Marketing TermPaper SectionB Group8

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<ul><li><p>8/8/2019 Marketing TermPaper SectionB Group8</p><p> 1/12</p><p>GOA INSTITUTE OF MANAGEMENT</p><p>Videocon Industries</p><p>LimitedMarketing Term Paper</p><p>Section B Group 8</p><p>Roshan Roy 2010103</p><p>SamvedBanhatti 2010104</p><p>Ankur Raj 2010105</p><p>Sarat Gopinath 2010106</p><p>Sarika Sinha 2010107</p><p>Saurabh Prabhudesai 2010108</p></li><li><p>8/8/2019 Marketing TermPaper SectionB Group8</p><p> 2/12</p><p>1</p><p>Contents</p><p>Company Profile ................................ ................................ ................................ ................................ 2</p><p>Business ................................ ................................ ................................ ................................ ............ 2</p><p>Segment ................................ ................................ ................................ ................................ ............ 3</p><p>SWOT Analysis of Videocon ................................ ................................ ................................ ............... 4</p><p>Strengths ................................ ................................ ................................ ................................ ....... 4</p><p>Weaknesses ................................ ................................ ................................ ................................ ... 5</p><p>Opportunities ................................ ................................ ................................ ................................ 5</p><p>Threats ................................ ................................ ................................ ................................ .......... 5</p><p>Value Chain of Videocon ................................ ................................ ................................ .................... 6</p><p>Porters Five Forces ................................ ................................ ................................ ............................ 6</p><p>Threat of New Entrants: ................................ ................................ ................................ ................. 7</p><p>Bargaining power of Consumers: ................................ ................................ ................................ ... 7</p><p>Threat of substitutes: ................................ ................................ ................................ ..................... 7</p><p>Competitive rivalry within the consumer durables industry:................................ ............ ............... 8</p><p>Competitive rivalry to Videocon in the mobile handsets business: ................................ ................. 8</p><p>Competitive rivalry to Videocon in the direct to home television segment. ................................ .... 9</p><p>The Brand Transition ................................ ................................ ................................ ......................... 9</p><p>Recommendations: ................................ ................................ ................................ .......................... 10</p><p>Outlook and Scope ................................ ................................ ................................ .......................... 11</p></li><li><p>8/8/2019 Marketing TermPaper SectionB Group8</p><p> 3/12</p><p>2</p><p>Company Profile</p><p>Videocon Industries Limited (VIL) incorporated in 1985, is undoubtedly one of the biggest</p><p>players in the local consumer electronics segment. The company has a market capitalization</p><p>of over $2.5 billion and is backed by the Videocon group. Such is the companys size in the</p><p>Indian consumer electronics terrain, that it accounts for over 90% of the CMIE (Centre forMonitoring Indian Economy) consumer electronic index. With the passage of time, it has</p><p>added other services to its portfolio, and is currently involved in oil and gas exploration,</p><p>manufacturing of glass shells, mobile phones and telecommunications (rendered as part of the</p><p>Videocon group), in addition to its core business of manufacturing and distributing a range</p><p>of consumer electronic goods. The company has a strong presence in both the local and</p><p>global landscape, and is involved in joint venture agreements with 23 other entities. It has</p><p>also established Research and Development (R&amp;D) centres in China, Aurangabad, Japan and</p><p>Gurgaon. The company is chaired and managed by Mr.VenugopalDhoot, well-known in</p><p>Indian business circles, having amassed a personal net worth of $1.8 billion.</p><p>Business</p><p>The consumer electronics division accounts for nearly 90% ofVILs total revenue (as at</p><p>September 2009), while its oil and gas exploration activities serve as a subsidiary business.</p><p>As part of the consumer electronics division, the company sells colour televisions, LCD</p><p>(liquid crystal display) televisions, refrigerators, washing machines, microwave ovens,</p><p>airconditioners, DVD (Digital Video Disc) players, home UPS, batteries and audio systems.