Strategic Management Consumer Durable Industry India Group Project

Strategic Management-I
Consumer Durable Industry in India
Guided by: Rear Admiral Dr Rakesh Chopra, VSM, MBA, PhD

Submitted by: Group 2

Puneet Aggarwal (10DM-108)

Puneet Mehta (10DM-109)

Puneet Pratap Singh (10DM-110)

Rabindra Narayan (10DM-111)

Rahul Kumar (10DM-112)

Rahul Padia (10DM-113)

Table of Contents
Introduction ............................................................................................................................................ 5
Rationale for the Study ............................................................................................................................ 5
Problem Formulation .............................................................................................................................. 7
Industry Analysis ..................................................................................................................................... 8
Key findings globally: ........................................................................................................................... 8
Top five emerging nations in Consumer Durable industry .................................................................... 8
Indian Consumer Durables- Overview .................................................................................................. 9
PEST Analysis ..................................................................................................................................... 10
Political Factors ............................................................................................................................. 10
Economic Factors ........................................................................................................................... 10
Social Factors ................................................................................................................................. 11
Technological Factors .................................................................................................................... 11
SWOT Analysis of Consumer Durable Industry ................................................................................... 12
Growth Drivers .................................................................................................................................. 13
Major Hurdles ................................................................................................................................... 13
Porter’s Five Force Model: Consumer Durable Industry ..................................................................... 14
Supply Chain Management: Consumer Durable Industry ................................................................... 15
Importance of SCM ........................................................................................................................ 15
Objectives of SCM .......................................................................................................................... 15
Benefits of SCM ............................................................................................................................. 15
Corporate Analysis ................................................................................................................................ 16
Overview ........................................................................................................................................... 16
LG India ............................................................................................................................................. 16
Company background .................................................................................................................... 16
Product profile............................................................................................................................... 16
Developments ............................................................................................................................... 17
Samsung India ................................................................................................................................... 17
Product profile............................................................................................................................... 18
Developments ............................................................................................................................... 18

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Whirlpool of India.............................................................................................................................. 18
Company background ........................................................................................................................ 18
Product profile............................................................................................................................... 19
Developments ............................................................................................................................... 19
Videocon Industries Ltd ..................................................................................................................... 19
Product profile............................................................................................................................... 19
Developments ............................................................................................................................... 20
Voltas Ltd .......................................................................................................................................... 20
Product profile............................................................................................................................... 20
Developments ............................................................................................................................... 21
IFB Industries Ltd ............................................................................................................................... 21
Product profile............................................................................................................................... 21
Detail Analysis Whirlpool Electronics of India..................................................................................... 22
Whirlpool Vision ............................................................................................................................ 22
Product management strategy ....................................................................................................... 22
Products introduced ...................................................................................................................... 22
Target Customer Segment ............................................................................................................. 23
Pricing Strategy.............................................................................................................................. 23
Sales channel strategy ................................................................................................................... 23
Growth over the years ................................................................................................................... 23
SWOT ............................................................................................................................................ 25
Plant Locations .............................................................................................................................. 26
Whirlpool installed capacity ........................................................................................................... 26
Whirlpool Regional Distribution Hubs ............................................................................................ 27
Whirlpool Sales office and Warehouse ........................................................................................... 27
Whirlpool Distribution Network ..................................................................................................... 28
Perspective from Mr. Shantanu Das Gupta (V.P. Corporate Affairs & Strategy): Refrigerators ........ 28
Whirlpool Sales and Market Analysis Graphs.................................................................................. 31
Whirlpool: Stats at a glance ........................................................................................................... 35

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Perspective from Mr. Shantanu Das Gupta: Washing Machines ..................................................... 35
Washing Machine Statistics in charts and Graphs ........................................................................... 37
Product Matrix:.............................................................................................................................. 40
Profit and Loss Account of Whirlpool ............................................................................................. 41
Profit & Loss account of Whirlpool of India. ..................................................................................... 41
Future:........................................................................................................................................... 42
Scenarios ............................................................................................................................................... 43
Identifying the high impact and high uncertainty factors affecting the industry. ............................ 43
Building Scenarios .......................................................................................................................... 43
Conclusion............................................................................................................................................. 45
Infrastructure Development .............................................................................................................. 45
Raw Material, Components & Machinery........................................................................................... 46
Building a Global Supply Chain Network ............................................................................................ 47
LEARNINGS FROM A STRATEGIC POINT OF VIEW ................................................................................... 48
Growth Drivers for Consumer Durable Products ................................................................................ 49
Recommendation .................................................................................................................................. 50
Limitations of the Project ...................................................................................................................... 50

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Consumer Durables Industry in India
Introduction
India’s Economy is expected to grow by around 8% in the next decade making it one of the fastest
growing major economies in the world. The Indian consumer durables industry has witnessed a
considerable change in the past couple of years. Changing lifestyle, higher disposable income coupled
with greater affordability and a surge in advertising has been instrumental in bringing about a sea
change in the consumer behavior pattern. Apart from steady income gains, consumer financing and
hire-purchase schemes have become a major driver in the consumer durables industry.

In the case of more expensive consumer goods, such as refrigerators, washing machines, color
televisions and personal computers, retailers are joining forces with banks and finance companies to
market their goods more aggressively. In addition, change in policy, such as the WTO FTA in 2005
resulted in zero customs duty on imports of all telecom equipment, thereby improving the pricing and
affordability of imported goods.

In the early 1990s, foreign companies were not permitted to start independent ventures in India.
Foreign companies used to come to India in a JV with other Indian Companies. Examples are LG
Electronics and Samsung.

It was not until 1992, when the Indian market first began to open up post liberalization, that the MNCs
started taking a closer look at the purchasing power of country’s middle class. Inevitably, the first thing
they saw was the massive volume of this potential market, rather than its cultural idiosyncrasies. Studies
have found that the penetration level of various appliances in India is fairly low. Refrigerator use is
about 18 per cent of the total population, washing machine 6 per cent, air-conditioner less than 2 per
cent and microwave ovens about 1 per cent, which translates into a great potential to tap new
consumers. Light Electrical Industry, particularly the large home appliances sector attracted a number of
leading MNC’s to either start joint ventures or start their fully owned subsidiaries in India.

The Indian consumer durables segment can broadly be segregated into consumer electronics (TVs, VCD
players and Audio systems etc.) and consumer appliances (also known as white goods) like Refrigerators,
Washing Machines, Air Conditioners, Microwave Ovens and Vacuum Cleaners.

Rationale for the Study
With the successful completion of the Uruguay Round of negotiations, which marked the
commencement of WTO regime of international trade relations, countries as well as industry/firms are
constantly investing their knowledge/intelligence to evolve strategies to remain competitive in the
global market. In this pursuit of excellence, no country or industry can afford to remain laggard as the
champions are promised huge economic gains, where as the losers face the dire risk of going out of
business. In essence, competitiveness has emerged as the determinant of winner or loser in the
manufacturing scene.

