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FINAL PROJECT
Business Environment
Environmental factors and constraints are largely if not totally, external and
beyond the control of individual industrial enterprises and their
managements. These are essentially the givers within which firms and their
managements must operate in a specific country and they vary often greatly
from country to country.
This above definition is give by Barry M. Richman & Melvyn Copen.
In this assignment the environmental analysis of Consumer Durable
Industryis given where factors affecting this particular industry based on
their environment are given.
OVERVIEW OF THE CONSUMER DURABLE INDUSTRY:-
Consumer durable industry is characterized by various companies who
produces and sells consumer durable goods.
Consumer durables are the products whose life expectancy is at least
3 years. These products are hard goods that cannot be used up at once.
Durable goods are typically characterized by long interpurchase timesthe
time between two successive purchases.
The consumer durables sector can be segmented into consumer
electronics, such as, VCD/DVD, home theatre, music players, color
televisions (CTVs), etc. and white goods, such as, dish washers, air
conditioners, water heaters, washing machines, refrigerators, etc Examples
of consumer durable goods include cars, appliances, business equipment,
electronic equipment, home furnishings and fixtures, house ware and
accessories, photographic equipment, recreational goods, sporting goods,
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toys and games.
Growth in 2005-06
Consumer Durables Growth
Air Conditioner 20-25%
Refrigerator 5-10%
Microwave Ovens 25%
Washing Machines 5-10%
Color Televisions (CTVs) 15-20%
Black & White Televisions -20%
Clock 10%
Watch 10%
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VCDs 30%
Consumer Electronics (Overall) 9%
These are the players in the consumer durable industry.
Players in Consumer Durable Industry
1. AIWA 12. Haier India 23. Samsung India
2. Akai India 13. Hitachi Ltd. 24. Samtel
3. BenQCorporation
14. Khaitan India Ltd. 25. Sansui India
4. Blue Star Ltd. 15. LG Electronics India Ltd. 26. Siemens
5. BoseCorporation
16. MIRC Electronics Ltd. 27. Sony India
6. BPL 17. Mitsubishi ElectronicsCorporation
28. Thomson Ltd.
7. Canon India 18. Nokia India 29. Titan Industries
8. Carrier AirconLtd.
19. Onida 30. ToshibaCorporation
9. Daewoo India 20. Pace Micro Technology 31. VideoconIndustries
10. Electrolux-
Kelvinator
21. Panasonic 32. Whirlpool
Appliances11. Godrej 22. Philips India
(*In this table names which are bolded are top players in the industry.)
ENVIRONMENTAL STUDY
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These are two environments external to the business affect each and every
industry.
MACRO ENVIRNMENT
Major external and uncontrollable factors that influence an
organization's decision making, and affect its performance and strategies.
These factors include the economic, demographics, legal, political, and social
conditions, technological changes, and natural forces. An organization's
macro environment consists of nonspecific aspects in the organization's
surroundings that have the potential to affect the organization's strategies.
Economic Environment
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This environment includes the current and anticipated stage of the
business cycle, as well as inflation and interest rates. This will define
how an organization can effectively utilize the availability of resources
to the best of its utility. It consists of factors that affect consumerpurchasing power and spending pattern. Following factors as important
elements:
o Increase in family income
o Availability of cheap sources of borrowing funds
o Availability of attractive sales promotional schemes
o The changes in the rate of taxes and duties levied by the
government
o Availability of surplus funds (saving)
o Availability of additional sources of income
o Pricing strategies of companies
o The perceived risk in terms of technological obsolescence.
It is clear that increase in family income accounted for an
average score of 3.4 having a medium level of influence in purchase of
the durable products. Secondly, the availability of attractive sales
promotional schemes announced by companies accounted for an
average score of 3.3 showing a medium level of influence in purchase
of durable products. . Thirdly, the pricing strategies of companies
accounted for an average score of 3.2 also having a medium level of
influence in purchasing durable products. Whenever the consumer
purchases any durable product, the product quality and price of the
product have major influences. Fourthly, the availability of surplus
funds and the perceived risk in terms of technological obsolescence
each had accounted for an average score of 3.1 respectively. Since,
technological improvement is often inevitable due to foreign
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collaborations any consumer prefers to make use of the most recent
technological advancement. The changes in the rate of taxes and
duties levied by central / state government and availability of cheap
sources of borrowing funds accounted for an average score of 2.9 and2.8 respectively showing a medium level of influence. Hence,
the above results showed that the economic factors as a whole have
an average medium level influence in purchase of durable products.
