Marketing TermPaper SectionB Group8

8/8/2019 Marketing TermPaper SectionB Group8

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GOA INSTITUTE OF MANAGEMENT

Videocon Industries

LimitedMarketing Term Paper

Section B Group 8

Roshan Roy 2010103

SamvedBanhatti 2010104

Ankur Raj 2010105

Sarat Gopinath 2010106

Sarika Sinha 2010107

Saurabh Prabhudesai 2010108


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Contents

Company Profile ................................ ................................ ................................ ................................ 2

Business ................................ ................................ ................................ ................................ ............ 2

Segment ................................ ................................ ................................ ................................ ............ 3

SWOT Analysis of Videocon ................................ ................................ ................................ ............... 4

Strengths ................................ ................................ ................................ ................................ ....... 4

Weaknesses ................................ ................................ ................................ ................................ ... 5

Opportunities ................................ ................................ ................................ ................................ 5

Threats ................................ ................................ ................................ ................................ .......... 5

Value Chain of Videocon ................................ ................................ ................................ .................... 6

Porters Five Forces ................................ ................................ ................................ ............................ 6

Threat of New Entrants: ................................ ................................ ................................ ................. 7

Bargaining power of Consumers: ................................ ................................ ................................ ... 7

Threat of substitutes: ................................ ................................ ................................ ..................... 7

Competitive rivalry within the consumer durables industry:................................ ............ ............... 8

Competitive rivalry to Videocon in the mobile handsets business: ................................ ................. 8

Competitive rivalry to Videocon in the direct to home television segment. ................................ .... 9

The Brand Transition ................................ ................................ ................................ ......................... 9

Recommendations: ................................ ................................ ................................ .......................... 10

Outlook and Scope ................................ ................................ ................................ .......................... 11


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Company Profile

Videocon Industries Limited (VIL) incorporated in 1985, is undoubtedly one of the biggest

players in the local consumer electronics segment. The company has a market capitalization

of over $2.5 billion and is backed by the Videocon group. Such is the companys size in the

Indian consumer electronics terrain, that it accounts for over 90% of the CMIE (Centre forMonitoring Indian Economy) consumer electronic index. With the passage of time, it has

added other services to its portfolio, and is currently involved in oil and gas exploration,

manufacturing of glass shells, mobile phones and telecommunications (rendered as part of the

Videocon group), in addition to its core business of manufacturing and distributing a range

of consumer electronic goods. The company has a strong presence in both the local and

global landscape, and is involved in joint venture agreements with 23 other entities. It has

also established Research and Development (R&D) centres in China, Aurangabad, Japan and

Gurgaon. The company is chaired and managed by Mr.VenugopalDhoot, well-known in

Indian business circles, having amassed a personal net worth of $1.8 billion.

Business

The consumer electronics division accounts for nearly 90% ofVILs total revenue (as at

September 2009), while its oil and gas exploration activities serve as a subsidiary business.

As part of the consumer electronics division, the company sells colour televisions, LCD

(liquid crystal display) televisions, refrigerators, washing machines, microwave ovens,

airconditioners, DVD (Digital Video Disc) players, home UPS, batteries and audio systems.

It also manufacturers glass shells, electronic tuners and flyback transformers (FBT) for its

other products. As far as its oil and gas activities are concerned, the company is currently,

only into oil exploration, and intends to foray into oil extraction, oil distribution and gas

distribution. Historically, the revenues from the Oil and Gas segment of the firm have moved

in tandem with the global crude oil prices. Recently the company has also branched into the

telecommunications and mobile phones activities. However the telecommunication services

will be rendered through its subsidiary- Videocon Telecommunications Limited. The

company is extremely bullish about this segment and plans to invest Rs.14000 crore over the

next 3 years for this segment alone. Its mobile phone segment too has done exceedinglywell,

considering that the company only entered this segment in November 2009. So far, the

company has been selling 2.5-3 lakh units a month and with the introduction of nine new

handsets in the current month, the company has revised its sales target to 10 lakh units a

month. It will however, have tocompete with the like of Bharti and Idea for the


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commissioning of the 3G license. The company has already introduced GSM services in

Tamil Nadu and plans to roll out its mobile service activities in 100 towns.

