Fortune Institute of International Business

Contents

S.NO. TITLE PAGE NO.

1 Acknowledgement i

2 Executive Summary ii-iii

3 Objective and Scope 1

5 Sample and Data Collection method 2

6 Secondary Data Review 3-14

7 About Samsung Electronics 15-18

8 Business Plans 19-20

9 Communication Strategies of brands 21-24

10 Results of the Survey

Dealers’ Survey Results 25-31

Consumers’ Survey Results 32-40

11 SWOT Analysis 41

12 Conclusions 42-43

13 Recommendations 44

14 Limitations 45

15 References 46-47

16 Annexure A A1 – A2

17 Annexure B B 1- B3

Acknowledgement

I would like to thank Mr. Chandrasekher Saha, Brand Partner, Leo Burnett for his kind

attention and assistance in successful completion of this project. It indeed has been a very

enriching and learning experience for me. He has been like a mentor as well as an

instructor to me to lead me through various problems and dilemmas that I faced while

working on the project.

I am also grateful to Mrs. Jayshree M. Sundar, Executive Director, Leo Burnett, for

giving me this opportunity to gain experience in her company. My biggest gratefulness

holds for Fortune Institute of International Business, the institute which emblazoned me

with learnings that I could apply in the professional world. My special thanks to Mrs.

Freda Swaminathan, who has been an inspiring educator and helped me to comprehend

my interest and potential.

Swati Grover

Executive Summary

The consumer durables segment can 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 (A/Cs), microwave ovens, vacuum

cleaners and dishwashers. The consumer durables industry in its formative years saw a lot

of Indian brands dominating the market scenario. But over the years, multinational

players have made significant inroads into the market.

This industry typically behaves like a fashion industry. The consumer taste changes

rapidly. He/She wants newer models with the latest features. The competition is on

features differentiation, time to market, price, and promotion, basically on every front.

The dealer-push and brand pull, both play a very crucial role.

Indian consumer durables industry is worth Rs 20,000-crore as of December 2005. There

was a positive growth trend in consumer durable segments – white goods and consumer

electronics during April-March 2004-05 and sustained growth is expected during 2005-06

because of emerging opportunities and strong fundamentals of the economy. FICCI

survey reflects the changing dynamics of consumer behaviour i.e. luxury goods are now

being perceived as necessities with higher disposable incomes being spent on lifestyle

products. There is a discernible shift in the consumers’ preference in favour of higher-

end, technologically superior branded products, the demand being spurred by increasing

consumer awareness and preference for new models. This shift is also explained by the

growing trend of products being manufactured in the organized sector of the economy

and the narrowing down of the price differential between branded and non-branded

goods.

The sectors which have recorded excellent growth rates of more than 20 per cent in terms

of quantity produced in April-March 2004-05 over the corresponding previous period are

Air Conditioners (25 %), Split Air Conditioners (42.6 %), Microwave Woven (27.3 %),

DVDS (25 %), CD/MP3 (20 %) and Colour Picture Tube (23 %). The sectors which have

recorded high growth rates between 10 and 20 per cent are Colour Television (12%),

Window Air Conditioners (18.8 %), Washing Machines (18.1 %) and Frost Free

Refrigerators (13.8%).

Consumer durables sales displayed sluggish trends since January ’06, with primary sales

(manufacturer to dealer) hitting new lows. However, secondary sales (dealer to

consumer) have picked up marginally, with dealers stepping up discounts and

promotional offers to clear up existing inventory levels. Leading consumer durables

players and experts predict a 10-12 per cent growth for the sector in 2006. Growth

expected is 10 per cent for colour TVs, over 20 per cent for both air conditioners and

microwave ovens, 3-5 per cent for refrigerators and 8-10 per cent for washing machines.

Samsung Electronics is a global leader in semiconductors, telecommunications, digital

media and digital convergence technologies. Employing approx. 113,000 people in over

90 offices in 48 countries. Samsung India Electronics Private Limited (SIEL) is the

Indian subsidiary of the US $55.2 billion Samsung Electronics Corporation (SEC)

headquartered in Seoul, Korea. It is the hub of Samsung’s South West Asia Regional

Operations, and looks after its business in Nepal, Bangladesh, Maldives & Bhutan

besides India. SIEL commenced operations in India in December, 1995. Samsung

Product Portfolio in India includes Mobile Phones, TV, Video & Audio systems, Home

Appliances and Information Technology Products.

