Ctv

A STUDY ON CTV INDUSTRY : INDIAN COMPANIES VIS-À-VIS MNC’s









CERTIFICATE

This is to Certify that MR. ABC has been under my guidance on the

final project. The title of the project was “A STUDY ON CTV

INDUSTRY:INDIAN COMPANIES VIS-À-VIS MNC’s”, as per curriculum

and has submitted satisfactory report on the same as a pre-requisite for the

award of Two Year Full Time Course of Post Graduate Diploma in Business

Management (PGDBM) from Ishan Institute of Management &

Technology, New Delhi, session 1996-98.

MR. X. Y. Z..........................

(PROJECT GUIDE)


ACKNOWLEDGMENT

I take the opportunity to express my gratitude to all of them who in

some or the other way helped me to accomplish this project. No amount of

written expressions would be sufficient to show my deepest sense of

gratitude to them.

First of all I am thankful to Mr. Shekhar Aggarwal (Executive

Engineer, C-DOT, IIT, Kanpur), who was a source of continuous guidance

and inspiration to me in my association with him I experienced not only his

astonishing knowledge but also his a affection towards me.

I am grateful to Mr. D. K. Garg (Chairman - I.I.M.T.) whose valuable

suggestions helped me in preparing the report.

Last but not least I am grateful to all of them who have helped me

directly or indirectly during the course of my project.

ABC


INTRODUCTION

Television is one of the most popular and common means of

entertainment for an average Indian family.

According to Michael J. Apter.,

“Television is the most powerful medium of mass communication

which has ever existed and it has revolutionized our lives in many ways.”

The improvement in standards of living and the growth in consumable

income has caused the spirit in the demand of consumer durable products.

In fact the increase in purchasing power and inclination to purchase has

made luxuries of yesteryears the necessities of today.

The electronics industry has been making rapid strides since the 70s

and the main impetus has been provided by growth of the consumer

electronics segment.

The phenomenal expansion of broadcasting facilities in the earlier

plan periods and the special emphasis on the development of the TV

network in the eighties have been major triggering factors.


In the union Budget 1993-94 , the electronics Ind. was projected as

Ind. with potential of becoming a world class Ind. contributing to our export

efforts and to employment generation. There was a world wide recession in

consumer electronics Industry. Indian B/w and CTV industry was also facing

a recession which is mainly due to continuous increase in excise duties

coupled with devaluation of rupee. This has led to increase in prices.

However, due to provisions in 1993 budget and 1994-95 . Budget and reform

policies of Finance Minister like - convertibility of rupee, reduction in custom

duties and some relief in excise & corporate tax reforms will help to make

Indian products internationally competitive.

The last one year has been fairly eventful for the colour television

(CTV) industry. The market grew by over 35 per cent. The foreign brands

spent the year learning the ropes in the Indian market. The Indian brands

spent it in building their ‘marketing’ defences. Market segmentation, product

proliferation, network strengthening, appointment of exclusive showrooms,

backward integration and high profile advertising and sales promotions, the

last year saw it all.

The market size at the end of the year was estimated at 1.75 million

units with the top four brands taking up over 80 per cent of the pie. BPL and


Videocon, both claiming the top spot in the market, had market shares of

about 26 per cent each, Onida and about 18 per cent and Philips about 13

per cent.

The 21” segment which saw the entry of most of the global brands

grew by 40-45 per cent and accounts for about 40 per cent of the market.

The 14” segment with an 18 per cent share grew at the market growth rate

while the 20” segment with a 35 per cent share grew at 20-25 per cent.

The 21” segment comprising the FST and FFST variations is expected to

account for roughly half the market during 1996-97. Most brands are moving

from FST models to the FFST segment which is expanding faster. Product

upgradation during the year saw most brands coming, auto tuning and

remote control as standard features. The premium segment is coming with

Hyper-band across models. The 14” segment is being fought on price and

most brands have launched models at below the Rs. 10,000 barrier.

Most of the major players are also expected to focus on consumer

financing schemes to help expand the market.

Philips has been steadily climbing the market share ladder and has

made an estimated three per cent gain during the year. On advertising

strategy it has focussed on the premium segment especially on the 29”

models. Philips has parallely concentrated on the dealer push angle by


increasing its expenditure on trade schemes. The distribution network was

also strengthened all over with special gains being made in Punjab where it

entered the very strong Texla TV network. With its product range, network

and advertising strategy in place Philips during 1996-97 will probably

concentrate on its pricing strategy at the lower end of the market. It will be

looking for a volume sale of 2.5-3 lakh units.

Videocon during the last year has very successfully segmented the

market into three distinct segments and has positioned its products in each

of these segments. At the top end it has built on its brand image through the

Bazooka with an emphasis on the bass output of the system. The middle

emphasis segment looking for a more durable product was offered the Turbo

Tough line and the cost conscious bottom end of the market was offered the

Budgetline series. However there is a growing feeling in the market that

most of Videocon’s volumes may be coming from the Budgetline series

where its margins cannot be very high.

Videocon has been trying to bring its market outstanding and to

streamline its credit and trade policies. An attempt has also been made at

streamlining the distribution setup. During the year BPL increased its

product range from 10 models to 13 models with the addition of the KNR,


BXR and DJR models. It launched the FXR model to flank other

competitive models in the market. It focussed on the 25” segment.

Following the success of its earlier experiment of sub branding the

21” FFST-”The Emperor”, the sub branding exercise was extended to the

premium end with “Teio” (meaning Emperor/Empress in Japanese).

The distribution network was further strengthen and BPL Galleries and

Exclusive showrooms were opened all over the country. The emphasis in

these showrooms is to display the entire range of consumer durable offered

by BPL.

BPL is expected to further widen its product range and continue with

its high profile advertising campaign.

Onida, the brand with the premium image in the market, focussed on

the 25” segment during the year. Like Philips and BPL, it carried out sales

promotion activities during the Cricket World Cup. Onida is finding it

increasingly difficult to hold on to its market share figures, It has squeezed

credit and through a mix of schemes tried to get money from the market.

It reacted to the entry of the big foreign brands by getting a more global

perspective on its advertising campaign. Its advertising campaign is

expected to continue to help it retain its premium image in the market.


