from

the

rural and semi

urban areas Color

Televisions

5-8 Increasing

disposable

income and

declining

prices

30-40 Reduction in

Prices of

LCD,LED

Washing

Machines

8-10 Reduction in

prices of fully

automatic

machines

30 New models

launched and

reduction in

prices

3) Production facility of some of the top consumer durable companies in India. Example LG

Electronics has 9 product lines in Pune plant (50 acre in area) and 7 product lines in Noida

plant (47 acre in area).

4) Distribution network of the company like the number of warehouses, supply chain process,

modern retailers etc.

5) Major players in the consumer durable industry. Example LG Electronics who is the market

leader followed by Samsung, Whirlpool, Videocon, Voltas, IFB etc.

6) Different sales and marketing strategies applied by different companies.

7) After sales service.

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Recommendation

The Indian consumer durable industry is ripe for investment and is going to grow at a significant

pace in the years to come. Hence, its best advised to enter Indian market with a diverse portfolio

of products with substantial capital investment in the form of setting up owned plants.

Limitations of the Project

While doing an interview with the industry heads of consumer durable companies they

might not be willing to share the necessary data that are very important to the project.

The plant head of a consumer durable company might not be interested in talking about

the supply chain process and the plant details like assembly lines and installed machines.

Taxation policy and regulatory environment might differ from one place to another and

keeps changing. The data obtained may not be up to date and current.

Very extensive scope of the project, difficult to fit in the time frame of one month

Difficulty in getting company specific information due to company policies

Blue diamond_consumer durables

Business

Transcript of Blue diamond_consumer durables