marketing term paper final

8/8/2019 Marketing Term Paper Final

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Contents

Contents .................................................................................................................................................... 1

1. OVERVIEW ............................................................................................................................................. 2

1.1 KEY GROWTH DRIVERS FOR CONSUMER DURABLES .......................................................................... 3

1.2 MAJOR HURDLES AND CHALLENGES PLAGUING THE INDIAN CONSUMER DURABLES SECTOR:........ 4

2. INDUSTRY ANALYSIS.......................................................................................................................... 5

2.1 INDUSTRY CLASSIFICATION ................................................................................................................. 5

2.3 PROFILES OF KEY INDIAN CONSUMER DURABLES PLAYERS (key players and their product)............. 6

3. CONSUMER ANALYSIS...................................................................................................................... 12

3.1 CONSUMER CLASSES ......................................................................................................................... 12

3.2 CHANGING ATTITUDES OF TODAYS CUSTOMERS ............................................................................ 14

3.3 MARKETERS REPONSE TO CONSUMER ATTITUDE ............................................................................ 15

4. MARKET ANALYSIS ........................................................................................................................... 17

4.1 CONSUMER ELECTRONICS ................................................................................................................ 17

4.2 HOUSEHOLD APPLIANCES ................................................................................................................. 20

5. PRODUCT ANALYSIS ......................................................................................................................... 22

5.1 TELEVISION ........................................................................................................................................ 22

5.2 CONSUMER ELECTRONICS MARKET IN INDIA: COLOUR TELEVISION ............................................... 24

5.3 THE COLOUR TV INDUSTRY POST LIBERALISATION: ......................................................................... 256. COMPETITION ANALYSIS................................................................................................................. 27

6.1 COMPETITION OVERVIEW................................................................................................................. 27

6.2 INDIA EMERGING AS A FORCE IN THE TELEVISION MARKET ............................................................ 30

6.3 MARKET MEASUREMENT AND FORECASTING .................................................................................. 31

7. WHY INDIAN COMPANIES ARE UNABLE TO COMPETE WITH MNCS.................................. 34

8. THE ROAD AHEAD ............................................................................................................................. 35


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1. OVERVIEW

India in its 62 years of journey has seen manifold increase in the income of its denizens

(Rs. 38,084 as on 2009) and this has led to paradigm shift in the purchasing behaviour of the

people here. 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 because of the increase in

manufacture of branded products and narrowing down of price between branded and non-

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

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

Post liberalization there has been inundation of goods transcending the borders and the

customer has a wider choice; breaking the shackles of the consumers regarding limitations of

choices. Indian consumer durables market used to be dominated by a few domestic players like

Godrej, Allwyn, Kelvinator, and Voltas. But post-liberalization many foreign companies have

entered into India, dethroning the Indian players and dominating the market. The major

categories in the market are CTVs, refrigerators, air-conditioners and washing machines. The

rural market is growing faster than the urban markets, although the penetration level in rural area

is much lower. The CTV segment is expected to be the largest contributing segment to the

overall growth of the industry. The rising income levels, double-income families and increasing

consumer awareness are the main growth drivers of this industry. In addition to them the young

nature of population and easy finance options are also fuelling the market and its dynamics.

Consumers today are more indulgent in market place than their predecessors.

There has been shift in the definition of needs and wants. For example a mobile phone is

more of a need today then a want. Westernization has influenced the psyche of the Indian

customers to a degree. This report is an attempt to reflect the changes in the consumer buying

behaviour in the Indian Market especially in home appliances buying.


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1.1 KEY GROWTH DRIVERS FOR CONSUMER DURABLES

Rise in disposable income: The demand for consumer electronics has been rising with the

increase in disposable income coupled with more and more consumers falling under the double

income families. The growing Indian middle class is an attraction for companies who are out

there to woo them. Availability of newer variants of a product: Consumers are spoilt for choice

when it comes to choosing products. Newer variants of a product will help a company in getting

the attention of consumers who look for innovation in products.

Product pricing: The consumer durables industry is highly price sensitive, making price the

determining factor in increasing volumes, at least for lower range consumers. For middle and

upper range consumers, it is the brand name, technology and product features that are important.

Availability of financing schemes: Availability of credit and the structure of the loan determine

the affordability of the product. Sale of a particular product is determined by the cost of credit as

much as the flexibility of the scheme.

Rise in the share of organized retail: Rise in organized retail will set the growth pace of the

Indian consumer durables industry. According to a working paper released by the Indian Council

for Research on International Economic Relations (ICRIER), organized retail which constituted a

mere four percent of the retail sector in FY07 is likely to grow at 45-50% per annum and

quadruple its share in the total retail pie 16% by 2011-2012. The share will grow with bigger

players entering the market.

Innovative advertising and brand promotion: Sales promotion measures such as discounts,free gifts and exchange offers help a company in distinguishing itself from others.

Festive season sales: Demand for colour TVs usually pick up during the festive seasons. As a

result most companies come out with offers during this period to cash in on the festive mood.

This period will continue to be the growth driver for consumer durable companies.


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1.2 MAJOR HURDLES AND CHALLENGES PLAGUING THE INDIAN

CONSUMER DURABLES SECTOR:

Threat from new entrants, especially global companies: The domestic consumer durables

sector faces threat from newer companies, especially from global ones who have technologically

advanced products to offer.

Rivalry and competition: Presence of a large number of players in the domestic consumer

durables industry leads to competition and rivalry among companies. Threat from rivalry and

competition poses a threat to domestic companies.

Potential markets remaining yet untapped: A large segment of the domestic market, mostly

the rural market is yet to be tapped. Tapping this yet untapped and unorganized market is a major

challenge for the Indian consumer durables sector.

Threat from substitute products/services: The domestic consumer durables industry is

plagued by threats from substitute products. Easy accessibility to theatres/multiplexes, especially

in urban areas has turned off the viewership from TV to a large extent. With the advent of a

horde of FM radio stations, radio sets have now substituted TVs.

Customer power with respect to availability of choice: The availability of a wide product line

on account of most products being homogeneous, poses a threat for companies operating in the

consumer durables sector. Customers have the choice of both domestically produced and

imported goods, with similar features.


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2. INDUSTRY ANALYSIS

2.1 INDUSTRY CLASSIFICATION

THE INDIAN CONSUMER DURABLES INDUSTRY CAN BE SEGMENTED INTO THREE

KEY GROUPS

CONSUMER DURABLES


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2.2 SUCCESS IN THE INDUSTRY WOULD DEPEND ON ADDRESSING

KEYFACTORS

2.3 PROFILES OF KEY INDIAN CONSUMER DURABLES PLAYERS (key

players and their product)

COMPANY PRODUCTS


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BLUESTAR

Bluestar is the largest central air conditioning company with a network of 23 offices, four

modern manufacturing facilities and around 2,000 employees.