International brands

For most of the international brands, last year was a year of learning.

Panasonic which launched at a premium price and with strict credit control

to dealers has since come down on its price and gone up on its credit period.

Akai continues to maintain its price premium but has announced one

customer scheme after another. Hence the market operating prices bear no

relation to the official retail price. Akai is operating with a very limited range

of products and also a very limited distribution network. It has taken the

hoarding route to popularise its brand name.

Like Panasonic and Akai, Sony too has come in with a limited range

and is currently operating with a very limited network . It has discovered that

the price premium at which it can operate is far lower than what was

expected at the time of its launch. Sony too is offering dealer oriented

schemes and is now expected to lay equal emphasis on the dealer push

angle. Advertising at this stage focussing on picture clarity.

Unlike the above brands (which entered in the 21” segment) Samsung

has entered the market with a range of 20” F & FST televisions. It has also

come out with a TV-cum VCR unit priced very competitively. Of all the

international brands Samsung appears to mean business and has gone

about its launches and operations in an extremely systematic manner. Like


Akai, Samsung too has taken the route of hoardings to popularise its brand

name in the metros. Advertising lays emphasis on flatness of its screen and

picture clarity.

The market it expected to continue growing at 35-40 per cent and

should stand at 2.4 million units in 1996-97.

The market shares battle is bound to start in right earnest and it the

beginning of the year is any indication sales promotions will be the order of

the day. Exchange schemes, free gifts, price off and other incentives will

increase their product range on offer and try to tone up the distribution

network. All Players are expected to work on their production capacities in

terms of utilisation and expansion. The domestic players are expected to

give serious consideration to the export market.


CTV INDUSTRY - A BIRDS EYE VIEW

As in most durables categories the growth in the TV industry was

marginal last year at less than one per cent by volume and about three per

cent by value. About 18 lakh units value at Rs. 2,900 crores are estimated

to have been sold during the year.

The market shares of major players (according to industry sources )

were as follows:

Major Players with their shares

Company Share

(Percentage)

BPL

Videocon

Onida

Philips

Akai

Samsung

Sony

Sharp

Panasonic

29

26

11

11

5

4

3

3

3

While the market leader BPL increased its volume of sales, Videocon,

Onida and Philips saw a decline during the year.


There has been an average price reduction of three per cent on TVs

for the consumer following the reduction of excise duties from 20 percent to

18 percent and customs duties on colour picture tubes from 35 per cent to

30 per cent in the 1997-98 Central budget. In the 29” segment however

prices have come down substantially from an average of Rs. 42,000 to Rs.

34,000. The effect of this price reduction on volumes is still awaited.

Size wise trends

There has been distinct shift kin consumer preferences from 20” to

21” sets. In 1995-96 the 20” sets accounted for 44 per cent of sales but their

share came down to about 39 per cent in 1996-97. The share of 21” went

up from 40 per cent to 42 per cent.

While the 21” + segment has not grown as expected, the 14” segment

has by about two per cent over last year.

Changing market shares

BPL was the only big Indian brand to gain volumes and market shares

during last year. The company aimed at improving its brand equity through

a high profile brand campaign. During the year it launched a NICAM Stereo

Range - FQR, BQR and NQR a high end of 14” model KSR. It increased

share in the 25” segment to over 50 per cent. It has undertaken extensive

market exploratory efforts for contemporary technology products like Internet


TV, 3D TV and wide screen TVs which were displayed in exhibitions across

the country and are due for launch this year.

Videocon saw volumes declining by about five per cent during the

year. It launched the “Challenger” Series in 20” and 21” sizes. Videocon

extended its marker segment strategy with the launch of Toshiba series at

the top end.

With Videocon’ value for money brand image this strategy should help

it gain numbers at the top end where a number of MNC brands have

registered their presence.

The Onida brand of Mirc Electronics registered the largest decline in

volume last year. A combination of internal factors was responsible for

constrained supplies during the year as well as extremely subdued media

presence between April and November 1996. However, it improved it

visibility after December and un increased its presence in the 25” segment.

Many new models

Philips lost volumes marginally. The company increased its visibility

last year with its high profile Sachin Tendulkar advertisement across audio

and Video categories.

It introduced new model in the 21” category and also upgraded

features in the existing range.


Among the foreign entrants, Samsung , the South Korean consumer

electronics giant, has established its presence in the North with a 10 per cent

market share. Its factory at NOIDA near Delhi is expected to come on-line

shortly. Samsung has planned a phased launch across the country, but

from initial reports it seems unable to duplicate its success in the North in

other parts of the county.

Amongst the new brands AKAI o Japan has toted up the highest

market share with a combination of innovative consumer promotions. Its

offers have ranged from “Exchange Schemes” to free washing machines

and free TV.

However, concentration of the promotion campaigns in select cities

has limited AKAI’s network. The brand is also unlikely to clock in numbers

without the schemes with which it has become so closely associated.

Another late entrant Sony of Japan has strengthened its product

range through the introduction of 14” and a 25” model. The company almost

doubled its sales last year while increasing its presence at the top end of the

market.

Outlook for 1997-98

As for the current year’s outlook, the year should see a continuing

shift towards 21” and 25” segments. The 29” segment will definitely become


an area of increased activity for most brands. The fight for market shares is

bound to get intense with aggressive efforts expected from three Korean

brands - Samsung, LG and Daewoo.

Smaller Indian brands with localised presence and strengths will get

marginalised by MNC brands fighting for shares in regional pockets, MNC

brands like Thomson, Grundig and Shivaki are expected to maintain their

presence in select markets.

Estimates of market growth range from low 10 per cent to above 20

per cent though accelerated growth rates are expected only in the second

half of the year.


SHIFT IN FOCUS -A MAJOR TRANSITION

The television industry has gone through patch for the last two years.

Domestic manufacturers had large capacities but the demand was just not

enough. Then there were the new entrants like Thomson, Daewoo and

Goldstar to increase the supply. And Akai, the dark horse, threatened to

change the way a consumer purchases a television. A media blitzkrieg with

attractive exchange schemes and freebies have given Akai market share of

10.9 per cent between January 1997 and November 1997 against 2.8 per

cent in previous corresponding period. And volumes at Akai continue to

increase. This is turn has resulted in similar schemes being offered by other

television manufacturers like Crown and even Philips. How will other

manufacturers take on Akai ? The smart investor find out.

