Consumer durable industry in india

Swot Analysis
Vindhey Gaurav

School Of Management Studies

Motilal Nehru National Institute Of Technology

Consumer durable industry in india, Swot Analysis

Table of Contents Overview ....................................................................................................................3 Some Facts .................................................................................................................3 Introduction ................................................................................................................4 Sector Outlook ...........................................................................................................4 Swot Analysis ............................................................................................................7 Classification ..............................................................................................................8 Consumer Electronics ................................................................................................8 Demand Drivers in Consumer Electronics Sector .....................................................8 Challenges Facing the Consumer Electronics Industry .............................................9 Major Players in Consumer Electronics Industry ....................................................10 Scope ........................................................................................................................11 Current Scenario ......................................................................................................11 Future Scenario ........................................................................................................12 List of Companies ....................................................................................................13

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Consumer durable industry in india, Swot Analysis

Overview
With the increase in income levels, easy availability of finance, increase in consumer awareness, and introduction of new models, the demand for consumer durables has increased significantly. Products like washing machines, air conditioners, microwave ovens, color televisions (CTVs) are no longer considered luxury items. However, there are still very few players in categories like vacuum cleaners, and dishwashers. Consumer durables sector is characterized by the emergence of MNCs, exchange offers, discounts, and intense competition. The market share of MNCs in consumer durables sector is 65%. MNC's major target is the growing middle class of India. MNCs offer superior technology to the consumers , whereas the Indian companies compete on the basis of firm grasp of the local market, their well-acknowledged brands, and hold over wide distribution network. However, the penetration level of the consumer durables is still low in India. An important factor behind low penetration is poor government spending on infrastructure. For example, the government spending is very less on electrification programs in rural areas. This factor discourages the consumer durables companies to market their products in rural areas.

Some Facts
1. Bargaining power of suppliers in consumer durables sector is limited due to threat of imports and intense competition. 2. Some of the entry barriers in consumer durables sector are distribution network, capital, and ability to hire purchases. 3. Demand is seasonal and cyclical.

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

Consumer durable industry in india, Swot Analysis

Introduction

Before the liberalization of the Indian economy, 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. Then, after the 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.

Consumer durables market is expected to grow at 10-15% in 2007-2008. It is growing very fast because of rise in living standards, easy access to consumer finance, and wide range of choice, as many foreign players are entering in the market. On the flip side, the presence of a large number of players in the consumer durables market sometimes results in excess supply.

Sector Outlook
There has been strong competition between the major MNCs like Samsung, LG, and Sony. LG Electronics India Ltd. has announced its extension plan in 2006. The company is going to invest $250 million in India by 2011 and is planning to establish a manufacturing facility in Pune. TCL Corporation is also planning to establish a $22 million manufacturing facility in India. The Indian companies like Videocon Industries and Onida are also planning to expand. Videocon has acquired Electrolux brand in India. Also, with the acquisition of Thomson Displays by Videocon in Poland, China, and Mexico, the company is marking its international presence.
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Consumer durable industry in india, Swot Analysis

According to isuppli Corporation (Applied Market Intelligence), country's fiscal policy has encouraged Indian consumer electronic industry. The reduction on import duty in the year 200809 has benefited many companies, such as Samsung, LG, and Sony. These companies import their premium end products from manufacturing facilities that are located outside India. Indian consumers are now replacing their existing appliances with frost-free refrigerators, split air conditioners, fully automatic washing machines, and color televisions (CTVs), which are boosting the sales in these categories. Some companies like Samsung Electronics Co. Ltd. and LG Electronics India Ltd. are now focusing on rural areas also. These companies are introducing gift schemes and providing easy finance to capture the consumer base in rural areas. Sector Financials 31/03/2007 Sales Sales Growth Gross Profit Margin Profit After Tax (PAT) PAT Growth Market Capitalization P/E Ratio Return on Capital Employed 13.9% (ROCE) 23.1% 6.9% 37,331m 10.7% 1,019m 1,787m 7.0 31/03/2008 30,100m -19.4% 6.6% 940m -4.3% 2,392m 7.6 In Rs 31/03/2009 43,096m 43.2% 4.3% -1,202m -209.5% 2,359m -7.9

