Download - Consumer Durables
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Consumer Durable Industry
Presented by-Kasturi MandalA Vijay KumarSasi KumarUmesh GS Arun KumarBarun Bardhan
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Consumer Durables- Overview
Mass market heavy goods such as washing machines, refrigerator etc. intended to last 3 or more years. Also called hard goods
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Consumer Durable Industry
White/Brown
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Characteristics - Consumer Durable Industry
• Rapid Innovation• Dynamic market place• Highly competitive industry• Significant ‘time to market’ pressure• Significant cost pressure• Rapid rate of market penetration• Rapid transition of technology
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Consumer Durable Sales (USA)
Source: Consumer Electronics Association
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Key Findings - Global 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.
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Top 5 Emerging Nations (Consumer Electronics)
1. CHINA2. INDIA3. BRAZIL4. MEXICO5. SOUTH AFRICA
• 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 period.
• China is the leading country among the Top 5 emerging nations, with market revenues of
$21.6 billion in 2007
Source: Consumer Electronics Association
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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
43%
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Political Factors:I. Anti-dumping duty on imported color picture tubes.II. FDI (100%), High Tax IncidenceIII. Resolution to reduce emission of carbon footprints in the
atmosphere
Indian Durable Industry- PEST Analysis
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Effect of GST & DTC
• Reduction in overall tax incidence (14-16% from 20- 25%)
• More disposable income• Efficient SCM • Prices of goods to reduce in the medium term
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Economic Factors: I. Growth of retail sector – expected to reach 16% by 2011-12 from
4% in FY07II. Easy fin schemes to consumerIII. Economic reforms by the government –higher purchasing powerIV. Emergence of organized retail market with large players like
Croma, next, reliance digital etc – leading to lower prices and higher varieties
VI. Indian incomes are likely to grow three-fold over the next two decades
Indian Durable Industry- PEST Analysis
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Social Factors :I. Disposable Income roughly doubled since 1985II. Changing perception of luxury to necessityIII. Rural market – constraintsIV. Demand of the consumer durables is seasonal V. Decrease in average household size
Indian Durable Industry- PEST Analysis
Source- CRISIL, NKP Research
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Technological I. Power efficientII. Higher quality products III. Technological advancements
Indian Durable Industry- PEST Analysis
TV Washing Machines AC
LCD,HD,OLED,3D,LPD Direct Drive, Fuzzy Logic, Silver Nano, Waterless (90%)
DEVap ( Desiccant enhanced evaporative AC) developed by NREL
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Indian Durable industry - SWOT
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Supplier PowerIndigenous supply base limited
- most raw materials are imported
Threat of New Entrants• Most current players are global
players• 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 PowerMultitude of brands across price points - wide variety of choice for customers
Threat of SubstitutesTechnological Enhancement
Indian Durable Industry- Porter’s 5 forces
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Indian Durable Market• The Indian durables market, with a
market size of US$ 27.38 billion in 2008–09, has grown by 7.1 per cent over the previous year.
• The compounded annual growth rate (CAGR) for the industry has been recorded at 20.3 per cent between 2004 and 2009.
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Consumer Electronics• Production in the consumer electronics industry is 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.
Source: Department of Information Technology, Minister of Communication & IT, Government of India., & http://www.mit.gov.in/dbid/eproduction.asp#2
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Consumer Electronics
Sources: “Consumer durables: Durable enough for tough times,” The Economic Times, December 13, 2009; Department of Information Technology, Minister of Communication & IT, Government of India.
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Consumer Appliances• The consumer appliances market is estimated at US$4.34 billion, with
imports valued at US$ 1.22 billion in 2009–2010. • Most imports are in the finished goods categories such as watches, electric
coffee makers, food grinders, electric heaters, etc.
AC38%
Refrigerator14%
Electric Fan8%
Washing
M/C7%
Sewing5%
Others28%
2009–2010
Source- www.ibef.org/download/consumer_durable
Rs.bn
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Key Players
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Key Players
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Product Mix Of Key Players By volume
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Electronic Goods EX-IM • Every year India imports electronics and appliances in huge quantity.
• More that 70 per cent of Indian electronics market depends on import of both finished
goods and components.
