A Study on

“MACRO ANALYSIS OF AIR CONDITIONER INDUSTRY”

Management Research Project -I Submitted

In the partial fulfilment of the Degree of

Master of Business Administration Semester-III

By

Amit A Babar (13044311003) (Marketing) Jay U Mistri (13044311037) (Marketing) Sanket S Patel (13044311106) (Finance) Kishan M Rajgor (13044311120) (Marketing) Vishang S Shah (13044311126) (Finance) Rakesh R Singh (13044311130) (HRM)

Under the Guidance of:

Prof. (Dr.) Mahendra Sharma

Prof. & Head,

V. M. Patel Institute of Management.

&

Prof. Harsha Jariwala, Asst. Professor

Prof. Abhishek Parikh, Asst. Professor

V. M. Patel Institute of Management.

Submitted To:

V. M. Patel Institute of Management,

Ganpat University,

Kherva.

(Decamber-2014)

I

CERTIFICATE BY THE GUIDE

This is to certify that the contents of this report entitled “A STUDY ON MACRO

ANALYSIS OF AIR CONDITIONER INDUSTRY by Amit A Babar .(003), Jay U Mistri.

(037), Sanket S Patel. (106), Kishan M Rajgor . (120), Vishang S Shah . (126) Rakesh R

Singh. (130) submitted to V. M. Patel Institute of Management for the Award of Master of

Business Administration (MBA Semester -III) is original research work carried out by them

under my supervision.

This report has not been submitted either partly or fully to any other University or Institute

for award of any degree or diploma.

Date:

Place: Kherva

Prof. (Dr.) Mahendra Sharma,

Professor & Head,

V. M. Patel Institute of Management,

Ganpat University.

Kherva.

II

CANDIDATE’S STATEMENT

We hereby declare that the work incorporated in this report entitled “A STUDY ON

MACRO ANALYSIS OF AIR CONDITIONER INDUSTRY” in partial fulfillment of the

requirements for the award of Master of Business Administration (Semester - III) is the

outcome of original study undertaken by us and it has not been submitted earlier to any other

University or Institution for the award of any Degree or Diploma.

Date :

Place : Kherva

Amit A Babar (13044311003)

Jay U Mistri (13044311037)

Sanket S Patel (13044311106)

Kishan M Rajgor (13044311120)

Vishang S Shah (13044311126)

Rakesh R Singh (13044311130)

III

PREFACE

As the part of the syllabus of MBA program. We are assigned some practical and theoretical

work in partial fulfilments of the segments for the Semester Third. We have to prepare a

comprehensive report on any one industry for subject "Management Research Project" that is

also known as MRP - I.

The basic purpose of this project is to enhance the knowledge of students about the industry

in its totality and appreciate the use of an integrated approach in understanding the

environmental issues and problems. This makes students more aware about Industry and its

position and makes student capable in analyzing the Industry's position in all shares. This

may also enhance student's analytical ability.

So far as the selection of the industry is concerned, on Macro analysis of Air Conditioner

Industry in India.. So we have selected this Industry to gain better knowledge of the state of

Industry its key success factors which makes this industry an essential part of consumers life.

So our aim is to analyze the industry and know its forces which run the industry. To know the

technological changes those have taken place in the industry. We also have analyzed

Political, Economical, Social and Technological Factor of Industry and then found out

strength, weakness, opportunity and threat of the industry.

This research really enhances our knowledge about industry and its various undertaking. We

gained lot of knowledge from this project. We hope this will also help in future.

IV

ACKNOWLEDGEMENT

We would like to express our deep feeling of gratitude to the mentioned officials for their

assistance, guidance and inspiration before and throughout the work of MRP-1.

We give our special thanks to respected Dr. Mahendra S. Sharma, Professor & Head, V.M.

Patel Institute of Management, Ganpat University for providing us an opportunity to carry out

industry analysis on Air Conditioner Industry.

We would like to thank Ms. Harsha Jariwala, Lecturer, V.M. Patel Institute of

Management, for her continuous guidance and support throughout the study period.

We would like to give vote of thanks to all the faculty members and library and computer lab

support provided by V.M. Patel Institute of Management.

We are very thankful to them for their help and advice throughout our project. Their

gentleness, availability and readiness to provide all the type of guidance, for understanding

the technical things made this project successfully completed well within the timeframe.

V

EXECUTIVE SUMMARY

Air conditioner industry is one of the industries which have shown moderate growth over the

period of years. Although the liberalization of the Indian economy have seen the emergence

of many leading players, the air conditioner industry consists of only a few companies like

Blue Star, Hitachi Home Appliances, Godrej Appliances, Daikin Air Conditioner, LG,

Samsung, Carrier Air- Conditioning, etc. which account for the major market share in the

industry.

Air conditioner industry is bound to be affected by the policies occurring in the consumer

durables industry as the air conditioner industry is a part of white goods section of the

consumer durables. With the consumer durables industry set to increase at a rate of 10 -15%

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 and hence increasing the

competitive rivalry among the firms. All this aspects of consumer durable are covered in this

report with the aid of a complete industry analysis in terms of the following abstracts.

Research Methodology

Type of Research: Descriptive Research

Research Instrument: Secondary Data

Objectives of the Study

• To identify the current scenario of the AC industry

• To analyze the success, failure and growth of AC segment in the white goods industry

• To study the growth of different companies and their comparison in the AC segment

• To depict various factors such as Political, Economical, Social and Technological factors

affecting AC segment

• To analyze various Threats and Opportunities for the industry

VI

• To study the present Technology used in this segment

• To know who are the major players and how they work in the industry

• To identify the market share of AC segments in Consumer Durable industry

A Secondary Research Analysis based on the objective to know about the structure of the

industry, to analyze the different competitive forces of the industry, to know about the

strength, weaknesses, opportunities and threats of industry and to know about the main

products on which the industry's growth depends.

Also the players in the industry today are more emphasized on providing the satisfaction to

the customers and try to delight them by after sales service so we can say that they are trying

to be their business customer driven. The industry is trying to adapt to the environmental

changes related to the globalization. The appliance industry has grown at a faster pace than

the customer electronics category. Lastly the player who can provide quality product updated

with latest technology through a wide spread distribution network and an efficient after sales

service will be the winner in this competitive industry.

VII

Abbreviations Used

AC Air conditioner APF Annual Performance Factor (used in Japan) ASHRAE American Society of Heating, Refrigerating and Air-Conditioning Engineers BTU British Thermal Unit CAC Central Air Conditioner CCE Cost of Conserved Electricity CFCs Chlorofluorocarbons CD Coefficient of discharge COP Coefficient of Performance (expressed in W/W (SI units) DCV Demand controlled ventilation DEVAP Desiccant-enhanced evaporative air conditioning DG-TREN Directorate General for Energy and Transport DG-ENTI Directorate General for Enterprise and Industry DOE Department of Energy (United States of America) EAC Evaporating air conditioner EC European Commission EER Energy Efficiency Ratio (expressed in W/W (SI units) ESEER European Seasonal Energy Efficiency Ratio, expressed in W/W (SI units) EU European Union EUP Energy-Using Products FCC Federal Communications Commission (US) GHG Green House Gases GWP Global Warming Potential HVAC Heating, Ventilating, and Air Conditioning HCFC Hydro chloro fluro carbons HP Heat Pump Hp Horsepower (US motors equivalent to kW) HSPF Heating Seasonal Performance Factor KW Kilowatt (EU motors equivalent to HP) LRMC Long Run Marginal Cost of Electricity Supply NREL National Renewable Energy Laboratory, Facility of the U.S. Department of Energy ODP Ozone depletion potential PCM Phase changing materials PSC Permanent split capacitor SEAD Super-efficient Equipment and Appliance Deployment SEER Seasonal Energy Efficiency Ratio (expressed in W/W (SI units) TEWI Total Equivalent Warming Impact TWH Terawatt hour UEC unit energy consumption US United States VAC Vapor compression air conditioner VAV Variable air volume air VRF Variable Refrigerant Flow

INDEX

Certificate By The Guide ……………………………………………………..…………... I

Candidate’s Statement ………………………………………………………...………… II

Preface ..…………..…………………………………………………………….………... III

Acknowledgement ..…………………………………………………………….………... IV

Executive Summary .…………………………………………………………….……….... V

Abbreviation Used .….………………………………………………………….………... VII

Sr.No Particular Page No.

1.0 Chapter 1 INTRODUCTION 1 1.1 Air Conditioner Industry in India 2 1.2 History 4 1.3 Types of Air Conditioner in India 6 1.4 Difference Between Types of AC’s 9 1.5 Categorization of AC by Capacity 10 1.6 Industry’s Dominant Economic Features 12

2.0 Chapter 2 INDUSTRY PLAYERS ANALYSIS 21 2.1 Hitachi 22 2.2 Daikin 24 2.3 Godrej 26 2.4 Blue Star 28 2.5 Samsung 30 2.6 LG 31 2.7 Carrier 32 2.8 Voltas 33

3.0 Chapter 3 STRATEGIC ANALYSIS 35 3.1 External Strategic Audit 36 3.1.1 Pest Analysis 36 3.1.2 Porter’s Five Forces 39 3.1.3 Competitive Profile Matrix (CMP) 42 3.1.4 External Factor Evaluation (EFE)Matrix 44 3.2 Internal strategic Audit 46 3.2.1 Space Analysis 46 3.2.2 Boston Consulting Group (BCG) Matrix 48 3.2.3 SWOT Analysis 49 3.2.4 Internal Factor Evaluation (IFE) Matrix 51 3.2.5 Seven S’s framework 53 3.2.6 Opportunity Matrix 55

4.0 Chapter 4 FINANCIAL ANALYSIS 56 4.1 Ratio Analysis 57 4.2 Trend Analysis 69 4.3 Common Size Statements 75

5.0 Chapter 5 BUSSINESS PLAN 77 5.1 Executive Summary 78 5.2 Company and Financing Summery 81 5.3 Products and Services 82 5.4 Strategic and Market Analysis 83 5.5 Marketing Plan 84 5.6 Personnel Summery 86 5.7 Financial Plan 86 5.8 Financial Data 88

6.0 Chapter 6 Chapter 7

CONCLUSION 90 7.0 BIBLIOGRAPHY 92

1

Chapter 1 INTRODUCTION

2

1.1 Air-conditioner industry in India:-

The market of air conditioners in India has been on a steady growth ever since, apart from certain

exceptions. The perception of people towards the category of this product has witnessed a

paradigm shift over the years from a luxury product to becoming a necessity in hot humid

weather conditions of India. Increasing demand by the residential sector owing to reduction in

prices has instigated the manufacturers to aim for a higher market share in the highly potential

market of air conditioners in India. The demand from the commercial segment is catching up fast

with the increasing number of commercial offices, stores and business apartments being set up,

as compared to the demand from the residential segment.

The Indian AC market accounted for sales of 3.6 million units in 2013. AC’s are perceived as

high-end products; current penetration stands at 6.8 per cent including Window and Split AC.

The segment had a 13.0 per cent share (2013) in the consumer appliances market. High

income growth and rising demand for split ACs are the key growth drivers. The room air-

conditioning market represents approximately 50% of the total market, with the other 50%

comprised of central and specialist air-conditioning systems. The room AC market can again be

divided into two sub-segments. On the one hand the residential segment which now constitutes a

majority 60% market share and on the other hand the commercial segment which represents a

smaller 40%.

According to “India Air Conditioner Market Forecast & Opportunities, 2017” the air conditioner

market is poised for greater growth over next five years. India air conditioner market is

forecasted to grow at a CAGR of 13.6% for the next five years. Increasing disposable income,

rising weather temperature, falling prices of air conditioners coupled with the latest technological

innovations increasing the cooling efficiency and the increasing commercialization of the

economy are the factors which are driving air conditioners market in India.

In an endeavour to consider market abuse in the consumer goods industry, I would be

considering the Air Conditioner (AC) segment in India. This market can be segregated into two

major parts i.e. the fore market or the primary market that deals with the transaction of buying

and selling of the good and the aftermarket or the secondary market that deals with the spare

parts and services thereof that are required to keep the goods functioning.

3

The Air Conditioner market in India includes many players. These include both foreign and

Indian brands such as LG, Voltas, Samsung, Daikin, Panasonic, Hitachi, Blue star, Godrej etc.

The fore market in air conditioners appears to be competitive. The focus of the research is on the

aftermarket of the air conditioners. This includes the servicing and maintenance of the product,

availability of spare parts, extension of warranty etc. Here the competitiveness of the primary

market may or may not result in the competitiveness of the aftermarket. This would require

further consideration of various aspects.