Demand in the television industry is price sensitive and the demand

pattern in the country has been highly volatile. According to K S Raman,

president of Consumer Electronics Manufacturers Associations (CETMA), if

a company through its dealer drops the price of a television even by Rs.200,

it will effect volumes significantly. In 1997, the television industry recorded a

sluggish 14 per cent growth and ORG has estimated growth of the colour

television industry at 10.3 per cent for 1998.


Last year overturned the apple cart for most television companies and

belied growth predictions of almost all the companies. Total colour television

sales rose from 1.95 million to 2.3 million units and the black and white

televisions declined for the first time after 1991 from 6 million units to 5.6

million units. And among companies only four did well ; Akai, BPL and

Videocon and the Korean multinational Samsung.

The myth that the entry of MNCs would finish Indian Television

industry was also destroyed. Major Indian brands together retained 70 per

cent of marketshare while Videocon and BPL together account for 45

percent of the total market share.

Another emerging pattern is the diversification plans of television

companies as they were uncertain about relying on television business

alone. Television companies unveiled plans to diversify as they have

realised falling profitability over past year.

MNCs despite the backing of their parent companies have found the

going tough in the first year of their Indian operations .Famous branded

television sets to enter the troubled Indian television market this year are

Korean MNCs like LG, Samsung, Daewoo and Sony from Japan .These

multinationals have had to scales figures for 1997-98, their first year of

operations They also had to scale down their estimated turnover and sales


projections of the Indian market as a whole for the next few years till the year

2000.

Companies like Sony, Whirlpool and Matsushita (the makers of the

Panasonic brand ) have admitted to have entered the Indian white goods

market on the basis of inflated views of demand in the Indian domestic

market, The scaled down market expectations have much do to with the

scale down of the much hyped buying potential of the fabled Indian middle

class.

Of the multinationals , Samsung was the lone company to belie its

own conservative estimates of turnover of Rs 400 crore on 1997 (they

achieved their estimated yearly) and captured 8 per cent of the market share

by selling 170,000 colour televisions.

In face of extensive competition, the domestic players appear to be

learning all about survival. The domestic players are to be waking up to the

reality of an extremely price sensitive market and the newly emerged

equation - that sales figures will be inversely proportional to the price and

every penny charged less will be reflected positively in the balance sheet.

Today the companies have realised that prices of their products have

to be reduced through economies scale, better production processes and

improved after sales service . The domestic players have realised the need


for internal cost cutting which will facilitate the sale of television sets at the

lowest possible price .On the flip side , the industry is seeing an

unprecedented increase in budgetary allocations for advertising . BPL has

allocated Rs 45 crore this year for the purpose of advertising and publicity

for television . Videocon’s budgetary for advertising is around 8 per cent of

its gross turnover.

The other company worth trailblazing success this year has been

Baron International, success this year has been baron International,

marketing the Akai brand of televisions. Akai offers its customers television

sets at extremely reasonable rates and has further set the trend for

increased discounts to trades and retailers. These discounts along with low

maximum retail price have been a very difficult precedent to follow for the

other companies. But analysts say they have heard rumors alleging that

Akai may be marketing substandard goods and therefore their real test will

be the “after sales service” offered by the company if complaints start

pouring.

Raman says the entry of Korean brands and the exchange schemes

with freebies launched by Akai will put further pressure on the established

television companies. The South East Asian crisis has further devalued

Korean currency, which means they will be able to sell cheaper television


sets in India. As the domestic market is price sensitive, Indian companies

will have to follow suit and slash prices in tandem with the MNCs. He says,

“If a company wants their sales figures to go up, it has to slash prices. The

moot question here is how much can companies reduce them without going

in red”.

The depreciation of the rupee on a daily basis also spells losses for

the industry where the import content is significant. While a section of the

industry thinks that the current devaluation will boost exports, the general

perception is that margins will be affected. It is believed that an immediate

increase in prices may prove disastrous given the sluggish market conditions

and high import costs as companies will be compelled to either absorb the

burden or pass it on to consumers.

The black and white segment of the television industry is on the brink

of extinction. Aditya Srinath, analyst with SSKI, says, :There has been a 12

to 13 per cent hike in demand for colour television in the year while the black

and white television industry is on its death bed, being killed at a rate faster

than expected”. This is a fall-out of the exchange schemes run by the

colour television (CTVs) majors in the rural markets. The used CTVs in

working condition are dumped in the rural markets at lower rates than that of

a new black and white television set. In a market that sells a brand new


black and white set at Rs.3000, an old spruced up colour television is sold at

Rs. 2500, thus eating into the black and white television market. This has

nearly wiped out the demand for black and white television sets. Thus the

booming replacement market will continue to displace the black and white

televisions from Indian homes.

Apart from domestic sales, the sole other avenue open to black and

white television manufacturers has been exports. But exports have also

slumped in 1997-98. The industry has lost out to Chinese manufacturers

who sell at much lower prices. If an Indian set costs $38-40, a similar

Chinese set would be available for $24-35. This has resulted in decreased

forex earning also. Big black and white players like Bestavision and

Fusebase Eltoro have shelved plans to enter the export market.

Thus the industry is going through a major transition as

manufacturers need to chase volume in order to survive. The ultimate

beneficiary for the next few years is obviously the consumer. But how are

the domestic manufacturers doing ? The only company in the industry worth

investing in right now is BPL. Market rumours are that Akai is also planning

a public issue.


BPL

For the first half of 1997-98, domestic leader BPL posted an

impressive 30 per cent growth in sales at Rs.606.55 crore and a 36 per cent

rise in net profits at Rs. 33.26 crore. BPL has managed to cut costs by

tightenning its internal operations. It has brought its working capital down

form Rs. 30 crore to Rs. 3 crore annually and their inventory is cash neutral

at present. Srinath expects BPL to eat into the market share of Videocon

and Onida.

