Negative impacts of MNC’s in Indian markets

General General ManagementManagement

Problems brought by Problems brought by MNCMNC

(to host countries)(to host countries) The host county is likely to lose its The host county is likely to lose its

economic sovereigntyeconomic sovereignty The host nation may also experience some The host nation may also experience some

loss of control over its own economyloss of control over its own economy Feeling that labour is being exploited by Feeling that labour is being exploited by

the MNC/ Outsourcingthe MNC/ Outsourcing Lost of cultural moorings Lost of cultural moorings The problem of DumpingThe problem of Dumping

ExampleExample – Chinese low quality products in – Chinese low quality products in Indian marketIndian market

Industry Chosen :Industry Chosen :

Colour Television (CTV)

Colour Television (CTV)Colour Television (CTV) The Indian colour TV (CTV) market is arguably The Indian colour TV (CTV) market is arguably

one of the most fascinating markets now in Asia one of the most fascinating markets now in Asia or perhaps even the world.or perhaps even the world.

Size of the Indian market : 5 million-sets-mark Size of the Indian market : 5 million-sets-mark 1984-85 growth rate was140.3% 1984-85 growth rate was140.3% 1985-86 fell to 68.6%,1985-86 fell to 68.6%, 1988-89 was 15% 1988-89 was 15% 1989-90 it touched a level of 5%1989-90 it touched a level of 5% 1991-92 the sales of color televisions at -14.5%.1991-92 the sales of color televisions at -14.5%. After declining in 2000 and 2001, the Indian After declining in 2000 and 2001, the Indian

consumer electronics market grew by 12.4% in consumer electronics market grew by 12.4% in current value in 2003, to reach Rs129.5 billion.current value in 2003, to reach Rs129.5 billion.

A recent trend shows that TV market has grown A recent trend shows that TV market has grown to 373.5 per cent between January-March 2003.to 373.5 per cent between January-March 2003.

Contd…..Contd…..

Sony India, Samsung and LG are the Sony India, Samsung and LG are the dominant players in the CTV segment. dominant players in the CTV segment.

In March 2003 the CTV segment grew by In March 2003 the CTV segment grew by 389.1 per cent389.1 per cent SamsungSamsung leading the race with a market leading the race with a market

share of 27 per centshare of 27 per cent SonySony at 20.1 per cent and at 20.1 per cent and LGLG at 19.9 per cent. at 19.9 per cent.

Main players in the Main players in the Indian marketIndian market

Indian:Indian: BPL, Onida, Videocon BPL, Onida, Videocon

European:European: Philips Philips

American:American: Thomson Thomson

Korean:Korean: Samsung, LG Samsung, LG

Chinese:Chinese: Akai, Sansui Akai, Sansui

Japanese:Japanese: Aiwa, Sony, Panasonic, Sharp Aiwa, Sony, Panasonic, Sharp

CTV Sales over the yearsCTV Sales over the years

CTV Sales over the CTV Sales over the yearsyears

AFTER a period of slump in 1999 and 2001, colour AFTER a period of slump in 1999 and 2001, colour television (CTV) sales had picked up again television (CTV) sales had picked up again

FY 2003 the industry reported an upward movement in FY 2003 the industry reported an upward movement in salessales

The CTV market has grown rapidly in the last one The CTV market has grown rapidly in the last one decade in India decade in India

On the supply side, over the last two to three years, On the supply side, over the last two to three years, there has been some intense activity in the CTV there has been some intense activity in the CTV market, with increased competition and players market, with increased competition and players launching premium products incorporating superior launching premium products incorporating superior technology technology

Till the late 1990s, the market was dominated by older Till the late 1990s, the market was dominated by older domestic players such as BPL, Videocon and Onida. domestic players such as BPL, Videocon and Onida.

Although they are still present in the market, they are Although they are still present in the market, they are steadily losing ground to multinational players such as steadily losing ground to multinational players such as LG and Samsung. LG and Samsung.

Most selling CTV brandMost selling CTV brand

2003

BPLBPL BPL is an Indian electronics company. The BPL is an Indian electronics company. The

acronym stands for "British Physical Laboratories". acronym stands for "British Physical Laboratories". It deals with consumer electronics (such as It deals with consumer electronics (such as refrigerators and washing machines), mobile refrigerators and washing machines), mobile networks etc. networks etc.

The company was started at a time when the The company was started at a time when the government had reserved many areas of business government had reserved many areas of business for the public sector for the public sector

BPL, CTVs have been the flagship businessBPL, CTVs have been the flagship business Over the years, BPL's growth has been subject to Over the years, BPL's growth has been subject to

constant challengesconstant challenges Using its experience of the market and the Using its experience of the market and the

consumer, BPL concentrated on importing consumer, BPL concentrated on importing technology, improving product quality, innovations technology, improving product quality, innovations and manufacture of electronic products that and manufacture of electronic products that enhanced the quality of life enhanced the quality of life

OnidaOnida Onida, a leading television brand, is still well Onida, a leading television brand, is still well

known for its brand mascot ‘The Onida Devil’ and known for its brand mascot ‘The Onida Devil’ and its punch line “its punch line “Neighbor's Envy Owner’s PrideNeighbor's Envy Owner’s Pride”.”.

Onida launched its advertising campaign in the Onida launched its advertising campaign in the 1980s when owning a television set was 1980s when owning a television set was considered a luxury, considered a luxury,

The mascot helped Onida gain substantial market The mascot helped Onida gain substantial market share and brand recall among the customers and share and brand recall among the customers and become one of the top three television brands in become one of the top three television brands in the country.the country.