Segment

Indias consumer electronics segment is currently valued at$23.3 billion and that is expected

to rise to $41.4 billion by2014, growing at a CAGR of 15.5%. While Videocon isconsidered

to be the most prominent Indian based consumerElectronics Company, it faces stiff

competition from a host ofmultinational companies. Thewashing machine segment grew at a

CAGR of 11% and isfurther expected to grow at a rate of 12-15% over the nextthree years,

while the air conditioning market grew at aimpressive rate of 19%. A boom inreal estate and

infrastructure industry, coupled with a changein perception of accepting air conditioners as

utility productsrather than luxury items will spur growth in this segment.

The refrigerator market on the other hand grew at a modestrate of 10% and is expected to

grow at the same pace. There isparadigm shift in the preference of frost free refrigeratorsfrom

direct cool refrigerators and companies that specialize inthe former category can expect do

better than the others. TheIndian micro wave segment however remained stagnant andis not

perceived to be a high growth segment. Televisionscontinue to be the mainstay of the

consumer electronicsdivision, particularly with LCD televisions catching on, bigtime. VILs

share in the LCD TV segment stands at around12-18% and the company is looking to

increase its marketshare by the end of the financial year. Nonetheless the future of the

consumer electronics segmentlies in the rural markets as the urban market will soon turninto

a replacement and an up-gradation market. The oil and gas industry contributes

approximately 15% toIndias GDP. Indias energy deficit is mounting where thedemand for

oil and gas far exceeds the supply. Wireless additions seem to be making rapid progress.In

December 2009 there was an addition of 19.1 millionsubscribers, up by 76.6% from a year

ago.The telecommunications segment is witnessing some positiveactivity with the

commissioning of 3G licenses just around thecorner. Sales and profits for most

telecommunication firmshave been disappointing mainly on accounts of falling

ARPUs(Average Revenue per Users), MOUs (Minutes of Usage),fierce tariff wars and

network expansion. As at March 2010,the total telecom subscriber base in the country stood

at612.2million, up by 42.5% from a year ago. The government isplanning to increase 2G

spectrum usage charges by 2% andthis will put further pressure on the operating margins

oftelecom companies.


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12. Globally acceptance.

13. Extensive knowledge of the local market.

Weaknesses

1. Lack of impetus on new technological innovations and developing new products.

1. Fewer margins to the distributor/dealer.

2. No proper approach of target customer.

3. Wide brand basket, which might lead to conflict of interest unless effectively managed

4. CRT technology is losing popularity.

5. Less focus on unconventional channel and online marketing.

6. Lack of efficient and prompt customer service.

7. Lack of exclusive showrooms and exclusive customer service stations.

Opportunities1. Global aspirations. Opportunity to enter other markets as the highly competitive Indianmarket is saturated.

2. Videocon can explore new segments.

3 Fast growing tier 2 and tier 3 cities provide ample opportunity for consumer electronicsbusiness of Videocon.

4. Wide distribution network can be used to venture into new territories within India.

5. Financial help and development of credit facilities have helped the low middle classsegment to avail the products thus creating a new segment for Videocon.

6. Purchasing power of people is increasing day by day.

7. Mergers joint venture of strategic alliances would increase market share in cluttered Indianmarket.

8. Alliances with overseas companies possesses an opportunity to enter new markets.

Threats1. Entrance of global competitors like China.

2. Brand loyalty is higher in competitors like Samsung, LG and Sony.

3. Market condition like slumps in market.

4. New home grown competitor offering products at lower price.

5. Competitor has a new innovative substitute product or service and access to latesttechnology.

6. Increased trade barriers create hindrance in entering new market.


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Value Chain of Videocon

Porters Five Forces

The Porters Five Forces tool is a simple but powerful tool for understanding where

power lies in a business situation. This is useful, because it helps us understand both the

strength of the current competitive position, and the strength of a position company is lookingto move into. Porter five forces can be represented as follows


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Threat of New Entrants:

Entering the electronic consumer durables isnt very easy. One of the most important feat is

needed is a good distribution system which isnt something that can be developed overnight.

Also the electronics good today are more of style statement. Therefore the brand plays an

important role in influencing the purchase decision. For a new company then entering thismarket, not having a brand name is a threat to entry. However a company having brand name

and distribution network already in place can enter consumer electronics segment and can

leverage its brand name and distribution network.

Bargaining power of Consumers:

The Electronic market today is a consumer market where the consumer has the upper hand

with him having the power having the power of choosing from a variety of brands. This

bargaining power of the buyer has forced the players to offer credit facilities on sale, to

provide lower EMIs and excellent after-sales service. The intense dealer competition also

benefits the consumer in terms of prices and offers available. Inventory carrying costs for

television companies are high. This is a boon for the consumers as it translates into higher

bargaining power for the consumer.