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Since, India has been trailing behind Asian neighbors in terms of production, quality and export of Light
Electrical Industry products, performance levels of most of factors of production such as quality
manpower, capital investment, infrastructure, technology etc., need to be enhanced through conscious
policy interventions and managerial action to boost competitiveness of this sector. In this context, an
attempt has been made to understand the productivity and competitiveness of light electrical
manufacturing in India with a view to document identify and recommend policy solutions to make the
sector internationally competitive. The study also attempts to identify the factors hindering the progress
of the sector and suggest measures for enhancing the competitiveness of the sector.

A wide range of products such as air conditioners, refrigerators, washing machines, microwave ovens,
vacuum cleaners, dish washing machines apart from household electrical appliances, electrical fans,
electrical lamps, storage batteries, dry cells and others are covered within the ambit of Light Electrical
Industry sector. Besides these items, light electrical industry also covers electric wires and cables
industry, transmission line towers, cranes, lifts & escalators, dairy machinery industry, food processing
machinery, packaging machinery industry, water pollution control equipment, air pollution control
equipment etc.

Domestic electrical appliances are now increasingly being used in the household and, therefore, it is very
important that safety and quality aspects of these products need special attention.

Government has introduced compulsory Bureau of Indian Standards (BIS) marking with respect to
certain electrical appliances like stoves, plugs and sockets. Greater consumer awareness about the
quality and safety of these goods will go a long way in ensuring that manufacturers adhere to these
standards. Since the industry covers a large number of diverse product categories which cannot be
covered in a single study, present study limits its scope to large home appliances only. Among the large
home appliances, the study focuses on five large home appliances such as Refrigerators, Air
Conditioners, Washing Machines, Microwave Ovens and Vacuum Cleaners. The biggest attraction for
light electrical industry manufacturers in the world is the growing middle class in India which is, equated
by many, to the size of European market in terms of purchasing power.

With Domestic Electrical Appliances (DEA) characterized by low household penetration, international
brands have an edge over their Indian counterparts in terms of superior technology combined with a
steady flow of capital, while domestic companies compete on the basis of their well-acknowledged
brands, extensive distribution network and an insight into local conditions. Sales of household domestic
electrical appliances in India posted strong growth in the recent years as the Indian economy recorded
sterling growth and personal disposable income levels increased. Intense competition among
manufacturers, influx of Chinese brands, and rationalization by manufacturers to offer products to cater
to the middle and lower-middle class has kept up pressure on unit prices - particularly for air
conditioners and refrigerators. Appliance manufacturers, having understood the need to localize
products for the Indian household strived to introduce new features and technologies that would appeal
to the Indian consumer. Refrigerators with a separate compartment for onions and fresh herbs, washing
machines that utilize less water, and Microwave ovens designed for Indian style cooking are becoming
more common.

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Problem Formulation
Any new entrant into the Consumer Durable Industry in India needs to have a thorough understanding
of the Industry wise best practices. So, when a company of large stature wants to make an entry into the
CDIT space in India, it requires a lot of information beforehand pertaining to supply chain of the Industry
as a whole, the plant location information, the warehouse locations, the distribution network and after
sales service. Hence, we are working to study the CDIT in India.

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Industry Analysis

Key findings globally:

The key findings and drivers of Consumer Durable industry worldwide are summarized below:

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 2012, 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.

Top five emerging nations in Consumer Durable industry

The top five emerging nations in Consumer Durable Industry are CHINA, INDIA, BRAZIL, MEXICO and
SOUTH AFRICA. Key points regarding the top five emerging nations are:

The Top 5 Emerging countries contributed $37.6 billion to the global consumer electronics
industry in 2007, with a CAGR of 10.9% between 2003 and 2007.

In 2012, the market is forecast to have a value of $51.2 billion, with a CAGR of 6.4% over the
2007-2012 periods.

China is the leading country among the Top 5 emerging nations, with market revenues of $21.6
billion in 2007.

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Indian Consumer Durables- Overview

Pre liberalization, only a few companies like Kelvinator, Godrej, Allwyn, and Voltas were the major
players in the consumer durables market, accounting for no less than 90% of the market.
Post liberalization, foreign players like -LG, Sony, Samsung, Whirlpool, Daewoo, Aiwa came into the
picture.
Today, these players control the major share of the consumer durables market.
Demand for consumer durables has increased significantly.
Characterized by the emergence of MNCs.
Major target is the growing middle class of India.
Bargaining power of suppliers in consumer durables sector is limited due to threat of imports and
intense competition.
Some of the entry barriers in consumer durables sector are distribution network, capital, and ability
to hire purchases.
Demand is seasonal and cyclical.
Competition among players is on the basis of difference in prices and well-acknowledged brands.

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PEST Analysis

Political Factors

Anti-dumping duty on imported color picture tubes.

FDI (100%), High Tax Incidence.

Resolution to reduce emission of carbon footprints in the atmosphere.

Effect of GST and DTC

 Reduction in overall tax incidence (14-16% from 20- 25%).

 More disposable income.

 Prices of goods to reduce in the medium term.

Economic Factors

Growth of retail sector – expected to reach 16% by 2011-12 from 4% in FY07.
Easy fin schemes to consumer.
Economic reforms by the government –higher purchasing power.
Emergence of organized retail market with large players like Croma, next, reliance digital etc.
leading to lower prices and higher varieties.
Indian incomes are likely to grow three-fold over the next two decades.

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Social Factors

Disposable Income roughly doubled since 1985.
Changing perception of luxury to necessity.
Rural market – constraints.
Demand of the consumer durables is seasonal.
Decrease in average household size.

Technological Factors

Power efficient
Higher quality products
Technological advancements

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SWOT Analysis of Consumer Durable Industry

Weaknesses
Strengths
1. Demand is seasonal and is high
1. Presence of established
during festive season
distribution networks
2. Demand is dependent on good
2. Presence of well-known brands
monsoons
3. In recent years, organized sector
3. Poor government spending on
has increased its share in the market
infrastructure
vis a vis the unorganized sector.
4. Low purchasing power of consumers

Opportunities
Threats
1. Penetration level of white goods is 1. Higher import duties on raw
lower as compared to other developing
materials
countries.
2. Unexploited rural market
3. Rapid urbanization 2. Cheap imports from Singapore, China
4. Increase in purchasing power of and other Asian countries.
consumers 3. Poor infrastructure
5. Easy availability of finance

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Growth Drivers

• Rise in disposable income

• Availability of newer variants of a product

• Product pricing

• Availability of financing schemes

• Rise in the share of organized retail

• Innovative advertising and brand promotion

• Festive season sales

Major Hurdles

• Threat from new entrants, especially global companies

• Rivalry and competition

• Potential markets remaining yet untapped

• Threat from substitute products/services

• Customer power with respect to availability of choice

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Porter’s Five Force Model: Consumer Durable Industry

Threat of New Entrants
Supplier Power
• Most current players are global players
Indigenous supply base limited - most raw
materials are imported • New entrants will need to invest in Brand,
Technology and Distribution

Competitive Rivalry
•Number of well established players, with
new players entering
•Good technological capability
•Many untapped potential markets

Customer Power
Threat of Substitutes
Multitude of brands across price points - wide
Technological Enhancement
variety of choice for customers

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Supply Chain Management: Consumer Durable Industry

Importance of SCM

SCM plays a very important role in Consumer Durable Industry and it is due to the following reasons:

• Product Proliferation

• Multiple players

• High competition

• Benchmarking and TQM

• Production Demand mismatch

• Ever Increasing Targets

• Bargaining power of Retailers

Objectives of SCM

• Efficient Sourcing

• Demand Planning

• Inventory Optimization

• Order Management

• Tracking

• High Inventory for High Demand Periods

• Reverse Logistics

Benefits of SCM

• Reduced vendor payments due to better on-time delivery and improved availability

• Increased revenues from improved availability of high fast moving inventory

• Working capital reduction due to improved inventory management and reduced order cycle times

• Fixed capital reduction due to effective asset utilization

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Corporate Analysis

Overview

The project needed us to have a thorough understanding of the Consumer Durable Industry in India and
the major players in Indian market. Below are some of the facts and figures of the companies involved
with our project.