The primary market and aftermarket need to be considered from the point of view of the

Competition Act, 2002, primarily, from the point of view of the Sections 3 and 4. These sections

deal with the anti competitive agreements and abuse of dominant position in the relevant

markets. The practices followed by the companies are considered under the act, not only from

the point of view of anti competitiveness, but also by way of promoting and sustaining

competition in markets, protecting the interests of the consumers and ensuring freedom of trade

carried on by other participants in markets.

The concept that is used in the consumer durables aftermarkets is about tying of products. Tying

arrangements generally arise when the seller of one product imposes various sorts of pressure on

a buyer to induce the buyer to buy additional products from the seller or the seller's designee.

The metaphor is that the buyer is "tied" to one product by his desire for the other ("tying")

product. These ways and manners vary with the customer attitudes and substitutability of the

products. The understanding of the air conditioners market is mainly relied upon the information

available in the public domain about these companies and various discussions with the dealers of

various Air Conditioner brands and Independent Service Organisations (ISOs) and service

centres. The market practices in India have been compared with the various practices followed

under the Federal Trade Commission (FTC) of United States, Office of Fair Trade (OFT) in

United Kingdom and European Commission (EC), in such cases.

While considering the air conditioning markets of India in terms of various provisions of the law

and the practices and rulings abroad, there are various aspects that need to be reviewed.

4

1.2 History:-

While moving heat via machinery to provide air conditioning is a relatively modern invention,

the cooling of buildings is not. The ancient Romans were known to circulate aqueduct water

through the walls of certain houses to cool them. As this sort of water usage was expensive,

generally only the wealthy could afford such a luxury.

Medieval Persia had buildings that used cisterns and wind towers to cool buildings during the hot

season: cisterns (large open pools in a central courtyards, not underground tanks) collected rain

water; wind towers had windows that could catch wind and internal vanes to direct the airflow

down into the building, usually over the cistern and out through a downwind cooling tower.

Cistern water evaporated, cooling the air in the building.

1.2.1 Development of mechanical cooling

In 1820, British scientist and inventor Michael Faraday discovered that compressing and

liquefying ammonia could chill air when the liquefied ammonia was allowed to evaporate.

In 1842, Florida physician John Gorrie used compressor technology to create ice, which he used

to cool air for his patients in his hospital in Apalachicola, Florida. He hoped eventually to use

his ice-making machine to regulate the temperature of buildings. He even envisioned centralized

air conditioning that could cool entire cities. Though his prototype leaked and performed

irregularly, Gorrie was granted a patent in 1851 for his ice-making machine. His hopes for its

success vanished soon afterwards when his chief financial backer died; Gorrie did not get the

money he needed to develop the machine. According to his biographer Vivian M. Sherlock, he

blamed the "Ice King," Frederic Tudor, for his failure, suspecting that Tudor had launched

a smear campaign against his invention. Dr. Gorrie died impoverished in 1855 and the idea of air

conditioning faded away for 50 years.

Early commercial applications of air conditioning were manufactured to cool air for industrial

processing rather than personal comfort. In 1902 the first modern electrical air conditioning

was invented by Willis Haviland Carrier. Designed to improve manufacturing process control in

a printing plant, his invention controlled not only temperature but also humidity. The low heat

and humidity were to help maintain consistent paper dimensions and ink alignment. Later

5

Carrier's technology was applied to increase productivity in the workplace, and The Carrier Air

Conditioning Company of America was formed to meet rising demand. Over time air

conditioning came to be used to improve comfort in homes and automobiles. Residential sales

expanded dramatically in the 1950s.

1.2.2 Electromechanical cooling

In 1906, Stuart W. Cramer of Charlotte, North Carolina, USA, was exploring ways to add

moisture to the air in his textile mill. Cramer coined the term "air conditioning," using it in a

patent claim he filed that year as an analogue to "water conditioning", then a well-known process

for making textiles easier to process. He combined moisture with ventilation to "condition" and

change the air in the factories, controlling the humidity so necessary in textile plants. Willis

Carrier adopted the term and incorporated it into the name of his company. This evaporation of

water in air, to provide a cooling effect, is now known as evaporative cooling.

1.2.3 Refrigerant development

The first air conditioners and refrigerators employed toxic or flammable gases

like ammonia, methyl chloride, and propane which could result in fatal accidents when they

leaked. Thomas Mid gley, Jr. created the first chlorofluorocarbon gas, Freon, in 1928. The

refrigerant was much safer for humans but was later found to be harmful to the

atmosphere's ozone layer. Freon is a trademark name of DuPont for any Chlorofluorocarbon

(CFC), Hydrogenated CFC (HCFC), or Hydro fluorocarbon (HFC) refrigerant, the name of each

including a number indicating molecular composition (R-11, R-12, R-22, R-134). The blend

most used in direct-expansion comfort cooling is an HCFC known as R-22. It is to be phased out

for use in new equipment by 2010 and completely discontinued by 2020. R-11 and R-12 are no

longer manufactured in the US, the only source for purchase being the cleaned and purified gas

recovered from other air conditioner systems. Several non-ozone depleting refrigerants have

been developed as alternatives, including R-410A, known by the brand name Puron.

Innovation in air conditioning technologies continue, with much recent emphasis placed on

energy efficiency and improving indoor air quality. As an alternative to conventional

refrigerants, natural alternatives like CO2 (R-744) have been proposed.

6

1.3 Different Types Air Conditioner in India:-

1) Windows AC

These types of AC are designed to be fitted in window sills. A single unit of Window Air

Conditioner houses all the necessary components, namely the compressor, condenser, expansion

valve or coil, evaporator and cooling coil enclosed in a single box. Since a window AC is a

single unit, it takes less effort to install as well as for maintenance.

Advantages

• Single unit air conditioner

• Less effort needed for installation

• Costs lesser in comparison to other varieties

2) Split AC

These are kits of 2 units, one internal and another external. The indoor unit installed inside a

room intakes warm air and throws in cold air. The outdoor unit on the other hand is installed out

of the house. It contains the compressor and is linked to the internal unit via drain pipes and

electric cables. This external unit throws out the warm air.

Advantages

• Internal unit takes up less space for installation

• Usually more silent than window ACs

• Minimally affect your home decor

• Can be installed in room with no windows

7

3) Tower AC

These are also known as floor-standing air conditioners. Like split ACs, a tower AC set consists

of 2 units- one internal and an external. However, the indoor unit doesn’t need wall installation.

It rather occupies some space on the floor. Tower air conditioners usually have high cooling

capacity and suitable for very large rooms.

Advantages

• Suitable for high capacity cooling

• Ideal for large rooms at home and in offices

• Doesn't need windows or wall installation

4) Cassette AC

These space-saving ACs are shaped like cassettes and are designed to be installed on ceilings.

The panel of these air conditioners is designed to blend with all kinds of home décor. They are

stylish, and are known to deliver fantastic performances. Most cassette type air conditioners

require no ducting. They are perfect for large spaces where windows or split AC may not reach

out.

Advantages

• Best at saving space

• Able to cool large areas where other ACs don’t reach

out

• Blends with decor

8

5) Cube Air Conditioner

This fairly new design introduced by Panasonic can be mounted close to a ceiling or at the

window level. Basically, this is a smaller version of the split type air conditioner and costs less

than the former. The indoor unit features a newly designed diagonal propeller fan for efficient

and fast cooling. Improved blade shape curvature and larger intake grill further aid for efficient

performance.

Advantages

• Can be mounted close to the ceiling or at window level

• Newly designed diagonal propeller fan for fast cooling

• Improved blade shape curvature for efficient

performance

9

1.4 Key differences between "Window", "Split" and a "cassette" air

conditioners:-

AC Parameters Window AC Split AC Cassette AC

Suitable For Small rooms with a

window sill

Any room with or without

a window Large indoor spaces

Noise Relatively on the higher

side Minimal noise Silent operation

Capacity range 0.75 ton to 2 ton 0.8 to 2 ton 1 ton to 4 ton

Advanced features Humidity control, dust

filter

Humidity control, dust

filter, bacteria filter

Humidity control,

dust filter, bacteria

filter

Interference with

home decor

Slight possibility to

interfere with window

curtains and drapes

Designer indoor units

blend well with wall decor

Barely interferes

with interior decor

Ease of installation Minimal effort required

Indoor and outdoor units

need some amount of

effort for installation

Needs specialized

false ceiling

10

1.5 Categorization by Capacity:-

Air conditioners can be categorised as per their cooling capacity. The common unit used to

categorise is the ton. A ton of cooling power means the unit can cool equal to the cooling power

of 907 kilograms (2000 pounds) of ice melting in a 24-hour period. A more specific way to

measure cooling capacity is with the unit of BTU (British Thermal Unit). A ton of cooling power

is about 12,000 BTU or 3,517 watts.

1) Sub-1 Ton AC

Air conditioners with 0.75 or 0.8 tons are suitable for small, constrained spaces. If you have a

really small room to condition air within, you should go for a sub-1 ton air conditioner. This will

help you save money on unnecessarily high electricity bills too.

• Made for small rooms and small office chambers

• Consumes less power and saves on electricity bills

• Suitable for approximately 6’ x 8’ rooms

2) 1 Ton AC

Air conditioners with 1 Ton capacity are suitable for small rooms at home or commercial places.

They are best fit for rooms that are not really tiny, but are smaller in comparison to average size

rooms. One tonner air conditioners are available in windows, cassette as well as split models.

The latter are more suitable if your room doesn’t have a window or if you prefer not to clog the

window for receiving daylight.

• Made for small rooms at home or office

• Suitable for approximately 8’ x 10’ rooms

11

3) 1.5 Ton AC

Air conditioners with 1.5 Ton capacity are suitable for medium size rooms with an average size

of 12’ x 15’ floor space. These are among the highest selling air conditioners. ACs with 1.5 ton

capacity are available in window, cassette as well as split models. Split air conditioners are more

preferable for bedrooms where you would want lesser noise for sound sleep throughout the night.

• Made for medium sized rooms

• Suitable for approximately 12’ x 15’ rooms

4) 2 Ton AC

Air conditioners with 2 Ton capacity are suitable for large rooms whether at home or in offices.

These are the highest capacity air conditioners available for consumers. You will find 2 Ton air

conditioners in windows, split, cassette and tower models. Split and cassette air conditioners

barely take up space in your room and do not interfere with the interior decor.

• Made for large size rooms or halls

• Suitable for larger than 15' x 18' rooms

Star rating for air conditioners

Bureau of Energy Efficiency evaluates and categorises electrical home appliances in terms of

their electric consumption and rates with 1 to 5 stars. A 1 star rated appliance consumes more

power whereas a 5 star rated appliance is highly efficient with least power consumption. An AC

with more number of stars means it is highly energy-efficient.

12

1.6 Industry’s Dominant Economic Features:-

1.6.1 Market size and Growth rate:-

The Room Air Conditioners market in India has experienced a negative to lower growth rates in

last 3 years due to weak economy and significant rise in prices. However, market is expected to

grow at a healthy pace of CAGR 10-12 % in between FY 2014-15 to 2018-19.

Lower market penetration, rising income levels, increasing number of households, high

temperatures & humidity, urbanization are strong growth drivers for this air conditioning

industry.

According to industry estimates, for the financial year 2013-14 Indian room air conditioner

market has sold more than 3.1 Million units, which accounts at around Rs 7,800 crores.

The below graph shows the trend in Room AC market sales volume over the years.

Room AC Market Over the Years (in Mn units)

Energy efficiency star rating, aesthetic look, maintenance, cooling capacity, warranty, price and

technology are currently major influential factors while purchasing an Air Conditioner.

13

The room ACs market in India comprises of split ACs and window ACs. The share of spit ACs

in overall sales is increasing from 49% in FY 2007-08 to 60% in FY 2013-14. Further to this, the

share of split ACs is estimated to reach 80-85% in FY 2018-19 due to lower noise levels, no

security problems, aesthetic look and space.

14

1.6.2 Number of Rivals With Market Shares:-

Air Conditioning market is more competitive with many Indian and foreign players. Top air

conditioner brands in India are Voltas, LG, Panasonic, Daikin, Samsung, Godrej, Bluestar,

Onida, Videocon and Whirlpool. The below graph represents the market share of major

companies in air conditioning industry in India for 2013.

Top Air Conditioner brands in India – Company Wise Market Share in Air Conditioner Industry,

India 2013

15

1.6.3 Degree of Product Differentiation:-

Degree of Product Diffetentiation means the point at which company’s products is

different from the rest competitiors into the same market offering same or substiute

product .

1) Inspiration:

At home user always hate running around for little things and keep looking for smart ways to cut

down on effort and save time. It’s important to simplify life. This inspired team to design Trane

interactive air conditioner that will address the high degree of convenience, comfort and control

that user always wanted and will make everyday living simple and intuitive.