The results of the research reveal Samsung is a strong player but only in some of its

product categories. Samsung enjoys strong position in TV and Audio System Categories

but needs to reposition itself for Washing Machine and Refrigerator market. Nokia is a

strong player in the cellular market. Although Samsung stands at the second position but

there is a huge gap between it and the market leader, Nokia. LG is its major competitor in

the white goods market.

Consumers regard customer service and product features as two of the most important

criteria used by them to judge a company’s products. Consumers perceive Nokia to be the

best company in terms of theses two parameters. The TOM (Top Of the Mind) position is

enjoyed by Nokia in mobile phones, Sony in TVs, audio systems and digital cameras,

Voltas in ACs, Godrej in refrigerators, Whirlpool in Washing machines, LG in

Microwave ovens and computer parts. Nokia is the only company being recalled by

100% consumers.

Objective:

To study the Indian Consumer Durables industry with focus on Samsung

Scope: This study enlightens the perceptions of consumers about Samsung. The complete

consumer durables industry analysis leads to complete knowledge about the economics of

the industry. Also as this project contains comparison of Samsung’s business plans,

communication strategy, product offerings, brand image etc. with its major competitors,

it helps one to evaluate the position of Samsung as a consumer durable brand. The

results of the survey facilitate in understanding the perceptions of the sellers and buyers

about the brands in each product category and enable to do the SWOT analysis for

Samsung.

Sample:

A survey was done in multi-branded and company exclusive consumer durable

showrooms in major markets of Delhi. The sample consisted of 75 dealers and 100

consumers of consumer durables. People of different demographics and psychographics

were considered. The sample for consumers was chosen at random. Out of the 75 dealers,

60 were owners of multi-branded outlets and 15 were dealers of company exclusive

showrooms. Dealers were categorized according to the size of their business units and the

markets they cater to. Places covered are:

North Delhi – Kamla Nagar, Kingsway Camp, Model Town, Pitam Pura West Delhi – Janak Puri, Tilak Nagar, Jail Road, Rajouri Garden East Delhi – Laxmi Nagar South Delhi – Green Park, Lajpat Nagar, Yusuf Sarai, Sarojini Nagar NCR – Gurgaon, Ghaziabad

Data Collection Method:

The choice of a data collection method is the most appropriate part for reaching the target

audience and the type of information collected. Information for the research was

collected through two different sources – Field research and Secondary data review.

I. Field Research : Two different questionnaires were prepared in order to cater to

the requirements of the buyers and the sellers (Refer to Annexure B). Data from the

dealers was extracted in disguise by visiting them as a prospective buyer. The guidelines

of the dealers’ survey were taken care of while dealing with salespersons at each outlet.

Questionnaire for consumers was of 2 pages which probed into all issues like brand recall

in each product category, ranking important parameters based on which they judge a

brand, rating of brands on each parameter, store & brand selection criteria, promotional

activities undertaken by brands, effect of advertisements etc. They were interviewed to

get an insight about their hidden perceptions. It was a chronometric survey where time

taken by them to recollect brand names under each product category was noted down.

II. Secondary Data Review

Industry trends in India were of necessity in order to draw up the accurate conclusions.

Various websites like agencyfaqs.com, exchange4media.com etc. were visited to collect

information about consumer durables market in India. Newspapers like Economic Times,

Times of India, Hindustan Times etc. were read regularly to catch hold of latest articles.

Secondary Data Review

Consumer Durables:

The consumer durables segment can 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 (A/Cs), microwave ovens, vacuum

cleaners and dishwashers.

Consumer Durables Industry - Introduction:

Over the years, demand for consumer durables has increased in India with rising income

levels, double-income families, changing lifestyles, availability of credit, increasing

consumer awareness and introduction of new models. Products like air conditioners are

no longer perceived as luxury products. The consumer durables industry in its formative

years saw a lot of Indian brands dominating the market scenario. But over the years,

multinational players have made significant inroads into the market. Korean brands like

LG and Samsung have been very successful, while Japanese brands have taken a back

seat from their success. This industry typically behaves like a fashion industry. The

consumer taste changes rapidly. He/She wants newer models with the latest features. The

competition is on features differentiation, time to market, price, and promotion, basically

on every front. The dealer-push and brand pull, both play a very crucial role.