LG India

Company background

LG India, a wholly-owned subsidiary of LG Electronics, South Korea, began its operations in India by
trading goods imported from South Korea. In 1998, the company set up a manufacturing facility at
Greater Noida where it manufactures CTV, semi-automatic washing machines, A/C, Microwaves, PCB
Assemblies, Sub Assemblies, and Refrigerators. In 2004, the company set up another facility at Pune,
Maharashtra where it manufactures GSM Mobile Phones, Plasma TV and all the other products which
are also manufactured at Noida plant.

Product profile

The company has introduced high-end products in each of its categories such as scarlet – New range of
LCD TVs, Artcool ACs, Dios refrigerators, Top loading washing machine, PDP TVs, LCD TVS, GSM phones,
R-200 notebook, etc.

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Color television: LG India has a wide variety of products across all categories such as conventional, flat
and slim TVs, LCDs and Plasma. LG 1942S is an ergonomically- designed LCD monitor, which is primarily
being targeted at business users. The monitor offers the ability to tilt the screen by up to 30 degrees,
and features a 5ms response time for crisp content as well as an 8,000:1 contrast ratio.

Refrigerators: The Company offers about 20 models across all segments like direct cool, frost free and
DIOS. The company launched Swarovski DIOS, a high end model with high performance in digital cooling.
It also launched frost-free models. The futuristic technologies that are currently in the pipeline of LG
Intellocool refrigerators are four-way cooling, patent protected door-cooling, computer controlled
cooling and the latest green ion door cooling.

Air-conditioners: The Company has launched its color series window ACs. It indigenously developed
advanced sensor based IntelloEye technology to address the needs of convenient and comfortable
cooling. Within the room air-conditioner segment, the company offers ACs in categories such as
inverters, floor standing, split, multi-split and window ACs.

Washing machines: The Company has launched the latest front loading TROMM series, which ensures
that once you press the start button smart automatically detects the laundry load and water level. The
company has presence in all the categories of washing machine market such as semi-automatic, front
loader and top loader.

Developments

LG worldwide is adopting the blue strategy and the company is planning to launch some path breaking
products and technologies as part of its strategy. Under the blue ocean strategy, the company will be
entering new segment and market, and will aim to create uncontested market space. The blue ocean
strategy will focus on creating high growth and profit by focusing on 5 key areas of the company:
product, business models, work, system and people.

Samsung India

Company background

Samsung India commenced its operations in India in December 1995, today enjoys a sales turnover
of over US$ 1 billion in just a decade of operations in the country. Samsung design centers are
located in London, Los Angeles, San Francisco, Tokyo, Shanghai and Romen. Samsung India has its
headquartered in New Delhi and has a network of 19 Branch Offices located all over the country.
The Samsung manufacturing complex housing manufacturing facilities for Color Televisions, Color
Monitors, Refrigerators and Washing Machines is located at Noida, near Delhi. Samsung ‘Made in
India’ products like Color Televisions, Color Monitors and Refrigerators are being exported to Middle
East, CIS and SAARC countries from its Noida manufacturing complex. Samsung India currently
employs over 1600 employees, with around 18% of its employees working in Research & Development.
To differentiate its products from competition, Samsung followed a deliberate strategy of bringing in
the world’s best design and technologies to India from its parent country. It launched its products in
India around the same time as the global launch of products.

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Product profile

The company is already the market leader in premium product categories like LCD TV and side-by-side
refrigerators. In 2007-08, the company is looking at consolidating its No 2 slot in air conditioners and
aiming for the top slot in frost-free refrigerator and fully automatic washing machine segments.
Samsung was the first to introduce the following in India at the same time as the global launch: DLP
televisions, fuzzy logic based washing machines, silver nano refrigerators, flat screen TVs and
microwave ovens.

Color televisions: Samsung offers a wide portfolio of flat and slim models in 15- inch, 21-inch, 25- inch
and 29 - inch screens.

Refrigerators: Samsung has its presence in both frost-free and direct cool segment. It has around 42
models in frost-free (230L- 730L) and around 15 models in direct-cool segment (180L-195L). Samsung
launched 4- star rated frost-free refrigerators in January 2007, ahead of Bureau of Energy Efficiency
guidelines. In March 2007, the company launched nine models including the world’s first quarto cooling
refrigerator (which allows customized cooling in each section of the refrigerator).

Air conditioners: Samsung has around nine models in split-ACs and seven models in window ac
segment in 1 tonne to 2 tonne capacity range. Samsung launched its three new advanced series
premium split air conditioners equipped with ultra tropical rotary compressor and micro plasma ion
technology under brands Vivace, Moderato and Forte.

Washing machines: Samsung is present in the semi-automatic segment with around eight models and
with around 16 models in the fully-automatic segment. For the semi-automatic segment of Samsung
washing machines, Samsung has introduced for the first time in India a feature called super dry. It is
present in three of Samsung’s semi automatic models and dries clothes better than the rest.

Developments

Focus sectors: Enhancing contribution from high-end products like LCD televisions, plasma television
and ultra slim televisions would be the focus business strategy during 2007-08.

Rural initiative: The Company also plans to carry out around 225 Samsung Dream Home road shows, all
over the country to educate consumers on its new products and technology.

Retail initiative: Samsung aims to expand brand shops from 115 in 2007 to over 200 by year end. By
2010, Samsung targets around 10-12 per cent from organized retail store for which it is in the process
of developing a dedicated team to tap the new retail opportunities.

Whirlpool of India

Company background

Whirlpool of India, formerly known as Kelvinator India was started in 1960 in collaboration with
Kelvinator International Corporation, USA. Whirlpool Incorporation, USA, and Sundaram Clayton Ltd
started TVS Whirlpool Ltd as a joint venture in 1987.In 1995; Whirlpool Inc took over TVS Whirlpool Ltd,

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and also acquired DC manufacturing facility of Kelvinator India. Finally in 1996, Kelvinator of India and
Whirlpool washing machines Ltd were combined to form Whirlpool of India. Whirlpool India has its
refrigerator manufacturing facility at Faridabad (Haryana) and Ranjagaon and washing machines are
produced at its Thiruphuvani (near Pondicherry) plant.