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Consumer durable industry in india, Swot Analysis

Growth in 2009-10 Consumer Durables Air Conditioner Refrigerator Microwave Ovens Washing Machines Color Televisions (CTVs) Black & White Televisions Clock Watch VCDs Consumer Electronics (Overall) Growth 20-25% 5-10% 25% 5-10% 15-20% -20% 10% 10% 30% 9%

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Consumer durable industry in india, Swot Analysis

Swot Analysis
Strengths
1. Presence of established distribution networks in both urban and rural areas 2. Presence of well-known brands 3. 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. In India, the penetration level of white goods is lower as compared to other developing countries. 2. Unexploited rural market 3. Rapid urbanization 4. Increase in income levels, i.e. increase in purchasing power of consumers 5. Easy availability of finance

Threats
1. Higher import duties on raw materials imposed in the Budget 2008-09 2. Cheap imports from Singapore, China and other Asian countries
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Consumer durable industry in india, Swot Analysis

Classification
Consumer durables Sector can be classified as follows: 1. Consumer Electronics includes VCD/DVD, home theatre, music players, color televisions (CTVs), cameras, camcorders, portable audio, Hi-Fi, etc. 2. White Goods include dishwashers, air conditioners, water heaters, washing machines, refrigerators, vacuum cleaners, kitchen appliances, non-kitchen appliances, microwaves, built-in appliances, tumble dryer, personal care products, etc. 3. Moulded Luggage includes plastics. 4. Clocks and Watches 5. Mobile Phones

Consumer Electronics
Consumer electronics are the products that are used everyday by the consumers. Consumer electronics include the products that come under the category of office products, communications, and entertainment.
Classification of Consumer Electronics Goods :-

Consumer electronics can be classified into personal computers, telephones, calculators, playback, digital video disk (DVD), video compact disc (VCD), video home systems (VHS), home theatre, music players, color televisions (CTVs), cameras, camcorders, portable audio, HiFi, etc.
Demand Drivers in Consumer Electronics Sector :-

Increase in disposable income, changing tastes of consumers, increase in nuclear families, increasing number of workingwomen, growth in per capita income, greater variety of choices,

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growth in entertainment sectors, increasing consumerism, etc.

Consumer durable industry in india, Swot Analysis

Indian Consumer Electronics Export

Growth
In India, the demand of video products, such as color televisions (CTVs), VCD/DVD players, and set-top boxes account for 90% of the consumer electronic market. Easy availability of finance is an important factor driving growth for consumer electronics market. Some companies are also taking advantage of this factor by teaming up with banks to offer attractive loan schemes to consumers. According to isuppli projects (India market intelligent service), consumer electronics industry in India is growing at a compounded annual growth rate (CAGR) of 11%.
Challenges Facing the Consumer Electronics Industry

With the increase in price wars due to the entry of new players in the market and increase in manufacturing capacity by some original manufacturers, the profitability and margins of the companies are adversely affected. Poor distribution network in semi-urban and rural areas. Low awareness of consumer electronics products in rural India. Presence of gray market in consumer electronics products, especially in DVD player, music players. Companies need to increase focus on product differentiation to address various segmental specific needs.

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Consumer durable industry in india, Swot Analysis

With the increase in access to Internet information, and availability of wide range of choices, consumers have become quite smart. They want the product that is easy-to-handle, good in quality and low in price. Most importantly, consumers want some guarantee for the product that they are buying. They look for the product that can be used for many years. The role of electronic companies doesn't end on the sale of the product, but continues till the end of guarantee period.