Most of the segments in this sector are characterized by intense competition, emergence

of new companies (especially MNCs), introduction of state-of-the-art models, price

discounts and exchange schemes. MNCs continue to dominate the Indian consumer

durable segment, which is apparent from the fact that these companies command more

than 65% market share in the colour television (CTV) segment. MNCs hold an edge in

terms of superior technology combined with a steady flow of capital, while domestic

companies compete on the basis of their well-acknowledged brands, an extensive

distribution network and an insight in local market conditions. The key growth drivers for

the consumer electronics industry are the weather, events (only for CTVs), the festival

season and to some extent, the marriage season. Another critical factor that influences

demand is the government spending on infrastructure, especially the rural electrification

programme.

The market for both CTVs and refrigerators is shifting to the semi-urban/rural areas, as

the penetration in the urban areas for these products is quite high. The only segment

where the figures have remained somewhat static is the washing machines segment. The

segment is suffering primarily because of poor infrastructure, that is, the unavailability of

regular water and power supply in the country. While CTVs and refrigerators have been

around for many years, washing machines, microwave ovens, air conditioners and

vacuum cleaners are beginning to make their presence felt in Indian households.

Retailing, manufacturing and the supply chain that link them together have changed

profoundly over the last few years. New sales channels, particularly web-based e tailing,

and the continuing drive for globalization, have placed more pressure on the whole

consumer goods industry. Today’s consumer is more confidently deciding when, where

and how to shop, and at what price. As a consequence there has been a continuing drive

to re-engineer consumer goods supply chains, investment that has affected strategies,

structures, operations, and systems throughout retailing, distribution and manufacturing,

with the aim of bringing about major efficiencies. Organized retailing in India can be

seamlessly and profitably synergized with the consumer durables sector.

The consumer durable market in India has seen a proliferation of brands and product

categories in recent years. All the major international brands from Japan, Korea, US,

Europe and China have launched in India with varying degrees of success. Most brands

are still trying to build a pan-India dealer network. The task is complex, as the market

forces vary with every region. One of the largest barriers to entry for any brand in India is

the distribution network. Working on 95 per cent individual led stores, cost of servicing

the network is huge for any brand. The consumer for durable products in India is aware

of the cost-benefit, or value for money aspect. Their concept of value incorporates socio-

cultural benefits in addition to product utility. For example, many households may have

two television sets, but both the sets may not be top-of-the-line. Thus, while there may be

demand for an additional TV set in many households, it must not be mistaken as demand

for the higher priced TV models. The prime consumer market in India, therefore, is not a

market for absolute premium products, but for something between the ‘high end popular

brands’ to the ‘premium brands’.

The combination of brand and product proliferation has put shelf space at a premium. A

large retailer can leverage on this strength to ensure that he/she gets additional margins

from the manufacturers. This means that for the average retailer the business has become

complex, as s/he has to continuously deal with an ever-increasing number of brands.

Since this industry is technology-led, there is always scope for product differentiation and

for providing that extra brand value or technological edge to the customer. With the

advent of newer technologies coming up in every segment, the shelf life of products has

gone down drastically.

In the low-price segment, brand strengths are less relevant as compared to mid priced

segment. Thus, brands like Aiwa, Akai, Sansui, Crown, etc. continue to make money. If

demand grows in the semi-urban and rural areas, the Indian companies can consolidate

their positions. Though companies like BPL, Videocon, and Mirc show lower sales, they

maintain decent operating margins. The manner, in which the Korean MNCs have

established themselves in a very short time, is a clear indication that they are here to stay.

Players like Sony and Philips are long term players while the financial performances of

Sharp and Panasonic have been gradually improving. Thomson is doing well in the

South. Also currently, 60% of the domestic demand, is met by local manufacturing and

the rest through imports.

Indian Consumer Durables Industry

It is worth Rs 20,000-crore as of December 2005 (Source: Business Standard, January

2006). It has been divided into following two major categories with some listed players:

Consumer electronics:

TVs – Sony, LG, Samsung, Philips, Onida, Videocon, BPL

VCD players – Sony, LG, Samsung, Philips

Audio systems – Sony, Panasonic, Philips, Samsung, LG

Consumer appliances (white goods):

Refrigerators - LG, Samsung, Whirlpool, Godrej

Washing machines - LG, Samsung, Whirlpool, Onida, IFB

Air conditioners - LG, Samsung, Whirlpool, Electrolux, Voltas,

Hitachi, Bluestar

Microwave ovens – LG, Samsung, National, Kenstar, IFB

Results of Survey done by indiainfoline.com

CTV Brands

Most of the dealers allocate best display positions to Samsung and LG products. Among

the most selling brands, LG leads the rally with Samsung tugging along in the second

place. The third in race is Onida with Sony and BPL following behind. Despite the

growing sales of LG and Samsung, BPL has a huge lead over them. BPL enjoys a market

share of 20.3% as compared to 8% and 6% market share of LG and Samsung

respectively. However, the long-term prospects would be disheartening if BPL fails to

plan its strategies effectively vis-à-vis the strong competition. The same could be the fate

of Videocon, which has failed heavily in the area of After Sales Services.