Interactive AC wirelessly interacts with electronic lock through Remote control and makes way

for better and comfortable living experience.

2) Unique Properties:

Interactive Split Air conditioner is a premium range air conditioner designed with the theme

“Smart and energy efficient homes”. Product is designed with differentiation in terms of energy

efficiency, user interface and home connectivity. Product works on new-age Zigbee interactive

technology that will address the high degree of convenience, comfort and control that user

always wanted and will make everyday living simple and intuitive. The product has an operating

mode called ‘Trane mode’ which uses the built- in, state of the art intelligence to maximize the

comfort while keep the energy consumption at lower level. The Efficiency Meter on Interactive

remote enables real time control of energy consumption without compromising on comfort.

One can switch off all Air conditioners just by pressing ‘away’ button on electronic lock. When

you enter your house, just by pressing ‘Home’ button on lock will switch ON Air conditioners.

Air conditioner front panel design is inspired from a ‘the curtain blown by the breeze’. Contrast

of white and black on unit and remote control grab the attention. The Trane AC has a multi bend

evaporator coil which takes lesser space than a normal coil, therefore rendering an ultra slim look

16

to the AC.Some of the additional information are like outdoor temperature, set temperature,

service alerts, Room name, energy meter, etc. The product will serve as a huge differentiator for

the builders who provide furnished apartments and will help them add value to their proposition

as smart and energy efficient homes.

3) Operation/ Flow/ Interaction:

The product uses zigbee wireless technology. This technology brings convenience to the home

user because they no longer have to point the remote control unit towards the AC. This

technology does not need line of sight to operate like other remotes which use Infrared

technology to communicate between the remote control unit and the AC. This technology allows

the user to sit anywhere in his home and control the AC unit installed in any of his room. The use

of wireless technology provides one more advantage to the home user – 2-way communication.

Unit assesses the weather outdoor, and accordingly sets an optimum indoor temperature using

built in algorithm. With this feature user will avoid thermal shock and thus won’t run the risk of

catching cold when people walk into a chilly room from the heat outside. Product helps to get

better energy efficiency without compromising on comfort. Multi-unit feature put an end to the

tiring exercise of going from one room to another just to switch off your ACs.

The Trane Interactive Remote can control up to 18 ACs in your home from anywhere in the

house. No running around anymore. One can switch on/off, change temperature or fan speed of

any Trane AC in any room of his home. The Efficiency Meter on Interactive remote enables real

time control of energy consumption without compromising on comfort. No more worries about

energy being wasted. The remote control unit displays error and service alerts which are easy to

understand, crisp and actionable. With these messages user no longer needs to depend upon

technical person or service technician to understand what’s wrong with the AC Interactive air

conditioner will be a part of a connected home. AC, remote control and Electronic lock interact

with each other through Zigbee technology. One can switch off all Air conditioners just by

pressing ‘away’ button on electronic lock. When you enter your house, just by pressing ‘Home’

button on lock will switch ON Air conditioners. Also Night latch function on remote enables

user to lock the door remotely.

17

4) Production Technology:

Indoor air conditioner unit: Outer body is made up of HIPS. Chassis that holds evaporator coil

unit is made up of HIPS. Unit that holds control panel is made up of Fire rated ABS. Louver fins

are made up of PVC. Colour of front panel, middle panel cover is Snow White Pantone 11-0601

TPX. Copper Tubing ensures long & trouble free life of AC due to usage of copper for

condenser, evaporator & interconnecting pipes A full length barrier makes the body waterproof

and thus protects electrical parts from rain water. It also reduces the possibility of short circuits

Corrosion resistant screws & washers provide longer life & lower noise. Valve Protection cover

protects valves against any impact during transportation, and also prevents them from dripping

condensed water. Grooved Copper tubing & Coated Aluminum Fin improves heat exchange

efficiency by lowering power consumption. Due to sound reduction jacket for compressor and

screw free protection grills, the outdoor unit operates at a lower noise Remote control unit: Front

housing of remote control unit is made up of Polycarbonate material. Screen on the front cover is

of Transparent Black Polycarbonate (1.5 gm. of black colour additive per Kg. of transparent

polycarbonate). Back housing and battery cover is made up of PC + ABS material. Colour of

front cover, back cover and battery cover is Snow White Pantone 11-0601 TPX. Dome switches

are used to get feel of gentle press. In order to backlight the keypad for better visibility at night,

silicon based keypad is used with transparent polycarbonate button caps on it. Infrared window is

made up of standard Indigo colored Transparent Polycarbonate. LCD glass is packaged with

ABS frame and is secured with rubber film on top of it.

Production method: Indoor air conditioner unit: Base chassis, middle frame, front panel is made

up of HIPS and is injection molded. Unit that holds control panel is made up of Fire rated ABS is

injection molded. Louver fins are made up of PVC and Injection molded. Copper tubing are

welded together with interconnecting pipes and fins are assembled to it. Corrosion resistant

screws & washers used for the assembly of the unit. Due to sound reduction jacket is assembled

for compressor and screw free protection grills. Remote control unit front cover and screen are

double injection molded to save assembly time as well as to avoid snaps making product slimmer

compared to existing air conditioner remote control. Back cover and battery cover are made up

of PC+ ABS and are injection molded. Silicon based keypad with transparent polycarbonate cap

is been injection molded. Infrared window is made up of transparent polycarbonate which is

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injection molded. Keypad buttons are panted with same colour of frame and then laser marked

with the given graphics. This will make keypad illuminate at night. UV coat is applied to front

cover, back cover and battery cover and keypad buttons. Less number of components for Remote

control saves time for remote control unit assembly.

5) Dimension / Package / Technical Properties:

Dimension (W*D*H) : 990 mm x315 mm x218 mm

6) TAGS:

Interactive Air Conditioner

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1.6.4 Pace of technological Change:-

With the globalization of air-conditioner selling, it is important for manufacturers to adopt

advanced technologies and market dynamics of this device. Breakthroughs have been achieved

in some aspects, such as power saving, low noise, environmental protection, and so on.

1) Direct current inverter technology:-

The conventional device is controlled by switches, which makes fast refrigeration/heating

difficult to implement. The direct current inverter technology aims to solve speed overshoot

issues. This type of air conditioner is controlled by digital signal processing, using advances

controlling technologies and direct current frequency conversion rotary compressor. The digital

signal processing is in a position to control temperature accurately to save time and power. The

closed- loop controlled circuit of interior flow fan makes the entire method stable.

2) Network control technology:-

The controlling interface of internet is added to the existing inverter air conditioner. The remote

control and remote diagnosis can be had through the internet. Meanwhile, the centralized control

is also optimized by this technology. The controlling signal is transmitted by telephone lines or

optical fiber cables. The signal is displayed on the screen to implement remote control, remote

diagnosis, or software updating.

3) Noiseless technology and replacement technology for refrigeration material:-

Noiseless technology optimizes the interior construction of the device, imitating the flow

direction of natural wind and minimizing the noise level. The replacement technology for

refrigeration is under study to safeguard the environment much better. The material used in

traditional devices is harmful to ozonosphere and should be forbidden all over the world.

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4) Air supply technology and wellness technology:-

The super air supply system is applied in advanced devices. The airflow control technology can

also supply air from each direction. The application of the wellness technology creates a new

idea, namely, negative oxygen ion, noiseless, antisepsis, and other technologies.

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Chapter 2 INDUSTRY PLAYERS

ANALYSIS

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2.1 Hitachi:-

Hitachi was founded in 1910 by electrical engineer Namihei Odaira in Ibaraki Prefecture. The

company's first product was Japan's first 5-horsepower electric induction motor, initially

developed for use in copper mining. Odaira's company soon became the domestic leader in

electric motors and electric power industry infrastructure.

The company began as an in-house venture of Fusanosuke Kuhara's mining company in Hitachi,

Ibaraki. Odaira moved headquarters to Tokyo in 1918. Long before that, he coined the

company’s toponymic name by superimposing two kanji characters: hi meaning “sun” and tachi

meaning “rise”. The young company's national aspirations were conveyed by its original brand

mark, which evoked Japan's imperial rising sun flag.

Hitachi America, Ltd. was established in 1959. Hitachi Europe, Ltd. was established in 1982.

Hitachi has well maintained human assets of 33500 approx in India and net sales of 2,070,147

million yen.

In March 2011, Hitachi agreed to sell its hard disk drive subsidiary, Hitachi Global Storage

Technologies, to Western Digital for a combination of cash and shares worth US$4.3 billion.

Due to concerns of a duopoly of WD and Seagate by the EU Commission and the Federal Trade

Commission, Hitachi's 3.5" HDD division was sold to Toshiba. The transaction was completed

in March 2012.

Hitachi entered talks with Mitsubishi Heavy Industries in August 2011 about a potential merger

of the two companies, in what would have been the largest merger between two Japanese

companies in history. The talks subsequently broke down and were suspended.

In October 2012, Hitachi agreed to acquire the United Kingdom-based nuclear energy

company Horizon Nuclear Power, which plans to construct up to six nuclear power plants in the

UK, from E.ON and RWE for £700 million.

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In November 2012, Hitachi and Mitsubishi Heavy Industries agreed to merge their thermal

power generation businesses into a joint venture to be owned 65% by Mitsubishi Heavy

Industries and 35% by Hitachi. The joint venture begun operations in February 2014.

From its humble beginnings, Hitachi has grown into a respected infrastructure solutions

company with more than 320,000 employees worldwide. Hitachi's products, services and

solutions impact nearly every aspect of modern life. Today, Hitachi is using its diverse range of

expertise to drive its Social Innovation Business on a global scale. Using advanced Information

Technology, the Hitachi Group is able to provide social infrastructure to the world while

continuing to drive innovation that will improve convenience, comfort and safety in people's

everyday lives

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2.2 Daikin:-

Daikin entered the North American air conditioning market in 2004.

Daikin Industries Ltd was founded in 1924 as Osaka Kinzoku Kogyosho LP by Akira Yamada.

In 1953, Daiflon was developed. In 1963 the company was renamed Daikin Kogyo Co Ltd and

developed Neoflon. In 1982 it was renamed to the current Daikin Industries Ltd. In November

2006 Daikin purchased OYL Industries. This made Daikin the second largest HVAC

manufacturer in the world after Carrier Corporation

In 2008 Daikin purchased a 75% share of All World Machinery Supply based on Harvard,

Illinois Daikin developed the hybrid hydraulic systems using technology from their Air

Conditioning division. Facing the global demands on CO2 reductions and the serious energy

issues facing the world, this product aims to cut energy consumption in the manufacturing sector.

As of April 2014, Daikin Hydraulics marketed a line of piston pumps, vane pumps, manual

pumps, solenoid valves, and flow and control valves claiming their pump technology to be 50–70

percent more energy efficient than conventional technology.

In August 2012 Daikin agreed to acquire Goodman Global from the San Francisco-based private

equity firm Hellman & Friedman for $3.7 billion, after first planning to buy Goodman the

previous year. In January 2011, Daikin had announced plans to buy Goodman Global at

approximately US $4 billion valuation, however, the plans were put off following the 2011

Tōhoku earthquake and tsunami The acquisition was expected to expand Daikin's presence in the

United States and in duct-type and split-system air-conditioners, and was expected to make

Daikin the world's largest maker of heating, ventilation and air-conditioning systems.

Daikin opened its first American manufacturing facility employing about 250 people in a

525,000 square feet (48,800 m2) facility in Houston, Texas in 2013.

Daikin is the official sponsor of Galatasaray Daikin women's volleyball team

Pioneering products include the first packaged air-conditioner in Japan in 1951 and world's first

Variable Refrigerant Volume (VRV) system in 1982. Daikin is committed to explore and adopt

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cutting-edge technology in order to continually offer value-added and solution-based products

and services to customers. The Group currently holds the prime share of the air-conditioning

market in Japan, and is the leading performer in VRV technology.

Daikin ensures safety comes first, and the Group is reputed for its quality products and services.

The Group also places much emphasis on "the fusion of the global environment and business

management".

In all aspects of its business operations, Daikin applies environmental- friendly practices, and

actively promotes the development of new products and inventive technologies that help to

sustain and improve our global environment.

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2.3 Godrej:-

Established in 1897, the Godrej Group has its roots in India's Swadeshi movement. Our founder,

Ardeshir Godrej, lawyer-turned-serial entrepreneur failed with a few businesses, before he struck

gold with the locks business that you know today. One of India’s most trusted brands, with

revenues of USD 4.1 billion, Godrej enjoys the patronage of over 600 million Indians across our

consumer goods, real estate, appliances, agri and many other businesses. You think of Godrej as

such an integral part of India that you may be surprised to know that over 25 per cent of our

business is done overseas.