Last year, BPL shed its premium image and began working on

introducing TV sets in the lower segment of the market and began chasing

volumes. Between January and November 1997, BPL commands a market

share of 19.6 per cent, with a growth of 5.5 per cent over the previous

corresponding period.

The company sold 523.616 colour television valued at Rs.759.13

crore and 456.282 million black and white sets valued at Rs.131.48 crore in

1996.97.

BPL has an equity capital of Rs. 26.93 crore and the 1996-97 EPS is

Rs. 18.02. The current market price of Rs. 90.5 discounts the EPS five

times. BPL has also diversified into other businesses like alkaline batteries

and gas tables. BPL is the most attractive stock in the industry right now.


Philips

Philips has gone through two bad years now as the company is

expected to show lower profits even this year. For the first half of 1997, it

made a net profit of only Rs. 1.08 crore against Rs. 7.27 crore in June 1996.

The severe liquidity crunch in the market has resulted in increased interest

costs for the company. The company faced higher financing costs due to

high utilisation of working capital in the first half of the year, additional term

borrowings and increase in the interest rates.

Costs at Philips are also high and analysts say that it will have to

spruce itself internally. Sujay Mishra, analyst, Peregrine, says, “These cost

structure of Philips is at least four times higher than all the other industry

players, and its employee costs are very high”. But he feels that as long as

the company has the backing of the parent, it will survive.

As a major cost cutting effort, the management has decided to shift

manufacturing facilities from Calcutta to Pune in Maharashtra. This move is

awaiting the chief minister of West Bengal Jyoti Basu and the company’s

future depends on this decision to an extent. Another positive step the

company has taken is by appointing Ravi Kant, a well known marketing man

in the industry and market watchers expect him to turn the company around.


Between January and November 1997, Philips market share fell to 8.9 per

cent, with a decline of 21.3 per cent over the previous corresponding period.

Even in volume terms, Philips saw a decline in televisions from 814,000 units

in 1995 to 775,000 units in 1996. Televisions contribute 27.44 per cent to

the total turnover. For 1996, the EPS was Rs. 1.77 with a not profit of Rs.

8.07 crore. The current share price of the company is Rs. 60.50.

Videocon

Videocon International sold 985,700 television between January and

November 1997 valued at Rs. 786.7 crore. Of the total turnover, 62.47 per

cent accrues from colour television sets, assemblies and sub assemblies of

colour sets. Its market share was 19.5 per cent for January-November

1997, a decline of 6.3 per cent. This decline is not as much as that of Onida

and Philips.

Nabi Gupta, director-marketing and sales, Videocon, says that the

company has a strong control on the distribution channels. He says that the

company has a strong control on the distribution channels. He says,

“Videocon has the largest dealer network in the country and therefore we are

better positioned to read the market trends accurately and well in advance”.

This allows the company to preempt any adverse fall-outs. Videocon has

also resorted to internal cost cutting to ensure the general


slowdown does not affect them. In addition, the company has integrated

manufacturing facilities and collaborations with Toshiba to generate state-of-

art products at competitive prices. For 1996-97, the company’s turnover

was Rs. 1724.36 crore against Rs. 1646.88 crores in the previous year. Net

profit dropped from Rs. 88.36 to Rs. 82.13. Its current market price is Rs.

25.55.

Mirc Electronics

Mirc Electronics suffered stagnant volumes in 1996-97. In face of

competition, the company has drawn up an aggressive marketing plan for

1997-98 along with new product launches this year. Onida’s agenda this

year is value engineering discipline and focusing on cost reduction as a

mechanism to improve gross margins. The brand Onida is also losing

market share and for the period January-November 1997, it saw a fall of

16.8 per cent and has a market share of 9.8 per cent. Sales for 1996-97

declined to Rs. 396.32 crores against Rs. 428.51 crore. Net profit dropped

from Rs. 25.66 crore in 1995-96 to Rs. 15.5 crore in March 1997. The

current stock price is Rs. 54.75.


ENTRY OF MULTINATIONALS - FACING NEW

CHALLENGES

Lucky Goldstar Electronics India Pvt. Ltd., Indian subsidiary of the

Korean consumer electronics gaint started marketing its TVs in India last

month and already claims to have sold more than 5,000 TV sets. Lucky

Golstar (LG) is that latest in the long list of foreign companies that have

invaded the Indian television market in the last five years. The complexion

of the Indian colour TV market has already changed.

The decade-long domination of the three market leaders - Videocon,

BPL and Onida is crumbling in the wake of the onslaught of the likes of Akai,

Panasonic, Samsung, Sony, and Sharp. Even Philips, technically a

multinational but an old India brand, has seen its sales stagnate. Foreign

brands last year made up for a third of the two million colour TV sets that

were sold in country, up from a small 8 per cent market share in 1993.

Enter the multinationals

The slowdown is likely to be temporary. What seems a more

permanent proposition, though, is that there will be a shake out and only a

few players will survive. While domestic players still have a 65 per cent

market share, MNCs have managed to grab an impressive 35 per cent.


Predictably, complaints about unfair competition have started emanating

from the domestic manufacturers.


Domestic CTV manufacturers have cause for concern because MNC

brands have been gaining market share at their expense. However, any

statistical exercise to determine exact market shares are fought with

uncertainty. The ORG-MARG retail audit does not include sales from

exclusive retail outlets and are therefore underestimate. All market share

data mentioned here has been collated from manufacturers. Courses at

BPL claimed a market share of 24 per cent in 1996-97, marginally behind

Videocon’s 26 per cent, which makes the later India’s largest selling CTV

brand. Gulu Mirchandani, the chairman of the Onida group of companies,

claims a market share of 15 per cent in 1996-97. the top three domestic

brands (Vidocon, BPL and Onida) thus accounted for 65 per cent of the

market last year, which is a share which the three commanded in 1993-94.

And where the domestic majors lost, the MNCs gained.

MNCs include both well established ‘old’ MNC brands like Kalyani-

Sharp (market share 5 per cent) and Philips (market share 10 per cent) as

well as the new entrants who have entered India after the liberalisation

process began in 1991. Among the latter, companies like Panasonic (5.5

per cent), Sony (5 per cent), Thomson (4 per cent) and Samsung (3.5 per

cent) are making their presence felt slowly, but surely. In fact, Karwal says

that by next year, MNCs will be able to garner 40 per cent of the market.