Product profile

Refrigerators: Whirlpool refrigerators have 28 models in both direct cool and frost-free segment. The
company’s direct cool segment is marketed under brand name Genius (180L to 200L) and Fusion (200L,
230L, and 260L). Frost-free refrigerators are under the brand of Iceberg (310L-340L) and Ice-magic
(400L-450L). The Refrigerator category witnessed the launch of 2 new ranges Whirlpool Mastermind
and Whirlpool Professional, both in the fast growing Frost Free segment. Whirlpool Professional, which
is a range of high-capacity top mount refrigerators, was enabled by the investment in a new line in
Ranjangaon specially made for producing high-capacity refrigerators that has high potential for both
the domestic and export markets.

Air conditioners: Whirlpool has presence in split and window air conditioners under the brand Magic-
cool. It offers windows AC models from 0.8 to 2 ton.

Washing machines: Washing machines are available in the complete range of semi-automatic and fully-
automatic segment (front and top load).

Developments

A range of Built-In appliances was launched in 2007.These products are an integral part of modular
kitchens which are seeing a boom, especially with the growth in high-end housing. This is currently a
niche market but with strong potential for growth in the years to come. The range of products are
imported from factories in Europe which are known for both performance and styling.

Videocon Industries Ltd

Company background

Videocon Industries Ltd, the flagship company of the Videocon Group, was incorporated in 1985 by NM
Dhoot. It manufactures TVs and audio appliances primarily at its Chittagong plant in Aurangabad,
Maharashtra, but the company has assembly operations at around 17 manufacturing locations across
the country. The company’s glass panels and glass funnels (collectively known as glass shells) facility is
in Bharuch (Gujarat), with an installed capacity of 4.5 million units and 7.5 million units, respectively.
Videocon industries also markets electronic appliances particularly white goods like refrigerators and
air conditioners manufactured by Videocon Appliances Limited (VAL), another Videocon Group
company.

Product profile

Products like, color televisions, washing machines, air conditioners, refrigerators, microwave ovens and
many other home appliances, fall under its Consumer Electronics, Home Appliances and Compressor
divisions. The company's in-house compressor manufacturing technology in Bengaluru supports

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refrigerator manufacturing. The display devices and its components division manufactures color picture
tube like slim CPT, extra slim CPT and high definition 16:9 format CPT, which operates in Mexico, Italy,
Poland and China. The color picture tube glass manufactured by the company operates through Poland
and India. Videocon is also involved in oil and gas exploration and operates from its oil fields in India,
Australia and Oman.

Color televisions: The Company has introduced three flat television models in the 15 inch, 18inch
models in 21 inch segment and eight models in the 29 inch segment.

Developments

Focus: The Company would be increasing its focus on comparatively better margin products like LCD,
plasma TVs, 29-inch TFT and slim color televisions. In the home appliances segment, the focus will be to
strengthen its position in the fully-automatic, front loading washing machine and frost-free refrigerator
divisions.

Rural initiative: The Company has formulated marketing strategies with customized products for the
rural market. It also plans to expand its distribution network to tap the pan India rural market. Further,
it plans to aggressively promote its consumer finance schemes in rural markets to enhance consumer’s
affordability across product range for penetrating the rural markets.

Videocon Retail: The Company plans to invest Rs 800 crores to expand its electronics retail format to
1,500 from 200 at present in the next 3 years.

Voltas Ltd

Company background

Voltas Ltd was promoted by Tata Sons Pvt Ltd in collaboration with Volkart Brothers in 1954. It is one of
India's premier air-conditioning and engineering services. Its operations are organized into four
segments viz., electro- mechanical projects and services, engineering products and services, unitary
cooling products and others. Its factories are located at Thane (Maharashtra), Dadra and Sanathnagar
(Andhra Pradesh). Its overseas offices are located in Abu Dhabi (UAE), Hong Kong and Singapore. For
turnkey engineering projects they have technical collaborations with international companies like
Hitachi (Japan), Standard Refrigeration (USA), Dunham Bush (USA), Hercules (USA), Mitsubishi (Japan)
etc. It has six subsidiaries and five joint ventures.

Product profile

Air conditioners: Voltas has presence in windows and split air conditioner sections under the brands
Vertis, Verdant and Vectra. It offers window AC models between 0.6 to 2.0 ton and split ACs from 0.8 to
4.0 ton. It was the first to launch sub 1.0 ton AC’s.

Commercial refrigerators: Products include chest freezers, deep freezers, upright coolers and chest
coolers.

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Developments

Voltas is planning an aggressive distribution strategy to increase its current channel partners from 3,000
to around 4,000 during the year.

IFB Industries Ltd

Company background

IFB Industries Ltd originally known as Indian Fine Blanks Limited started its operations in India in 1974 in
collaboration with Hienrich Schmid AG, Switzerland. IFB Industries has its business categorized into fine
blanking and home appliances. IFB Home Appliances deals with washing machines, microwaves,
dishwashers and drying machines. The engineering divisions of the company are located in Kolkata and
Bengaluru. Apart from Fine Blanked components, the Bengaluru unit manufactures motors for white
goods as well as automotive segments.

Product profile

IFB Industries Ltd (Home Appliances Division) has recently launched top loading washing machines. IFB is
the leader in front loading washing machines in India. Earlier, IFB exclusively manufactured front loading
washing machines and has a huge market share of the front loading fully automatic washing machines.

Washing machines: Earlier, the company was present only in the fully automatic front-loading washing
machine category. Its fully automatic top loading model is now available in capacities ranging from 5-7
kg. It has also launched top loaders in the Indian market in the capacity of 6-7 kg.

Other appliances: Besides washing machine, the company also offers a comprehensive range of
microwave ovens, dryers and dish washers.

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Detail Analysis Whirlpool Electronics of India

Whirlpool Vision

Every Home… Everywhere... With Pride, Passion, Performance

Their goal is a Whirlpool product in every home, everywhere.

They will achieve this by creating:-

Pride in their work and each other

Passion for creating unmatched customer loyalty for their brands

Performance results that excite & reward global investors with superior returns

They will bring this dream to life through the power of unique global & their Outstanding people…
working together… everywhere.

Product management strategy

TWL was established as an assembly operation, dependent on components that were 80-90%
externally sourced.

Faridabad(Haryana)

Ranjangaon, Pune(Maharashtra)

Thirubhuvanai(Puducherry),

New line to make high capacity(8kg) washing machine in 2008

Products introduced

Compact washers i.e. automatic washers initially

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Target Customer Segment

Initially high end customers

Positioned the brand as a “Partner to the homemaker” and the values were translated into the
various elements of the brand identity leading to the well known tagline “You & Whirlpool, The
World’s best homemakers.”

In fact, Whirlpool is credited with changing the lexicon from “housewife” to “homemaker” in
everyday parlance.

Engaged a real life celebrity couple Ajay & Kajol to endorse the brand who symbolize the values that
brand stands for.

Pricing Strategy

Premium pricing initially

Sales channel strategy

TVS also had few connections with appliance retail distribution outlets. Dealers were not interested in
buying products from single-product firms like TWL

Growth over the years

Product range includes refrigerators, washing machines, air-conditioners, microwave ovens, 100%
dryers and Purafresh.