Source: Indiainfoline.com

Chart 1: The most selling CTV Brand in 2005

Demand Analysis by CTV Size: In India, the eastern part contributes nearly 15% of the

total demand. Rest is equally distributed amongst north, south and west. Demand for a

14-inch or a 21-inch television may vary region-wise. The 14" and the 21" CTV segment

continue to dominate over the 20", 25" and the 29" segments. They are found in the

homes of all income segments and jointly form around 55% of the CTV market. Among

the 20", 25" and the 29" category, the demand for 20" has been continuously declining

and that of 25" and 29" is steadily growing. In the replacement market, consumers are

slowly substituting their 21" TV with the 29" TV set.

A Shift from Normal to Flat screens: Shift in the preference for a normal screen to a flat

screen TV has been gradually increasing. Over the recent past, several dealers have been

receiving consumer complaints for the 25" CTV series. The fault lies in the performance

of the picture tubes and is not specific to any single brand of television. Dealers also

mentioned that they are now advising their customers to purchase either a 21" or a 29"

CTV. The future of CTV industry will be in convergence. Onida came with web

televisions but was not successful because it couldn't support Java. The other reason was

that the price point was not right. Technology at the right price point is essential for

success in the market. In the long run there will be brand equalization in a mature market.

Still, differentiation will exist depending on convenience, special technology or other

features.

Refrigerator Brands

The direct cool segment makes the most of the refrigerator market. However, market is

witnessing a change in the consumer preferences towards frost-free refrigerators. In the

years to come, the gap between the shares of direct cool v/s frost-free refrigerators will

diminish. Whirlpool has been a winner in 2005 as the highest selling brand with about

36% of the respondents supporting it. It has taken a clear lead over others by

concentrating on aggressive marketing, promotional activities and improved brand image.

Source: Indiainfoline.com

Chart 2: The most selling Refrigerator Brand in 2005

LG and Samsung are fast gaining popularity as they together account for 40% of the

response. These two Korean MNCs are concentrating on the >300ltrs Frost-Free segment.

They have almost swept the entire market in this segment. The refrigerator market in

India has been dominated by the 165ltrs capacity. However, in the last 2-3 years there has

been increasing demand for ‘200ltrs & above’ capacity. Presently, about 60% of the

capacity is in the 165ltrs segment. The new capacities being installed (especially by the

MNC’s) are in the ‘220ltrs & above’ segment. The increasing competition in all segments

of the refrigerator market has resulted in lower margins for both the manufacturers and

the dealers.

Washing Machine Brands

Washing machines in India are divided into two broad segments – semi-automatic and

fully automatic. The semi-automatic machines form around 65-70% of the total washing

machines market in 2005. There are two models of washing machines – front loading and

top loading. Top loading is preferred by most due to the reasons of convenience and

safety. Front loading model has not picked up at all in India. The market for washing

machines in India has been growing at a significantly slow rate. Until 1998 Videocon was

the market leader with about 50% of the total market share. However, with the entry of

Whirlpool, LG & Samsung the competition scenario has changed. In the year 2005,

Whirlpool is preferred by 34% of the dealers as the most selling brand. Domestic

companies like Videocon, BPL and Godrej are steadily losing popularity.

Source: Indiainfoline.com

Chart 3: The most selling Washing Machine Brand in 2005

FICCI survey results

The Survey highlights the positive growth trends in consumer durable segments – white

goods and consumer electronics during April-March 2004-05 and points to sustained

growth during 2005-06 because of emerging opportunities and strong fundamentals of the

economy. It reflects the changing dynamics of consumer behaviour i.e. luxury goods are

now being perceived as necessities with higher disposable incomes being spent on

lifestyle products. There is a discernible shift in the consumers’ preference in favour of

higher-end, technologically superior branded products, the demand being spurred by

increasing consumer awareness and preference for new models. This shift is also

explained by the growing trend of products being manufactured in the organized sector of

the economy and the narrowing down of the price differential between branded and non-

branded goods. Competition has forced companies to offer efficient after sales service

and support and this, in turn, has swayed customer preference for branded products. The

