project report group 5 indian
TRANSCRIPT
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Table of Contents
ContentsIndian Consumer Market .............................................................................................................................. 3
Key Industry Dynamics .................................................................................................................................. 4
List of Top Consumer Durable companies in India ....................................................................................... 5
Key Growth Drivers for Consumer Durables ................................................................................................. 6
Major Hurdles and challenges plaguing the Indian consumer durables sector ........................................... 7
PEST ............................................................................................................................................................... 9
Porters five forces ...................................................................................................................................... 10
Swot Analysis .............................................................................................................................................. 13
Indian Companies Report ........................................................................................................................... 14
Income Analysis of Major Players ............................................................................................................... 15
The Road Ahead .......................................................................................................................................... 25
Conclusion ................................................................................................................................................... 25
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Indian Consumer Market
Indias consumer market is riding the crest of the countrys economic boom. Driven by a young
population with access to disposable incomes and easy finance options, the consumer market hasbeen throwing up staggering figures. The market share of MNCs in consumer durables sector is
65 per cent. MNC's major target is the growing middle class of India. MNCs offer superior
technology to the consumers whereas the Indian companies compete on the basis of firm grasp of
the local market, their well acknowledged brands, and hold over wide distribution network.
India officially classifies its population in five groups, based on annual household income
(based on year 1995-96 indices). These groups are: Lower Income; three subgroups of Middle
Income; and Higher Income. Household income in the top 20 boom cities in India is projected to
grow at 10 per cent annually over the next eight years, which is likely to increase consumer
spending on durables.
With the emergence of concepts such as quick and easy loan, zero equated monthly installment
(EMI) charges, loan through credit card, loan over phone, it has become easy for Indian
consumers to afford more expensive consumer goods.
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Key Industry DynamicsIndustry Size: Rs. 350 billion
Key Categories: White Goods, Brown goods and Consumer electronics.
Competitive landscape: Dominated by Korean majors like LG and Samsung in most of the segments
Margin Profile: Low margin, dependant on volumes
Growth opportunities: Lower penetration coupled with increasing disposable income
Indian consumer electronics and durables market
Year Market (RS. Billions)
2012 340
2013 391
2014 450
2015 517
Market Fundamentals:-
Market size - 340 billion INR
Growth rate - 15% CAGR
Rural and semi-urban market share- 40%
Rural and semi-urban market growth - 30% CAGR
Global market size - 16,000 billion INR
Global growth rate - 10% CAGR
340
391
450
517
2012 2013 2014 2015
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Major Hurdles and challenges plaguing the Indian consumer durables
sector
Threat from new entrants, especially global companies:
The domestic consumer durables sector faces threat from newer companies, especially from
global ones who have technologically advanced products to offer.
Rivalry and competition
Presence of a large number of players in the domestic consumer durables industry leads to
competition and rivalry among companies. Threat from rivalry and competition poses a threat to
domestic companies.
Potential markets remaining yet untapped:
A large segment of the domestic market, mostly the rural market is yet to be tapped. Tapping this
yet untapped and unorganized market is a major challenge for the Indian consumer durables
sector.
Customer power with respect to availability of choice:
The availability of a wide product line on account of most products being homogeneous, poses a
threat for companies operating in the consumer durables sector. Customers have the choice of
both domestically produced and imported goods, with similar features.
Growth Scenario
India, with its huge middle-class population and rapid economic growth, is one of the largest
spenders in consumer electronics in Asia. Double-income families, rising income levels,
availability of credit, changing lifestyle, introduction of new models, and increasing consumer
awareness led to the surging demand of consumer electronics in India. The digital technology
revolution has enabled the industry to earn profit from the growing interaction of digital
applications, such as LCD TVs, mobile phones, etc. Thus, our research foresees that the Indian
consumer electronics market will grow at a CAGR of around 18% during 2011-2014. The Indianconsumer electronics market today stands at over Rs.400 billion.
Moreover, another important factor that has contributed significantly to the expanding consumer
goods market is the phenomenal growth in the Indian media. Even consumers in the remotest
areas are equally aware of the latest products launched in the market due to the increasing
penetration of television channels and cinemas.
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In addition, aggressive marketing efforts of the domestic majors are also helping the industry.
Even Internet explosion is contributing significantly towards its successful achievement.
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.
The consumer durables market recorded revenues of USD6.3 billion in FY10. During FY 03-10,
the industry expanded at a CAGR of 11.7 per cent.
Value growth of durables is expected to be higher than 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.
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PEST
1) Heavy taxation in the country is one of the challenges for the players. At its presentstructure the total tax incidence in India even now stands at around 25-30 per cent, whereas
the corresponding tariffs in other Asian countries are between 7 and 17 per cent.
2) About 65 per cent of Indian population that lives in its villages still remains relevant forsome consumer durables companies. This India, at least a large proportion of its
constituents, still buys black and white TVs and doesn't know what flat screens are. Also,
foraying into these rural markets has a considerable cost component attached to it.