Threat ofsubstitutes:

For a television, the substitute can only be a functional substitute. The functional use of a

television is to watch programs, live events etc. This today can also be done on a computer.

Theatres too can be a substitute to watching movies at home. Today with various multiplexes

and theatres providing screenings of live events such as sports telecasts etc. along with the

luxury of good food and the opportunity to enjoy the event with a number of other

enthusiasts, the TV can be substituted if the TV is bought only to watch certain events. Also,

IP TV and cable television plays a big substitute for DTH.

Bargaining Power of Suppliers:

PCBs (Printed Circuit Boards) & CRTs (Cathode Ray Tube) are key raw materials in the

production of CTVs. CRT accounts for 46-48 per cent of the total raw material costs of a

CTV. PCBs and housing components account for 33-39 per cent of total raw material costs.Domestic CPTs prices tend to follow Global price trends. Therefore the suppliers do not have

much of bargaining power in this regard. Cabinets are sourced from plastic manufacturers

and as these manufacturers supply to different industries, they therefore do have a bargaining

power, especially in comparison to CRT suppliers.


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Competitive rivalry within the consumer durables industry:

Degree of rivalry denotes the intensity of competition within the industry. Videocon,LG,

Samsung, Sony, Onida, are the big competitors in television industry. Although

Videocon, another major player has managed to hold its own in the midst of the

onslaught from the Korean majors, though profits have suffered.LG ELECTRONICS - LG Electronics rightly understood the consumer motivations to

create magnetic products, price them strategically, position them sharply and keep making the

magnetism more potent.

SAMSUNG In line with the Global Digital Initiative of the Parent Company, Samsung

India is seeking to acquire digital leadership in India by introducing its digital ready

televisions like the 40" LCD Projection TV, 43" Projection TV and the Plano series of Flat

Colour televisions.

ONIDA

Its popular devil ad although had engendered a strong emotional pull towards the

brand, technologically it represented no advancement. The company plugged the gap by

touting its digital technology. Like Videocon, it has also been able to hold its

market share. The world-class quality of Onida has enabled the company to make a

breakthrough on the export front.

VIDEOCON - Videocon has always been a price player and has an image of a low price

brand. This entails providing more features at a given price vis--vis competitors. It has taken

over multinational brands to cater to unserved segments, like Sansui- to flank the flagship

brand Videocon in the low to mid priced segment, essentially to fight against brands like

BPL, Philips, Onida etc.Videocon is one of the largest manufacturers of television and its

components inIndia and thus has advantages of economies of scale and low cost due to

indigenisation.

Competitive rivalry to Videocon in the mobile handsetsbusiness:

A large number of Indian companies have entered in the mobile handsets business in India

along with Videocon. These companies target the same customer segment and offer similar

services and attributes. Hence these offer intense rivalry to Videocon for its mobile handsets

business. These include Micromax, Karbonn, Beetel and Alcatel

Videocon also faces competition from existing mobile handsets manufactures who have

mobile models across the various price segments. These include Nokia, Blackberry,

Samsung, Motorola and LG.


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Competitive rivalry to Videocon in the direct to home television segment.

Videocon faces rivalry in the direct to home television segment in India from Tata Sky, Zee

DTH, Sun TV, Reliance Big TV and Airtel direct to home TV.

The Brand Transition

To improve its association with young customers, especially for its upcoming ventures like

DTH (direct-to-home) television, mobile telecommunication services and handsets, the

Videocon Group of the Dhoots has come up with a new brand identity.

Videocon Group has unveiled its new eco-friendly green brand identity, developed by

international brand consultancy Interbrands. As part of the overall re-branding exercise, the

company released a new logo and a new positioning in San Francisco last week, coupled witha new proposition 'Experience Change'.

Prior to this, the brand has banked on other propositions, such as 'Technology for health

and pleasure', 'Bring Home the Leader', 'New Improved Life'. The Indian

multinational', 'Whatever role life gives you, play it big', as well as the most

recent one, Eco Logic for sustainable life.

Eco Logic for sustainable life

The 'V' in the new Videocon logo is composed of two animated green, lava-like shapes

called Chouw and Mouw, which are 'live' characters and will be used to tell simple stories

through a series of short videos. Both have certain personality traits, based on their physical

attributes.