Take, for instance, Panasonic. Starting off with two models of CTVs in

December 1994, they extended the range to 11 models by September 1996

and plan to launch the Sophia series of two 21” models and one watch of

20”, 25” and 29” models. Panasonic’s sales have risen from 55,000 sets in

1995-96 to 100,000 last year, according to information provided by the

company. This month, Panasonic plans to launch a 25” twin-top-dome

mode;. Sony India Pvt. Ltd., on its part, has brought in 10 models of CTVs

ranging from 14” to 53”. Sony still enjoys a great brand equity in India.

During the Asian Games in 1982, about two lakh Sony sets were sold. Sony

sold 58,000 sets during 1995-96 and 130,000 in 1996-97. Samsung officials

are equally optimistic and hope to achieve sales of 150,000 to 180,000 sets

by the end of 1997 and have targeted an ambitious market share of about 8

per cent by next year. Samsung which started selling its CTVs from

December 1996, claims to have sold about 80,000 sets so far.

Lucky Goldstar had initially entered India with the Goldstar brand in

1993 through a joint venture (JV) with Texla, a small New Delhi based TV

manufacturer. However, the JV with Texla soon broke up and LG tried to

hookup with C.K.Birla’s Orient Paper. Finally, they entered India on their

own again late last year. LG hopes to achieve a turnover of Rs.100 crore in

the first year of operations - Rs.75 crore from CTVs and Rs.25 crore from


refrigerators - and plans to sell 1.5 lakh sets in the first year. It is a realistic

target since I fell the industry should grow at a compounded annual rate of

20 per cent. LG plans to invest $289 million (Rs.1,040 crore) over the next

nine years.

Facing the Challenge

The Indian companies no doubt are putting up a brave front, even

claiming that the MNC’s pose much of a challenge. The MNCs do not even

pose a threat to us. Contrary to what people think, they have not brought in

the latest technology and are only bringing in catchy phrases and gimmicks.

BPL has 19 CTV models and plans to import larger-screen (33” and 54”)

Sanyo models during this year’s festival season (they have a technology-

transfer agreement with Sanyo of Japan dating back from 1984). BPL which

along with Videocon is the main contender for the market leader’s position,

sold 5.5 lakh sets in 1996-97 and has projected CTV sales of 9 lakh units for

next year. BPL’s own estimates of its 1996-97 sales however contrast with

the ORG-MARG retail audit, which pegs its sales at 4.13 lakh. As mentioned

previously, the latter figure excludes sales from exclusive retail outlets.

The same confusion about numbers surrounds Onida. While the

company claims to have sold 2.94 lakh sets in 1996-97, ORG-MARG credits


it with sales of only 1.95 lakh. Mirchandani predicts 40 per cent growth in

1997-98 followed by 35 per cent rate over the following three years. He is

also confident that MNCs will not pose much of a challenge to the top three.

“MNCs taken together now account for about 20 per cent of the total market.

However, the three major Indian players together still retain 70 per cent

market share. The net result of MNC entry is that smaller players have been

marginalised further”.

Videocon’s claims are similar. Their USP is that they have products

for every segment of the population. Their prices range from Rs. 8,990 for a

14” TV to Rs. 20,690 for a top-of-the line Bazooka model (21”). However,

this is not a threat to the MNCs since their volumes in the 20” and 21”

segments, which form 65 per cent of the market, are rapidly increasing.

Most of the new customers for CTVs will go for the MNC brands because of

the value-added technical features they offer, due to which their volumes

and shares will increase. The domestic brands, on the other hand, will

continue to maintain their shares but not drastically increase them.

Of course the term Indian-made TV set is a sense a misnomer. A

large portion of what goes into the making a television set continues to be

imported. And all Indian manufacturers have arrangements with foreign

companies for components. BPL has a tie-up with Sanyo, Videocon has an


arrangement with Toshiba and Onida with JVC of Japan. And even in the

case of those components that are made locally, like the colour picture

tubes, a large portion of the raw materials continues to be imported. But

the import of fully assembled TC sets in the popular 14” to 29” category

continues to be banned under the prevailing government policy. Hence all

TV sold in the country, expect the 29” and above are assembled locally. But

considering the intense pressure on the government from trade bodies like

the WTO to open up the Indian market, it won’t be long before fully

assembled foreign TV sets are allowed to be imported, which should create

more competition for the Indian Companies.

Currently, the government announce the ban on imports of the

popular models with a high duty on components. On picture tubes alone,

the import duty is in the region of 65 per cent, while other components have

duties varying between 30 and 40 per cent. This combined with excise duty

of 18 per cent and the average sales tax of 12 per cent, have ensured that a

20” CTV in India costs twice as much as it does in China. It has also

spawned a thriving black market. Sony’s Nookala explains that their “biggest

competitor” is Sony itself. The gray market for Sony alone, he adds,

accounts for Rs.1,000 crore.


CETMA reckons that the CTV market would reach 2.8 million in 1997-

98 and 4.4 million in 1999-2000 at existing duty rates. However, a reduction

in excise duty to 10 per cent and a cut in duties on picture tubes to 20 per

cent would, according to CETMA, boost CTV sales to 3.78 million in 1997-98

and 6 million in 1999-2000. Much of this is expected to come from the

multinational brands, who are already busy setting up factories. Both

Samsung and Panasonic have set up plants at Noida, outside New Delhi

with annual capacities of 400,000 and 200,000 units respectively. LG’s

800,000 unit capacity plant nearby is expected to be ready by the middle of

next year. Son’s 200,000 units plant is located in Haryana while Sharp has

taken over and expanded the Kalyani plant in Pune and the French gaint

Thomson has taken over the old Dynora plant in Chennai. Some like LG are

even moving beyond, to set up a colour picture tube factory at a cost of over

Rs. 350 crore.

Looming Price War

Lucky Goldstar, on its part, claims it believes in an ‘honest pricing’

policy. The customers will realise that they are getting value for money. He

adds that what is taking place in the CTV market now is not a price war in

the real sense, but is actually just “bail marketing”. The customers, are

paying more for less insted of paying less for more, which is what should


happen in the case of a price war. Once the price wars start (maybe in a

couple of years), the marketing strength of organisations will be tested.