It has established its leadership in the field of commercial refrigeration equipment ranging fromwater coolers to cold storages.

The company plans to increase production capacity by setting up a new manufacturing plant at

Thane and is also looking to enhance its product range, which comprises developing special

purpose products and comfort applications.

Bluestar is the largest central airconditioning company with a network of 23 offices, four

modern manufacturing facilities and around 2,000 employees.

WHIRLPOOL OF INDIA

Whirlpool was established in 1911 as first commercial manufacturer of motorized washers to

the current market position of being world's number one manufacturer and marketer of major

home appliances.

The parent company is headquartered at Benton Harbour, Michigan, USA with a global

presence in over 170 countries and manufacturing operation in 13 countries with 11 major brand

names such as Whirlpool, Kitchen Aid, Roper, Estate, Bauknecht, Laden and Agnes.

Today, Whirlpool is the most recognized Brand in home appliances in India and holds a market

share of over 25%.

The company owns three state-of-the-art manufacturing facilities at Faridabad, Pondicherry and

Pune.

According to IMRB surveys Whirlpool enjoys the status of the single largest refrigerator and

second largest washing machine brand in India.

VOLTAS

The company offers engineering solutions in areas such as heating, ventilation and

airconditioning, refrigeration, electro-mechanical projects, textile machinery, machine tools,


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mining and construction equipment, materials handling, water management, building

Management systems, indoor air quality and chemicals.

Its operations have been organised into four independent, business -specific clusters: air

conditioning and refrigeration, unitary products, engineering products and international

operations.

It has tied up with RBS Home Appliances Ltd for the use of 640 service centres that Voltas has

across the country for after-sales services.

BAJAJ ELECTRICALS

The company is engaged in the marketing of various consumer household and industrial goods.

It manufactures the erection and commissioning of transmission line towers, telecom towers,

mobile telecom towers and wind energy towers.

The company is planning to outsource manufacturing of gas appliances and water dispensers,

which will be marketed under its own brand.

It is also planning to introduce inverters and two new lines of business.

GODREJ

Godrej India was established in 1897, the Company was incorporated with limited Liability on

March 3, 1932, under the Indian Companies Act, 1913.

The Company is one of the largest privately-held diversified industrial corporations in India.

The combined Sales during the Fiscal Year ended March 31, 2006, amounted to about Rs.

58,000 Million (US$ 1,270 million).

The Company has a network of 38 Company-owned Retail stores, more than 2,200 Wholesale

Dealers, and more than 18,000 Retail Outlets.

A survey carried out by FICCI last year indicated that the consumer durable goods sector is all

set to witness 12 percent growth this year. Spurred by a marked shift in consumers preference

for high end products from premium brands floating superior technology. Clearly, the aspiration

to own premium lifestyle products among consumers has gone up.


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The rural Indian market, which accounts for nearly 70 percent of the total number of households,

Witnessed a 25 percent annual growth while the urban consumer durables market reflected an

annual rate of 7 to 10 percent. CE companies are re-working their strategies for the ensuing

summer season, considered to be a good period for the industry. A cut in customs duty on inputs

will enhance the manufacturing competitiveness of the industry by reducing cost and boosting

demand and sales.

Rationalization of taxes, clearly, seems to be a universal demand across the CE sector. This will

ensure manufacturers in India have a level playing field as against their counterparts in the

import business. Fast growing product segments such as flat panel TVs, LCD TVs, Plasma TVS,

Slim CRT TVs, frost-free refrigerators, fully automatic washing machines, split air-conditioners,

DVD players, microwave ovens, home theatre systemsproducts entailing high aspiration value

are likely to see a growth in consumption. The consumer durables sector is set to close the

current financial year with 12% growth, 0.5 percentages point more than the growth registered

last fiscal, according to a Ficci survey. The survey is based on feedback from the consumer

durables industry, allied industry organizations and government agencies. Technological

improvements, falling prices due to competition, aggressive and innovative marketing and

declining import tariffs have contributed to the strong growth. According to the survey, many

high-end products such as LCD TV, MP3, DVD, split air-conditioner, high end washing machine

do not find place in the list of items covered by the Central Statistical Organization (CSO) for

calculating official data. These items, however, have seen impressive growth. The sectors which

are projected to achieve excellent growth rates of more than 20% in terms of units

manufactured are air-conditioner (25%), split air-conditioner (60%), frost-free refrigerator

(54%), washing machines (20 %), fully-automatic washing machine (35 %), microwave oven (35

%), high-end flat panel TV (100 %) and DVD (25 %). The sectors which are expected to record

high growth rates between 10% and 20 % are refrigerator (11 %) and colour TV (15%).

India has an increasingly affluent middle class population that, on the back of rapid economic

growth, has made the countrys consumer electronics industry highly dynamic. The industry has

been witnessing significant growth in recent years due to several factors, such as retail boom,

growing disposable income and availability of easy finance schemes. But still, the consumer


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electronics goods, like refrigerators, microwave and washing machines have low penetration in

the country, representing vast room for future growth.

Propelled by growing middle class population, changing lifestyle and rapid urbanization, the

Indian consumer electronics industry is forecasted to grow at a rapid rate of 10% to 12% in the

coming few years.

Volume sales of washing machine will be driven by growth in fully automatic category during

2008-09 to 2011-12.

The market for televisions in India is changing rapidly from the conventional CRT technology

to Flat Panel Display Televisions (FPTV). Currently, the split between CRT and FPTV is around

97% and 3% respectively, and the share of FPTV is projected to increase at robust rate in near

future.

Frost-free refrigerator sales, certainly growing at a much faster pace than the direct-cool

category, are anticipated to drive the Indian refrigerators market over the forecast period.

The AC market in India is projected to grow at 30% to 35% for the coming few years.

Driven by young population, demand for MP3 players and digital video appliances are

anticipated to surge at double-digit rate in near future.

The low penetration level of consumer electronics goods coupled with increasing preference for

comfort and luxurious goods are widely attracting the foreign as well as domestic players to the

industry.


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2.4 OPPORTUNITIES AND CHALLENGES

THE CHALLENGES

Heavy taxation in the country is one of the challenges for the players. At its present structure the

total tax incidence in India even now stands at around 25-30 per cent, whereas the corresponding

tariffs in other Asian countries are between 7 and 17 per cent.