Acquired Kelvinator India Limited in 1995 and marked an entry into Indian refrigerator market as well.

Kelvinator had a high cost structure, old factories, diversification into non core business areas like
mopeds and excessive staff which brought losses to the company for the first time from 1991 to
1993; by 1994 it lost its position to Godrej.

Electrolux retained the Kelvinator brand and Whirlpool was allowed to keep the manufacturing
facilities and distribution network.

Kelvinator purchase gave Whirlpool access to more than 3000 dealers in India.

Kelvinator brand was handed over to Whirlpool on a two year lease till the end of 1996.

Whirlpool used the Kelvinator brand as a launch pad for its own line of products. Whirlpool
refrigerator was promoted as a refrigerator manufactured by the same company that manufactured
Kelvinator. By the end of 1996 Whirlpool successfully established itself as a strong brand making use
of Kelvinator’s trade partners and brand name.

23

The same year also saw acquisition of major share in TVS joint venture. The removal of FERA
restrictions and the liberalization of FDI enabled MNC, who were already operating in India, to raise
their equity in their Indian enterprises to 51% or more post 1991 reforms.

In 1996, Kelvinator and TVS acquisitions were merged to create Indian home appliance [6] i.e.
Whirlpool India Limited which is An 82.3% subsidiary of Whirlpool Inc, USA

New line in Ranjangaon, specially made for producing high-capacity refrigerators

Product portfolio was expanded with the introductions of a front load fully automatic range in the
highly salient <6 kg capacity.

A Fully Automatic Dryer was also introduced

A range of Built-in appliances was launched in 2007

Management at Whirlpool concluded that if the company were to be a major player in the developing
global major home appliance industry, it needed a presence in Asia to compete with the Japanese and
Korean manufacturers. Industry projections suggested that Asia would surpass North American and
Europe and represent 40% of world demand for home appliances by 2004. In 1987, Whirlpool
managers thought that rising incomes and aspirations among India's middle class would generate
substantial demand for home appliances over the next few decades. That same year, Whirlpool met
and signed a joint venture agreement with India's TVS group, for the purpose of manufacturing
automatic washing machines and eventually other appliances. TVS had begun as a bus service and
diversified into auto component manufacturing and other auto-related businesses. Its most recent (and
least successful) diversification into computer components was also its first into non-automotive
consumer goods. TVS then joined with Whirlpool in forming TWL because it also wanted to take
advantage of future growth in consumer products in India.

Under the terms of the joint venture agreement, TVS provided day-to-day operational management,
with Whirlpool providing the technical expertise in automatic washing machines. Unfortunately, TVS
knew nothing of either making or marketing major home appliances, and Whirlpool ignored the fact that
the Indian market had no interest at the time in automatic washing machines! People purchased either
manual washers or semi-automatic twin-tub washers. Fully automatic machines were affordable only to
a tiny segment of the population. TVS' and Whirlpool's investment of time and money into the
development of their first washer meant that the venture had to sell 5,000 high-priced units per month
to reach break-even. TWL was established as an assembly operation, dependent on components that
were 80-90% externally sourced. TVS' lack of experience with appropriate suppliers, plus the marginal
ability of suppliers to deliver quality parts on time, caused huge problems in production. TVS also had
few connections with appliance retail distribution outlets. Dealers were not interested in buying
products from single-product firms like TWL when they could deal with companies making a full range of
consumer durables, like Videocon. Even after two years of operations, only 2,000 to 2,500 units were
coming off TWL's assembly line. By 1993, TWL's equity was reduced to zero, cash flow was weak, and

24

losses were accumulating. Whirlpool purchased TVS' stock in the joint venture and implemented a
turnaround strategy under the new name of Whirlpool Washers Manufacturing Limited (WWML).

Whirlpool initiated its Worldwide Excellence Program in the Pondicherry plant to raise the level of
quality and reduce costs. It worked to develop better relations with its suppliers. Whirlpool replaced
TVS managers with its own from the United States but still had to deal with the TVS corporate culture in
the workplace. The reorganized venture reduced its losses and became profitable. Whirlpool's market
share rose from 12.9% in 1994 to 17% by the end of 1995. WWML finally made a book profit in 1995
but still had to pay off its accumulated losses of US$50 million. Increasing competition and price wars
were making the targeted 1996 market share of 20.6% difficult to achieve.

Also in 1995, Whirlpool purchased a 51% interest in Delhi-based Kelvinator of India (KOI), one of India's
leading refrigerator makers. Even though KOI had 30% market share in India, its refrigerators were
outdated and the company was unprofitable. Whirlpool began construction of a US$119 million plant
to produce state-of-the-art refrigerators. This was on top of its investment, totaling US$120 million, in
the TVS joint venture and in Kelvinator. The company was also considering entering the Indian air
conditioning market as well as the fast-growing, Chinese major home appliance market. In the
meantime, Whirlpool's erratic corporate earnings translated into a decline in its per share stock price
from $56 in 1993 to $51 in 1996. Whirlpool's plan to become a global appliance manufacturer
appeared to be in difficulty.

SWOT

STRENGTHS
a.)Strong R&D backbone
b.)Strong Brand Image WEAKNESS
c.)Increasing cash flow from operations a.)Low Margins
d.)Growth in revenue from Latin b.)Declining Private label sales to Sears
America
e.)Aggressive marketing campaigns

SWOT

THREATS
OPPORTUNITY a.)Influx of new multinational brands
a.)Growing Asian markets b.)High marketing & Infrastructure
b.)Growth in housing Investment by competitors
c.)Expansion of organized retail beyond c.)Inflation of material costs
metros d.)Regulations on energy and
d.)Overall low penetration levels in the Sustainability
country e.)Import risk due to currency
fluctuations

25

Plant Locations

Whirlpool of India Ltd. Plant Locations

Faridabad ,Haryana
Puducherry ,Tamil Nadu
Maharashtra
Ranjangaon
Pune

 There are 3 factories of Whirlpool which server by providing the following goods
 Faridabad----Refrigerators
 Pune----------Washing Machines & Refrigerators
 Pondicherry----Washing Machines

Source: Secondary Research

Whirlpool installed capacity

Whirlpool Trends in capacity utilisation (%)
+22%
+13%
100%
-5%
80%

60%

40%
2010
20%

0%

Source: Prowess (CMIE) database

26

Whirlpool Regional Distribution Hubs

Whirlpool Regional Distribution Hubs

ASSAM

Faridabad, Haryana
Puducherry,
(Pondicherry, Tamil Nadu)
Ranjangaon, Pune,
Maharashtra


Whirlpool Sales office and Warehouse

Whirlpool Sales office/Warehouse

ASSAM

 The company has 18 sales branch offices in India and 1 CFA each. The company markets its products through CFA’s who further
provide the goods to the Direct Dealers.
 The Direct Dealers can also source the products directly from the company.
Another Alternative Channel is selling through Sub-Dealers who in turn source their products from either the Distributors or the
Direct Dealers.