FICCI Survey offers insights into the dynamics of growth in a competitive market

environment. The Survey has identified some of the salient features of developments as

follows:

Quality products with superior technology and technology up gradation have helped the

industry to achieve higher growth in terms of volume and also in higher realization in

value terms. Though CTV segment faced a de-growth in April- June 2005 sales of CTVs

declining by 5.3 per cent and in value terms by 14.1 per cent due to the Value Added Tax

(VAT) regime introduced in April 2005, the flat CTV category achieved a volume growth

of 36.2 per cent and value growth of 25.8 per cent in the first quarter of 2005-06. The

refrigerator segment also has shown a similar trend with frost-free segment having about

54 per cent growth with about 15 per cent de-growth indirect cool refrigerators.

Rate of growth in production has been more in terms of quantity or in volume growth

rather than the growth in value terms for a number of products. This has happened

because of constantly falling prices over the years due to competition among the major

players, aggressive marketing strategies, declining import tariffs. Because of growth in

production in the organized segment and domestic availability of branded products due to

lowering of import duties and other liberal measures, the share of unorganized segment

has come down sharply to only 8 to 10 per cent from 40 to 50 percent.

The price difference between branded and unbranded goods has narrowed down and with

branded players providing good after sales services and support, consumers prefer to buy

branded products. The consumer durables industry appears to have these two clearly

differentiated segments. Competitive strategies revolve around strong brand

differentiation and prices. Bargaining power of customers is high due to availability of

many brands. Demand is Cyclical and seasonal. Demand is high during festive season

and is generally dependent on good monsoons. Purchase necessarily is done only during

the festive and wedding seasons i.e. April to June and October to November in North

India and October to February in the South. Increasing consumer awareness and

preference for new models have added to the demand. Attractive consumer loan schemes

with reduced interest rates over the years by the financial institutions and commercial

banks and the hire-purchase schemes have added to the surge in demand.

Besides, the consumer goods companies are themselves coming out with attractive

financing schemes to consumers through their extensive dealer network. The

phenomenal growth of media in India and the flurry of television channels and the rising

penetration of cinemas have spread awareness of products in the remote markets. Rural

India, which accounts for nearly 70% of the total number of households, offers plenty of

scope and opportunities for the white goods industry. The urban consumer durable

market for products including TV is growing annually by 7 to 10 % whereas the rural

market is zooming ahead at around 25 % annually.

Growth Highlights in Fiscal year 2005

The sectors which have recorded excellent growth rates of more than 20 per cent in terms

of quantity produced in April-March 2004-05 over the corresponding previous period are

Air Conditioners (25 %), Split Air Conditioners (42.6 %), Microwave Woven (27.3 %),

DVDS (25 %), CD/MP3 (20 %) and Colour Picture Tube (23 %). The sectors which have

recorded high growth rates between 10 and 20 per cent are Colour Television (12%),

Window Air Conditioners (18.8 %), Washing Machines (18.1 %) and Frost Free

Refrigerators (13.8%). Some sectors which have recorded moderate growth of 0 to 10 per

cent are refrigerators (5 %) and Direct Cool Refrigerator (2.8 %). The sector recording

negative growth is B&W TV (- 16.7%).

The Refrigeration Industry has reached 3.9 million units in 2004-05 from 3.7 million

units in the last year with a growth of 5 %. The Air-Conditioners Industry has reached at

1.2 million units during 2004-05 with a growth of 25 % from 9.8 lakh units in 2003-04.

Washing Machines is estimated to have grown by 18.1 per cent from 1.35 million units in

2003-04 to 1.6 million units in 2004-05. Microwave ovens have grown by 27.3 per cent

growth with 3.5 lakh units compared to 2.75 lakh units in 2003-04.

The Indian Colour Television industry has grown by 12.1 per cent in 2004-05 by

reaching 9.25 million units in 2004-05 from 8.25 million units in 2003-04. The B&W TV

has recorded a negative growth of 16.7 per cent from 3 million units in 2003-04 to 2.5

million units in 2004-05. The VCD/MP3 industry has registered 20% growth and has

achieved production of 8.4 million units. The unorganized sector has occupied a major

share in manufacturing and supplying VCD/MP3.