We promise Godrejites a culture of tough love; take serious bets on them and differentiate basis

performance. We also understand that our team members play multi- faceted roles and so, we

strongly encourage them to explore their whole selves. Our canvas is growing. In fact, our Vision

for 2020 is to be 10 times the size we were in 2010. We truly believe that while our amazing past

distinguishes us, we are only as good as what we do next.

Godrej Appliances was voted the Most Trusted Brand, Gold award (Reader’s Digest consumer

survey) 4 years in a row by its consumers has continued to be a Superbrand. In 1958, Godrej

Appliances made the very first refrigerator in India. The PUF (polyurethane foam) technology

was launched way back in the 80s. The company created 100% CFC free fridges much before

the green revolution stepped in Godrej appliances is known for not just Refrigerators but

Washing Machines, Air Conditioners, Microwave Ovens, DVD Players and Televisions. Godrej

air conditioners are available both in window & split ACs.

Fast forward to today. Eon is bringing you cool new features to meet today’s needs. And earned

the CNBC Consumer Awaaz Award, 3 years in a row. Eon, in the Consumer World Awards, was

chosen as Mera Brand of the year, 2008. The same year when Urjavaran Foundation handed over

the Empower India Award, towards energy efficiency, we were at the receiving end. Next Godrej

Appliances becomes a Superbrand. We continue moving forward. Not just with Refrigerators,

also Washing Machines, Air Conditioners, Microwave Ovens, DVD Players and Televisions.

And more.

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We’re not resting though. It’s time to spread our wings further.

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2.4 Blue Star:-

Blue Star was founded in 1943, by Mohan T Advani, an entrepreneur of exemplary vision and

drive. The Company began as a modest 3-member team engaged in reconditioning of air

conditioners and refrigerators

Blue Star is India's largest central air conditioning company with an annual turnover of Rs 2900

crores, a network of 32 offices, 7 modern manufacturing facilities, over 2000 dealers and around

2500 employees.

It fulfills the air conditioning needs of a large number of corporate, commercial and residential

customers and has also established leadership in the field of commercial refrigeration equipment

ranging from water coolers to cold storages. The Company also offers comprehensive Electrical

Contracting and Plumbing & Fire Fighting Services. Blue Star's other businesses include

marketing and maintenance of hi-tech professional electronic and industrial products.

Blue Star has business alliances with world renowned technology leaders such as Rheem, USA;

Hanbell, Taiwan; Hitachi, Japan; Midea, China; Information Security Systems, Thales, UK; E's

Inc, Japan; Carel, Italy; GREE, China and many others, to offer superior products and solutions

to customers.

The Company has manufacturing facilities at Thane, Dadra, Bharuch, Himachal, Wada and

Ahmedabad which use state-of-the-art manufacturing equipment to ensure that the products have

consistent quality and reliability.

Blue Star primarily focuses on the corporate and commercial markets. These include

institutional, industrial and government organizations as well as commercial establishments such

as showrooms, restaurants, banks, hospitals, theatres, shopping malls and boutiques.

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The Company has started pursuing the residential segment with its wide range of sleek and

contemporary Room ACs. In accordance with the nature of products and markets, business

drivers, and competitive positioning, the lines of business of Blue Star

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2.5 Samsung:-

With over 70 years in business, Samsung is engaged in providing a diverse service range to its

customers right from semiconductors, skyscrapers, petrochemicals, to fashion, medicine, finance,

hotels and more. Samsung Electronics leads the global market in high tech electronics

manufacturing & digital media. The product range is wide & varied from mobile phones, LCD

TVs, cameras, home appliances like washing machines, refrigerators, ACs to computer

peripherals.

The company has always made an effort to strengthen its air conditioning market. It offers three

types of air conditioners – split, window & floor standing. Lately the company had launched new

Purista and Invincia AC series of Split Airconditioners. Samsung’s VirusDoctor with S plasma

ion technology eliminates airborne viruses like H1N1. 18 new AC models across Split and

Window AC categories were introduced in 2011.

Samsung had put a big thrust on AC business in India in 2010. It set up Split AC manufacturing

line at its NOIDA facility & introduced S-series AC models powered by the world’s first S-

UTRTM compressors. Samsung also launched 26 new models across Split and Window AC

categories. In 2009, it set up AC manufacturing line at Sriperumbudur, which is

the 5th Samsung AC manufacturing facility in the World. In 2008, Samsung launched its range

of bio sleep air conditioners. It also introduced 10 new Split and 5 new Window AC models,

with capacities of 0.8T and 1.6T in Split ACs and 1.6T in Window ACs. With the introduction of

the new models, the company has plans to strengthen its air conditioner business through an

aggressive sales channel expansion for its Home appliance business.

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2.6 LG:-

LG Corp. founder Koo In-Hwoi established Lak-Hui Chemical Industrial Corp. in 1947. In 1952,

Lak-Hui (pronounced "Lucky", currently LG Chem) became the first Korean company to enter

the plastics industry. As the company expanded its plastic business, it established GoldStar Co.

Ltd. (currently LG Electronics Inc.) in 1958. Both companies Lucky and GoldStar merged and

formed Lucky Goldstar. Founded in 1958, the company is known for bringing advanced digital

products and applied technologies to its customers.

GoldStar produced South Korea's first radio. Many consumer electronics were sold under the

brand name GoldStar, while some other household products (not available outside South Korea)

were sold under the brand name of Lucky. The Lucky brand was famous for hygiene products

such as soaps and HiTi laundry detergents, but the brand was mostly associated with its Lucky

and Perioe toothpaste. Even today, LG continues to manufacture some of these products for the

South Korean market, such as laundry detergent.

In 1995, to compete better in the Western market, the Lucky-Goldstar Corporation was renamed

"LG". The company also associates the letters LG with the company's tagline "Life's Good".

Since 2009, LG has owned the domain name LG.com.

LG Electronics is on its way to becoming a worldwide leader in digital world, ensuring customer

satisfaction through innovative products and superior service. LG Electronics plays an active role

in world markets with its assertive global business policy. LG Electronics controls 114 local

subsidiaries worldwide, with roughly 82,000 executives and employees. In 2001 Asynchronous

IMT-2000 equipment got commercialized. The world’s first internet enabled washing machine,

air conditioner, and microwave oven was launched. LG Philips Displays, a joint venture with

Philips was established. The ACs come in a wide variety ranging from Window, split, floor

standing to cassette, network solution & ducted ACs introduced.

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2.7 Carrier:-

Carrier Corporation provides heating, ventilation, air conditioning and refrigeration systems,

components, controls and services for residential, commercial, industrial and transportation

applications and food service equipment. With 2009 revenues of $11.4 billion, Carrier has

operations in more than 170 countries. Carrier is part of United Technologies Corporation, which

provides high technology products and services to the building systems and aerospace industries

worldwide. UTC is ranked 37th on the 2009 Fortune 1000 List of America’s Largest

Corporations.Other than the normal ducted, window & split ACs, Carrier also provides Slimpk,

Packaged & Digital Scroll ACs. Packaged AC gives a wide range of comfort features especially

suited for Indian conditions like wide operating voltage, silent operation, economical running

and unmatched reliability. Digital scroll AC gives the power of flexible applications, installation,

line-Up, selection and control.

Carrier is the world’s leader in high-technology heating, air-conditioning and refrigeration

solutions. Carrier is a part of UTC Building & Industrial Systems, a unit of United Technologies

Corp., a leading provider to the aerospace and building systems industries worldwide.

At Carrier, our mission is to be the first choice for heating, air-conditioning and refrigeration

solutions worldwide. We work every day to make the world a better place to live, work and play.

Our employees, products and services create comfortable, productive and healthy environments,

regardless of climate, and ensure the global food supply is transported and preserved for safe

consumption.

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2.8 Voltas:-

Voltas has been a pioneer in the manufacturing of Air-Conditioners in India . In the year 1954 a

collaboration with the Volkart Brothers, a Swiss firm and Tata Sons Limited, resulted in the

formation of Voltas Limited, which is now one of the leading Air conditioning concerns of India.

The air conditioners come in the range of window, split, cassette & slimline. Voltas

manufactured the first ever room air conditioner in 1954 & introduced the first innovative split

air conditioner in 1984. The slimline air conditioner was launched in 1993, followed by micro-

processor based packaged unit in 1998. Voltas was amongst the first to launch 1 ton Acs. Later

in 2007, it introduced energy efficient air-conditioners & in 2008, corner split AC was

introduced.

Tata Group firm Voltas Ltd today reported an increase of over two-and-a-half times in

consolidated net profit at Rs 108.99 crore for the first quarter ended on June 30, 2014.

The company had a consolidated net profit of Rs 40.75 crore in the April-June quarter of the

previous fiscal.

Voltas consolidated net sales increased 9.39 per cent to Rs 1,752.31 crore during the quarter

under review as against Rs 1,601.78 crore in the same period a year ago, the company said in a

statement.

Voltas scrip closed at Rs 203.70 per scrip on the BSE, down 1.57 per cent from its previous close

on the BSE.

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Prices of Air Conditioners in India:-

In India the lowest priced ACs can be had at Rs 12000-13000 which are of a 1 ton size and can

be bought from good brands like Samsung and LG.The price range can go upto Rs 30-35000 for

better Japanese brands which have higher energy efficiency and premium features.This is the

general price range for ACs in India though you some companies like Sharp,General sell even

higher priced ACs touting their better quality.But India being a highly price sensitive market

lower priced ACs sell more.Earlier Spilt ACs used to be priced much higher but with companies

lowering the prics to the Rs 18-20000 range,split ACs have been selling more increasing their

marketshare in India.

With most companies selling mostly in the same price range and similar quality,the selling and

distribution strength is the USP and Samsung,LG score very highly here.The unorganized and

second hand market also exists in India but with falling prices of the name brands,the

unorganized market has sunk to extremely small size nowadays.

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Chapter 3 STRATEGIC ANALYSIS

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3.1 External strategic Audit:-

In the external audit the environment around the organisation should be examined thoroughly.

The geographical area of operations for LVI-Kallio Oy has been relatively small, for some

operators in the same area reported to cover the whole of south Finland if necessary for a certain

project. The area in general is fairly good for operations of this kind, for Turku and surrounding

areas are growth areas and building is bound to take place. The mobility of the work gives it

possibilities (the work places can be on a wide area) but also limitations (office and supplies

need to travel alongside). The different factors affecting the external environment in a whole will

be discussed in the following chapters.

3.1.1 PEST Analysis:-

Political Aspects

The political arena has a huge influence upon the regulation of the businesses, and the spending

power of the consumers and other businesses.

• India is politically stable which have a positive impact on their business activities in

Asian sub-continent.

• There is no FDI limit for retail companies operating in India which contributes to

extensive competition among the existing companies and expand in different geographic

areas.

• EPCG (export promotional capital goods scheme)-zero duty scheme allows import of

capital goods for production, pre production and post production.

• Air-conditioning also has to comply with the standards set by environmental protection

agency.

• Setting of plants in tax incentive areas like greater Noida and Pune.

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Economic Aspects

Marketers need to consider the state of a trading economy in the short and long-terms. Important

economic factors are :

• Inflation in India saw a decrease from 10.5 in 2011 to 7.18 percent in 2012. The decrease

in inflation see reducing of cost of raw materials and manufacturing cost which would

give air-conditioning companies an opportunity of making higher profits.

• GDP growth (annual %) Rounded 2011: 6% ,

Growth in GDP combined with increasing disposable income of consumers with their changing

lifestyles and trends in the industry will see a rise in demand for high-end segment durables,

which gives an opportunity to expand and invest more in its manufacturing processes.

• AC industry reversed its declining trend and grew by 20% YoY in Q3FY13.

Social Aspects

• Penetration of white goods across all major consumer appliances categories is more than

70 % in urban areas and more than 50% in rural areas

• Increase in the employable population in the country and more nuclear families, so more

potential customers.

• Number of first-time users and people upgrading to better products is been increasing at a

fast rate due to increasing disposable income.

• Increasing competition among brands leads to decline in prices therefore higher

affordability and greater chances of people up-grading.

• Change in consumer preferences and trends.

• They leave an impact on customer’s life by making it easy with 6thsense technology as

consumers can achieve significant savings in time and power usage.

• It shows lifestyle of customers.

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Technological Aspects

• With the advent of new technology, more features are being added to the existing

products.

• Increasing technology has helped to enhance its manufacturing and deliver more on

quality front.

• Service Centers have been opened up to provide quality services post-sale and faster

addressing of customer problems.