27

Whirlpool Distribution Network

Whirlpool Distribution Network
2010

 Distributors are being preferred as they increase
40%
the company’s reach into rural markets as well reduce
60%
the risk exposure of the company by providing credit
worthiness

Distributors Direct Dealers

 Direct Dealers are important as there are some stores where company has to be present so
as to have a superior business relationship with the customer

 Distributor margin 3.25%(approx.)
 Dealer margin 1.25% (approx.)


Perspective from Mr. Shantanu Das Gupta (V.P. Corporate Affairs & Strategy): Refrigerators

On Protton Refrigerators

• Innovative & premium range of frost free refrigerators- Protton world series.

• It’s an eco-friendly refrigerator.

• Available in 2 formats:

• Protton 3 Door: India’s 1st fully automatic refrigerator for systematic and odor free storage of
frozen food, fresh food & vegetables separately. ABS (air booster system) vents present in each
zone and FBS (freshness booster system) in vegetable drawer ensures lasting freshness for more
than a week. 30% faster ice making. Capacity 300L & 400L, in 4 high gloss finishes. Price:
Rs.23400- Rs 27500.

• Protton 2 Door: New lifestyle features like double decker ice twister, can rack, choco box & fruit
crisper. 50% faster ice making. Capacity 410L, 450L & 480L, in 3 high gloss finishes. Largest
vegetable basket with freshness booster system.

• Protton World series is third sub brand in Whirlpool’s frost free category besides Mastermind &
Professional.

28

On sales in 2009

Sales of 1.53 million refrigerator units in 2009, an increase of 28% over 1.23 million units in 2008

On market trends

• Direct cool

 Good growth driven by low capacity products

 Price points attract first time buyers with modest income

 Aesthetics- particularly color has become important in addition to durability

• Frost free

 Good growth will continue with more innovations

 Demand for large capacity products will increase

 New formats in large capacity products e.g. multi door formats

 Smaller innovation cycle

 Electronic user panel gaining importance

 Innovative space management solutions in high capacity products

 Energy efficiency is an additional criterion

 Health and freshness benefits sought

On sales trend

• Upward momentum in both segments

• Double digit growth over next 3 to 5 years across different population strata

On challenges

• Supply/component base not keeping pace with change in market dynamics, necessitating imports

• Innovation at low cost given expectation for better and more featured products on one hand and
reality of affordability on the other.

29

On Opportunities

Limited penetration

Rise in disposable income, improvement in infrastructure

Implementation of GST, 2011 to ease movement of goods across states

Expansion of modern retail

On Product range

• Direct cool single door – 180L, 200L, 230L, 260L AND 310L

• Frost free double door – 220L, 250L, 280L, 310L, 340L, 410L, 450L and 480L

• 3 door top mount – 300L, 330L

On price range

• Direct cool – Rs. 8200 – 16000/-

• Frost free – Rs. 13100 – 48000/-

On advertisement and promotional strategies

• Mass media such as TV, print & radio

• Innovations in advertising e.g. Fusion in direct cool & protton in frost free

• Consumer promotions in specific periods e.g. Diwali

30

Whirlpool Sales and Market Analysis Graphs

Whirlpool Sales : 2009-10
Region wise Sales (%)

15%
31%

18%
2009-10

36%

North + central South East West

Whirlpool Total sales Trend
Total Sales (units)

2009 1533000

2008 1203000

0 500000 1000000 1500000 2000000

31

Whirlpool Turnover Trend (Rs. Million)
Turnover

2009 15114

2008 11791

0 2000 4000 6000 8000 10000 12000 14000 16000

Whirlpool–Direct cool v/s Frost free: (2009-10)

21%

2009-10

79%

Direct cool Frost free

32

Whirlpool – Direct cool: Capacity wise (2009-10)

Sales – 1215000 units

10%
10%

2009-10

80%

184L or less 185L to 225L 226L or more

Whirlpool Frost free: Capacity wise(2009-10)
Sales – 318000 units

6%
13%

6% 2009-10
53%

22%

225L or less 226L to 270L 271L to 300L 301L to 350L 401L or more

33

Whirlpool Market Penetration (2009-10)
Market Penetration (%)

Urban 34

Rural 6

0 5 10 15 20 25 30 35 40

Whirlpool Market Segment: (2009-10)
Market segment

30%

2009-10

70%

Rural Urban

34

Whirlpool: Stats at a glance

Sales Target for 2010-11 30-40% growth

Upcoming Model Both at mass and premium end

Manufacturing Plant Faridabad and Pune

Total export 0.17 million units

Installed Capacity 2 million units per annum

Turnover Sales units (2009-10) 1.54 million units

Turnover (2009-10) Rs. 15.114 billion

No. of Dealers/ Distributors 2350

Perspective from Mr. Shantanu Das Gupta: Washing Machines

On sales trends

• Fully automatic growing at 20% & semi automatic at 10%

• Fully automatic top load is fastest growing segment

• Color becoming an important aspect

• Plastic cabinet gaining salience

35

On key growth drivers

• Low penetration

• Aspiration & changing lifestyle

• Increase in disposable incomes

• Growth in nuclear families

On market trends

• Industry in 2009-10 is 3-3.5 million units

• Growth in 2008-09 is 15-20%

• Industry growth pegged at 15-20% over the next three years

On emerging technologies

• Green technologies offering greater energy efficiency & optimal water use

• Plastic cabinets replacing steel

On major challenges and Opportunities

• Only 4% penetration at all India level

• Lack of proper infrastructure like water & electricity

• Changing lifestyles, more working women, longer hours out of home, uncertainty of domestic help
present opportunity

On energy efficiency initiatives

• Features addressing water issues like eco wash, water saving wash & half load cycle

• 6th sense optimizes detergent & water based on wash load

• Aqua shower in semi automatic saves 20% water

On marketing strategies

• Short term objective to be at 20% mark by fiscal end

• Interesting innovations in both formats prior to Diwali

36

• Expanding distribution, 700 towns with population of 50000 to 5 lakhs, adding another 100
distributors

• Increasing brand visibility

On product range

• Semi auto, 6-8kg capacity, plastic & metal body

• Fully automatic top load, 4 designs, Agipellar & Agitator

• Front loaders, only brand locally manufacturing 7kg m/c in India

• Will introduce dryers in next 12-18 months

On manufacturing facility

• Manufacture WMs at plant in Pondicherry

• 10% product range is imported

Washing Machine Statistics in charts and Graphs

Whirlpool: Contribution of Fully and Semi –
Automatic WMs (2009-10)
Percentage Contribution (%)

40%
2009-10
60%

Semi automatic Fully automatic

37

Whirlpool : Total Capacity Wise Sales (2009-
10)

4%
21%

2009-10

75%

5kg-6kg 6kg-7kg Above 7 kg

Whirlpool : Semi – Automatic Capacity Wise
Sales (2009-10)

29%

2009-10

71%

6kg-7kg Above 7kg

38

Whirlpool : Fully Automatic WMs Capacity
Wise Sales (2009-10)

3% 13%

2009-10

84%

5 kg- 6kg 6kg-7kg Above 7 kg

Whirlpool : Zone wise sales, Semi – Automatic
WMs (2009-10)

14%
23%

11%
2009-10

23%
29%

Central North South East West

39

Whirlpool : Zone wise sales, Fully – Automatic
WMs (2009-10)

7.0%
21.0% 3.5%

7.5% 2009-10

61.0%

Central North South East West

Product Matrix:

Refrigerator

• Direct Cool: 7 models

 Capacity 180-230 Lts

 Price Range 9290-13930

• Frost Control: 12 models



• Frost Free: 48 models



40

Air Conditioner

• Window: 5 models

 Capacity .8-1.5 Ton


• Split: 13 models

 Capacity 1-15 Ton


Dishwashers

Capacity 220-230V
Price 50000

Profit and Loss Account of Whirlpool

Profit & Loss account of Whirlpool
------------------- in Rs. Cr. -------------------
of India.