DVD Players are estimated to have grown by 25 per cent in 2004-05 with the volume

estimated to be 625000 units. The first half of the year and the first quarter of the

financial year 2005 have seen a little setback for the domestic consumer electronics and

durables industry with the two largest segments of the industry - colour televisions (CTV)

and refrigerators facing decline in production and sales during the period. But the Air

conditioners and washing machines market have grown at the rate of 20%.

Consumer Durables Industry in 2006

Consumer durables sales displayed sluggish trends since January ’06, with primary sales

(manufacturer to dealer) hitting new lows. Even the cricket-fever in January ’06 failed to

weave any excitement among consumers. However, secondary sales (dealer to consumer)

have picked up marginally, with dealers stepping up discounts and promotional offers to

clear up existing inventory levels. Dealers are sitting on high inventories after Diwali

sales failed to live up to expectations in 2005. Leading durables manufacturers are unable

to put a finger on the real reason for the downtrend, except that consumers are possibly

expecting prices to go down further post-budget.

Leading consumer durables players and experts predict a 10-12 per cent growth for the

sector in 2006. Growth expected is 15-20 per cent for colour TVs, over 20-25 per cent for

both air conditioners and microwave ovens, 5-10 per cent for refrigerators and 5-10 per

cent for washing machines. Refer to table 2 (Annexure A).

This will also be the year Indian consumer durable majors Videocon and Onida will

compete better against the South Korean “chaebols”, having enhanced their product range

in both consumer electronics and home appliances. The plasma display panel (PDP) and

LCD TV categories would see at least 10 per cent price erosion. PDP prices are expected

to come closer to Rs 1 lakh from the current Rs 1.5 lakh. New product launches are being

lined up, especially in the flat TV, LCD TV and plasma display categories. Driven by a

young population with access to disposable incomes and easy finance options, the

consumer market has been throwing up mind-boggling figures.

The year 2006 promises a price revolution in the Indian consumer durables market with

the entry of modern retail formats and their private labels. Reliance, Big Bazaar, Hyper

City (from Shopper’s Stop) and E-Mart are planning to launch private labels (in-house

brands which could be 20-25% cheaper) by importing consumer durables such as

televisions, DVDs, refrigerators, video cameras, washing machines in massive numbers

from China and Thailand to be sold in the new formats. In addition, they have begun talks

with leading manufacturers such as LG, Samsung, Philips and Videocon to offer a line of

specialized price-competitive models for the modern formats. Global durable retail chains

like Best Buy, Circuit City and Radio Shack are also eyeing a slice of the Indian market.

Taking note of a more competitive business landscape, high-cost, city-specific retail

chains like Vijay Sales, Vivek’s and Vasanth’s are also gearing to tie up with strategic

business partners including global durable retails chains to be in business. Indians are far

more brand-conscious than their global counterparts.

The consumer determines the value at the end of the day and may move on from picking

up a branded product to a private label if it offers similar price and quality values. While

the Big Bazaars will offer price-competitive models, both in-house and branded, they are

also setting up massive, 15,000-30,000 sq ft specialized lifestyle and indulgence stores

which will house a range of high-end durable models which will be also be very price-

competitive. Under pressure from modern formats, traditional retail chains like Vijay

Sales and Sony Mony in Mumbai, Vivek’s in Chennai have pressed the panic button to

offer more discounts to consumers.

Durable majors, LG, Samsung, Onida, Videocon, Philips and others are considering the

new formats seriously to get more shelf space on a national scale and shore up business

volumes, once FDI in retail gets the green signal. The new crop of retail chains are

expected to not only offer multi-branding formats but also larger shelf-space for

individual brands with better MRPs to consumers, information kiosks and area-specific

models.

Opportunities for Future Growth

The rising rate of growth of GDP, rising purchasing power of people with higher

propensity to consume with preference for sophisticated brands would provide constant

impetus to growth of white goods industry segment. Penetration of consumer durables

would be deeper in rural India if banks and financial institutions come out with liberal

incentive schemes for the white goods industry segment, growth in disposable income,

improving lifestyles, power availability, low running cost, and rise in temperatures.

While the consumer durables market is facing a slowdown due to saturation in the urban

market, rural consumers should be provided with easily payable consumer finance

schemes and basic services, after sales services to suit the infrastructure and the existing

amenities like electricity, voltage etc.