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3.1.2 Porter’s Five Forces:-

The following section focuses on an analysis of the competitive landscape of HVAC systems

sector of Bangladesh using the Porter’s 5- forces framework.

Diagram:-

1) Competitive Rivalry within the Industry:

There are many Indian air conditioning business entity to assemble complete A/C units

domestically in India. Authorized local dealers/importers of renowned global brands like:

General, LG, Haier, Panasonic, GE etc. were the primary competitors of Daikin in the Indian

market. Local dealers were primarily retailers/wholesalers, and lacked the depth of technical

expertise that a full fledged manufacturing entity. The absence of capacity and capability in

terms of human resources (e.g. experienced technicians/engineers) and equipments to provide

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optimum installation, commissioning and after-sales services enabled companies to quickly

achieve substantial B-2-B market shares. Large scale A/C installation projects in

industrial/commercial establishments (e.g. commercial buildings, banks, hospitals, universities

etc) became Daikin’s domain of expertise. Delivery of prompt and precise services, through

adept technical know-how, was an instant success among corporate clientele.

Currently the industry is dominated by a few major players. Global brands such as General, LG,

Haier and Panasonic are popular choices in the household segments. It is notable that imported

A/Cs are priced substantially above offers from Daikin, since domestic assembly provides a

competitive edge through import tariff benefits. Import duty rates are significantly higher for

finished A/C units than that of components/raw materials. Although recognition of global brands

influence the purchase decision of certain market segments, core functional characteristics and

price eventually determine buying patterns. Empirical results concur with this deduction, since

an increase in demand for locally produced brands can be observed in the last decade.

2) Bargaining Power of Suppliers:

Many Indian companies are the primary supplier of Raw Materials and components. This vertical

integration of the foreign supplier with the Indian manufacturer renders a strategic competitive

edge for the operations of air-conditioner industry.

3) Bargaining Power of Customers:

Important buyer groups might play a powerful role in forcing down prices or bargaining for

higher quality or better terms in business. Especially two buyer groups would be the strongest

positions in playing the producers against one and other. They would therefore have bargaining

power in the industry. The buyers who purchase a large proportion of the seller’s output naturally

play a huge role in demand and supply, but also the buyers who can change to alternative

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supplier, given that the product is standard and the switching costs low can cause stress to the

supplier.

Customers in the Air Conditioner industry of India have a wide array of competing brands to

choose from. It can be deduced that the bargaining power of customers is relatively high in this

sector with high price elasticity of demand. This increases the overall competitiveness of the

industry, and customers are benefited through the efforts of companies to minimize costs to

maximize profit margins in an environment of stiff competition.

4) Threat of New Entrants:

New and potential entrants for an industry mean greater capacity and greater competition for

market shares, even though they pose a threat for existing competitors. There exists a strong

probability of emergence of new players to enter this industry given the medium capital

requirements, no barriers to entry, and relatively high profit margins. Probability of collusive

behavior among the existing players in the market is low, given the number of sellers, and their

strategic inclinations. Therefore, the threat of new entrants, is relatively high with the probability

of strong players (e.g. conglomerates such as Walton) to enter the market.

5) Threat of Substitute Products:

A substitute product is one that performs the same function as the industry’s product and

therefore opposes a threat. India is a country of tropical monsoon climate with very hot and

humid weather throughout most of the year. Electric appliances such as cooling fans (ceiling or

desktop versions) can be considered as substitutes, but are seldom considered to serve the

purpose of A/Cs. The demand for A/Cs is thereby accelerating, given the high rates of

urbanization and industrialization. As urban boundaries expand, constructions of new buildings

take place, resulting in stimulation of demand for A/Cs. The threat of substitute products in this

sector is therefore relatively low.

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3.1.3 Competitive Profile Matrix (CPM):-

A competitive matrix is an analysis tool that helps you establish your company's competitive

advantage. It provides an easy-to-read portrait of your competitive landscape and your position

in the marketplace. The matrix can be just a simple chart. In the left column, you list the main

features and benefits of your product or service. On the top row, you list your company and the

names of your competitors. Then fill in the chart with the appropriate information for each

company. For example, if you own a dry cleaning service, you might list the different services

you offer or the quick turnaround you provide on items (24 hours), and then note how your

competitors fail at these features.

The matrix can be shared with customers as a sales tool, or you can develop the matrix solely for

in-house purposes to keep abreast of the competition.

Daikin Godrej Blue star Hitachi Competitive

Factors Weight Rating Extended Rating Extended Rating Extended Rating Extended

Market Shares

0.10 4 0.40 3 0.30 2 0.20 2 0.20

Product Quality

0.30 3 0.90 2 0.90 4 1.20 1 0.30

Price 0.25 3 0.75 2 0.50 1 0.25 4 1.00 Customer

Service 0.15 2 0.30 1 0.15 4 0.60 2 0.30

Promotion 0.10 3 0.30 1 0.10 3 0.30 2 0.20 Profit

Margin 0.05 4 0.20 2 0.10 2 0.10 2 0.10

Financial Resources

0.05 2 0.10 3 0.15 1 0.05 2 0.10

Total 1.0 2.95 2.15 2.70 2.20

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As shown in Above Table, the Players which included in CPM is Daikin, Godrej, Blue star,

Hitachi. Here we have evaluated some competitive factors and according to this we have given

the rating and weight to each company.

For Market Share, Daikin has covered the large market share in India so we have rated as 4, for

the Godrej it is 3, while other two has been rated equally as 2 each.

For Product Quality, Blue star has good quality among four players so rated it as 4. Daikin

rated as 3, while Godrej and Hitachi as 2 and 1 because of cheap quality.

For Price, one of the most crucial economic variable for customer, Hitachi has very low price

compared to other so it is rated as 4, Daikin as 3,while Godrej and Blue star are very high at

price for AC in the Indian market so rated as 2 and 1.

In Customer Services, Blue Star provides excellent Service to customer so rated as 4, with an

average service Daikin and Hitachi are rated as 2 each, while with poor service Godrej is rated

with 1.

For Promotion, Daikin and Blue star provides good promotional Schemes to the customer profit

oriented so rated as 3 while Hitachi provide less promotional schemes so rated as 2 and Godrej

does not give any type of schemes either retailer or customer, so rated as 1.

In Profit Margin, Daikin stands first with rating of 4 and followed by other three players as 2.

For Financial Resource, Godrej seems stronger so it rated as 3, and with moderating financial

resources Daikin and Hitachi stands second with rating as 2, while weaker financial resources is

followed by Blue star as 1.

So, according to evaluation of all this factors, Daikin comes first among all four players with

total score of 2.95, Blue star with 2.70, Hitachi with 2.20 score, and at last followed by Godrej

with 2.15 total score.

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3.1.4 External Factor Evaluation (EFE) matrix:-

External Factor Evaluation (EFE) matrix method is a strategic-management tool often used

for assessment of current business conditions. The EFE matrix is a good tool to visualize and

prioritize the opportunities and threats that a business is facing.

The EFE matrix is very similar to the IFE matrix. The major difference between the EFE matrix

and the IFE matrix is the type of factors that are included in the model. While the IFE matrix

deals with internal factors, the EFE matrix is concerned solely with external factors.

External factors assessed in the EFE matrix are the ones that are subjected to the will of social,

economic, political, legal, and other external forces.

Following table shows key internal factors for the “Daikin Air conditioning ltd” which is one of

the major players in the air conditioning industry. The rating show about the various factors for

the Daikin.

Key External Factors Weight Rating Weighted Score External Opportunity Win Market Share 0.20 4 0.80 Cash Discount 0.15 3 0.45 Training Program 0.10 2 0.20 Trade Shows 0.05 1 0.05 Entering Into Alliance 0.10 2 0.20 Acquiring New Technology 0.15 3 0.45 Treats Decline Margin 0.05 1 0.05 Government Overnight 0.15 3 0.45 Economic Downtown 0.05 1 0.05 Total 1.00 2.70

(1) List factors: The first step is to gather a list of external factors. Divide factors into two

groups: opportunities and threats.

45

(2) Assign weights: Assign a weight to each factor. The value of each weight should be between

0 and 1. Zero means the factor is not important. One means that the factor is the most influential

and critical one. The total value of all weights together should equal 1.

(3) Rate factors: Assign a rating to each factor. Rating should be between 1 and 4. Rating

indicates how effective the firm's current strategies respond to the factor. 1 = the response is

poor. 2 = the response is below average. 3 = above average. 4 = superior. Weights are industry-

specific. Ratings are company-specific.

Considering all factors of opportunities, winning the market share is the main factor which all

company in the industry wants to achieve, so here it is rated as 4. While in today's era new

technology is also one of the variable which is important for the company to make innovative

features in air conditioning, so it is rated as 3. Entering into alliances are also factors while going

into foreign market so rated as 2. Cash discount is the factor which can be used to encourage

retailers to purchase the company products weighted as 0.15 and rated as 3. Trade show is also

one of opportunity weighted as 0.05 and rated as 1.

From threat side, Government overnight changes in policies, taxes play a major role in profit

margin and terms and conditions for the industry so it is rated as 3. Declining margin and

economic downtown such as occurred in year 2009 also a part of threat for industry growth so

rated as 1.

Over all weighted score of the External factor evaluation is 2.70 .

46

3.2 Internal strategic Audit:-

The company is relatively young and therefore the evaluation of the efficiency and effectiveness

of the operations becomes difficult. Assessing performance without anything to measure it

against does not give very logical results. Auditing shows its meaning as a tool when it can be

used in checking the right direction of operations, assessing the effect of executed strategic

decisions and examining the future ambitions. At this point of the operations we can concentrate

on the upcoming events and decisions done this far. The fact that it is a one man company limits

the analysis at some sectors.

3.2.1 SPACE Analysis: Strategic Position & Action Evaluation:-

Diagram:-

47

The aforementioned SPACE Analysis reveals of the industry offers a financially strong product,

enjoying a competitive advantage in an attractive industry, operating in an environment which is

relatively stable (but susceptible to turbulences). Therefore the strategic inclination of companies

might be a Competitive Approach with cost reduction, productivity improvement, raising more

capital to invest in opportunities and strengthen competitive edge. This aspect is apparent in the

company’s strategy to reduce costs and price levels to stimulate demand and maximize growth.

(Hunger & Wheelen, 2003)

48

3.2.2 Boston Consulting Group Growth-Share Matrix:-

The following analysis focuses on depicting the products portfolio of an Industry on the BCG

Market Growth/Share Matrix with relative market share on the horizontal axis, and potential

growth on the vertical axis.

Diagram:-

From the above analysis of BCG Matrix, it is evident that the Split, Cassette and Duct-type A/Cs

are the product lines with highest market shares and growth rates. Duct-type centralized A/Cs are

more widespread in the commercial/industrialized applications, with a high market share but a

growth rate lower than that of Split or Cassette type versions. Window type A/Cs with high

market shares is declining in popularity (negative growth rate) following the general trend of

increasing popularities of split/cassette/duct type versions.

49

3.2.3 SWOT Analysis:-

1) Strengths:

• Optimal Experience and Expertise of entrepreneurs in the HVAC Systems industry.

• Experienced pool of technicians and engineers with advanced levels

assembling/manufacturing/trouble shooting skills and know-how.

• Business entities that have started manufacturing/assembling complete air conditioner

units in india.

• Core competencies arising from the vertical integration of supplier.

• In-house manufacturing/ testing/ troubleshooting equipments and facilities.

• Dedicated pool of staff enhances superior after-sales service providing.

2) Weaknesses:

• Strategic Planning not comprehensively carried out but done on an ad-hoc basis.

• Tunnel vision of the entrepreneurs e.g. lack of clear Integrated Marketing

Communication Strategies.

• Financial Weaknesses arising from not being able to raise funds through issuing

debt/equity securities in capital (or OTC) markets.

• Dependence upon Banks/other financial institutions for financing long-term investment

projects.

3) Opportunities

• Demand for Air-Conditioners is increasing rapidly in the Indian context.

• The hot and humid tropical monsoon climate of India renders A/Cs to be an indispensable

requirement for indoor usages.

50

• The economic growth rate of the country has fostered the stimulation of demand for

A/Cs.

• Economies of scale & usage of technological innovations have driven down costs, and

made the products more affordable to the middle-class lower/medium income

individuals.

• Introduction of schemes such as hire/purchase and payment through installments have

rendered stimulated demand for A/Cs among lower-middle class.

• Symbiotic relationships with established corporate clientele; increasing chances of future

repeat business, and expected revenue streams from providing services of installed

systems.

4) Threats

• Revisions in the regulatory duty/tariff with respect to import of raw materials or A/C

components.