Mar '06 Mar '07 Mar '08 Mar '09 Mar '10
12 mths 12 mths 12 mths 12 mths 12 mths
Income
Sales Turnover 1,379.161,626.26 1,974.05 2,097.21 2,683.62
Excise Duty 123.55 146.11 173.41 153.88 142.58
Net Sales 1,255.611,480.15 1,800.64 1,943.33 2,541.04
Other Income 4.46 4.64 0.84 4.35 14.64
Stock Adjustments 11.80 16.23 93.81 -16.82 113.53
Total Income 1,271.871,501.02 1,895.29 1,930.86 2,669.21
Expenditure
Raw Materials 783.77 907.46 1,142.97 1,088.79 1,476.51
Power & Fuel Cost 9.52 11.13 12.97 13.56 16.94
Employee Cost 92.30 100.07 121.96 133.41 159.64
Other Manufacturing Expenses 6.80 8.99 21.18 29.11 41.83
Selling and Admin Expenses 286.13 344.13 426.57 443.15 619.77
Miscellaneous Expenses 90.32 73.30 71.84 74.38 94.69
Preoperative Exp Capitalized 0.00 0.00 0.00 0.00 0.00
Total Expenses 1,268.841,445.08 1,797.49 1,782.40 2,409.38
Mar '06 Mar '07 Mar '08 Mar '09 Mar '10
12 mths 12 mths 12 mths 12 mths 12 mths

41

Operating Profit -1.43 51.30 96.96 144.11 245.19
PBDIT 3.03 55.94 97.80 148.46 259.83
Interest 17.10 15.74 17.24 17.32 8.27
PBDT -14.07 40.20 80.56 131.14 251.56
Depreciation 36.55 34.42 37.35 39.01 39.68
Other Written Off 13.66 18.32 15.21 9.43 9.40
Profit Before Tax -64.28 -12.54 28.00 82.70 202.48
Extra-ordinary items 10.95 6.90 0.81 3.50 4.33
PBT (Post Extra-ord Items) -53.33 -5.64 28.81 86.20 206.81
Tax -15.23 -0.32 -3.51 15.68 61.78
Reported Net Profit -38.10 -5.32 32.32 70.52 145.02
Total Value Addition 485.07 537.61 654.52 693.61 932.87
Preference Dividend 0.00 0.00 0.00 0.00 72.24
Equity Dividend 0.00 0.00 0.00 0.00 0.00
Corporate Dividend Tax 0.00 0.00 0.00 0.00 12.28
Per share data (annualized)
Shares in issue (lakhs) 1,268.721,268.72 1,268.72 1,268.72 1,268.72
Earnings Per Share (Rs) -3.00 -0.42 2.55 5.56 5.74
Equity Dividend (%) 0.00 0.00 0.00 0.00 0.00
Book Value (Rs) 3.29 2.87 5.41 10.77 15.74

Future:

• Immediate focus is on 700 towns with a population of 100,000-500,000 which we is expected to
emerge as major consumption centres in the years ahead.

• Plan to add new distributors to expand distribution width, and investment of around Rs 3 billion
in India over the next three years

• Strategic focus on countries which are less affected by the economic recession, primarily the
Oceania region (Australia +New Zealand) and neighbouring markets in the SAARC region

42

Scenarios
With easy availability of finance, emergence of double-income families, fall in prices due to
increased competition, government support, growth of media, availability of disposable incomes,
improvements in technology, reduction in customs duty, rise in temperatures, growth in
consumer base of rural sector, the consumer durables industry is growing at a fast pace.

Identifying the high impact and high uncertainty factors affecting the industry.

1. Government policies

2. I mprovements in technology

3. Increase in raw material cost

4. Easy availability of finance

Building Scenarios

Scenario 1: No great change.

With all the other factors affecting in one direction and increase in raw material prices acting
against them, the change may be nullified, due to India being a highly price sensitive market.

Scenario 2: Market growth despite increase in raw material cost and stringent RBI policies.

Indian economy is expected to grow at the rate of more than 8% in future years; this will result in
higher disposable income with the consumers. But the inflation as per the recent data is hovering
around 9% resulting in the increase in the price of these goods and impacting the demand.

Moreover, RBI is tightening the monetary policy to check the inflation and hence the increase in
interest rate. Consumer durables sector which are sensitive to credit conditions in the
economy, have seen a slowdown in growth to 3.3 percent in the April-June quarter of 2011,
down from 19.7 percent yoy as shown in the table given below.

43

Thus we believe that the measures taken by RBI will check the inflation rate and hence economy
may not grow at the expected rate. This will result in the slower growth rate of consumer durable
sector. But as the RBI policy ease out in long run, we expect to higher growth of the consumer
durable sector.

Scenario 3: Saturation in urban areas, shifting the focus to rural markets.

The penetration level of consumer durables is very low in India, as compared with other
countries. This translates into vast unrealized potential.

For example, in case of color televisions (CTVs), the penetration level of various countries is:

India 24%

Brazil 11%

China 98%

U.S 333%

France 235%

Japan 250%

44

In a study conducted by Frost & Sullivan and commissioned by India Semiconductor
Association (ISA), the demand for Electronic Appliances is projected to grow exponentially at a
compounded annual growth rate (CAGR) of 30%

Conclusion

There are various factors which will influence the rate of growth of consumer durables industry
in India.

Infrastructure Development

Lack of adequate physical infrastructure like transport system, roads, ports, airports etc.
adversely affect the competitiveness and productivity of the manufacturing sector. Uninterrupted
power supply is a necessary condition for operation of manufacturing units as power fluctuations
can lead to breakage of entire system. Many of the respondents to the survey have shown their
dissatisfaction with the existing availability and quality of infrastructure.

It has been suggested by industry associations that preferential pricing on land, building and
infrastructure etc., are required to save the industry. For example, in China land and power are
assured by Government. Industry and industry association has been supported by Government in

45

China. There is need for active government support for the survival of domestic manufacturing
in India.

It is important that Government should prepare a time bound plan to upgrade physical
infrastructure to ensure long term competitiveness and sustained development of light electrical
manufacturing sector. Adoption of Private–Public–Partnership (PPP) model can facilitate faster
and cost effective development of infrastructure. Financial incentives are given to manufacturing
units for establishing and maintaining of backup power units and for utilizing non-conventional
energy sources.

While setting up its new plant Arcelik needs to take into account the location close to a
distribution hub or a region well connected to other parts of the country.