</p><p>It also manufacturers glass shells, electronic tuners and flyback transformers (FBT) for its</p><p>other products. As far as its oil and gas activities are concerned, the company is currently,</p><p>only into oil exploration, and intends to foray into oil extraction, oil distribution and gas</p><p>distribution. Historically, the revenues from the Oil and Gas segment of the firm have moved</p><p>in tandem with the global crude oil prices. Recently the company has also branched into the</p><p>telecommunications and mobile phones activities. However the telecommunication services</p><p>will be rendered through its subsidiary- Videocon Telecommunications Limited. The</p><p>company is extremely bullish about this segment and plans to invest Rs.14000 crore over the</p><p>next 3 years for this segment alone. Its mobile phone segment too has done exceedinglywell,</p><p>considering that the company only entered this segment in November 2009. So far, the</p><p>company has been selling 2.5-3 lakh units a month and with the introduction of nine new</p><p>handsets in the current month, the company has revised its sales target to 10 lakh units a</p><p>month. It will however, have tocompete with the like of Bharti and Idea for the</p></li><li><p>8/8/2019 Marketing TermPaper SectionB Group8</p><p> 4/12</p><p>3</p><p>commissioning of the 3G license. The company has already introduced GSM services in</p><p>Tamil Nadu and plans to roll out its mobile service activities in 100 towns.</p><p>Segment</p><p>Indias consumer electronics segment is currently valued at$23.3 billion and that is expected</p><p>to rise to $41.4 billion by2014, growing at a CAGR of 15.5%. While Videocon isconsidered</p><p>to be the most prominent Indian based consumerElectronics Company, it faces stiff</p><p>competition from a host ofmultinational companies. Thewashing machine segment grew at a</p><p>CAGR of 11% and isfurther expected to grow at a rate of 12-15% over the nextthree years,</p><p>while the air conditioning market grew at aimpressive rate of 19%. A boom inreal estate and</p><p>infrastructure industry, coupled with a changein perception of accepting air conditioners as</p><p>utility productsrather than luxury items will spur growth in this segment.</p><p>The refrigerator market on the other hand grew at a modestrate of 10% and is expected to</p><p>grow at the same pace. There isparadigm shift in the preference of frost free refrigeratorsfrom</p><p>direct cool refrigerators and companies that specialize inthe former category can expect do</p><p>better than the others. TheIndian micro wave segment however remained stagnant andis not</p><p>perceived to be a high growth segment. Televisionscontinue to be the mainstay of the</p><p>consumer electronicsdivision, particularly with LCD televisions catching on, bigtime. VILs</p><p>share in the LCD TV segment stands at around12-18% and the company is looking to</p><p>increase its marketshare by the end of the financial year. Nonetheless the future of the</p><p>consumer electronics segmentlies in the rural markets as the urban market will soon turninto</p><p>a replacement and an up-gradation market. The oil and gas industry contributes</p><p>approximately 15% toIndias GDP. Indias energy deficit is mounting where thedemand for</p><p>oil and gas far exceeds the supply. Wireless additions seem to be making rapid progress.In</p><p>December 2009 there was an addition of 19.1 millionsubscribers, up by 76.6% from a year</p><p>ago.The telecommunications segment is witnessing some positiveactivity with the</p><p>commissioning of 3G licenses just around thecorner. Sales and profits for most</p><p>telecommunication firmshave been disappointing mainly on accounts of falling</p><p>ARPUs(Average Revenue per Users), MOUs (Minutes of Usage),fierce tariff wars and</p><p>network expansion. As at March 2010,the total telecom subscriber base in the country stood</p><p>at612.2million, up by 42.5% from a year ago. The government isplanning to increase 2G</p><p>spectrum usage charges by 2% andthis will put further pressure on the operating margins</p><p>oftelecom companies.</p></li><li><p>8/8/2019 Marketing TermPaper SectionB Group8</p><p> 5/12</p></li><li><p>8/8/2019 Marketing TermPaper SectionB Group8</p><p> 6/12</p><p>5</p><p>12. Globally acceptance.</p><p>13. Extensive knowledge of the local market.</p><p>Weaknesses</p><p>1. Lack of impetus on new technological innovations and developing new products.</p><p>1. Fewer margins to the distributor/dealer.</p><p>2. No proper approach of target customer.</p><p>3. Wide brand basket, which might lead to conflict of interest unless effectively managed</p><p>4. CRT technology is losing popularity.</p><p>5. Less focus on unconventional channel and online marketing.</p><p>6. Lack of efficient and prompt customer service.</p><p>7. Lack of exclusive showrooms and exclusive customer service stations.</p><p>Opportunities1. Global aspirations. Opportunity to enter other markets as the highly competitive Indianmarket is saturated.</p><p>2. Videocon can explore new segments.</p><p>3 Fast growing tier 2 and tier 3 cities provide ample opportunity for consumer electronicsbusiness of Videocon.</p><p>4. Wide distribution network can be used to venture into new territories within India.</p><p>5. Financial help and development of credit facilities have helped the low middle classsegment to avail the products thus creating a new segment for Videocon.</p><p>6. Purchasing power of people is increasing day by day.</p><p>7. Mergers joint venture of strategic alliances would increase market share in cluttered Indianmarket.</p><p>8. Alliances with overseas companies possesses an opportunity to enter new markets.