• Fluctuations of Exchange Rates.

• Political turbulence in the country.

• Emergence new companies following similar business models (i.e. assembling

domestically instead of importing the finished products)

• Emergence of conglomerates with massive financial investments.

• Probability of fierce price-wars predicted as competition increases.

• Rising inflation resulting in increased priced causing reduced demand.

The SWOT analysis is derived from the study of the external environment in which the business

operates along with the assessment of internal core competencies (strengths) and weaknesses

observed. The following section focuses upon the strategic implications of the SWOT analysis,

and attempts to devise and suggest measures to address the imminent strategic issues.

51

3.2.4 Internal Factor Evaluation (IFE) matrix:-

A summary step in conducting an internal strategic-management audit is to construct an Internal

Factor Evaluation (IFE) Matrix. This strategy-formulation tool summarizes and evaluates the

major strengths and weaknesses in the functional areas of a business, and it also provides a basis

for identifying and evaluating relationships among those areas. Intuitive judgments are required

in developing an IFE Matrix, so the appearance of a scientific approach should not be interpreted

to mean this is an all powerful technique. A thorough understanding of the factors included is

more important than the actual numbers.

Following table shows Key Internal Factors for the "Daikin Air Conditioning Ltd." which is one

of the major players in the Air Conditioning industry. The rating show about the various factors

for the Daikin.

Key Internal Factors Weight Rating Weighted Score Internal Strength Wide range in AC models 0.10 3 0.30 Attractive dealer price 0.10 3 0.30 Good Specialty Advertisement 0.05 2 0.10 Weakness After sales services are not better 0.10 3 0.30 Installation service in time 0.15 4 0.60 Discount on bulk order quantity 0.10 3 0.30 Delivery in proper time 0.15 4 0.60 Credit period 0.10 3 0.30 POP & POD 0.05 2 0.10 Promotional schemes 0.10 3 0.30 Total 1.00 3.20

An IFE Matrix has been developed in five steps:

1. Key internal factors like strengths and weaknesses are listed and weights are assigned from 0

to 1.0.

52

2. Sum of all weights = 1.0

3. 1-4 rating to each factor are assigned. These ratings are the firm's current strategies response to

the factor.

4. A weighted score is produced and multiply each factor's weight by its rating.

5. Sum the weighted scores for each and the total weighted score for the organization is

determined. Highest possible weighted score for the organization is 4.0; the lowest is1.0 and the

average is 2.5.

Considering all the factors among strengths and weaknesses, in the strength part, Avaibility of

wider ranges of AC models, attractive dealer prices to retailer to encourage the selling product,

given each weight 0.10 and rating 3.

While in weakness section, Delivering AC, Company takes too much time os weighted as 0.15

and rated as 4. Same case with installation service in time. After sales service, discount on

purchase on bulk order quantity, credit period given to retailer and promotional schemes are also

major weaknesses so given weighted 0.10 and rated them 3. Also carrier is lagging in

promotional about its product as POP & POD so rated as 2.

Combining all the internal factors, the total weighted score of the industry comes to 3.20.

53

3.2.5 The Seven S’s framework:-

A slightly different view of internal analysis is offered by the Seven S’s framework. This

framework concentrates more on the whole organisation than on individual departments or

systems like in the idea presented before. It is an additional analysis not alternative.

The Seven S’s model was originally developed by Tom Peters and Robert Waterman when they

were examining what made companies excellent. The both were consultants at the McKinsey &

Company, which lead to the model being called the McKinsey Seven S’s. The Seven-S

framework is based on the theory that an organization is not just structure, but is comprised of

seven elements distinguished by the “hard” S’s and “soft” S’s. The hard elements, structure,

strategy, and systems, (e.g. IT, training and budgeting) are practical and reasonably identifiable

and can be found in strategy statements, plans, charts and so on. The four soft S’s, skills, staff,

style (e.g. management style), and shared values by the organization, are somewhat less easily

discerned and are less tangible. Staff can be categorized as both a soft and a hard S, due to its

nature involving recruitment and payment as “hard elements” and morale and staff development

as “soft elements”. Continuously evolving and changing, the soft S’s are determined by the

people at work in the organization and hence, are difficult to anticipate or to influence. Although

subterranean in nature, they can and do have a great impact on the hard S’s.

Diagram:-

54

The investigations of Peters and Waterman, that also led to the development of the seven S’s, led

them to develop eight attributes or principles for a successful company:

1. A bias for action - a preference for doing something rather than sending a question through

cycles and cycles of analyses and committee reports.

2. Staying close to the customer – learning his preferences and catering to them.

3. Autonomy and entrepreneurship – breaking the corporation into small companies and

encouraging them to think independently and competitively.

4. Productivity through people – creating the awareness that the best efforts of all employees

are essential and that they will share the rewards of the company’s success.

5. Hands-on – importance of executives keeping in touch with the firm’s essential business.

6. Stick to the knitting – remaining with the business the company knows best.

7. Simple form, lean staff – few administrative layers, few people at the upper levels.

8. Simultaneous loose-tight atmosphere – fostering a climate where there is dedication to the

central values of the company combined with tolerance for all employees who accept those

values.

55

3.2.6 Opportunity Matrix:-

The organisational opportunities for LVI-Kallio Oy might lie in the up to date training and the

interest to the field. In the building boom and the increasing interest in home decoration and

interior planning the industry should have work for the upcoming years and companies with

vision are always needed. The fact that the company is young and the training and methods are

very up to date, should be emphasized as a positive aspect. Knowledge of the newest techniques

and solutions is an important issue as well as effectiveness of the solutions. Heating is an

example of an area of HVAC, where effectiveness in taking advantage of the heated air is

crucial, as well as the water consumption. The different facets and toilets that save water are a

good example of interest in being ecological.

56

Chapter 4

FINANCIAL ANALYSIS

57

Financial Analysis:-

Financial analysis is an assessment of the (1) effectiveness with which funds (investment and debt) are employed in a firm, (2) efficiency and profitability of its operations, and (3) value and safety of debtors' claims against the firm's assets. It employs techniques such as 'funds flow analysis' and financial ratios to understand the problems and opportunities inherent in an investment or financing decision.

Tools of Financial Analysis

Ratio Analysis Trend Analysis Common Size Statements

4.1 RATIO ANALYSIS:-

Ratio analysis involves establishing a relevant financial relationship between components of

financial statement. Two companies may have earned the same amount of profit in a year, but

unless the profit is related to sales or total assets, it is not possible to conclude which of them is

more profitable. Ratio analysis helps in identifying significant relationship between financial

statement items for further investigation. If used with understanding of industry factor and

general economic conditions, it can be powerful tool for recognizing a company’s strengths as

well as its potential trouble spots.

Ratio analysis is a process of comparison of one figure against another and the interpretation of

the ratio to know the strengths and weaknesses of the firm’s operation and of its financial

position. Ratio analysis helps various interested parties like prospective investor, creditors,

banks, etc. to draw useful conclusions to serve their purpose.

58

Functional classification:-

Ratios are also grouped in accordance with certain tests. On this basis there are four categories of

ratios.

• Liquidity Ratios: These ratios indicate the position of liquidity. They are computed to

ascertain whether the company is capable of meeting its short-term obligations from its short

term resources. These are Current Ratio, Liquidity Ratio and Acid Test Ratio.

• Profitability Ratios: A number of ratios are designed to indicate the profitability of the

business and are grouped into the category of profitability ratios. These are Gross Profit Ratio,

Net Profit Ratio, Return on Capital Employed, etc.

• Leverage Ratios: The composition of capital of business and the proportion of owners’ capital

and capital provided by outsiders are reflected by leverage ratios. These are Proprietary ratio,

Debt-equity ratio, Capital Gearing Ratio, and Fixed capital-Fixed Assets Ratio.

• Efficiency Ratios: These are the ratios showing the effectiveness with which the resources of

the business are employed. It signifies the efficiency of the management. These are Debtors

ratio, Creditors’ ratio, Total Assets Turnover, Fixed Assets, Turnover, etc..

59

4.1.1 LIQUIDITY RATIO

4.1.1.1 Current Ratio:-

Current ratio is a financial ratio that measures whether or not a company has enough resources to

pay its debt over the next business cycle (usually 12 months) by comparing firm's current assets

to its current liabilities. Acceptable current ratio values vary from industry to industry. Generally,

a current ratio of 2:1 is considered to be acceptable. The higher the current ratio is, the more

capable the company is to pay its obligations. Current ratio is also affected by seasonality.

This most widely used ratio shows the proportion of current assets to current liabilities. It is also

known as “working capital ratio” as it is a measure of working spatial available of a particular

time.

The Current Ratio formula is:

CURRENT RATIO = Current Assest / Current liabilities

Table 4.1 Current Ratio

Company Year

2014 2013 2012 2011 2010

Blue Star 0.99 0.98 1.06 0.45 0.11

Daikin Aircondi. - 1.32 1.27 1.14 -

Hitachi Home 1.17 1.13 1.06 1.08 1.09

Godrej Appliance 1.27 2.12 1.37 1.37 1.61

Average 0.86 1.39 1.19 1.01 0.70

60

Chart 4.1 Current Ratio

INTERPRETATION:

From the year 2010-2014, Air conditioner industry is going to increase its liability, Current Ratio

is continuously increasing from 2010-2013 over a period of time and decrease in 2014. If current

ratio is bellow 1 (current liabilities exceed current assets), then the company may have problems

paying its bills on time. However, low values do not indicate a critical problem but should

concern the management. Current ratio gives an idea of company's operating efficiency. A high

ratio indicates "safe" liquidity, but also it can be a signal that the company has problems getting

paid on its receivable or have long inventory turnover, both symptoms that the company may not

be efficiently using its current assets. So, we can conclude that the industry is moderate for the

investment purpose.

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

2010 2011 2012 2013 2014

61

4.1.2 LEVERAGE RATIO

4.1.2.1 Debt- Equity Ratio:-

Debt-Equity ratio indicates the relationship between total long-term debt and net worth.

Debt/equity ratio represents that how much debt is there in the company on the basis of total

equity, the more Debt Equity Ratio shows the company have more debt. The Debt and Equity

Capital of the company should be balanced to reduce tax payment and long term gain.

DEBT-EQUITY RATIO = Total liabilities / Shareholders Equity

Table 4.2 Debt Equity Ratio

Company Year

2014 2013 2012 2011 2010

Blue Star 0.78 0.77 0.76 0.45 0.11

Daikin Aircondi. - 0.29 0.08 0.21 -

Hitachi Home 0.61 0.65 0.55 0.47 0.44

Godrej Appliance 0 4.69 3.35 3.95 3.45

Average 0.35 1.6 1.19 1.27 1

62

Chart 4.2 Debt Equity Ratio

INTERPRETATION:

The ratio shows it is decreasing in 2014. So, it can be said that the industry is taking less debt

continuously for running the business, in the previous financial year the data indicates above 35

percent of Debt Equity Ratio. It is under control and it is good for industry because it decreasing

its debt.

Overall industry Debt Equity Ratio is decreasing drastically, so that the industry is favorable to

invest. Also companies are going to borrow money for increasing their business.

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2010 2011 2012 2013 2014

Debt Equity Ratio

63

4.1.3 TURNOVER OR ACTIVITY RATIO

4.1.3.1 Debtors Turnover Ratio:-

Accounts receivable turnover ratio or debtors turnover ratio indicates the number of times the

debtors are turned over a year. The higher the value of debtors turnover the more efficient is the

management of debtors or more liquid the debtors are. Similarly, low debtors turnover ratio

implies inefficient management of debtors or less liquid debtors. It is the reliable measure of the

time of cash flow from credit sales. There is no rule of thumb which may be used as a norm to

interpret the ratio as it may be different from firm to firm.

Debtor turnover ratio is the relationship between net sales and average debtors. It is also called

account receivable turnover ratio because we debtor and bill receivables' total is used for

following formula

DEBTOR TURNOVER RATIO = Net Credit Sales / Average Debtors (Sundry Debtors + Bill

Receivables)

Table 4.3 Debtor Turnover Ratio

Company Year

2014 2013 2012 2011 2010

Blue Star 4.22 4.34 3.86 4.12 4.14

Daikin Aircondi. - 23.27 32.04 24.55 -

Hitachi Home 6.80 6.52 6.35 7.50 7.72

Godrej Appliance 7.51 5.86 0.23 9.08 4.82

Average 4.63 10 10.62 11.31 4.17

64

Chart 4.3Debtor Turnover Ratio

INTERPRETATION:

According to above graph we can say that the Debtor Turnover Ratio of Air-conditioner industry

is fluctuating year to year. In 2011 it was above 11.31 times per year, after that it was decreased

to 10.62 times in 2012, 10.00 times in year 3013 and in 2014 it displays vast decrease of 4.63

times per year. So, we can say that 2011, 2012 and 2014 are more liquidate year out of last five

years. It is normal in Air-Conditioner industry where the investment is huge. but it also directly

affect the liquidity of the industry.