In 1998, Mirc Electronics (the owner of Onida In 1998, Mirc Electronics (the owner of Onida brand) decided to abandon the “Onida Devil” in its brand) decided to abandon the “Onida Devil” in its communication campaigns as the brand mascot no communication campaigns as the brand mascot no longer appealed to the Indian consumer.longer appealed to the Indian consumer.

SamsungSamsung Samsung India is the hub for Samsung’s South Samsung India is the hub for Samsung’s South

West Asia Regional operationsWest Asia Regional operations Sports Marketing and Entertainment Marketing Sports Marketing and Entertainment Marketing

have been the key elements of the Company’s have been the key elements of the Company’s Brand Marketing Strategy Brand Marketing Strategy

Samsung’s uses state of the art highly automated Samsung’s uses state of the art highly automated manufacturing facilitiesmanufacturing facilities

Samsung has been awarded as the Best Retailer Samsung has been awarded as the Best Retailer of the year 2005 of the year 2005

Samsung India commences exports of 'Made in Samsung India commences exports of 'Made in India' Colour televisions to Western EuropeIndia' Colour televisions to Western Europe

A Second Production Line set up at Noida for the A Second Production Line set up at Noida for the manufacture of Projection TVs in Indiamanufacture of Projection TVs in India

LG LG life’s goodlife’s good

LG Electronics India Pvt. Ltd., a wholly owned LG Electronics India Pvt. Ltd., a wholly owned subsidiary of LG Electronics, South Korea was subsidiary of LG Electronics, South Korea was established in January, 1997.established in January, 1997.

LG has been able to craft out in eight years, a LG has been able to craft out in eight years, a premium brand positioning in the Indian market premium brand positioning in the Indian market and is today the most preferred brand in the and is today the most preferred brand in the segment.segment.

In 2003, LG has emerged as the leader in Colour In 2003, LG has emerged as the leader in Colour Televisions, Semi Automatic Washing Machines, Air Televisions, Semi Automatic Washing Machines, Air Conditioners, Frost-Free Refrigerators and Conditioners, Frost-Free Refrigerators and Microwaves Ovens. Microwaves Ovens.

The company has achieved a turnover of Rs 6500 The company has achieved a turnover of Rs 6500 crore in 2004 and aims to touch a turnover of 10 crore in 2004 and aims to touch a turnover of 10 Billion US Dollars by 2010 Billion US Dollars by 2010

As on today, LG is the No 1 brand in the CTV As on today, LG is the No 1 brand in the CTV market.market.

Why Indian companies lost Why Indian companies lost its market share to MNC’sits market share to MNC’s

Primarily because of the following reasons:Primarily because of the following reasons:

They lagged behind in technologyThey lagged behind in technology They offered a small range of productsThey offered a small range of products Provided less margin to dealersProvided less margin to dealers Less number of outlets. Less number of outlets. Poor after sales services Poor after sales services Most of the BPL galleries were transformed Most of the BPL galleries were transformed

by the dealers into a gallery with a range by the dealers into a gallery with a range of products from different manufacturersof products from different manufacturers

Contd…Contd…

What MNC’s did?What MNC’s did?

Multinationals such as LG and Samsung Multinationals such as LG and Samsung managed to increase their market share on managed to increase their market share on the strength of the strength of aggressive marketingaggressive marketing

What Indian companies What Indian companies are now doing to are now doing to

regain their market regain their market shareshare

Better Innovations to productsBetter Innovations to products Better pricing techniquesBetter pricing techniques Better positioning of the brandBetter positioning of the brand Following an aggressive marketingFollowing an aggressive marketing Trying to move the after sales service to a Trying to move the after sales service to a

new levelnew level Segmentation of the product range by Segmentation of the product range by

creating specific sub-brandscreating specific sub-brands

What did BPL do?What did BPL do?BPL tied up with Sanyo (a Fortune 500 BPL tied up with Sanyo (a Fortune 500 consumer electronics major ). The key consumer electronics major ). The key points to their strategy to gain a good points to their strategy to gain a good market share are as follows-market share are as follows-

Right pricing and the right product. Right pricing and the right product. Product positioning Product positioning Strong regional presenceStrong regional presence Different prices in different show roomsDifferent prices in different show rooms

Benefits from MNCBenefits from MNC

To Host CountriesTo Host Countries Transfer of technology, capital and Transfer of technology, capital and

entrepreneurship to the host countryentrepreneurship to the host country EmploymentEmployment Improved competition in the host country Improved competition in the host country

and ultimately better utilization of and ultimately better utilization of available resourcesavailable resources

More products for local consumersMore products for local consumers Greater access to high quality managerial Greater access to high quality managerial

talent that tends to be scarce in the host talent that tends to be scarce in the host country, particularly developing onescountry, particularly developing ones

Encourages the world unity and all Encourages the world unity and all resulting in world harmonyresulting in world harmony

To home countriesTo home countries Acquisition of raw materials from abroad, Acquisition of raw materials from abroad,

steady supply of raw material at a lower steady supply of raw material at a lower price that can be found domesticallyprice that can be found domestically

Technology and management expertise Technology and management expertise acquired from competing in global marketsacquired from competing in global markets

Export of components and finished goods for Export of components and finished goods for assembly or distribution in foreign marketsassembly or distribution in foreign markets

Inflow of income from overseas profits, Inflow of income from overseas profits, royalties licensing fees and management royalties licensing fees and management contractscontracts

Job and career opportunities at home and Job and career opportunities at home and abroad in connection with overseas abroad in connection with overseas operations.operations.

Thank you!!Thank you!!

By-Rajeev Gupta

Questions???Questions???