Videocon Industries

GOA INSTITUTE OF MANAGEMENT| Videocon Industries Limited| Marketing Term Paper| | | | Section B Group 8 Roshan Roy 2010103 Samved Banhatti 2010104 Ankur Raj 2010105 Sarat Gopinath 2010106 Sarika Sinha 2010107 Saurabh Prabhudesai 2010108 | Contents Company Profile2 Business2 Segment3 SWOT Analysis of Videocon4 Strengths4 Weaknesses5 Opportunities5 Threats5 Value Chain of Videocon6 Porters Five Forces6 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 Transition9 Recommendations:10 Outlook and Scope11 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 company’s size in the Indian consumer electronics terrain, that it accounts for over 90% of the CMIE (Centre for Monitoring 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. Venugopal Dhoot, 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% of VIL’s 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, air conditioners, DVD (Digital Video Disc) players, home UPS, batteries and audio systems.

It also manufacturers glass shells, electronic tuners and fly back 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 exceedingly well, 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 to compete with the like of Bharti and Idea for the 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 India’s consumer electronics segment is currently valued at $23. 3 billion and that is expected to rise to $41. 4 billion by 2014, growing at a CAGR of 15. 5%. While Videocon is considered to be the most prominent Indian based consumer Electronics Company, it faces stiff competition from a host of multinational companies.

The washing machine segment grew at a CAGR of 11% and is further expected to grow at a rate of 12-15% over the next three years, while the air conditioning market grew at a impressive rate of 19%. A boom in real estate and infrastructure industry, coupled with a change in perception of accepting air conditioners as utility products rather than luxury items will spur growth in this segment. The refrigerator market on the other hand grew at a modest rate of 10% and is expected to grow at the same pace.

There is paradigm shift in the preference of frost free refrigerators from direct cool refrigerators and companies that specialize in the former category can expect do better than the others. The Indian micro wave segment however remained stagnant and is not perceived to be a high growth segment. Televisions continue to be the mainstay of the consumer electronics division, particularly with LCD televisions catching on, big time. VIL’s share in the LCD TV segment stands at around 12-18% and the company is looking to increase its market share by the end of the financial year.

Nonetheless the future of the consumer electronics segment lies in the rural markets as the urban market will soon turn into a replacement and an up-gradation market. The oil and gas industry contributes approximately 15% to India’s GDP. India’s energy deficit is mounting where the demand 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 million subscribers, up by 76. 6% from a year ago. The telecommunications segment is witnessing some positive activity with the commissioning of 3G licenses just around the corner.

Sales and profits for most telecommunication firms have 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 at 612. 2million, up by 42. 5% from a year ago. The government is planning to increase 2G spectrum usage charges by 2% and this will put further pressure on the operating margins of telecom companies. SWOT Analysis of Videocon Strengths 1.

Videocon has one of the largest distribution capacities across India with 17 manufacturing facilities and plants in China, Poland, Italy and Mexico. 2. Manufacturing capacity is 1, 40,000 units. 3. Videocon has a network of 400 plus service and 85 mobile service vans to give better service to their customers. 4. Tie up with the Matsushita electric company of Japan add to the goodwill of Videocon 5. High awareness among the customers regarding the products of Videocon. 6. Strong backward integration 7. Videocon has largest distribution manufacturing based across in India. 8. Large brand basket . Multi brand strategy 10. 3rd largest picture tube manufacture in India 11. Cheap price. 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. Opportunities 1. Global aspirations. Opportunity to enter other markets as the highly competitive Indian market is saturated. 2. Videocon can explore new segments. 3 Fast growing tier 2 and tier 3 cities provide ample opportunity for consumer electronics business 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 class segment 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 Indian market. 8. Alliances with overseas companies possesses an opportunity to enter new markets. Threats 1. 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 latest technology. 6. Increased trade barriers create hindrance in entering new market.

Value Chain of Videocon Porters Five Forces The Porter’s 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 looking to move into. Porter five forces can be represented as follows – Threat of New Entrants: Entering the electronic consumer durables isn’t very easy. One of the most important feat is needed is a good distribution system which isn’t 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 this market, 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 of substitutes: 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. 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-a-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 in India and thus has advantages of economies of scale and low cost due to indigenisation. Competitive rivalry to Videocon in the mobile handsets business: 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. 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 with a 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 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 the message 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 mobile handset business by starting exclusive Videocon showrooms and stores. 2. Loyalty programs can be started by Videocon to take full advantage of its multi brand offerings. 3. Exchange programs can be implemented where the customer can return any television, washing machine, mobile handsets in exchange for newer versions. 4. There is huge scope for aggressively promoting lower end products across segments in 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 mobile handset 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 on the verge of setting up a Rs. 8000 crore LCD manufacturing capacity in Navi Mumbai with the aid of the government. With VIL contributing Rs. 6000 crore and the government contributing Rs. 2000 crore, the unit will have a manufacturing capacity of 20 crore units. The company possesses strong expertise in the other areas of consumer electronics and will be hoping to capitalize on the rapidly growing air-conditioning market (growth rate of 19%). The company has leveraged its rather strong R&D to come up with impressive technology in the consumer electronics segment.

The introduction of Star rated products in consumer electronics and home appliances has led to the benefit of saving approximately 15% of power consumption, resulting into effective utilization of power resources in the nation. The Videocon group is also in talks with the management of the Kings XI Punjab to buy a stake in the cricket team. The company is said to have offered Rs. 920-Rs. 1035 crore for a 23% stake in the team. If the deal goes through, it will provide the Videocon Group with a majority stake and mark its entry into the sports business.