Demographic Environment
Demographic environment consists of following factors that affects the
consumer durable industry;
o Density,
o Fertility,
o Growth
o Language
o Literates
o Migration
o Primitive Tribe Group
o Population
o Religion
o Residential
o Houses and Households
o Sex ratio
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o Workers
Socio-Cultural Environment
The task of any marketing executive is becoming more
complex because our cultural patterns life style, social values and
beliefs, which are changing more quickly than they used to. A
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consumers behavior also is influenced by social factors, such as the
consumers small groups, family and social roles and status. These
factors are shared by a society and are transmitted from generation to
generation i.e., the influence of older and younger generation and viceversa. In recent times, extensive exposure has led the younger
generation into more influence in changing 'Cultural Revolution' that
has resulted in replacement of new attitudes on culture.
For measuring the influence social and cultural factors hold
over the purchase of durable products these factors are useful up to a
great extent;
o Increase in the number of nuclear families
o Influence of reference groups
o Chance of more interactions among family members
o The desire for leisure time
o Ones standard of living / status
o Need for comfort / sophistication
o Education and level of occupation
o Dominance of elderly person in family
o The influence of younger generation in a family
o Compulsions of religious values / moral values
o Individual values and attitudes
o Experience etc
o Influence of sentimental / traditional values
o Social conditions and freedom of living and learning attitudes of
individuals
Technological Environment
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Dueto the open market condition, many foreign companies
have entered into the Indian market with advanced technology. This
has led to change in life style of our Indian consumers that has in turn
resulted in a challenge to our existing Indian companies to reconsidertheir strategies of production and marketing.
MICRO ENVIRNMENT
Micro or Task environmental factors are those that influence a company's
or product's development but that are outside of the company's control.
Customers
The study of consumer behavior is much more important than
the number of consumers in the market because each consumer is
unique. Their behavior, attitude, temperament, mentality, and
personality have their own say on what he wants and how his/her
needs could be satisfied. A persons buying choices are mostly
influenced by four major psychological factors
o Motivation
o Perception
o Learning
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o Beliefs and attitudes
These are the factors that affect consumers while purchasing durable
products;
o Increase in competitions among sellers of various brands
o Price differentials among various brands/ sellers
o Technological superiority seen among the products
o Influence of promotional efforts/ additional benefits
o Life expectancy of the product
o Various product attributes
o Sources of information
o Assurance of prompt after sales service
o Resale value of an item
o Frequency of usage of the product
o Increasing consumers expectations
o Availability of choice leading to complexity in purchase
o Brand loyalty among consumers
o Sentimental/ traditional values
o The availability of leisure time
o Convenience in usage of the product
o Realization of his ego needs
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Due to competition more number of foreign brands have
entered and occupied the Indian market in durable products industry.
It has given an enormous scope to Indian consumers through a range
of choices in their mind. Secondly, the technological superiority seenamong the products and increasing consumers expectations.
Basically, our Indian consumers are price conscious, while they
purchase any product. Knowing this, all foreign brands started
launching their products with the latest technology at a competitive
price. This has led to Indian brands reconsidering their position and
opting for latest technology at competitive price level with the foreign
brands. Of course, our Indian consumers basically hold loyalty towards
the particular brand to which they are associated. Indian consumers
normally hold their beliefs on certain sentiments like seeing an
auspicious day, time, color, place etc., or they simply follow the
traditions followed by their ancestors. Further they also look at a
reasonable resale value for the investment made on purchasing the
durable products. Likewise all above factors have their own bearing on
purchase decision in case of durable products.