Another essential aspect of the CTV market are the dealers. While normally

dealer margins are between 7 and 8 per cent, market leader Videocon

insists that one of the main reasons why it has stayed on top is because of

their “excellent relationship with their dealers”. The company, like many

others, does not believe in giving cash incentives to its dealers and instead

gives indirect incentives. Most companies admit that dealers are kings and

have the power to influence the decisions customers make and therefore

have to be constantly pampered. Industry sources allege that some

companies set such challenging targets for the dealers that they (the

dealers) often sell the TVs at lower prices so that they can sell larger

numbers. What they don’t realise, say industry sources, is that while

volumes may go up, their profitability doesn’t.

Whether the dealers are kings or not, one thing is beyond doubt

ultimately, it’s the consumer who might just have the last laugh. As for the

industry, despite the slow down last year, there is little doubt about it’s future

potential. Only seven out of a 100 Indian households currency own a CTV,

much lower than in other emerging economies. While Indians bought less

than two million CTVs last year, the Chinese bought 16 million. so while


demand will continue to accelerate in the coming years, the question is

which are the brands that will survive the intense competition this demand is

bound to engender ? In countries like US and the UK, the Japanese and the

Koreans have virtually killed the local television industry over the years.

That should cause some worry for the likes of BPL, Videocon and Onida in a

world where the pace of technological change is matched only by the rate at

which the import barriers are being brought down.


MUST SELL STRATEGIES TO BE ONE UP THE RIVALS

When Consumer Electronics manufacturers battle to establish a

beachhead in a crowded market, there are windfalls for buyers and sellers.

Like a music system worth Rs. 20,000 that comes free with the purchase of

every Akai 29-inch colour television (CTV) set prices at Rs. 44,990. or take

Videocon. The company will continue with its year-old bonus scheme and

has a bonanza lined up for its go-getter dealers: 28 Mercedes, 50 Opel

Astras and 100 Cielos among other cars. It will also spend Rs. 40 crore on

taking them for a weeklong tour of the US later this year.

All this because, today, it requires more than the salesman’s spiel to

come up trumps in the tough CTV league. Sony, Panasonic, Samsung and

Thomson are fighting BPL, Videocon and Akai for increased shares in the

Rs. 2,700 crore market. Now others have joined them, LG Electronics and

Daewoo Anchor Electronics. The mood in the arena can be gauged from

the marketing strategy of Videocon competition, even it is means a head-on

collision on prices or any other front.

Accordingly, the strategies today revolve around direct wooing of

customers and dealers. And such tactics work. Last year, Baron

International, which markets the Akai brand in India, almost doubled its

market share with an aggressive campaign that tempted buyers with

freebies


a 14-inch CTV or a Whirlpool washing machine free with a 21-inch set and a

music system free with a 29-inch CTV. Its unit sales doubled to 1,65,000

during the year. Infact, the sheer pull of the incentive driven market saw

overall sales grow by 12 per cent to touch the 20 lakh units mark in 1996-97.

The coming months should be no different, especially as LG Electronics and

Daewoo Anchor Electronics have also begun bard selling their brands.

Besides, Onida and Philips are hoping to improve on their lacklustre

performance of the past year. And the dealers have a vital role to play in

this situation. A survey carried out in 1996 by Bangalore based consumer

durables market research firm Francis Kanoi Marketing Planning Services

Ltd. showed that even after a buyer decided on a brand, he was likely to

change his decision at the point of purchase. For instance, 33 per cent of

the 2.5 lakh households contacted showed a preference for BPL TVS, but

the company’s share in the market in 1996-97, though the highest among

the players was 21.65 per cent. Companies are eager to exploit this by

making it more attractive for dealers to sway customers at the showroom

into opting for a particular brand or simply by stocking only that brand.

To this end, dealers are being offered generous margins, besides the

cars and foreign jaunts. Daewoo Anchor Electronics, for example, is talking

about 13 per cent margins on the maximum retail price (normally margins


are 6-8 per cent). But others, like BPL, subscribe to another method of

promoting sales.

Incentive to the dealers are not in the form of giveaways or extra

credit. But in actually helping them to improve their return on investment by

way of lower inventories, quicker rotations and right model mix.

Pampering dealers is only one aspect of the intense competition in

the TV food chain that aims to gobble market share at any cost. The more

important spin-off of the crowding in the market it the arrival of technically

superior TV sets. At one time, a 21-inches CTV was almost the ultimate in

viewing luxury. Today black and white TV set owners are being invited to

upgrade to 14-inch CTVs.

Those who already own 14” or 21” CTVs are being tempted to own

companion sets or, better still, to buy the 25” or 29” sets. The mass selling

21” models now come with innovative features. BPL’s latest NICAM series

promises CD-quality sound, while LG’s Golden Eye model tom-toms

sensitive ‘eyes’ that respond to any change in the room lighting and

automatically adjust colour, sharpness, brightness and contrast. LG’s

Soundmax II series, like Samsung’s Super Haunt, is advertised as having

boosted audio output.

Along with newer, upgraded models to choose from, consumers will

also end up spending less with companies restoring to price undercutting.

For example, Thomson which expected to sell about 1.2 lakh sets overall in


1997, slashed the price of its Quadra 29” from Rs. 54,000 to Rs. 43,000 in

February and introduced the Fusion 29” model priced at Rs. 34,995 which is

mouth watering in comparison to prices in the 29” category Rs. 68,000 for

Samsung’s and Rs. 75,000 for Sony’s. “Throughout 1996 Thomson could

sell only four hundred 29” sets. Within a month of its new price schemes, it

sold 1,300 sets”, Thomson Electronics, “After March this year selling around

800 sets every month. It has increased the entire market for 29” sets. “In a

similar attempt to sell the 14” CTV in rural pockets, Baron has started selling

its Akai sets, which normally cost Rs. 12,990, for Rs. 8,990 from this month.

It has also brought the price of its 25” model to below Rs. 20,000 when the

market price for the category ranges Rs. 25,000 to Rs. 27,000.

