consumer behaviour towards electronics

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Worldwide Consumer Electronics MarketThe consumer electronics industry has witnessed a phenomenal growth over the past few years. This growth can be attributed to the increasing effect of state of the art electronic devices on the market. The consumer electronics industry is ushering in the dawn of Convergence. It is the confluence and merging of hitherto separated markets of digitalbased audio, video and information technology, removing entry barriers across the market and industry boundaries. This convergence of technologies has resulted in a greater demand for consumer devices, be they portable, in-home (mobile phones, digital camera) or in-car (CD/DVD players), offering multiple functions. The revolution brought about by Digital technology has enabled the consumer electronics sector to profit from the growing interaction of digital applications such as: camcorders, DVD player/recorder, still camera, computer monitor, LCD TV etc. It has also witnessed the emergence of mobile telecommunications technology, incorporating both digital visual and digital MP3 capabilities. The computer industry has also benefited by being able to make its way into consumer's living rooms. HDTV's with VGA connections and SD/MMC card slots, personal media players, and Microsoft-based Media Center PCs have pushed the two industries even closer together than before. The overall revenue earned through the sale of audio, video and gaming consoles constitutes the international consumer electronics market. The global sale of consumer electronics is estimated to exceed all expectations to touch an all time high of $135.4 billion in 2006, which indicates 8% increase from 2005. By the year 2008, sales are forecasted to soar up to $158.4 billion, up BY 65% over 2000. The Asia Pacific region is the market leader wielding the biggest chunk of the market, closely followed by Europe. The European market share is expected to take a drubbing due to the growing demand for consumer durables in the Asia Pacific consumer electronic market. Japanese companies have captured the consumer electronics market. World famous brands such as Sony, Panasonic and Matsushita are all owned by these Japanese manufacturers. Korean companies such as Samsung and LG are all trying to join the Japanese bandwagon. Samsung can claim to be the world's fastest growing electronic company.

SWOT Analysis Of Electronics1

Strengths1. Presence of established distribution networks in both urban and rural areas 2. Presence of well-known brands 3. In recent years, organized sector has increased its share in the market vis a vis the unorganized sector.

Weaknesses1. Demand is seasonal and is high during festive season 2. Demand is dependent on good monsoons 3. Poor government spending on infrastructure 4. Low purchasing power of consumers

Opportunities1. In India, the penetration level of white goods is lower as compared to other developing countries. 2. Unexploited rural market 3. Rapid urbanization 4. Increase in income levels, i.e. increase in purchasing power of consumers 5. Easy availability of finance

Threats1. Higher import duties on raw materials imposed in the Budget 2007-08 2. Cheap imports from Singapore, China and other Asian countries

HOW THE INDUSTRY BREAKS DOWN2

The largest are multinational conglomerates with more than 100,000 employees. The smallest often have only one office with fewer than 50 employees focused on one product. In the middle are manufacturers that offer a range of products within a certain category, such as speakers and audio accessories. Industry observers usually break down the market by product category rather than company size.

Consumer durables are items that provide a flow of services to a consumer over a period of time. Examples include new cars, household appliances, audio-visual equipment, furniture etc. The real level of spending on durables has surged in the last eight years. Among the explanations are: Falling prices for many durable products arising from rapid advances in production technology and the effects of globalization which means that we can now import many of these durables more cheaply from overseas Low interest rates which have encouraged people to spend more on big ticket items there has been a surge in demand for consumer credit

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Strong consumer confidence and borrowing levels. The demand for consumer durables is more income elastic than for non-durables which are usually staple items in peoples monthly budget.