About 65 per cent of Indian population that lives in its villages still remains relevant for some

consumer durables companies. This India, at least a large proportion of its constituents, still buys

black and white TVs and doesn't know what flat screens are. Also, foraying into these rural

markets has a considerable cost component attached to it. Companies not only have to set up the

basic infrastructure in terms of office space, manpower, but also spend on transportation for

moving inventory. Even LG and Samsung, which are touted as having the largest distribution

network in the country, have a direct presence only in 15,000 to 18,000 of the around 40,000

retail outlets (for consumer durables) in the country.

Poor infrastructure is another reason that seems to have held back the industry. Regular power

supply is imperative for any consumer electronics product. But that remains a major hiccup in

India.

THE OPPORTUNITIES

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


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basic services, after sales services to suit the infrastructure and the existing amenities like

electricity, voltage etc.

Currently, rural consumers purchase their durables from the nearest towns, leading to

increased expenses due to transportation. Purchase necessarily done only during the harvest,

festive and wedding seasons April to June and October to November in North India and

October to February in the South, believed to be months `good for buying, should be converted

to routine regular feature from the seasonal character. 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 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. According to

survey made by industry, the rural market is growing faster than the urban India now. 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.

3. CONSUMER ANALYSIS

3.1 CONSUMER CLASSES

Even discounting the purchase power parity factor, income classifications do not serve as

an effective indicator of ownership and consumption trends in the economy. Accordingly, the

National Council for Applied Economic Research (NCAER), Indias premier economic research

institution, has released an alternative classification system based on consumption indicators,

which is more relevant for ascertaining consumption patterns of various classes of goods. There

are five classes of consumer households, ranging from the destitute to the highly affluent, i.e.

starting with the destitute, the aspirant, the climber, the consuming class and the rich , which


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differ considerably in their consumption behaviour and ownership patterns across various

categories of goods. These classes exist in urban as well as rural households both, and

consumption trends may differ significantly between similar income households in urban and

rural areas.

CONSUMER SPENDING

For long, the consumer has been the poster-boy of the India growth story. The demographic

shift in favour of a younger working population and the upward-bound income levels have been

cited to support the view that, no matter what goes wrong with the global economy, the Indian

consumer will continue to splurge. But this assumption is now being challenged, with the

prospect of pay cuts and even layoffs beginning to materialise. Is the slowdown taking a toll on

the Indian consumer?

CONSUMER DURABLES: NO SLOWDOWN YET

Sales of consumer durables do not yet show signs of a dramatic slowdown. Overall production

for categories such as washing machines, refrigerators and televisions grew 7 per cent in 2008,

based on numbers captured in the Index of Industrial Production. Month-on-month production

numbers this financial year, however, are erratic.

Taking published production figures of consumer durables as a sales indicator, categories such as

television sets and washing machines recorded better growth in the previous two quarters, while

Air-conditioners suffered sharp declines.

However, IIP numbers may not fully represent ground reality, as sales of high-end consumer

electronics such as mobile handsets and LCD televisions, key drivers of durables sales in recent

years, are not captured here. Helped by healthy replacement demand and price-cuts,

manufacturers such as Samsung and LG have seen a sharp increase in LCD TV sales in 2008.

Samsung reported a doubling of its Indian LCD TV sales in 2008, even as the television segment

overall notched up a 15.8 per cent growth. Future growth may, however, hinge on the availability

of consumer finance, with about 15-20 per cent of total durables sales relying on finance.


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3.2 CHANGING ATTITUDES OF TODAYS CUSTOMERS

Today customer likes to indulge in buying spree. No more the customers buy only tofulfil their basic needs and emphasise on savings itself. Indian consumers have become value

sensitive and are not much price sensitive as was the case earlier. If they feel that a particular

product offers them more value and its price is high, even then they are willing to buy the

product. The Indian consumers strictly follow their culture, tradition and values, as a result of

which foreign companies were forced to give an Indian touch to them in order to succeed in

India. McDonalds, MTV, Pepsi, Star TV, Coca Cola India and many more had to Indianise

themselves to flourish in India. Karva Chauth is celebrated with more zeal and enthusiasm than

the Valentine Day. The Indian consumer of today gives preference to features of a product rather

than its brand name. The trend that higher segment consumers only buy the top brands has also

come to an end. Even after liberalization Indian companies and brands are doing very well. It is

clearly evident from the fact that despite many foreign brands being sold in India, Raymond is

still Indias largest textile company and Haldiram is doing well despite the presence of

McDonalds and Pizza Hut.

The consumers today are not confined to a single brand and prefer change rather than sticking to

the same brand. Not often do we see any home with cars of the same brand or household

products of the same brand. The use of credit card for shopping is a new emerging trend in India.

Also consumers are availing credit or loan from banks and other financial institutions to fulfil

their needs and wants.

The Indian consumers are spending thick and fast on premium and luxury products. The Indian

consumers have shown another major change in their buying behaviour. They just dont want

availability of products; they also want better experience, services and ambience. This has led to

the growth of shopping malls where shopping, entertainment and better facilities are all available

under one roof. To a great extent the presence of heavy weight such as the pantaloons, big

bazaar, croma, nilgiris etc has given a huge fillip to the growing market by not only selling

products but also the experience. The Indian consumers are much more inclined to the


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organized sector. The rural Indian consumers are also showing signs of change. They have all the

modern amenities at their home and their standard of living is fast improving. The rural

households have earned huge money due to price rise in real estate. They are also shifting

towards industrial and services sector; hence their purchasing power is increasing. It is reflected

in their living standard and possession of all electronic gadgets and luxury cars.

There is a stiff competition in the Indian market today and it has become a buyers market from

sellers market. Customers are the ultimate beneficiary of the fierce competition in the market.

Competition has reduced prices to a great extent and has forced the manufacturer to maintain

product quality to sustain in the highly competitive market.

Though in a small way internet and telemarketing have also caught the attention of the Indian

customers. Dell, Amazon .com, etc have carved a good niche for them in the sector. The

consumers today do not mind availing credit as when needed. So credit availability has become a

key factor for determination of a buying a good. Consumers are also availing the information

available on net through various forums and websites.

3.3 MARKETERS REPONSE TO CONSUMER ATTITUDE

With change in consumer buying behaviour the companies also made necessary changes in

their marketing strategies. The changes include:

1) Launching of premium products by companies to fulfill requirements of high class consumers.

2) Since purchasing power of rural India has increased, the companies have started shifting their

focus towards rural India to capture untapped rural market. This has reaped huge benefits for

companies like in cases of PepsiCo, Coca Cola India and other FMCG companies.