Rural India that accounts for nearly 70% of the total number of households, has a 2%

penetration in case of refrigerators and 0.5% for washing machines, offers plenty of

scope and opportunities for the white goods industry. The urban market is a replacement

and up gradation market now. The increasing popularity of easily available consumer

loans and the expansion of hire purchase schemes will give a moral boost to the price-

sensitive consumers. The attractive schemes of financial institutions and commercial

banks are increasingly becoming suitable for the consumer. Consumer goods companies

are themselves coming out with attractive financing schemes to consumers through their

extensive dealer network. This has a direct bearing on future demand. The other factor for

surging demand for consumer goods is the phenomenal growth of media in India. The

flurry of television channels and the rising penetration of cinemas will continue to spread

awareness of products in the remotest of markets.

The vigorous marketing efforts being made by the domestic majors will help the industry.

The ability of imports to compete is set to rise. However, the effective duty protection is

still quite high at about 35-40 per cent. So, a flood of imports is unlikely and would be

rather need based. Reduction in import duties may significantly lower prices of products

such as microwave ovens, whose market size is quite small in India. Otherwise, local

manufacturing will continue to stay competitive. At the same time, there will be some

positive benefits in the form of reduction in input costs. Washing machines and

refrigerators will also benefit from lower input costs.

About Samsung Electronics

Introduction

Samsung Electronics is a global leader in semiconductors, telecommunications, digital

media and digital convergence technologies. Employing approx. 113,000 people in over

90 offices in 48 countries, the company has of 5 main business units: Digital Appliance

Business, Digital Media Business, LCD Business, Semiconductor Business and

Telecommunication Network Business. Recognized as one of the fastest growing global

brands, Samsung Electronics Corporation is the world’s largest producer of Colour

Monitors, Colour TVs, Memory Chips and TFT LCD’s. Samsung Electronics creates

digital solutions for homes, mobile users and offices that enable seamless

communications facilitate business transactions, access to the internet and offer digital

entertainment. Samsung Electronics’ strong performance both in terms of financial

results and product design has been recognized by various industry awards and rankings.

It has been recognized as ‘The Fastest Growing Global’ brand, by Business

Week/Interbrand and is ranked amongst the top technology leaders in the world.

Samsung enjoys a brand equity of US$12.5Bn and is ranked 21st is the list of top 100

global brands.

Samsung Electronics – Vision

Recognizing that the ‘digital revolution’ is entering a new phase, Samsung Electronics

has transformed its operations by putting digital technology at the core. The company is

committed to being a market-driven solutions provider and leader in digital convergence.

With core competencies in semiconductors and CDMA technologies, Samsung

Electronics creates digital solutions for homes, mobile users and offices that enable

seamless communications, facilitate business transactions, access to the internet and offer

digital entertainment.

Samsung Electronics Businesses

From memory chips to digital TV’s, Display Monitors to Mobile Phones, Samsung

Electronics has channelised it’s core competencies in the field of semiconductors and

backed it with it’s R&D capabilities and manufacturing scale to emerge as one of the

most unique brands creating innovative and superior digital products. Some of the

products manufactured by its key business areas include:

Digital Media Network – Leading developer and manufacturer of Digital TV’s,

Colour Monitors, DVD Players, Notebook PC’s, Printers and all-in-one wireless

devices such as NEXiO handheld PC.

Device Solution Network Business – The worlds’s largest producer of DRAMs,

SRAMs and TFT-LCDs.

Telecommunication Network Business – A leading producer of CDMA handsets

and among the top 3 GSM handset providers in the world.

Digital Appliance Network Business – A major presence in the home appliance

market with a significant share of the global microwave, internet refrigerators,

airconditioners and other household product categories.

About Samsung India

Samsung India Electronics Private Limited (SIEL) is the Indian subsidiary of the US

$55.2 billion Samsung Electronics Corporation (SEC) headquartered in Seoul, Korea.

Samsung India is the Regional Headquarters for Samsung's operations in South West

Asia, and is a leading provider of high tech information technology, telecom, consumer

electronics and home appliances products in the country. It is the hub of Samsung’s

South West Asia Regional Operations, and looks after its business in Nepal, Bangladesh,

Maldives & Bhutan besides India. SIEL commenced operations in India in December,

1995. Initially, a player only in the Colour Televisions segment, it later diversified into

colour monitors (1999) and refrigerators (2003). Today, it is recognized as one of the

fastest growing brands in the sphere of digital technology, and enjoys a sales turnover of

over $ US 1 billion in a just a decade of operations in India.