Moreover, the companies are trying to ensure that the TV buyer does

not feel the burden even the lowered prices. They have tied up with

consumer finance firms to provide attractive hire-purchase schemes. the

dealers also have their own installment options. The result higher sales. As

Ashok Sharma, general manager (marketing and sales), Daewoo Anchor

Electronics, points out, “At least 30 per cent of our sales today is via

consumer finance”.

With TV sets becoming cheaper and the selling more innovative, it’s a

buyer’s market out there.


CONCLUSION

The growth rates have tumbled and the market for several durables

has either increased or grown at snails pace. The CTV Industry in India is

no expectation to it. But a lot of euphoria has been generated by the entry of

global big wigs in the Industry.

The recent budget proposal’s has caught the market up by surprise.

The finance minister has announced cuts in excise and customs duties on

various consumer durables items with gusto.

The peak duty on consumer electronic imports such as colour TVs

black and white TVs and Washing machines will now be 40 per cent, down

from 50 per cent. Multinational companies like Sony, Samsung and

Thomson which import CKD kits for assembling in India will be the major

beneficiaries. Already Sony had cut the prices of higher-end models by 8

per cent. Says an industry source, “Reduction in import duty would help the

MNCs to increase their share in the domestic market from 8 to 12 per cent”.

On the domestic front, the finance minister announced a cut in the

excise duty on CTVs by 2 per cent. They will also be benefited by reduction

in the import duty of colour pictures tubes (CPT) from 35 to 30 per cent.

This would enable to reduce the CTV prices by Rs. 400-500. By this cuts,

the CTV industry would witness a growth of 20-25 per cent.


However, not all the domestic manufacturers are optimistic about the

cuts. The duty cuts on finished TV sets being more than on CPTs, the

MNCs stand to gain. Moreover, the domestic CTV makers are not in a

position to effect any price cuts as they are already facing a severe pressure

on their margins.

So it’s back to price-led consumer pull for now and the near future,

reckons the industry. Further on, a polarisation of consumers will probably

occur on product value and price, which is currently in a 30:70 ratio.

Brand stances will have to be taken on this, something that already

seems to be emerging. there will be those that stay with the low price

propositions and others that straddle both through range and image. And

still others who, having rejected deals and offer, will have to keenly peg on

distinctive product value. Any which way, the consumer will benefit.


MAJOR RUG PULLERS IN THE INDIAN CTV INDUSTRY

Crown

If necessity is the mother of invention, then the marketers at a Rs 92

crore (1995-96) Ahmedabad - based manufacturer literally take the crown.

Crown, which has been around in the market since 1982, was facing a virtual

obliteration in the market. Its market share in the colour television (CTV)

market had declined from 15 per cent to about 8 per cent in 1996-97 . The

entry of MNC brands with their exchange offers, together with the slump in

the consumer durable market, had merely put the company and the brand

under severe pressure. Crown’s gambit : launch a television priced at a

shade below Rs 10,000 . Says Sunil Jhaveri, director, Crown TV, “We

realized that Rs 10,000 was a psychological barrier. If we could break it,

there was every chance that even the replacement market would consider

buying a completely new television.”

By the looks of it, Crown seems to have pulled it off. In a span of 40

days covering July to the first half of August, Crown has booked 17,000 sets

and actually sold 11,000 CTV sets. Typically, the market size of Gujarat is

12,000 CTV sets per month. Says Jhaveri, “Crown has expanded the market

and by rough estimates captured 60 per cent of the Gujarat market”.


Onida

The harsh competition has badly damaged the working at ONIDA.

Last year faced with the Korean and Japanese onslaught , the brand saw its

market share plummet by a whopping 39 per cent In the Rs 2000 crore

colour television market. In the eighties, ONIDA had captured the

imagination of the TV market with its stunning products and dare - devil

advertising and zoomed to the top of the heap. This rapid growth continued

into the early nineties. But what the company failed to do was build an

organizational structure that could support the increased size of business.

The company was started in 1984 by two brothers, Gulab and Sonu

Mirchandani. Soon after the New Delhi Asiad, the two brothers sighted the

opportunity in the nascent television market. Then came the Reliance Cup

in 1987. Here Onida’s technical tie - up with JVC helped it no end in a colour

television (CTV) marketplace. By 1991 , the cricket fever had reached its

pitch with tournaments like Nehru Cup, Hero Cup servicing to prepone the

CTV purchase. In 1991-92 , the brand peaked at 20 per cent market share,

BPL had 21 per cent of the market and Videocon had 22 per cent. Since the

top three brands had over 65 per cent of the market the industry looked

consolidated. In 1995, there started a trickle of the


Japanese and the Koreans. The year saw a slowdown all around and the

colour television segment was one of the hardest hit. Growth just

disappeared . While every marketer is grappling with ways to tackle this

phenomenon . ONIDA too is looking at the market in its own way.

Sony

The turn over of SONY INDIA RS. 345 Crores. It ranks no.1 in the high end segment.

The Core Brand Values of SONY are Innovation, Consistency, Originality. It

product mix is such that, it caters to all the segments. But its target segment

lies in the age group of 18-40 years. High Quality Product & Aesthetic

Appeal are its USP. It follows a Premium Pricing policy. Its distribution

network comprises of 33 distributors to take care of 1300 dealers.

Daewoo

The founder & chairman of Daewoo is Kimwoo choong. In 1995

Daewoo recorded sales of $ 57 billion. Daewoo is South Korea’s third

largest company, after Samsung & Hyundai. It was only in the late 1980’s

that Daewoo electronics Co. & Daewoo Motor Co. came in the international

spotlight. Since late 1995 , Daewoo has been running to become the world’s


largest manufacturer of T.V. sets, with its bid to buy out France’s Thomson

Multimedia. The deal, if it goes through , will give Daewoo control over the

RCA brand name, as well as manufacturing facilities in Europe Singapore’s

and America, all in a single stroke. Nothing has fructified yet. But a failure

here is likely to make the group even more determined to emerge amount

the top 3 electronics companies in the world by year 2000, a target every

employee is supposed to be working towards.