• India imported worth US$ 18.5 billion and exported worth US$ 3.69 billion of electronics
goods between April 2008 and February 2009
Source: Ministry of Commerce and Industry, Government of India, Annual Report 2008–09.
USD (mn) 2006-07 2007-08 2008-09 % Growth 2007-08 % Growth 2008-09
Exports 2690.5 2809.3 3697.1 4.4% 31.6%
Imports 15057.3 17320.4 18505.8 15.0% 6.8%*excluding computer in physical form
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Sales Trend- Consumer Electronics
Source- CRICIL
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Consumer Durable- Growth Drivers
Appreciation of Indian Rupee
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Consumer Durable- Growth Drivers
• Availability of financing
Source- CRISIL, NKP Research
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Consumer Durable- Growth Drivers
• Income Growth
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Refrigerator Market Share
LG26%
Samgsung16%
Videocon 14%
Wirlpool 16%
Godrej6%
Others22%
FY 2007-08
Source- CRICIL
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Television Market Share
LG19%
Videocon22%
Samgsung15%
Mirc13%
Others31%
FY 2007-08
Source- CRICIL
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Washing Machine Market Share
LG23%
Samgsung17%
IFB5%
Videocon20%
Godrej6%
Whirlpool15%
Other14%
FY 2007-08
Source- CRICIL
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Mobile Phone Market Share
Nokia59%
Sony8%
Samgsung7%
Mo-torola
6%
Others20%
FY 2007-08
Source- CRICIL
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DTH TV Market Share
Dish TV6%
SunTV4%
TATA Sky4%
Big TV2%
Airtel1%
Cable83%
FY 2007-08
Source- CRICIL
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Consumer Durables SCM
IMPORTANCE:• Product Proliferation• Multiple players• High competition• Benchmarking and TQM• Production Demand mismatch• Ever Increasing Targets• Bargaining power of Retailers
OBJECTIVES: • Efficient Sourcing• Demand Planning• Inventory Optimization• Order Management• Tracking• High Inventory for High Demand Periods• Reverse Logistics
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Benefits of Efficient 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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Consumer Durables Channel
Individual Consumers Institutional Consumers
Traditional RetailingCompany
Managed StoresFranchisee
Showrooms
E-RetailingReverse Logistics
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Consumer Durable Supply Chain
COMPANY SHOWROOM
E Retail
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Planning and Forecasting
• Annual Forecasts based on previous year sales and current trends.
These sales are disaggregated into monthly sale plans
• Catering for the seasonal variations in demand
• Interaction between production and marketing departments for
better quality of forecasts and demand utilization.
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Consumer Durable Value Chain
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Durable- Top 10 Players (Indian) by sales FY 2009-10
1. Nokia India2. LG Electronics India Ltd3. Samsung India Electronics4. Sony India5. Philips India6. Whirlpool Appliances7. Titan Industries8. Siemens9. Videocon Industries10. Blue star
Source: http://www.naukrihub.com/india/consumer-durables/companies-list/top-players
• India being the second largest growing economy with huge consumer class has resulted in consumer durables as the fastest growing industries in India
• LG, SAMSUNG the two Korean companies has been maintaining the lead in the industries with LG being leader in almost all the categories.