Competitors
Competitors strategies: A companys competitive environment
obviously is a major
influence on its marketing programs. Skillful marketing executives
constantly monitor all
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aspects of competitors marketing activities their products, pricing,
distribution systems and promotional programs. Moreover, the destiny
of many Indian firms today is affected by international competition due
to our new economic policy of government called liberalization. Thishas really challenged many Indian companies to reconsider the
strategies adopted for their survival.
Challenges To The Consumer Durable Industry
1. Heavy Taxation:
Heavy taxation in the country is one of the challenges for the players. At its
presentstructure the total tax incidence in India even now stands at around
25-30 per cent, whereas the corresponding tariffs in other Asian countries
are between 7 and 17 per
2. Potential markets remaining yet untapped:
A large segment of the domestic market, mostly therural market is yet to be
tapped. Tapping this yet untapped and unorganized market is a major
challenge for the Indian consumer durables sector. About 65 per cent of
Indian population that lives in its villages still remains relevant for some
consumer durables companies. Its also true that companies are trying hard
to make their marketing channels more and more efficient.
3. Poor Infrastructure:
Poor infrastructure is another reason that seems to have held back the
industry. Regular power supply is imperative for any consumer electronics
product. But that remains a major hiccup in India.
4. Threat from new entrants, especially global companies:
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The domestic consumer durables sectorfaces threat from newer companies,
especially from global ones who have technologically advanced products to
offer.
5. Rivalry and competition:
Presence of a large number of players in the domestic consumer durables
industry leads to competition and rivalry among companies. Threat from
rivalry and competition poses a threat to domestic companies.
6. Threat from substitute products/services:
The domestic consumer durables industry is plagued bythreats from
substitute products. Easy accessibility to theatres/multiplexes, especially in
urban areas has turned off the viewership from TV to a large extent. With the
advent of a horde of FM radio stations, radio sets have now substituted TVs.
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Opportunities To The Consumer Durable Industry
1. Rising rate of growth of GDP:
The rising rate of growth of GDP, rising purchasing power of people with
higher propensity to consume with preference for sophisticated brands would
provide constant impetus to growth of white goods industry segment.2. The urban consumer durable market:
As durable products are not available at their nearest place rural
people purchase them from their nearest hometown, hence, it results
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into increase in demand at urban markets. The urban market is a
replacement and up gradation market now.
3. Attractive financing schemes:
Consumer goods companies are themselves coming out with attractive
financing schemes to consumers through their extensive dealer network.
This has a direct bearing on future demand.
4. Growth of media:
The other factor for surging demand for consumer goods is the phenomenal
growth of media in India. The flurry of television channels and the rising
penetration of cinemas will continue to spread awareness of products in the
remotest of markets.
5. Rise in disposable income:
The demand for consumer electronics has been rising with the increase in
disposable income coupled with more and more consumers falling under the
double income families. The growing Indian middle class is an attraction for
companies who are out there to woo them.
6. Availability of newer variants of a product:
Consumers are spoilt for choice when it comes to choosing products. Newer
variants of a product will help a company in getting the attention of
consumers who look for innovation in products.
7. Rise in the share of organized retail:
Rise in organized retail will set the growth pace of the Indianconsumer
durables industry. According to a working paper released by the IndianCouncil forResearch on International Economic Relations (ICRIER), organized
retail which constituted a merefour percent of the retail sector in FY07 is
likely to grow at 45-50% per annum and quadruple itsshare in the total retail
pie 16% by 2011-2012. The share will grow with bigger players entering the
market.
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8. Innovative advertising and brand promotion:
Sales promotion measures such as discounts, freegifts and exchange offers
help a company in distinguishing itself from others.
9. Festive season sales:
Demand for colour TVs usually pick up during the festive seasons. As a result
most companies come out with offers during this period to cash in on the
festive mood. This periodwill continue to be the growth driver for consumer
durable companies.
10. Customer power with respect to availability of choice:
The availability of a wide product line onaccount of most products being
homogeneous, poses a threat for companies operating in theconsumer
durables sector. Customers have the choice of both domestically produced
and importedgoods, with similar features
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