SOME KEY FINDINGS Asia-Pacific region is the most lucrative area for the consumer electronics industry, as most of the markets are still untapped. MP3 players continue to drive the audio market worldwide. Wi-Fi networking is expected to become a key enabler for the delivery and redistribution of content in homes, particularly for retail consumer electronics hardware. Mobile camera phone market has emerged as the single largest market for image sensors, surpassing the entire consumer electronics segment, including digital still cameras worldwide. The strongest growth in consumer electronics segment is expected to come from China by 2010, as the demand for consumer electronics is rising with the rapid pace of economic development and low cost consumer electronics manufacturing. On the back of this strong demand, China will become the second largest market for consumer electronics, after US.

ProductTelevision (any model) DVD Player/Recorder Digital Camera Cell Phone Desktop Computer

Tech Enthusiasts97 % 96 % 93 % 92 % 90 %

All Adults98 % 84 % 62 % 76 % 66 %

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Consumer Electronics Industry AnalysisPorters Five Forces ModelAlthough the Indian Consumer electronics market is highly competitive, the high growth rates that it promises make it a good industry to enter.

Threat of New EntrantsCapital Requirements and Economies of Scale:In the case of retail stores, there is lack of good distribution network and lack of knowledge of consumer buying patterns which calls for large investment in distribution channels and research to improve the reach. Economies of scale is required in as there are large fixed costs associated with setting up a manufacturing plant as there are problems of under-developed infrastructure, erratic supply of water and electricity in many areas, a high cost of capital and continuous up gradation of technical and managerial skills.5

Supply Chain Issues:The existence of too many intermediaries in the supply chain coupled with issues in logistics, management of POS data, pilferage and distribution and inventory management, eats away the profits of the retailer, making it unattractive for new entrants.

Product Differentiation:Though the awareness is increasing amongst the Indian consumers, retailers and manufacturers are unable to increase brand loyalty. The Indian consumer is very price sensitive and hence he keeps hoping from one place to another, hunting for good deals. Switching costs vary amongst the electronic categories. For instance, the switching costs in mobile phones are high, as consumers who are used to one brand find it difficult to use another brand. However, for televisions, cameras, and even laptops, consumers are ready to try new brands based on price for features offered and service quality or reputation of the brand.

Government Policy:By encouraging manufacturing zones and improving the infrastructure, the government is developing the entire manufacturing sector, which will help in boosting the electronics production in India, which has traditionally been a very small slice of the overall manufacturing segment. While the government is trying to encourage the growth of the retail and manufacturing industries in India, there are some policies which need to be looked at. The duty structure for electronics adds up to 30% which is a significant amount. This is mainly due to the multiple tax structure which consists of 12% VAT, 8% excise, 4% Goods and Service Tax, 2% Central Sales Tax and Local taxes. The FDI policy limits to 51% stake for foreign investors, which forces foreign retailers to use franchise arrangements, and in the manufacturing sector, the FDI is 100% favouring foreign investors.

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Existence of the grey market due to poor government regulations to keep counterfeits at bay coupled with the lack of consumer knowledge and legal recourse encourages manufacturers to churn out spurious products which can lead to lost sales of the tune of 10-15%. Red tapes and bribery in the Indian government system is also a stumbling block for new retailers or manufacturers. Taking into consideration the positives and negatives, India still offers a good chance for new entrants and hence the threat is considered to be low to moderate.

Bargaining Power of BuyersWith the emergence of new channels like the internet, auction sites like rediff.com, the general consumer (buyers) who usually purchase electronic goods from electronic retailers, hypermarts, music and book stores, can easily compare prices and go for the best deals in town. Though the better brands can command a higher price, buyers are constantly comparing prices, service quality and product features and hence commands a moderate to high power in this industry. Large chain stores like Tata Croma, E-Zone have distinct advantage over the smaller stand alone stores as they can demand good discounts suppliers. As brands play an important role in the electronics market, the retailers find it difficult to integrate backwards to produce their own electronic goods as in the case of private food labels. Considering the market dynamics and the size of the market, the buyers have moderate to high power in the consumer electronics industry.

Bargaining power of suppliersThe biggest threat is the trend of large suppliers integrating forward as in t