3) Companies not only aim to sell their products but also aim to provide better after sales

services to its consumers. For example companies have provisions to send their technicians to

repair the cars struck at highways or other outer locations due to technical failure or in case of a

mishap. This improves the companys credibility and helps to build its customer base.


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4) Companies design their products on the basis of market segmentation so that they have

products to suit every pocket and requirement.

5) Due to sharp growth in the communication sector, companies are providing many schemes

and plans to attract customers. For example mobile service providers provide lifetime option and

free calls to other mobile users under a specific plan of the company.

6) Due to fierce competition in the electronics market and peoples willingness to purchase hi-

tech products the rates of LCD and plasma TVs have been slashed by 25%-30%. Through this

strategy electronic companies received very good response from the consumers in the recent past

and were able to build a considerable market for their products.

7) Indian consumers have developed a liking for foreign tours and holidays. This has led to

development of many travel agencies that provide a planned foreign tour at a reasonable price.

What is even more interesting is that the customer does not have to pay the amount in lump sum;

instead, he has the facility to make the payment in monthly installments according to his

convenience.

8) Consumers of India have developed a tendency to save travel time. For such consumers low

fare or low cost carriers are available that provide air travel facility at a very affordable price.

9) Consumers of India want better housing facilities. The construction companies are fulfilling

this requirement of consumers by providing them luxurious houses, exquisite interiors, round the

clock water and electricity supply, full time security, club house, gymnasium, etc. within the

premises.

10) Indian consumers are increasingly becoming aware of the importance of health and hygiene.

Hence companies are making products to suit their health like low calorie, low fat food. As far as


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hygiene is concerned companies have fully mechanized their plants to maintain hygiene and

pack the food in such a way that it remains fresh for longer period of time and does not lose its

nutritive value before consumption.

11) The need for internet is fast growing. To fulfill this need of consumers, mobile

manufacturing companies are providing internet access facility on mobile phones. This has

revolutionized the communication sector and provided a means of communication that was never

ever in anybodys dreams till a few years back.

12) Indian consumers liking for credit is also increasing rapidly. Hence many financial

institutions have come into existence in India and are flourishing. Banks have also become

liberal in their loan and credit policies.

4. MARKET ANALYSIS

For the purpose of doing the market analysis the whole consumer durables market has been

divided into two parts i.e.; Consumer electronics and Household appliances.

Now analysis has taken into account the market value, market value forecast, market volume,

and market volume forecast.

4.1 CONSUMER ELECTRONICS

CTV is the largest contributor in this segment and the market has been estimated at 15.15 million

units in 20092010.

LCDs are perceived as high-end products. The LCD market has been estimated at 0.8 million

units, registering a growth of over 130 per cent during 200809 over the previous year.

Indian DVD market was estimated at 6.2 million units in 2009.


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Due to the expansion of DTH and introduction of conditional access system (CAS) in the metros,

the set top box (STB) market is growing rapidly.

Multimedia mobile phones have been growing at a fast rate, from 800,000 units in 200809 to

1.8 million units in 20092010.

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

consumer appliances market, followed by refrigerators at 14 per cent, electric fans at 7.5 per

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

Source economic times: December 2009

ATTRACTIVE AREAS FOR INVESTMENT

High-end colour Vs

High-end, flat screen TVs, plasma display panels and liquid crystal display TVs registered an

average of more than 130 percent growth in 200809 and the trend is expected to continue

Split air conditioners

Split air conditioners have been growing much faster than window air conditioners, growing at97 percent in 200607 compared to 32 percent growth for window air conditioners.

Distribution and retail

With the rural and semi-urban markets opening up avenues for expansion, the need to have a

strong distribution network is crucial for companies to remain price competitive

Mobile phones

The mobile phone market grew at 29 percent in 200708 over the previous year. The market is

expected to grow at a compound annual growth rate (CAGR) of about 28.3 percent from 2006 to

2011


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MARKET VALUE

The Indian consumer electronics market grew by 7.7% in 2008 to reach a value of $4.2 billion.

The compound annual growth rate of the market in the period 2004-2008 was 9.5%.Electricals

and electronics retailers sales proved the most lucrative for the Indian consumer electronics

market in 2008, generating 91.1% of the market's overall revenues. Sales from discount, variety

store, and general merchandise retailers generated 7.2% of the market's aggregate revenues.


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MARKET VALUE FORECAST

In 2013, the Indian consumer electronics market is forecast to have a value of $5.7 billion, an

increase of 36.5% since 2008. The compound annual growth rate of the market in the period

2008-2013 is predicted to be 6.4%.

4.2 HOUSEHOLD APPLIANCES

The household appliances market reflects the sale of six product sectors: refrigeration appliances

(including fridges, freezers and fridge freezers), cooking appliances (including cookers,

microwaves, ovens, cooker hoods, food processors and toasters), washing appliances (including

washing machines, clothes dryers and washer-dryers), room comfort and water heater appliances

(which include air conditioning, circulating and ventilation fans, space heaters and water

heaters), vacuum cleaners, and dishwashers. The market value has been calculated using

manufacturer selling prices. The performance of the market is forecast to decelerate, with an

anticipated CAGR of 10% for the five-year period 2008-2013, which is expected to drive the

market to a value of $7.7 billion by the end of 2013.The Indian household appliances market has

grown at a strong rate in recent years. Further strong growth is expected for the forecast period.

The Indian household appliances market generated total revenues of $4.8 billion in 2008,

representing a compound annual growth rate (CAGR) of 12.5% for the period spanning 2004-

2008. In comparison, the Japanese and Chinese markets grew with CAGRs of 1.1% and 7.5%,

respectively, over the same period, to reach respective values of $18.6 billion and $24.4 billion

in 2008.

Market consumption volumes increased with a CAGR of 13.2% between 2004-2008, to reach a

total of 34.7 million units in 2008. The market's volume is expected to rise to 52.2 million units

by the end of 2013, representing a CAGR of 10% for the 2008-2013 periods. Refrigeration

appliance sales proved the most lucrative for the Indian household appliances market in 2008,

generating total revenues of $1,445.3 million, equivalent to 30% of the market's overall value. In


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comparison, sales of cooking appliances generated revenues of $1,405 million in 2008, equating

to 29.1% of the market's aggregate revenues.

The performance of the market is forecast to decelerate, with an anticipated CAGR of 10% for

the five-year period 2008-2013, which is expected to drive the market to a value of $7.7 billion

by the end of 2013. Comparatively, the Japanese and Chinese markets will grow with CAGRs of

0.4% and 4.7%, respectively, over the same period, to reach respective values of $18.9 billion

and $30.7 billion in 2013.