Samsung India has a product portfolio comprising of Consumer Electronics, Home

Appliances, Information Technology and Telecommunication products in the country.

The Samsung Consumer Electronics and Home Appliance Product Portfolio in India

comprises of colour televisions in the range 14" conventional ~ 63" Plasma TVs, ´Bio-

Fresh´ Refrigerators in the capacity 230 litres~640 litres, ´Bio Cool´ Conventional

Refrigerators in the 170 litres~195 litres capacity, Air-conditioners including both

Window and Split type, semi-automatic and fully automatic washing machines, including

Front loading type, Microwave Ovens (20 litres~32 litres), CD based audio systems and

Camcorders including MiniDVs.

Samsung Operations

Its operations are broadly divided into the following key sub-functions:

Sales & Marketing

Manufacturing

Software Centre Operations

The Sales & Marketing Function

Headquartered in New Delhi, Samsung India has a network of 19 branches and 16 Area

Sales Offices (ASOs) located all over the country. It is divided into two categories:

• Sales & Marketing (IT)

• Sales & Marketing (AV/HA)

Apart from sales to households through its robust distribution channel, SIEL also has a

huge clientele in the Institutional Sales space. Therefore, there is a separate department

devoted completely to this function. It is the VMB (Vertical Market Business)

department that is responsible for making sales to institutions such as airports, hotels,

banks, movie theatres, etc.

Corporate Marketing is aimed at strengthening Samsung as a brand among the dealers,

distributors, and end customers. Hence, the activities covered under this function include

formulating and announcing promotional schemes for both the trade partners as well as

the end customers. Moreover, it also plays an instrumental role in ensuring brand

visibility through corporate sponsorships, and planning, managing and organizing various

events and product launches. Another function of the sales & marketing function at SIEL

is public relations, also known as corporate communications. Here, the scope of activities

includes maintaining liaison with the media, organizing corporate social responsibility

initiatives, website management, corporate literature, etc.

The Manufacturing Function

SIEL has its manufacturing facility at Noida, U.P. This is the state-of-the-art, high-tech

facility for manufacturing Color Televisions, Color Monitors, and Washing Machines &

Refrigerators. This manufacturing unit consists of sophisticated facilities with latest Auto

Insertion Machines, Auto PCB Tester, High Efficiency Module Conveyor, and all

modern machines geared up for High Speed, High Volume & Very High Quality

Production.

It firmly believes that continuous innovation is the key to making path-breaking

improvements in its products & processes and achieves productivity goals beyond

imagination. Samsung uses many tools for innovation such as “Reduced 7 Type of

Wastage & SixSigma”. Its commitment to grow through continuous innovation has

helped it improve their productivity by 200% in the last 5 years.

Samsung India is also instrumental in carrying out Hardware Research & Development at

its Noida R&D Centre. The focus of the R&D Centre is to customize both Consumer

Electronics and Home Appliances’ products to better meet the needs of the Indian

customer. From color televisions designed for higher sound output, to washing machines

with special “Sari Wash Course”, DNIe vision series of Flat CTVs especially designed

for the Indian market to Samsung mobiles with regional languages menus, the Samsung

R&D Centre in India is helping the company to continuously innovate and introduce

products customized for the Indian market.

The Software R&D Centre Operations

SIEL Software R&D Center was set up in September 2002 as a Software R & D Center

in Noida, U.P. SIEL Software Center is involved in the business of developing embedded

and desktop software for Samsung Electronics Corporation in a variety of areas related to

Analog and Digital TV, Monitors and other Multimedia technologies.

SIEL Software Center has successfully completed more than two hundred projects in

collaboration with Samsung Headquarters Visual Display and Digital Media divisions

(Korea). SIEL Software Center engineers continuously strive to improve the performance

and introduce innovative features to make the end products more efficient and user

friendly. It designs and implements some of the critical components for products such as

next generation CRT and Projection TVs, Plasma and LCD TVs, DLP TVs, Digital TV

Set Top Boxes, DVD Players, MP3/Video players, PDAs, 2D/3D Graphics Engines,

Camcorders, Multimedia applications etc., and believes in following optimized and

stringent quality processes to build these world leading products. For SIEL Software

Center to continue to remain a strategic and key R&D Center of Samsung Electronics, it

is important that every employee of SIEL Software Center contributes his/her fullest

potential and capabilities. SIEL Software Center is always looking for dynamic

individuals who are driven by ambition, youth, vibrancy and challenge.