The group’s new corporate philosophy, “Innovation Tank” depicts

exactly how it wants to go about its ambition. The idea is to liken all Daewoo

products to an army tank, each of which need to verify as simples durables

reliable , trouble free. To that, one may need the ability to surprise

competition and a dogged determination to bulldoze through adversity.

L. G. Electronics

Many TV brands made noise on technology this year. Foremost

among them : LG Electronics India Pvt. Ltd., a wholly owned subsidiary of

the $ 73 million south Korean electronics giant L.G.Electronics. The high

pitched ad campaign said , “1926: John logic Barid invents the TV & creates

history ; 1997 : LG creates Golden Eye, and makes other TVs history . How?

The Golden Eye consists of a light sensitive natural algorithm ‘eye’ and an


advanced circuit developed by LG. The eye responds to any changes in the

soon lighting, triggering off the circuit which then automatically adjusts

colors, sharpness, brightness, contrast, tint & white balance”.

The product boasts of a host of other features like sound retrieval

system, revolutionary graphic equalizer, super flat colour picture, scanning

velocity manipulation & a picture improvement circuit with 3 electronic filters.

The company introduced the 29 inch Golden Eye this year, at a price of Rs

54,490. This was followed by the launch of 2 variants - The Golden Eye 20

inch and the Golden Eye 21 inch, priced at Rs 16550 and Rs 19790.

LG claims Golden Eye presents the biggest breakthrough since the

invention of TV.

But will the ad campaign based on technology sell ? It apparently has.

LG has announced its first Rs 50 crore in overall sales, just in 4 months of

launch.


Samsung

Samsung (India) Electronics Ltd. (SIEL) , is a relatively new

organization having received its service for commencement of business on

9th Aug. 1995. Currently it has its Head office at New Delhi with branches at

: Delhi , Ghaziabad, Lucknow, Jaipur, Chandigarh, Bangalore, Madras,

Hyderabad, Bombay, Cochin, Haryana and Gandhinagar. For Samsung

India Electronics Ltd. Ad- spent is stated to go up from 4.5 million last year to

$ 6.7 million this time.

The Samsung Philosophy :

We will devote our human resources and technology to create

superior products and services, thereby contributing to a better society.

Samsung Spirit : To be always involved with customers

To recognise and confront global challenge

To create a better future for all

Product Mix : Catering to mid and hi-end segment

Distribution : 1200 dealers


Akai

In the crowded consumer electronics arena, Akai has opted for an

aggressive price - off strategy. Akai entered the Indian market in January

1995. Akai’s aggressive price discount strategy took the TV industry by

storm forcing all players to follow suit. The company has grown an

unbelievable 100 times in 4 years - from a start up of Rs 5 crore in 1992-93

to Rs 500 crore brown goods giant in June 1996 and has grabbed 11%

share of overall CTV market. Akai is looking at efficiencies reducing

inventories from warehouse to dealer, supplying dealers on a daily basis,

creating consumer pull through advertising. Akai’s distribution cost is 1% of

sales, against the 5% of others. Akai’s dealer’s earning is higher by 70 to

80% on investment , against the 25 to 30% provided by competition.

Some of the schemes offered by Akai are

A Nokia - 1610 cellphone ( Rs 12,000) together with a connection along

with its 21” CTV (Rs 23490) in Hyderabad.

Exchange an old 21” TV for a new 29” model and get Rs 20,000 off.

Free 14” CTV with every 21” CTV purchase.


Free 165 litre whirlpool refrigerator with 21” CTV (Rs 18,000).

Free washing machine with Akai TV.

Akai’s break even is half that of Indian players.

The TARGET MARKET of Akai are the second T.V. buyers, owners of

black and white sets who want to go colour and those who want to trade up

to a bigger 29” model.

However, Akai now risks being dubbed a discount brand. It is felt that

Akai’s design and components are not necessarily of a high quality standard.

Further, by making use of the loopholes in the manufacturing policy, semi

assembled sets are imported, final assembly done and sets offered at throw

away prices.

There is a danger in letting advertising take a back seat to sales

promotion. Sales Promotion aims to weaken brand loyalty. When a brand is

promoted too much of the time, the consumer begins to think less of it and

buy it mainly when it goes on sale . So would Akai be able to sustain its

growth ?


PREFACE

The economic liberalisation has turned the Indian economy into

competitive market place. The Indian industry is made to struggle against

both Internal and external competition. the protected environment is new a

thing of the past.

With augmentation in capacity the fresh capacity creation is on the

anvil. Existing ones are also planning expansion of or setting up of new,

capacities. the domestic market is expanding rapidly, total sales growth

exceeding 20% for the last two years. And yet a question is being

legitimately asked as to whether the market can absorb the massive capacity

addition what is in the pipeline. What is the growth prospectus of the

domestic market ?

With all new development taking place in the market, the present

study strives to examine these issues thread bare.


BIBLIOGRAPHY

I. INDIA TODAY - June 30, 1997

II. SURVEY OF INDIAN INDUSTRY 1996 - THE HINDU

III. SURVEY OF INDIAN INDUSTRY 1997 - THE HINDU

IV. CHARTERED FINANCIAL ANALYST - April,1997

V. BUSINESS WORLD - 2-15 Oct., 1996

VI. BUSINESS TODAY - 7-21 June, 1997

VII. BUSINESS INDIA - 1-10 Aug., 1997

VIII. CII REPORT


multinationals in thE limelight

Brands 1995-96 1996-97

VIDEOCON 25% 26%

BPL 24% 24%

ONIDA 17% 11%

AKAI 06% 08%

PHILIPS 01% 09%

SHARP 04% 5%

PANASONIC 03% 4%

SAMSUNG 03% 5%

SONY 03% 4%

THOMSON 03% 4%



A STUDY ON CTV INDUSTRY : INDIAN COMPANIES VIS-À-VIS

MNC’S

SUBMITTED TO : MR. X. Y. Z....... (CHAIRMAN), IIMT

SUBMITTED FOR THE PARTIAL FULFILLMENT OF POST GRADUATE DIPLOMA IN BUSINESS

MANAGEMENTBY

ABC(1996-98)


ISHAN INSTITUTE OF MANAGEMENT AND

TECHNOLOGYNEW DELHI

Documents

Ctv