MARKET VALUE

The Indian household appliances market grew by 9.4% in 2008 to reach a value of $4.8 billion.

The compound annual growth rate of the market in the period 2004-2008 was 12.5%.

MARKET VOLUME

The Indian household appliances market grew by 11.8% in 2008 to reach a volume of 34.7

million units. The compound annual growth rate of the market volume in the period 2004-2008

was 13.2%.Refrigeration appliance sales proved the most lucrative for the Indian household

appliances market, generating 30% of the total revenues. In comparison, cooking appliance sales

account for a further 29.1% of the market's revenue.

MARKET VALUE FORECAST

In 2013, the Indian household appliances market is forecast to have a value of $7.7 billion, an

increase of 60.7% since 2008. The compound annual growth rate of the market in the period

2008-2013 is predicted to be 10%.

MARKET VOLUME FORECAST

In 2013, the Indian household appliances market is forecast to have a volume of 52.2 million

units, an increase of 50.4% since 2008. The compound annual growth rate of the market volume

in the period 2008-2013 is predicted to be 8.5%.


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5. PRODUCT ANALYSIS

5.1 TELEVISION

INTRODUCTION

In the last five years colour television industry (CTV) has witnessed drastic changes

in the intensity of competition. Exchange schemes, free gifts, price offs, prizes, deferred payment

schemes and other incentives as promotional tools have been deployed by the players, which

certainly have made the market, vibrant and pulsating. A major factor contributing to the growth

has been availability of consumer financing schemes. Concomitantly the industry has been

witnessing a new scenario with a new market profile. The entrenched position of the Indian

market leaders in CTVs like Videocon, BPL and Onida has been challenged by MNCs such as

LG, Samsung, Sony, Philips, AIWA, Akai, Panasonic, Sansui and Sharp; some in a perceptible

way, others threatening to do so.

The industry is going through turbulent transformation. Companies are relooking at

their strategies and are desperate for growth. Since this is a technology driven industry,

companies need to constantly improvise, innovate and customise their products. Coloured

cabinets, headphones, 3-D 360 degree sound technology and e-mail TV, plasma TV and golden

eye technology are just a few examples. The last few years have seen a quantitative andqualitative change in TV technology and software. With the advent of several local and foreign

satellite channels, demand for CTVs has seen a rise. In fact, the television manufacturing

industry has come a long way since the big black and white TV sets to the modern day ultra-thin

Plasma and LCD TV sets. With the ever changing technology the Television industry has

adapted itself suitably to cater to the changing tastes of the consumer. Although the top players

viz. LG, Sony, Videocon, Phillips, Samsung and Onida have drastically reduced prices, they

have gained more volume due to increasing market size and higher penetration levels, coupled

with conscious shift towards flat colour televisions. Aggressive and innovative marketing

strategies and technological advances have led to strong brand differentiation and prices. In the

process the industry has evolved with products available at different price points at all levels.

This process was also facilitated by growth in production in the organised segment and domestic

availability of multinational brands due to lowering of import duties and other liberal measures.


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The television industry appears to have two clearly differentiated segments. The MNCs have an

edge over their Indian counterparts in terms of technology, aggressive marketing strategy,

economies of scale in branding through international events and associations combined with a

steady flow of capital.

INDUSTRY ANALYSIS- 5 FORCES MODEL

Michael Porters Five Forces Model provides a robust and time-tested framework for analyzing

any industry, reflected in the strength of the five forces (industry competitors, potential entrants,

and threat of substitutes, power of buyers and power of suppliers). The collective strength of the

five forces determines the ultimate profit potential in an industry, where profit is measured in

terms of long term returns on capital invested (Porter, 1980). The elements of each of the above

forces and the extent and /or effect of each element in the context of the television industry have

been analysed and enumerated below.

THREAT OF NEW ENTRANTS

Most current players are global players

New entrants will need to invest in brand, technology, distribution

CUSTOMER POWER Multitude of brands across price pointswide variety of choice for customers

SUPPLIER POWER

Indigenous supply base limited most raw materials are imported

COMPETITIVE RIVALRY

Number of well-established players; several new players entering Good technological capability

Many untapped potential markets

THREAT OF SUBSTITUTES

Unbranded products and cheaper imports could enter the market


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Overall, the sector is a dynamic one, with significant growth opportunities.

5.2 CONSUMER ELECTRONICS MARKET IN INDIA: COLOUR TELEVISION

The consumer electronics market is one of the largest segments in the electronics industry in

India. Catering to a population of more than 100 crores people, the consumer electronics industry

in India is poised for strong growth in the years to come. It is predicted that the Indian

audio/video consumer electronics industry will grow to Rs.26,931.13 crores ($6.59 billion) by

2011, rising at a Compound Annual Growth Rate (CAGR) of 10.0 per cent from Rs.18,390

crores ($4.5 billion) in 2007.The growth will be aided by a multitude of factors, including:

Growing consumer confidence due to rising disposable incomes;

Easy financing schemes that are making purchases possible;

Increased local manufacturing;

Expanding distribution networks;

Sporting events, such as the Cricket World Cup.

Television continues to be the mainstay of the consumer electronics industry in India with the

transition slowly occurring to newer technologies such as LCD and PDP. The history of the

Indian television industry dates back to 1982, the year when India hosted the Asian Games.

There was a huge demand for colour televisions all through the 80s. In 1984-1985, the colour

television industry was growing at an astounding rate of 140.3%. However, in 1985-86, it fell to

68.6%, 15% in 1988-89 and finally in the year 1989-90 it touched a rock bottom level of 5%. In

1991-92, the Indian economy was going through a balance of payment crisis. As a result of this,

for the first time in the history of Indian colour television, one saw a deceleration in the sales of

colour televisions at -14.5%. During this period, the prices of colour televisions skyrocketed due

to the high import duties imposed on colour picture tubes.


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5.3 THE COLOUR TV INDUSTRY POST LIBERALISATION:

The Colour TV industry in India has seen a gamut of changes in the past one decade as

liberalization set in the Indian subcontinent making its market highly competitive and consumer

driven. With the fast changing liberalization policies, changing and growing demands of the

consumers made the industry competitive. The constant desire of the companies (domestic or

international) to have a major share in the market often leads them to die many deaths which has

became a hackneyed phenomenon in this sector of Liberalized India if the companies are not in

able to cope with changing reforms and the changing tastes and preferences of the consumers.