So, The industry is moderate for investment and has a huge investment in it.

0

2

4

6

8

10

12

2010 2011 2012 2013 2014

Debtor Turnover Ratio

65

4.1.3.2 Inventory Turnover Ratio:-

Inventory Turnover Ratio measures company's efficiency in turning its inventory into sales. Its

purpose is to measure the liquidity of the inventory. The Ratio is figured as "turnover times".

Average inventory should be used for inventory level to minimize the effect of seasonality.

A ratio showing how many times a company's inventory is sold and replaced over a period.

INVENTORY TURNOVER RATIO = Sales / Inventory

Also calculated as: Cost of goods sold / average inventory

Table 4.4 Inventory Turnover Ratio

Company Year

2014 2013 2012 2011 2010

Blue Star 5.14 5.92 5.86 7.46 10.07

Daikin Aircondi. - 3.00 3.16 1.64 -

Hitachi Home 4.02 3.55 2.92 3.27 4.62

Godrej Appliance 3.65 1.09 0.17 4.99 3.61

Average 3.20 3.39 3.03 4.34 4.58

66

Chart 4.4 Inventory Turnover Ratio

INTERPRETATION:

In 2014, The Inventory Turnover Ratio was 3.20 times per year which had increased to 3.39

times in 2013. A low inventory turnover ratio is a signal of inefficiency, since inventory

usually has a rate of return of zero. It also implies either poor sales or excess inventory. A low

turnover rate can indicate poor liquidity, possible overstocking, and obsolescence, but it may also

reflect a planned inventory buildup in the case of material shortages or in anticipation of rapidly

rising prices. A high inventory turnover ratio implies either strong sales or ineffective buying

(the company buys too often in small quantities, therefore the buying price is higher).A high

inventory turnover ratio can indicate better liquidity, but it can also indicate a shortage or

inadequate inventory levels, which may lead to a loss in business. As compared to previous four

years the Inventory Turnover Ratio is decreased in 2012 a much to 3.03 times.

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

2010 2011 2012 2013 2014

Inventory Turnover Ratio

67

4.1.4 INTEREST COVERAGE RATIO

4.1.4.1 Interest Coverage Ratio:-

A ratio used to determine how easily a company can pay interest on outstanding debt. The

interest coverage ratio is calculated by dividing a company's earnings before interest and taxes

(EBIT) of one period by the company's interest expenses of the same period.

INTEREST COVERAGE RATIO = EBIT / Interest

The lower the ratio is, the more a company is burdened by its debt expense. When a company's

interest coverage ratio is 1.5 or less, its ability to meet its interest expenses may be questionable.

An interest coverage ratio below 1 indicates that a company is not generating sufficient revenues

to satisfy interest expenses and should raise a red flag for investors.

Table 4.5 Interest Coverage Ratio

Company Year

2014 2013 2012 2011 2010

Blue Star 2.53 2.06 -0.26 10.32 33.73

Daikin Aircondi. - 0 0 0

-

Hitachi Home 1.95 3.87 1.31 6.41

38.76

Godrej Appliance -2.86 -77.25 -3.19 -0.41 -0.92

Average 0.14 -17.83 -0.54 4.08 17.89

68

Chart 4.5 Interest Coverage Ratio

INTERPRETATION:

The lower the ratio, the more the company is burdened by debt expense. When a industries'

interest coverage ratio is 1.5 or lower, its ability to meet interest expenses may be questionable.

An interest coverage ratio below 1 indicates the industry is not generating sufficient revenues to

satisfy interest expenses as in the year 2013 and 2012 from -17.83 times and -0.54 times. So, in

the five financial year industry was not suffering burden in the operations because of low Interest

coverage Ratio. A company that barely manages to cover its interest costs may easily fall into

bankruptcy if its earnings suffer for even a single month.

-20

-15

-10

-5

0

5

10

15

20

2010 2011 2012 2013 2014

Interest Coverage Ratio

69

4.2 TREND ANALYSIS:-

Trend Analysis is the practice of collecting information and attempting to spot a pattern, or trend,

in the information. In some fields of study, the term "trend analysis" has more formally defined

meanings Although trend analysis is often used to predict future events, it could be used to

estimate uncertain events in the past, such as how many ancient kings probably ruled between

two dates, based on data such as the average years which other known kings reigned.

4.2.1 Aggregate Industry Net Sales Trend:-

Table 4.6 Net Sales Trend

Year Company

Net Sales

(%) Blue Star Dikin Aircondi. Hitachi Home Godrej

Appliances 2010 0.21 - 32.17 -38.16 -1.45

2011 12.92 0.00 20.98 19.04 13.24

2012 -5.52 71.52 4.51 -98.55 -7.01

2013 2.57 34.07 17.51 -40.10 3.51

2014 0.12 - 17.67 293.70 77.87

70

Chart 4.6 Net Sales

INTERPRETATION:

On the basis of the Net sales of the selected companies, we can interpret that overall Net sales of

the industry decreasing constantly.

From the above chart we can interpret that in the year 2014, Net sales is at 77.87 % which was

higher in all five years, before 2014 net sales of the industry is declining because of external as

well as internal factors that affects the industry in previous years. In 2011 there was an up slop in

the graph of net sales of hitachi homes was at top level in the sales in that year to 13.24%. 2012

is the very poor year for the Indian air conditioner industry because of the negative sales growth

of -7.01%. So the sales trend of airline industry is going to be stable or decline in next year +/-

10 to 15 %. So due to emergence of new companies there may be a possibility of increasing in

net sales of the industry.

-20

-10

0

10

20

30

40

50

60

70

80

90

2010 2011 2012 2013 2014

71

4.2.2 Aggregate industry PAT Trend:-

Table 4.7 PAT Trend

Chart 4.7 PAT

-100

-50

0

50

100

150

200

250

2010 2011 2012 2013 2014

Year Company

PAT (%)

Blue Star Dikin Aircondi. Hitachi Home Godrej

Appliances

2010 17.30 - 118.98 703.55 209.96

2011 -26.71 0.00 -36.43 -31.51 -23.66

2012 -157.52 56.39 -88.89 -93.18 -70.8

2013 -158.04 -113.40 369.33 -12.81 21.27

2014 46.70 - -47.39 -51.44 -13.03

72

INTERPRETATION:

Except 2010 and 2012 the air conditioner industry is constantly making loss, in the year 2012

there was a huge loss in the industry because of the emergence of new player. Though godrej

appliances was the leading profit making company in 2010, after that there was very critical

situation in air conditioner industry with subject to profitability.

From above figure we can see that in 2010 there was 209% growth in profit, in 2011 it was -

23.66% and in 2012 there was vast decrease of -70.8% but after 2011 there was through in the

profitability of air conditioner industry and in the previous it was covered and reached at the

level of -13.03%.

So we can say that the trend of PAT can predict positive or negative +/- 20 to 30% in next year.

73

4.2.3 Aggregate Industry Net Worth Trend:-

Table 4.8 Net Worth Trend

Chart 4.8 Net Worth

-25

-20

-15

-10

-5

0

5

10

15

20

2010 2011 2012 2013 2014

Year Company

Net worth

(%) Blue Star Dikin

Aircondi. Hitachi Home Godrej Appliances

2010 33.93 - 40.30 -44.26 7.49

2011 16.64 0.00 17.27 21.25 13.79

2012 -17.37 65.21 -0.43 -97.01 -12.4

2013 4.32 14.00 38.08 -148.57 -23.04

2014 7.12 - 1.53 149.02 39.42

74

INTERPRETATION:

The amount by which assets exceed liabilities. Net worth is a concept applicable to individuals

and businesses as a key measure of how much an entity is worth. A consistent increase in net

worth indicates good financial health; conversely, net worth may be depleted by annual operating

losses or a substantial decrease in asset values relative to liabilities. In the business context, net

worth is also known as book value or shareholders' equity. The average net worth of air

conditioner industry in 2013 was at -23.04% and after that it is increased to 39.42%, and it is a

good sign for industry.

So, we can say that Net Worth of an industry can be increase in next year.

75

4.3 COMMON SIZE STATEMENT:-

4.3.1 Common Size Profit & Loss A/C:-

INCOME : Mar 14 Mar 13 Mar 12 Mar 11 Mar 10 Sales Turnover 100 100 100 100 100 Excise Duty 0 0 0 0 0 Net Sales 100 100 100 100 100 Other Income 0 0 0 0.89 0 Stock Adjustments 0.39 3.03 -5.33 -0.66 8.05

Total Income 100.39 103.03 94.67 100.24 108.05

EXPENDITURE : Raw Materials 96.72 100.59 93.8 94.48 97.8 Power & Fuel Cost 0 0 0 0.01 0.01 Employee Cost 0.02 0.01 0 0.01 0.01 Other Manufacturing Expenses 0.13 0.12 0.08 0.09 0.09 Selling and Administration Expenses 0.23 0.21 0.15 0.17 0.59 Miscellaneous Expenses 0.02 2.27 0.05 0.13 0.03 Less: Pre-operative Expenses Capitalised 0 0 0 0 0

Total Expenditure 97.11 103.2 94.1 94.89 98.52

Operating Profit 3.28 -0.16 0.57 5.35 9.53 Interest 0.02 0 0 0 0 Gross Profit 3.27 -0.16 0.57 5.35 9.53 Depreciation 0.02 0.01 0.01 0.02 0.02 Profit Before Tax 3.25 -0.18 0.56 5.33 9.52 Tax 0.59 0 0.19 0.85 1.61 Fringe Benefit tax 0 0 0 0 0 Deferred Tax 0 0 0 0 0 Reported Net Profit 2.66 -0.18 0.37 4.48 7.91 Extraordinary Items -0.01 0 0 0 0 Adjusted Net Profit 2.67 -0.18 0.37 4.48 7.91

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4.3.2 Common Size Balance Sheet:-

Mar 14 Mar 13 Mar 12 Mar 11 Mar 10 SOURCES OF FUNDS : Share Capital 13.05 13.61 13.54 13.72 15.38 Reserves Total 86.87 86.33 86.41 86.22 84.62 Equity Share Warrants 0 0 0 0 0 Equity Application Money 0 0 0 0 0 Total Shareholders' Funds 99.93 99.94 99.95 99.95 100 Secured Loans 0 0 0 0 0 Unsecured Loans 0 0 0 0 0 Total Debt 0 0 0 0 0 Other Liabilities 0.07 0.06 0.05 0.05 0 Total Liabilities 100 100 100 100 100 APPLICATION OF FUNDS : Gross Block 0.64 0.86 0.85 0.85 0.94 Less : Accumulated Depreciation 0.42 0.55 0.5 0.46 0.45 Less: Impairment of Assets 0 0 0 0 0 Net Block 0.21 0.31 0.35 0.39 0.48 Lease Adjustment 0 0 0 0 0 Capital Work in Progress 13.7 0 0 0 0 Investments 15.74 11.28 24.9 2.53 2.95 Current Assets, Loans & Advances Inventories 71.92 73.99 64.98 85.44 97.92 Sundry Debtors 0.02 0 2.57 5.26 1.19 Cash and Bank 0.27 13.96 0.59 0.93 1.31 Loans and Advances 0 0 0 0 0 Total Current Assets 0.36 0.64 7 8.16 1.75 Less : Current Liabilities and Provisions 72.58 88.59 75.15 99.79 102.16 Current Liabilities Provisions 0.32 0.4 0.43 0.48 1.81 Total Current Liabilities 2.44 0 0.04 2.44 3.79 Net Current Assets 69.82 88.18 74.7 96.87 96.57 Miscellaneous Expenses not written off 0 0 0 0 0 Deferred Tax Assets 0 0 0 0 0 Deferred Tax Liability 0 0 0 0 0 Net Deferred Tax 0 0 0 0 0 Other Assets 0.52 0.25 0.05 0.21 0 Total Assets 100 100.03 100 100 100

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Chapter 5

BUSINESS PLAN

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5.0 Business Plan:-

Business plan refers to a road map that provides direction so a business can plan its future and

helps it avoid bumps in road. The time you spend making your business plan thorough and

accurate, and keeping it up-to-date, is an investment that pays big dividends in long term.

Business plan is set up to prepare for new company by six partners who are promoters of the

company and hold equal share i.e. investing equally and each and every partners holds expertise

in their own field i.e. Finance, Marketing and Human Resource. So that a better company can be

made and can serve better to their customers and markets.