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LG Electronics
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LG Global Presence
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LG Leading Player In Many
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LG Electronics India Ltd• The parent company was originally established in1958 as Goldstar producing
Radio, TV, Refrigerator & AC• LG group was the merger of two companies Lucky and Goldstar• A wholly owned subsidiary of LG Electronics, South Korea• Established in India in January, 1997• State-of-the art manufacturing facility at New Delhi / Pune• Vision was to become a 'Health Partner' for its consumers
•The CTV range offered by LG has 'Golden Eye' technology•Entire range of LG air-conditioners have 'Health Air System'•Microwave ovens have the 'Health Wave System’•Refrigerators have the 'PN System’•Washing machines have 'Fabricare System'
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Vision- “Global Top 3 by 2012”
"Life's Good“Represents LG's determination to provide delightfully smart
products that will make your life good
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LG- Product Portfolio
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LG- Product PortfolioMobile communications• CDMA Handsets• GSM Handsets• 3G Handsets • Cellular Phones
Digital appliance• Air Conditioners • Refrigerators• Microwave Ovens • Washing Machines
Digital display• Plasma TVs• LCD TVs• Micro Display Panel TVs• Monitors
Digital media• Home Theater Systems • DVD Recorder • Notebook PCs• Desktop PCs• Car Infotainment
Source: Corporate Website : http://www.lg.com
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LG Technology Collaboration
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LG Global Financials
http://www.lg.com/global/ir/financial-information.jsp
2003 2004 2005 2006 2007 2008 2009
20,177
24,659 23,774 23,171 23,502
27,63830,513
Sales KRW (bn)51%
2003 2004 2005 2006 2007 2008 2009
663
1,546
703
239
1,222
483
2,052
Net Profit KRW (bn)
209%
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The challenges faced by LG when entered in Indian market
• Low brand awareness about LG in India.
• One of the last MNCs entered in India (Samsung, Panasonic entered in1995 in
India).
• High import duty
• Competition from local market players and other MNCs in consumer durable
segment.
• Price sensitiveness of the Indian consumer
LGEI over came these challenges to emerge as the Market Leader!
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LG Electronics India Ltd
Source- www.lg.comSource- www.lg.com
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LGIL- SWOT Analysis Strength:• Manufacturing Unit at tax incentive area• Wide range of products to serve all
category• Widest distribution network in the
industry (47 branches, 10000 trade partners)
• Highest share in home appliance market
Weakness:• Transportation cost• Demand fluctuation handling capacity• Service quality
Opportunities:• Fast growth of home appliances market• Growing rural market in India• New technology• Increase in income level
Threat:• Cut throat competition• Korean rivals in Indian market• Raw material import duties• Price sensitiveness of the Indian
consumer
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Market share in a few categories
Source- CRICIL
Microwave
Color TV
Refrigerators
Washing Machines
40%19%
26%
23%
2007-08
Leader in all the above categories
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LG Logistic Organization Structure Corporate Logistics
Team Head
Zonal Head For 2 Zones (S&W, E&N)
Branch Logistics In Charge
CFA & Warehouses
Distribution &Planning
Product Wise
Operation & Traffic
To Deals With trucks & Transporter
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• LGE Transportation with its annual expense exceeding $40 million, was recognized as one of the critical areas within the companies operations that would deliver significant value to both the top and bottom line.
• Transportation Cost account for approximately 51% of total logistic cost and was recognized as a primary target for reduction.
• In order to extend the value of Oracle ERP and EXEWMS systems deeper into the distribution network ,LGE needed to integrate a best of breed transportation management into its existing enterprise management systems.
The Situations of Supply Chain
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The challenge for LGE was to achieve transparency between market demand variability and distribution planning and execution.
To effectively manage this, LGE set out to establish integrated best practice workflows across the entire transportation and distribution organization.
The selection criterion was focused on partnering with the best in class transportation management solution provider, followed by the lowest overall total cost of ownership the least rest and a rapid time to value.
The Challenge In Supply Chain
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Innovative Market Strategy
LG has adopted the regional distribution channel in India.
Introduced the low-priced “Cineplus” and “Sampoona” for the rural market.
LG was the first brand to enter in cricket in big way a way, by sponsoring the 1999 world cup followed it up in 2003 as well.
LG brought in four captains of the Indian cricket team to endorse its products. LG invested more then US$ 8 million on advertising and marketing in this sport.
Launch new technologies in consumer electronic and home appliances.
LG has differentiated its product using technology and health benefits. CTV has “Golden eye technology” Air conditioner has “Health air system” and microwave ovens have the “Health wave system”.
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Key Trends
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LG- Future Outlook
• Plan to focus on premium products for the monitor business and expand buyers for commercial display business while entering new markets to secure profitability
• Focus on profitability by launching premium smart phones and differentiated tablet PC products along with recovering cost competitiveness for feature phones
• Maintain market dominance in refrigerators and washing machines while securing competitiveness for future businesses
Although uncertainties exist, market demand is expected to increase along with the IT industry recovery
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