The foreign player entered the Indian market since the Indian economy increasingly

interdependent almost over the last one and half decades. Consumers in India with open markets

on an average are enjoying lower prices, improved consumption, improved savings and risingstandards of living. Before liberalization in India, the consumer was at the mercy of the producer

and savings management were prevailing in the sense that individuals saved and then consumed.

This might be because of no financing facilities, no credit card facilities and moreover demand

side economic were prevailing. After liberalization the total scenario has changed- consumers in

India moved from savings management to expenditure management. This is because of the

availability of goods and services at lower price, availability of credit cards, availability of

finance at low interest and in some cases zero interest and moreover the death of power of

monopoly in many sectors because of the entry of the foreign players. Producers have become

price takers rather than price setters.

The tastes and preferences, life style and consumption patterns of the consumers have

also changed. Like other third world countries, people in India have started spending much more

money on eating out; started buying a flat or a car because of the availability of credit cards and

easy financing facilities; more number of people have been travelling abroad after liberalization

and there has been a distinct shift from joint family system to that of nuclear families. As per the

estimates of the confederation of Indian Industry (CII) the Indian consumer durable industry is

Rs 20,000 crores business industry. The industry is highly dominated by the foreign players

occupying the top slots in the market shares. From a recent data obtained from the

Equitymaster.com the market share of all the MNCs in the colour TV segment is about 65%. The


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biggest attraction for these players is the growing Indian middle class, which is approximately

250 million, and also low penetration levels characterize this market. 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. There is

a significant shift today. 15-20 years ago, it was a Seller's market. Customers had to buy what

was available. There was absolutely no choice. But today, it is entirely different. It is a Buyer's

market. There is plenty of choice, both in terms of brands and the items. It has helped in

widening the product base of consumer durables. Also, technological changes have helped the

boom in the industry. TV sets are still the fastest growing category among household durables.

During the last two years 11.5% of Indian homes bought a TV set. This figure is even higher

among the top eight metros at 21.3% about one in every five home in these cities acquired a TV

set in the last two years. As a result of which the entrenched position of the Indian market leaders

in CTVs like Videocon, BPL and Onida has been challenged by the MNCs such as LG, AIWA,

Akai, Panasonic, Samsung, Sony, Philips and Sharp; some in a perceptible way and others

threatening to do so. Some of the growth drivers because of which CTV market is growing fast

are:

Increased awareness Increase in disposable income Emergence of nuclear families Rising

availability Declining prices Many MNC and domestic companies are now making India as a

manufacturing centre because: Low cost skilled labour Tax free zones i.e. SEZs Qualified

workforce Untapped domestic market Excellent supply base for glass and colour picture tubes.

Some economic measures that have also played a role in this phenomenal growth are:

Custom duty on colour picture tubes (CPTs) lowered to 20% from 25%

Abatement rates on TV sets have changed from 35% to 40%

Special additional duty on customs of 4% was done away with

Single rate ofexcise duty at 16%


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6. COMPETITION ANALYSIS

6.1 COMPETITION OVERVIEW

Samsung India (CURRENT MARKET SHARE-37%)

Initially the strategy of Samsung in India was to create premium image by emphasising global

brand. After facing stiff competition from another Korean major- LG, Samsung also started

playing price game. In 2004 it reverted back to its premium positioning, although it resulted in

some loss of market share. In line with the Global Digital Initiative of the Parent Company,

Samsung India acquired 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.

LG India (CURRENT MARKET SHARE-23%)

LG Electronics rightly understood the consumer motivations to create magnetic products, price

them strategically, position them sharply and keep making the magnetism more potent. Having

understood the finer differences in consumer motivations, it opted for sharp-arrow reasons-to-buy differentiation over the blanket-all approach taken by most of the other players. It is an

aggressive marketer. It focuses on low and medium price products.

Toshiba India

Toshiba India Private Limited (TIPL) is the wholly owned subsidiary of Japanese Electronics

giant Toshiba Corporation and was incorporated in India on September 2001. Toshiba had a

presence in India since 1985 and was represented in India through their Liaison Office.

Sony India (CURRENT MARKET SHARE-21-22%)

Sony Corporation, Japan, established its India operations in November 1994. In India, Sony has

its distribution network comprising of over 7000 channel partners, 215 Sony World and Sony


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Exclusive outlets and 21 direct branch locations. The company also has presence across the

country with 21 company owned and 172 authorized service centres.

Sharp India Ltd

Sharp India ltd was incorporated in 1985 as Kalyani Telecommunications and Electronics Pvt

Ltd, the company was converted into a public limited company in the same year. The name was

changed to Kalyani Sharp India in 1986. The company was entered into a joint venture with

Sharp Corporation, Japan - a leading manufacturer of consumer electronic products to

manufacture VCRs/VCPs/VTDMs. The company manufactures consumer electronic goods such

as TVs, VCRs, VCPs and audio products. The products were sold under the Optonica brand

name. Sharp has a production base in 26 countries with 33 plants, and its products are used in

133 countries. The company was accredited with the ISO-9001 certification in the month of

February, 2001.

Hitachi India

Hitachi India Ltd (HIL) was established in June 1998 and engaged in marketing and sells a wide

range of products ranging from Power and Industrial Systems, Industrial \Components &

Equipment, Air Conditioning & Refrigeration Equipment to International Procurement of

software, materials and components. Some of HILs product range includes Semiconductors and

Display Components. It also supports the sale of Plasma TVs, LCD TVs, LCD Projectors, Smart

Boards and DVD Camcorders.

Mirc Electronics (ONIDA)

The company commands strong brand equity among consumers largely owing to the success of

its Onida brand.

High-quality designs have made the company a leading player in the electronics and

entertainment business. 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. Onida is a leading brand in Gulf market and also exports its models to Africa, Bangladesh,


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Sri Lanka and Nepal. It has technical tie-up with the Japan Victor Company, better known as

JVC. So focused is Onida on positioning itself on the premium, high-tech plank that it is even

planning to push its own envelope on obsolescence, much like Intel has been doing in its own

industry. The strategy is aimed at further broad basing the product offering of the company,

which has largely dominated the top-end of the television market, across multiple market

segments. Besides understanding the strategy adopted by different players, several other factors-

industry growth, concentration and balance, corporate stakes, fixed cost, and product differences

need to be analysed to determine the extent of rivalry between the existing players.

Videocon (CURRENT MARKET SHARE-12%)

It is the market leader in the consumer electronics and home appliances segments in India; the

company manufactures home appliances such as refrigerators, microwave ovens, compressors,

air conditioners and washing machines.