</p><p>Threats1. Entrance of global competitors like China.</p><p>2. Brand loyalty is higher in competitors like Samsung, LG and Sony.</p><p>3. Market condition like slumps in market.</p><p>4. New home grown competitor offering products at lower price.</p><p>5. Competitor has a new innovative substitute product or service and access to latesttechnology.</p><p>6. Increased trade barriers create hindrance in entering new market.</p></li><li><p>8/8/2019 Marketing TermPaper SectionB Group8</p><p> 7/12</p><p>6</p><p>Value Chain of Videocon</p><p>Porters Five Forces</p><p>The Porters Five Forces tool is a simple but powerful tool for understanding where</p><p>power lies in a business situation. This is useful, because it helps us understand both the</p><p>strength of the current competitive position, and the strength of a position company is lookingto move into. Porter five forces can be represented as follows </p></li><li><p>8/8/2019 Marketing TermPaper SectionB Group8</p><p> 8/12</p><p>7</p><p>Threat of New Entrants:</p><p>Entering the electronic consumer durables isnt very easy. One of the most important feat is</p><p>needed is a good distribution system which isnt something that can be developed overnight.</p><p>Also the electronics good today are more of style statement. Therefore the brand plays an</p><p>important role in influencing the purchase decision. For a new company then entering thismarket, not having a brand name is a threat to entry. However a company having brand name</p><p>and distribution network already in place can enter consumer electronics segment and can</p><p>leverage its brand name and distribution network.</p><p>Bargaining power of Consumers:</p><p>The Electronic market today is a consumer market where the consumer has the upper hand</p><p>with him having the power having the power of choosing from a variety of brands. This</p><p>bargaining power of the buyer has forced the players to offer credit facilities on sale, to</p><p>provide lower EMIs and excellent after-sales service. The intense dealer competition also</p><p>benefits the consumer in terms of prices and offers available. Inventory carrying costs for</p><p>television companies are high. This is a boon for the consumers as it translates into higher</p><p>bargaining power for the consumer.</p><p>Threat ofsubstitutes:</p><p>For a television, the substitute can only be a functional substitute. The functional use of a</p><p>television is to watch programs, live events etc. This today can also be done on a computer.</p><p>Theatres too can be a substitute to watching movies at home. Today with various multiplexes</p><p>and theatres providing screenings of live events such as sports telecasts etc. along with the</p><p>luxury of good food and the opportunity to enjoy the event with a number of other</p><p>enthusiasts, the TV can be substituted if the TV is bought only to watch certain events. Also,</p><p>IP TV and cable television plays a big substitute for DTH.</p><p>Bargaining Power of Suppliers:</p><p>PCBs (Printed Circuit Boards) &amp; CRTs (Cathode Ray Tube) are key raw materials in the</p><p>production of CTVs. CRT accounts for 46-48 per cent of the total raw material costs of a</p><p>CTV. PCBs and housing components account for 33-39 per cent of total raw material costs.Domestic CPTs prices tend to follow Global price trends. Therefore the suppliers do not have</p><p>much of bargaining power in this regard. Cabinets are sourced from plastic manufacturers</p><p>and as these manufacturers supply to different industries, they therefore do have a bargaining</p><p>power, especially in comparison to CRT suppliers.</p></li><li><p>8/8/2019 Marketing TermPaper SectionB Group8</p><p> 9/12</p><p>8</p><p>Competitive rivalry within the consumer durables industry:</p><p>Degree of rivalry denotes the intensity of competition within the industry. Videocon,LG,</p><p>Samsung, Sony, Onida, are the big competitors in television industry. Although</p><p>Videocon, another major player has managed to hold its own in the midst of the</p><p>onslaught from the Korean majors, though profits have suffered.LG ELECTRONICS - LG Electronics rightly understood the consumer motivations to</p><p>create magnetic products, price them strategically, position them sharply and keep making the</p><p>magnetism more potent.</p><p>SAMSUNG In line with the Global Digital Initiative of the Parent Company, Samsung</p><p>India is seeking to acquire digital leadership in India by introducing its digital ready</p><p>televisions like the 40" LCD Projection TV, 43" Projection TV and the Plano series of Flat</p><p>Colour televisions.</p><p>ONIDA</p><p>Its popular devil ad although had engendered a strong emotional pull towards the </p><p>brand, technologically it represented no advancement. The company plugged the gap by</p><p>touting its digital technology. Like Videocon, it has also been able to hold its</p><p>market share. The world-class quality of Onida has enabled the company to make a</p><p>breakthrough on the export front.</p><p>VIDEOCON - Videocon has always been a price player and has an image of a low price</p><p>brand. This entails providing more features at a given price vis--vis competitors. It has taken</p><p>over multinational brands to cater to unserved segments, like Sansui- to flank the flagship</p><p>brand Videocon in the low to mid priced segment, essentially to fight against brands like</p><p>BPL, Philips, O...</p></li></ul>