The present campaign that announces the change comprises five TVCs, of which one is

already on-air. Each commercial is a short story of someone in need of help. Chouw and

Mouw come to the rescue and spread happiness and joy through their charm, kindness and


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efforts.

KR Kim, vice-chairman and chief executive officer, Videocon India, says, "The rationale

behind Videocon's brand evolution comes from our constant endeavour to listen and respond

to changing market dynamics in India and overseas. Our new tag line - Experience Change -

will mark the beginning of a sea change for customers of consumer durable goods."

Kim adds, "We have initiated a new communication strategy for our consumer durables

division. Spearheading our efforts is the all-new Videocon logo, which is a reflection of our

'Experience Change' mantra. We have chosen green as the new colour as we are an

environmentally-aware company."

The amoebic presentation represents a company that can adapt to new markets, consumers

and environment. The change makes the brand come alive and look very consumer-centric,

says Harish Bijoor, chief executive officer of Harish Bijoor Consults, a business strategy

specialist consulting company. The latest makeover by the company stands out in

presentation. It makes its rivals look stodgy. They will sit up and take notice and maybe even

reinvent themselves.

The re-branding comes after a major review of the brand's advertising and media planning

and buying duties. The group had put up the account, estimated to be in the region of Rs 200

crore, for a pitch.Speaking about the two mascots, Prasoon Joshi, executive chairman,

McCann World group India, and regional creative director, McCann Asia, says, "Chouw is

the kind-hearted one and Mouw the more mischievous one. And together, they send out themessage that if you put your heart and mind together, anything can be achieved."

But why did the brand feel the need for change? Prasoon adds, "The logo needed more

energy. So, we energised it by giving it a more modern look. Green is the colour of the future.

The logo also has a liquefied, fluid-like feel to it. It gives the feeling that the company is on

the move and can take any shape and form."

To communicate the change in identity, the brand will engage in strong marketing initiatives

and promotional campaigns across all the media, including print, electronic, radio and various

BTL and on-ground activities, marketing collaterals and visual merchandising.

Recommendations:

1. Videocon can further enhance its consumer durables, home appliances and mobilehandset business by starting exclusive Videocon showrooms and stores.

2. Loyalty programs can be started by Videocon to take full advantage of its multi brandofferings.


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3. Exchange programs can be implemented where the customer can return anytelevision, washing machine, mobile handsets in exchange for newer versions.

4. There is huge scope for aggressively promoting lower end products across segmentsin tier 2-3 cities and rural markets.

5. The mobile handset business has number of new entrants targeting the same segment.Consolidation can be achieved in this segment by acquiring the smaller Indian mobilehandset makers.

Outlook and Scope

On paper, the future of VIL seems extremely bright; as the company has a number of projects

lined up, and is diversifying into other areas, beyond its core business. The

telecommunications and mobile services projects are the big hope for VIL, with the firm

stating its plans to invest Rs.14000 crore for the next three years, for this segment alone.

While the firm has already started rendering GSM services in the state of Tamil Nadu it has

also made an ambitious bid for a 3G spectrum license. Late last year, the

company added to its impressive list of foreign initiatives by buying a stake worth $72

million in Finnish manufacturer Elcoteq. Elcoteq designs and manufactures set-top-boxes,

mobile phones and flat panel televisions for leading international electronic companies such

as Nokia, Sony Ericsson and Philips. The company is very optimistic about its unique DTH

product, where a DTH satellite receiver is built into its 19 inch and 32 inch LCD TVs. The

company is also onthe verge of setting up a Rs.8000 crore LCD manufacturingcapacity in

Navi Mumbai with the aid of the government.With VIL contributing Rs.6000 crore and the

governmentcontributing Rs.2000 crore, the unit will have a manufacturingcapacity of 20

crore units.The company possesses strong expertise in the other areas ofconsumer electronics

and will be hoping to capitalize on therapidly growing air-conditioning market (growth rate

of19%). The company has leveraged its rather strong R&D tocome up with impressive

technology in the consumerelectronics segment. The introduction of Star rated productsin

consumer electronics and home appliances has led to thebenefit of saving approximately 15%

of power consumption,resulting into effective utilization of power resources in thenation.TheVideocon group is also in talks with the management ofthe Kings XI Punjab to buy a stake in

the cricket team. Thecompany is said to have offered Rs.920-Rs.1035 crore for a23% stake in

the team. If the deal goes through, it will providethe Videocon Group with a majority stake

and mark its entryinto the sports business.

Marketing TermPaper SectionB Group8

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