It has plans to acquire Daewoos consumer electronics businesses worldwide to bring LC D

TVs, plasma TVs and components into its fold; the move would also help it acquire a consuming

partner for the recently-acquired Thomsons picture tube business. 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 un served

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 and taken over Akai- tail end brand or

brands like Aiwa. 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. It has

the widest distribution network in India with more than 5000 dealers in the major cities .It also

has a strong base in the semi-urban and rural markets. Due to its multi-brand strategy, it has at

present multiple brands at the same price point. This has led to a state of diffused positioning for

its brands. It has also led to a cannibalization of sales among these brands. The flagship brand

Videocon has lost market share due to the presence of Sansui in the same segment. Because of

reduction in import duties on CPT the cost advantage of Videocon is also on the decline. Hence

it is facing rough weather and also trying to boost exports.


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Panasonic India (CURRENT MARKET SHARE-6%)

Panasonic Corporation based in Osaka, Japan is a worldwide leader in the development and

manufacture of electronic products for a wide range of consumer, business, and industrial needs.

Panasonic Electric Works Co., Ltd. traces its roots to the company started in 1918 by Konosuke

Matsushita. Panasonic India plans to invest USD 100 million in its new plasma TV production

facility in 2011.

The company currently has five production units in the country, at Noida, Gurgaon, Vadodara,

Chennai and Delhi. It also launched the worlds slimmest, 1-inch plasma TV called Vierra PDP

Z1.According to Panasonic The market potential for plasma TV was much greater in India than

China, the demand for such high-end sets was increasing at a rate of 4-10 per cent in the country.

The company has priced its plasma TV between Rs 24,000 and Rs 30 lakh (for a 103-inch

screen). It has already sold ten such units this month.

6.2 INDIA EMERGING AS A FORCE IN THE TELEVISION MARKET

In India, where 70 percent of citizens earn less than $5,000 a year, buying a television is not an

option for many consumers. Surprisingly, however, Indians have shown remarkable interest in

buying televisions, even the more-expensive flat-panel sets, mostly because of increased

awareness, rising availability and declining prices.

India is emerging as a major force in the global television market in terms of domestic

consumption as well as in production of sets, while there remain disparities in terms of the

economic status of television buyers, set sales in India are experiencing strong growth. Indias

television market is set to grow to 18.7 million units by 2011, expanding at a Compound Annual

Growth Rate (CAGR) of 9 percent from 12.1 million units in 2006. On the revenue side, overall

television sales will reach $4 billion by 2011, rising at a CAGR of 9.6 percent, up from $2.5

billion in 2006.

CRTs still dominate market


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While Flat-Panel-Display (FPD) televisions are gaining sales momentum in India, CRT

televisions still have a leading position in the nation because the higher prices of Liquid Crystal

Display Televisions (LCD-TVs) and plasma sets have discouraged their adoption in most parts

of the country. Many consumers in India buying their first television sets are looking at 21-inch

and smaller CRTs as starter sets. However, this carries over to the replacement market as well,

where consumers are attracted to 29-inch flat-face CRT TVs as alternatives to LCD-TVs because

of their lower prices. It is the urban areas, where consumers are looking for replacement sets or

buying second televisions, where there is a likelihood of flat panels gaining some market share.

Manufacturing on the rise

Television set manufacturing continues to rise in India, with both domestic and overseas firms

increasing their production bases in the country. This is due to a number of reasons, including:

Low-cost skilled labour.

Availability of a qualified workforce.

An untapped domestic market.

Special economic zones that provide tax-free environments.

Other tax and financial support breaks.

Factories in India are cropping up in less-developed regions because of tax breaks given by the

government in order to improve the living conditions of citizens as well as to promote

investments in television production in the country. India has an excellent component supply

base in terms of manufacturing facilities for glass and colour picture tubes so it makes it a good

fit for companies striving to take advantage of this emerging market.

6.3 MARKET MEASUREMENT AND FORECASTING

Demand forecasting and sales forecasting are important for any marketing planning and control

as it serves the basis for comparison over a period of time. Forecasting helps in identifying and

solving marketing and sales problems. Further, they are also used for setting performance

standards. If the marketer knows the different tools and their application and is familiar with the

market forces, most often, 90-95% of the forecast is good. Besides, it is increasingly felt that the

forecast should generally be in a range rather than just having a single point forecast.


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Forecasting exercise involve understanding market potential. Consider the example of a

product such as a T.V set .To estimate the market potential for T.V sets in India, we have to

know the number of households .Assuming that each household will have a T.V set , we can say

that that the market potential for T.V sets is equal to the number of households in the country

.And if we assume that six people constitute a household, we have about 142 million households

Ideally, this is the market .But then , we know that 25% of Indian population is below the

poverty line and hence will not be able to buy T.V sets Besides, almost 40% of Indians are in

low income group and given the prices of T.V sets, they too may not be able to afford it. So, one

is left with only 35% of the total population which is the real market that needs to be targeted.

One might ask why this is so?

The answer lies in the fact that the size of any market is based on the number of buyers who

might exist for a particular marketing offer. These buyers need to have three characteristics:

Interest in the product

Income to be able to afford the product

Access to the product

Based on these characteristics .we have arrived at 35% of the total Indian population to be the

size of the total market. Market potential is the limit approached by the market demand as

industrys marketing expenditures approach infinity, for a given environment, in other words,

market potential refers to the upper limit of market demand. It is important for us to understand

that there are three key terms involved in defining the market potential. These are

Market demand

Marketing expenditure by the industry

Defined market environment

Market demand refers to the total volume that could be bought by a defined customer group in a

defined geographical area in a defined time period in a defined marketing environment under a

defined marketing programme. It is important to note that demand could be measured in physical

or monetary terms. Demand is always for a specific time frame. An important dimension to be


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understood is also the fact that market demand is not a fixed number but a function of specific

conditions. It is for this reason that it is called market demand function of market response

function.

In the above example of T.V sets, as more income is generated in the Indian economy following

higher economic growth rate, the demand for T.V sets will increase .The demand for Colour T.V

sets boomed in 1982-84 as Doordarshan started colour telecast, went commercial and beamed

popular soap operas. We know that at any given time there is only one level of industry

marketing expenditure. The market demand corresponding to this level is called market forecast.

Marketing demand as a function of industry marketing expenditure (assumes a given marketing

environment)

Marketing demand in two different marketing environments

This refers to a companys share of the total market demand, it is subject to all the determinants

ofthe market demand, plus the determinants of the companys market share.