Major Players in Consumer Electronics Industry

The major players in the sub-categories of consumer electronics are: Personal Computers Samsung, Wipro, HP, Compaq, Dell VCD/DVDs Sony, Panasonic, Pioneer, Toshiba Hi-Fi/Music Systems Samsung, Sony India, Thompson, BPL Sanyo Technologies, Videocon Industries, Mirc Electronics, Philips India, Baron International, Eastern Micro Electronics, Matsushita Television and Audio Ltd Video Projectors Phil Systems, Keltron Projectors, Birla 3M, Samrat Video Vision Colour Television LG Electronics, Philips, Sony; Sansui, Samsung, BPL, Videocon, Onida, Aiwa, Akai, Thompson, Panasonic Cameras/Camcorders Sony, Canon, Olympus, Fuji film, Nikon

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Consumer durable industry in india, Swot Analysis

Scope
In terms of Purchasing Power Parity (PPP), India is the 4th largest economy in the world and is expected to overtake Japan in the near future to become the 3rd largest. Indian consumer goods market is expected to reach $400 billion by 2010. India has the youngest population amongst the major countries. There are a lot of young people in India in different income categories. Nearly two- thirds of its population is below the age of 35, and nearly 50 % is below 25. There are 56 million people in middle class, who are earning US$ 4,400- US$ 21,800 a year. And there are 6 million rich households in India. The upper-middle and high-income households in urban areas are expected to grow to 38.2 million in 2007 as against 14.6 million in 2000. Rural sector offers huge scope for consumer durables industry, as it accounts for 70% of the Indian population. Rural areas have the penetration level of only 2% and 0.5% for refrigerators and washing machines respectively. The urban market and the rural market are growing at the annual rates of 7%-10%and 25% respectively. The rural market is growing faster than the urban market. The urban market has now largely become a product replacement market. The bottom line is that Indian market is changing rapidly and is showing unprecedented business opportunity.

Current Scenario
The consumer durables market in India is valued at US $ 4.5 billions currently. In 2006, microwave ovens and air conditioners registered a growth of about 25%. Frost-free refrigerators have registered significant growth as many urban families are replacing their old refrigerators. Refrigerator sales amounted to 4.2 millions in 2006, whereas the production of the refrigerators went up by 17% as compared to the preceding year. Washing machines, which have always seen poor growth, have seen reasonable growth in 2006. More and more Indians are now buying

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Consumer durable industry in india, Swot Analysis

electrical appliances due to change in electricity scenario. The penetration level of color televisions (CTVs) is expected to increase 3 times by 2010 According to National Council for Applied Economic Research (NCAER), Indian consumer class is growing at a fast rate. This in turn is benefiting the consumer durables manufacturers.

Future Scenario
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. Given these factors, a good growth is projected in the future, too. 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 Brazil China US France Japan 24% 11% 98% 333% 235% 250%

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Consumer durable industry in india, Swot Analysis

Demand and Penetration Level of White Goods in India 1995-1996 Demand 3.43 million 149 per 1,000 Penetration level households households households 2005-2006 8.72 million 319 per 1,000 2009-2010 13.14 million 451 per 1,000

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%. In billions

List of Companies
Some of the companies in consumer durables sector are: 1. AIWA 2. Akai India 3. BenQ Corporation 4. Blue Star Ltd.
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Consumer durable industry in india, Swot Analysis

5. Bose Corporation 6. BPL 7. Canon India 8. Carrier Aircon Ltd. 9. Daewoo India 10. Electrolux-Kelvinator 11. Godrej 12. Haier India 13. Hitachi Ltd. 14. Khaitan India Ltd. 15. LG Electronics India Ltd. 16. MIRC Electronics Ltd. 17. Mitsubishi Electronic Corporation 18. Nokia India 19. Onida 20. Pace Micro Technology 21. Panasonic 22. Philips India 23. Samsung India 24. Samtel 25. Sansui India 26. Siemens 27. Sony India 28. Thomson Ltd. 29. Titan Industries
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Consumer durable industry in india, Swot Analysis

30. Toshiba Corporation 31. Videocon Industries 32. Whirlpool Appliances

The top 10 players in consumer durables sector are:

Nokia India LG Electronics India Ltd. Philips India Titan Industries Samsung India Electronics Whirlpool Appliances Siemens Sony India Videocon Industries Blue star

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