5.1. Executive Summary

The purpose of this business plan is to raise RS 60,00,000 (equally among six partners i.e.

10,00,000 each) for the development of a fantastic cooling business while showcasing the

expected financials and operations over the next three years. The Fantastic cooling, Inc. (“the

Company”) is a Indian based corporation that will provide heating, ventilation, and air

conditioning installation and maintenance to customers in its targeted market. The Company was

founded in 20010 by six partners and they manufacture Air Conditioners and Services related to

it.

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COMPANY PROFILE

Name of Organization: Fantastic cooling system

Factory Address: C-1, 1301 G.I.D.C.

Mehsana.

Website: WWW.fantasticcool.com

Contact no: +91-2762-233431/32/33

Fax no: +91-2762-233031

Form of Unit: Partners

Email Address: salse@fantasticcool.com

Partners of the company: 1) Amit A Babar

2) Jay U Mistri

3) Sanket S Patel

4) Kishan M Rajgor

5) Vishang S Shah

6) Rakesh R Singh

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5.1.1 Products and Services:-

The Company provides cooling system installation, maintenance, inspection and repair services

to building/home owners and property managers. All of the services by the Company will be

rendered on site. One of the positive aspects of operating in this business is that many state and

local ordinances demand that building owners inspect and maintain their air conditioning

systems on a regular basis. This will help the Company maintain normal business operations

regardless of the overall economic climate. The third section of the business plan will further

describe the services offered by the fantastic cooling system.

5.1.2 The Financing:-

The partners are seeking to raise Rs 60,00,000 from as a bank loan. The interest rate and loan

agreement are to be further discussed during negotiation. This business plan assumes that the

business will receive a 10 year loan with a 9% fixed interest rate.

5.1.3 Mission Statement:-

The Fantastic’s mission is to become the recognized local leader in its targeted market for Air

conditioning services.

5.1.4 Management Team:-

The Company was founded by partners which has more than 10 years of experience in the air

conditioner industry. Through his expertise, he will be able to bring the operations of the

business to profitability within its first year of operations.

5.1.5 Sales Forecasts:-

Partners expects a strong rate of growth at the start of operations. Below are the expected

financials over the next years.

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5.1.6 Expansion Plan:-

The Founder expects that the business will aggressively expand during the first three years of

operation. Partners intends to implement marketing campaigns that will effectively target

homeowners, contractors, and real estate investors within the target market.

5.2.0 Company and Financing Summary

5.2.1 Registered Name and Corporate Structure:-

Fantastic cooling system, the Company is registered as a corporation in India.

5.2.2 Required Funds:-

At this time, the Fantastic cooling system requires Rs 60, 00,000 of debt funds. Below is a

breakdown of how these funds will be used:

Profit and Loss (Yearly) (in Rupees) YEAR 1 2 3

Sales 39317.4 42855.96 46713 Operating Cost 22651.5 23499.96 25486.08 EBITDA 12734.1 15070.38 16555.62 Taxes, Interest, and Depreciation 5978.94 6534.06 7061.46 Net Profit 6755.16 8889.9 9847.74

5.2.3 Investor Equity:-

Promoters are not seeking an investment from a third party at this time.

5.2.4 Management Equity:-

Promoters i.e. Partners owns equal Percent (%) of the Fantastic Cooling System.

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5.2.5 Exit Strategy:-

If the business is very successful, The Promoters may seek to sell the business among members

or third party for a significant earnings multiple. Most likely, the Company will hire a qualified

business broker to sell the business on behalf of the fantastic company. Based on historical

numbers, the business could fetch a sales premium of up to 4 times earnings.

5.3.0 Products and Services

Below is a description of the services offered by the Fantastic cooling system.

5.3.1 Fantastic Cooling System Installations:-

The Company specializes in engaging large Air Conditioner installations into new and old

buildings. This will be the largest business segment of the Company. Management has developed

an extensive pricing model that will allow the business to profit from all aspects of these jobs.

Gross profits will be accrued through the sale of labor and consultation services and from the

sale of direct job materials. Management anticipates that it will generate extremely high gross

margins from these services. The Company will employ its workforce in-house, and will not

outsource these jobs to subcontractors

5.3.2 Fantastic Cooling System Maintenance and Inspection:-

The Fantastic cooling will also generate revenue from ongoing maintenance and repair fees from

its installations. This revenue will allow the Company to remain profitable regardless of the

overall economic climate. As stated before, there are many state and local ordinances that require

building and home owners to have regular inspections and maintenance of their Air Conditioning

systems. By virtue of the law, the market will always provide a steady income stream to market

agent.

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5.4.0 Strategic and Market Analysis

5.4.1 Economic Outlook:-

This section of the analysis will detail the economic climate, the Air conditioner industry, the

customer profile, and the competition that the business will face as it progresses through its

business operations. Currently, the economic market condition in the Indian Market is moderate.

The meltdown of the sub prime mortgage market coupled with increasing gas prices has led

many people to believe that the India is on the cusp of an economic recession. This slowdown in

the economy has also greatly impacted real estate sales, which has halted to historical lows.

5.4.2 Industry Analysis:-

According the Indian Economic Census, Air conditioner and specialty plumbing installation

contractors generated gross revenues of $88 billion dollars. The industry employs more than

750,000 people and outputs gross annual payrolls of $35 billion dollars. The market growth in

this industry has been resilient, with its five year growth rate nearing 15%. This growth is

expected to taper off as the demand for new housing construction continues to wane. One of the

primary keys to surviving in the contracting industry is to develop relationships with property

managers and building owners so that the business can generate a recurring stream of revenue

from required inspections and regular maintenance. Overall, the outlook for the industry is

moderate. HVAC contracting and maintenance is only something that a trained and licensed

professional can perform, and as such, the demand for contractors is expected to remain strong

regardless of the general economic condition.

5.4.3 Customer Profile:-

The Company anticipates that a majority of its clients will be building owners and property

management firms contracting on behalf of building owners. Management expects that the

business’ client base will consist of commercial, industrial, and residential clientele. However,

Management anticipates that its secondary client base will come from the residential arena

(homeowners). As time progresses, the Company may engage more complicated industrial and

high-end commercial and industrial installations. In this section of the analysis, you should

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describe the type of customer you are seeking to acquire. These traits include income size, type

of business/occupation; how far away from your business is to your customer, and what the

customer is looking for. In this section, you can also put demographic information about your

target market including population size, income demographics, level of education, etc.

5.4.4 Competitive Analysis:-

This is one of the sections of the business plan that you must write completely on your own. The

key to writing a strong competitive analysis is that you do your research on the local

competition. Find out who your competitors are by searching online directories and searching in

your local Yellow Pages. If there are a number of competitors in the same industry (meaning that

it is not feasible to describe each one) then showcase the number of businesses that compete with

you, and why your business will provide customers with service/products that are of better

quality or less expensive than your competition.

5.5.0 Marketing Plan

The fantastic cooling intends to maintain an extensive marketing campaign that will ensure

maximum visibility for the business in its targeted market. Below is an overview of the

marketing strategies and objectives of the Company.

5.5.1 Marketing Objectives:-

• Establish relationships with contractors, developers, and real estate investors within the

targeted market.

• Implement a local campaign with the Company’s targeted market via the use of flyers,

local newspaper advertisements, and word of mouth advertising.

• Develop an online presence by developing a website and placing the Company’s name

and contact information with online directories.

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5.5.2 Marketing Strategies:-

The Fantastic cooling system will primarily use local advertising, Internet advertising, and

Yellow-pages listings to develop the business’s clientele. These strategies are especially

important among people that will actively seeking Air-Conditioning maintenance services

through Yellow Books and other traditional forms of advertising. The business will also seek to

develop relationships with property managers and building owners so that the Company is called

on to maintain their Air-Conditioning systems. These clients are of immense importance to the

success of the business as these owners/property managers have ongoing maintenance and

inspection needs. There are several legal and regulatory statues that require building owners to

perform periodic maintenance, inspection, and testing services. These clients will ensure that in

times of business slowdowns, the Company will be able to continue to generate revenues and

profits. The Fantastic cooling system will also develop ongoing referral and contractual

relationships with general contractors and real estate construction firms throughout the target

market.

5.5.3 Pricing:-

In this section, describe the pricing of your services and products. You should provide as much

information as possible about your pricing as possible in this section. However, if you have

hundreds of items, condense your product list categorically. This section of the business plan

should not span more than 1 page.

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5.6.0 Organizational Plan and Personnel Summary

5.6.1 Company Ownership:-

Fantastic Cooling System is a Private Limited company incorporated at the Registrar of

Companies through the foresight and vision of all partners. It is a 100% wholly partnership

owned firm.

5.7.0 Financial Plan

5.7.1 Underlying Assumptions:-

• The fantastic cooling system will have an annual revenue growth rate of 10-15% per

year.

• The Owner will acquire Rs 60,00,000 of debt funds to develop the business.

• The loan will have a 10 year term with a 9% interest rate.

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5.7.2 Sensitivity Analysis:-

The Company’s revenues are not sensitive to changes in the overall economy. Air conditioning

installation and contracting businesses are needed regardless of the economic climate. This is

especially true since many states and municipalities have ordinances requiring building owners

to have regular inspections and maintenance on their properties. Additionally, as this is air

conditioner business, the Company can scale back its operations at anytime depending on the

demand for systems and services.

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5.8.0 Financial Data

5.8.1 Profit and loss A/c:-

Profit and Loss (Yearly ) (In Rupees) Year 1 2 3

Sales 39317.4 42855.96 46713 Cost of Goods Sold 3931.74 4285.62 4671.3 Gross Margin 90.00% 90.00% 90.00% Operating Income 35385.66 38570.34 42041.7 Expenses Payroll 14580 15017.4 16422.72 General and Administration 864 898.56 934.5 Marketing Expenses 825.66 900 981 Professional Fees and Licensure 1500 1545 1591.38 Insurance Costs 450 472.5 496.14 Travel and Vehicle Costs 900 990 1089 Rent and Utilities 1050 1102.5 1157.64 Miscellaneous Costs 294.9 321.42 350.34 Payroll Taxes 2187 2252.64 2463.42 Total Operating Costs 22651.56 23499.96 25486.08 EBITDA 12734.1 15070.38 16555.62 Federal Income Tax 4202.28 4731.72 5241.54 State Income Tax 636.72 716.94 794.16 Interest Expenses 786.42 731.82 672.12 Depreciation Expenses 353.58 353.58 353.58 Net Profit 6755.16 8889.9 9847.74 Profit Margin 17.18 % 20.74 % 21.08 %

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5.8.2 Balance Sheet:-

Balance Sheet (Yearly) (In Rupees) Year 1 2 3

Assets Cash 5285.58 6244.68 7388.94 Amortized Development/Expansion Cost 3150 3483.3 3917.22 Inventory 2100 3766.62 5936.1 EF&E 1500 2833.32 4568.88 Accumulated Depreciation (482.1) (964.26) (1446.42) Total Assets 11553.48 15363.66 20364.66 Liabilities and Equity Accounts Payable 780.3 1602.96 2459.4 Long Term Liabilities 7015.26 6485.04 5954.82 Other Liabilities 0 0 0 Total Liabilities 7795.56 8088 8414.16 Net Worth 3757.92 7275.66 11950.5 Total Liabilities and Equity 11553.48 15363.66 20364.66

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Chapter 6 CONCLUSION

91

Conclusion:-

Like stated before, the aim of the study was to conduct an industry analysis and a competitor

analysis for the case industry. With the help of these and other analysis a marketing plan was

created according to the strategic steps. The qualitative method used proved to be the best one

for the research in terms of collecting valuable data. The theoretical data gathered earlier from a

variety of sources provided the basis for the empirical part. The research findings and results

alongside with the more in depth considerations on various subjects can be found in the text.

Here we will summarize the main conclusions and recommendations for the case industry.

In the end, it is important to consider the primary and secondary markets together to make an

overall assessment of the competition that the market is facing. Though the primary market with

very limited barriers to entry and evenly distributed market share appears to be competitive, the

same cannot be said about the secondary market. The competitor in the primary market has the

possibility of becoming a monopolist in the aftermarket due to the costumers getting tied in to

availing services from the buyer.

The level of complexity of the external and internal variables determining the performance of

Unitech in the upcoming period of three years is relatively high. The company can strategically

devise approaches to thrive through the challenges, or remain stagnant to suffer the negative

consequences.

The inception and initial journey of the company had been an inspiring one, and if the company

leaders can evolve as per the necessities, and grow organically as demanded by the imminent

reality, it can be expected to succeed in the upcoming periods.

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Chapter 7

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