Company Potential is the limit approached by company demand as its marketing effort increases

relative to its competitors. The absolute limit to this potential is the market potential and this will

be so only in a monopolistic situation.

Sales Forecast refers to the estimates of future sales of companys products.

Various research and report had analyzed the trends and opportunities within the India market

and predicts that by 2012, LCD TV shipments will surpass those of CRT TVs in India.

India has the second largest population in the world and an annual GDP growth rate of more than

8 per cent from 2002 to 2012, with a TV market that is projected to be 1.3 crores (13 million)

units in 2008. CRT TV accounts for 92.9 per cent of those units in 2008, followed by LCD TV

with 6.6 per cent and PDP TV with 0.5 per cent. However, research finds that the India flat panel

TV market is just at the beginning of a real growth curve, with Y/Y growth of more than 100 per

cent expected for each of the next five years. Growth will be driven by enhanced purchasing


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power, the digital broadcast (DTH, IPTV, STB cable) transition as well as consumer awareness

and affordability of flat panel TVs. India's growing upper middle class is projected to be the

greatest source of LCD TV purchasing power. Research analyses the favourable demographics

where more than 23 Million Indiansgreater than the entire population of Australiawill enter

this demographic in the next five years.

Meanwhile, major brands like Samsung, LGE, Sony and Philips and Indian local brands like

Videocon and Onida are all focusing promotional efforts around LCD TV. Several Chinese

brands are also targeting India with their first exports.

7. WHY INDIAN COMPANIES ARE UNABLE TO COMPETE WITH

MNCS

To remain domestically competitive, a brand has to be globally competitive.Gone are the days when a company could be assured of its success in its strong hold bastion.Today with the economy opening up, it becomes more accessible to multinationals with theirproven track record can displace any domestic brand. Hence, it is becoming increasinglyimportant for the Indian brands to establish their superiority in India and globally.So, what is it that sets them apart from the Indian brands. The following factors are considered as

important .

Customer Focus: The Indian companies rank poorly on this aspect. Global players have aperception of better focused strategy towards the consumers and work towards satisfying theconsumers rather than just selling the products.

Symbolic Value: Owning and using a global brand has more symbolic value than that presentedby an Indian brand. Global brands have a certain amount of aspirational value associated withthem which makes them more desirable.

Global Citizen: Consumers look to global brands as symbols of cultural ideals. They use brands

to create an imagined global identity that they share with like-minded people. Transnationalcompanies therefore compete not only to offer the highest value products but also to delivercultural myths with global appeal.

Social responsibility: People recognize global companies wield extraordinary influence, both positive and negative, on societys well-being. They expect them to address social problemslinked to what they sell and how they conduct business.


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Perceived Quality: Consumers watch the fierce battles transnational companies wage overquality and are impressed by the victors. People like global brands because they usually offermore quality and better guarantees than other products. That perception often serves as arationale for global brands to charge premiums. Perhaps the biggest differentiator and inhibitorfor the domestic or local brands in context is the perception of quality. Lets discuss this in

greater detail to come up with a solution to the problem.

PERCEIVED QUALITY

Perceived quality is defined as the customers perception of the overall quality or superiority of aproduct or service with respect to its intended purpose, relative to alternatives. It is a perceptioncreated overtime by the customers and hence cannot be objectively determined. Global brandsscore higher than the Indian brands in perceived quality.

8. THE ROAD AHEADThe 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 slowdowndue 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. Currently, rural consumers purchase their

durables from the nearest towns, leading to increased expenses due to transportation. Purchase

necessarily done only during the harvest, festive and wedding seasons April to June and

October to November in North India and October to February in the South, believed to be

months `good for buying, should be converted to routine regular feature from the seasonal

character.

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.


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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.

According to survey made by industry, the rural market is growing faster than the urban India

now. 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 Internet being now used by the market

functionaries that will lead to intelligence sales of the products. It will help to sustain the demand

boom witnessed recently in this sector. 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.

According to a study by the McKinsey Global Institute (MGI), Indian incomes are likely to grow

threefold over the next two decades and India will become the world's fifth-largest consumer

market by 2025. In the given scenario, urban markets will continue to fuel the Indian economy

for quite some time to come. Moreover, expenditure by the middle class accounts for the bulk of

Indias urban consumer expenditure. About 61 per cent of total urban income comes from

households that can be classified as middle classearning between US$ 1,493 and US$ 9,955 a


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year. Further, India is likely to see rapid urbanization, with around 45 per cent of Indians living

in urban areas by 2050, up from 30 per cent in 2007-08, according to a study by National

Council of Applied Economic Research's (NCAER). According to a report by McKinsey, India's

overall retail sector is likely to grow to US$ 419.93 billion by 2015. According to global real

estate consultant, CB Richard Ellis, India has moved up to the 39th most preferred retail

destination in the world in 2009, up from 44 last year. The turnover of the organized retail

segment in India is pegged at around US$ 8.1 billion. It is expected to reach US$ 51 billion by

2010. Retail opportunity is slated to rise by about US$ 160 billion in India in five years. In urban

India, modern retail is likely to grow from the current 9.6 per cent of total retail to 26 per cent in

the next five years, as per Technopak Advisors The Indian consumer durables market seems to

be relatively untouched by the economic slowdown. The consumer durable goods output

witnessed a 2.5 per cent rise in durables output in the first quarter of 2009, according to a report

by the Development Bank of Singapore (DBS).

Colour televisions have seen an increase in sales, growing 2 per cent to 2.8 million units in

January- March 2009, according to the figures released by ORG-GFK. Whirlpool is on the

expansion mode and is targeting a 22 per cent share of the US$ 423.28 million washing machine

market in India by the end of 2009, and is launching a range of new products with an investment

of US$ 4 million for the same. Moreover, a large number of hi-technology durables are expected

to flood the US$ 4.03 billion Indian durables market in 2009. Samsung, LG, Haier and Videocon

are among companies planning new product launches in the coming months.


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BIBILOGRAPHY

1. Douglas B. Holt, John A. Quelch & Earl L. Taylor, How Consumers Value Global Brands,

2004.

2. Philip Kotler , Marketing Management, Thirteenth Edition, Prentice Hall, 2010

3. Harsh V. Verma , Brand Management, First Edition, Excel Books, 2002

4. Rishikesha T. Krishnan, Anshu Goel, Sachin Sharma, Building International Brands from

India.

5.www.cygnus.com

6. Electronics and appliances manufacturingThe Indian opportunity. Ernst and Young - 2009
http://www.cygnus.com/http://www.cygnus.com/http://www.cygnus.com/http://www.cygnus.com/

marketing term paper final

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