Raw Material, Components & Machinery

Some of the raw materials like Polypropylene are being manufactured by a single company

(Monopoly) and as a result price is exorbitantly high. Due to the unavailability of good quality of
aluminum, copper tubes, gear boxes and other components several Indian manufacturers are
forced to import from countries like China. Domestic component manufacturers may be given
adequate support to overcome these constraints.

The manufactures of large home appliances are generally dependent on imported raw material as
the availability of good quality raw material is a serious problem. Due to the unavailability of
good quality of aluminum, copper tubes, gear boxes and other components and subassemblies
are forced to import from the countries like China and assembled in India to produce finish
product. The Quality of these imported raw materials available in local markets is not fully
reliable.

Government can evolve necessary mechanisms such as removal of safeguard duties on certain
raw materials such as Aluminum and Polypropylene. An agency may over see the pricing of raw
material to ensure abnormal fluctuations in raw material prices.

The domestic manufacturers of Air Conditioners reported problems in getting good and quality
Copper Tube in India hence they are relying on imports from China. Even 40 percent of the main
component is imported by most of the manufacturers. Even this is same in the case of
compressors. Rotary compressors which are considered to be more energy efficient than
reciprocating compressors are mainly being imported from China. These compressors are cost
effective as well. Only the reciprocating compressors which are used in Refrigerators are being
manufactured in India. Nowadays, due to the adoption of energy efficiency norms, the
production of reciprocating compressors is declining in India. Cooling coil and condenser etc.,

46

cost about 60 percent of the windows and split ACs. Most of the Indian manufacturing units
producing reciprocating compressors were reported to be taken over by large MNCs.

Weak supply chain network and lack of vendor support also affects the quality, productivity and
competitiveness of the products. Manufacturing units directly importing raw materials face delay
in import clearances which slows down completion of time bound projects as well as export
production by these units. Government should ensure hassle free import of raw material and
components by streamlining the import policy and systems and through simplification of import
procedures. Maritime Transport is a critical infrastructure for the development of Logistics and
Supply Chain Management. It influences the pace, structure and pattern of development.
Ministry of Shipping may undertake appropriate action plans for hassle free Handling of raw
material and finished products at the ports.

The Light Electrical Industry is a highly capital intensive industry and also the obsolescence is
very high. The industry is competing with major players in countries like China, Malaysia,
Thailand and South Korea. Thus, there is the imperative to continuously upgrade manufacturing
facilities in line with the latest technological developments. Importing is considered to be
cheaper than manufacturing locally by many manufacturers in India.

It is recommended that the government should promote modernization of units through a special
scheme with fiscal incentives and minimum import duties. Special Financing Schemes need to be
formulated for encouraging the entrepreneurs in the manufacturing sector. Depending on the
needs and performance of existing manufacturers, special loans may be granted for technology
up gradation, infrastructure building or expansion of business.

Import duties play a key role in deciding whether to import goods or manufacture, with possible
FTA between Turkey and India in the pipeline the consumer durable major, Arcelik can import
CBU units from Turkey.

Building a Global Supply Chain Network

The competitiveness of light electrical industry could be enhanced only through strengthening
the global supply chain network as the industry is highly dependent on the import of raw
materials. The cost of the supply network or logistic management network also needs to be
assessed through value chain analysis. Unless it is intervened at the right time there will be a
spiraling effect (e.g., rise in price of raw materials leading to high cost of production, that would
result in either rise in product price or incurring of loss by the manufacturer) that would hinder
the competitiveness of both the product and the firm. However, while calculating cost, the
efficiency and reliability of the supply chain also need to be considered, as most of the products
require handling with care and to be delivered in time.

47

LEARNINGS FROM A STRATEGIC POINT OF VIEW

As students of management this project helped us a lot to learn about:

1) Consumer Durable Industry in India which is expected to grow by around 8% in
the next decade. The Indian consumer durables segment can be segregated into 2
consumer electronics groups:

White goods Consumer electronics

•Air conditioners •Televisions

•Refrigerators •Audio and video systems

•Washing machines •Electronics accessories

•Sewing machines •PCs

•Electric fans •Mobile phones

•Watches and clocks •Digital cameras

•Cleaning equipments •DVDs

•Microwave ovens •Camcorders

•Other domestic appliances

2) Growth Scenario of Consumer Durable Industry in India-
Rising disposable income and declining prices of durables have resulted in increased
volumes. An increase in disposable income is aided by an increase n the number of both
double-income and nuclear families. Production in the consumer electronics industry has
been estimated at US$ 6.7 billion in 2009– 2010. The segment registered a growth of 18 per
cent in 2009–2010 from US$ 5.5 billion in the previous year. The consumer electronics
segment contributes about 27 per cent to the total hardware production in the country.

Air conditioners (including industrial and office conditioners) constituted 38 per cent of the
consumer appliances market, followed by refrigerators at 14 per cent, electric fans at
7.5 per cent, washing appliances at 7 per cent and sewing machines at 5 per cent.
Consumer durables are expected to grow at 10-15 per cent in 2007-08, driven by the growth
in CTV’s and air conditioners. Value growth of durables is expected to be higher than

48

historical levels as price declines for most of the products are not expected to be very
significant. Though price declines will continue, it will cease to be the primary demand
driver. Instead the continuing strength of income demographics will support volume growth.

Growth Drivers for Consumer Durable Products

Product 2007-2008 over 2005-2006 2008-2009 over 2009-2010
Category % Growth % Growth
Driver Driver
20-22 Decreasing 30-40 Reduction in
Air Prices, Prices
Conditioners changing
lifestyle
5-8 High demand 24 low
Refrigerators for the frost penetration
free level in the
segment country and
together with the increase in
reduction in demand from
prices the
5-8 Increasing 30-40 Reduction semi
rural and in
Color disposable Prices areas
urban of
Televisions income and LCD,LED
declining
8-10 Reduction in
prices 30 New models
Washing prices of fully launched and
Machines automatic reduction in
machines prices

3) Production facility of some of the top consumer durable companies in India. Example LG
Electronics has 9 product lines in Pune plant (50 acre in area) and 7 product lines in Noida
plant (47 acre in area).
4) Distribution network of the company like the number of warehouses, supply chain process,
modern retailers etc.
5) Major players in the consumer durable industry. Example LG Electronics who is the market
leader followed by Samsung, Whirlpool, Videocon, Voltas, IFB etc.
6) Different sales and marketing strategies applied by different companies.
7) After sales service.

49

Recommendation

The Indian consumer durable industry is ripe for investment and is going to grow at a significant
pace in the years to come. Hence, its best advised to enter Indian market with a diverse portfolio
of products with substantial capital investment in the form of setting up owned plants.

Limitations of the Project

 While doing an interview with the industry heads of consumer durable companies they
might not be willing to share the necessary data that are very important to the project.
 The plant head of a consumer durable company might not be interested in talking about
the supply chain process and the plant details like assembly lines and installed machines.
 Taxation policy and regulatory environment might differ from one place to another and
keeps changing. The data obtained may not be up to date and current.
 Very extensive scope of the project, difficult to fit in the time frame of one month
 Difficulty in getting company specific information due to company policies

50

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