3) Companies not only have to set up the basic infrastructure in terms of office space,manpower, but also spend on transportation for moving inventory. Even LG and Samsung,
which are touted as having the largest distribution network in the country, have a direct
presence only in 15,000 to 18,000 of the around 40,000 retail outlets (for consumer
durables) in the country.
4) Poor infrastructure is another reason that seems to have held back the industry. Regularpower supply is imperative for any consumer electronics product. But that remains a majorhiccup in India.
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Access to Distribution Channels
A strong distribution network is absolutely essential to compete in this industry. Not only does it
guarantee a country wide reach for a companys products but is also necessary for providing
good after sales service.
Videocon has implemented ERP system, which helps in integrating the manufacturing,
marketing, procurement and distribution services with the corporate office
LG Electronics sells in 1800 towns and cities with a population of 1, 00,000 and above.
Samsung also has a widespread service network, which includes 123 exclusive service centers
and 200 distributors in any town with more than 1 lakh population.
Distribution hence is difficult and costly as established firms dominate distribution. Large
incentives are required to gain entry into the distribution channels and further gain
recommendation to retailers from the dealers.
Brand Salience
With little product differentiation and parity products, it is imperative that distinct images are
created in the minds of consumers through positioning and brand building. MNCs have been able
to compress the cost of brand building by amortizing the cost of sponsoring international events
across a larger footprint straddling multiple countries.
Capital Investment and Economies of Scale
The industry is capital intensive and players have made huge investments in putting up state of
the art manufacturing facilities. For example, Videocon has seven manufacturing site in India.
Apart from investments in manufacturing the industry requires huge working capital to manage
inventories.
Supply chain management and inventory management thus becoming crucial to determining
profitability. With regard to sourcing funds, MNCs are better placed than their Indian
counterparts as they manage to get funds from their parent companies at low rates of interest.
Huge capital requirement thus can act as barrier to entry.
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3) Threat of Substitutes goods (low)
In Porters model, substitute products refer to products in other industries. There are few
substitutes from other industry if any. Most of them seem to be obsolete or have one foot out of
door.
4) Bargaining power of Buyer (high)
The power of buyers is the impact that consumers can have on a producing industry. Buyer
power influences the prices that a firm can charge. Buyer power is influenced by various factors
as follows:
Buyer Concentration
The industry is akin to consumer durables whose end users are fragmented. Hence buyers do not
have any specific influence on producers.
Buyer Switching Cost
The cost incurred by consumer in switching from one brand to another is practically zero. Brand
loyalty is low. Hence the companies cannot rest on their laurels and have to be on their
tenterhooks to retain the customers.
Price Sensitivity
Market is highly price conscious and promotion driven. With the onslaught of major price cuts
and promotional schemes, this market has now become a promotion driven one. To successfully
compete in this industry, even premiumplayers like Sony, LG have had to come up withschemes.LG and Philips have been the most aggressive amongst industry leaders as far as pricing is\
Concerned and hence their realization shave been lower than industry average.
5) Bargaining power of supplier (low)
There is low bargaining power of Suppliers because of big global supply chain management.
There is direct negotiation with supplier in order to encourage reliable supply, faster delivery and
lower price. Bargaining power influences the cost and quality of input material. Higher supplier
power raises the input cost, thereby reducing the industry profitability.
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Swot Analysis
Strengths
1. Presence of established distribution networks in both urban and rural areas
2. Presence of well-known brands
3. In recent years, organized sector has increased its share in the market vies a vies the
unorganized sector.
Weaknesses
1. Demand is seasonal and is high during festive season
2. Demand is dependent on good monsoons
3. Poor government spending on infrastructure
4. Low purchasing power of consumers
Opportunities
1. In India, the penetration level of white goods is lower as compared to other developing
countries.
2. Unexploited rural market
3. Rapid urbanization
4. Increase in income levels, i.e. increase in purchasing power of consumers
5. Easy availability of finance
Threats
1. Higher import duties on raw materials imposed in the Budget 2013-14
2. Cheap imports from Singapore, China and other Asian countries
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Indian Companies Report
Symphony
Voltas
Whirlpool
Godrej
Videocon
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Income Analysis of Major Players
Analysis: - Over the period of time Symphony LTD is growing at a very fast rate as compared to
its peers in Indian market. Symphony is focusing more on their efficiency of manufacturing
goods which will optimize their raw material. Voltas and whirlpool are not applying strategicmotions to uplift their production as they have a constant decline of OPM
23%
30%28% 27% 26%
8% 7%9% 9%
6%
22%
15%
21%18% 19%
5%7%
9% 8% 7%
19%24%
20% 19% 19%
Mar '08 Mar '09 Mar '10 Mar '11 Mar '12
OPM % - Indian
Symphony Voltas Godrej Whirlpool Videocon
Operating Profit Margin
(%)
Mar
'08
Mar
'09
Mar
'10
Mar
'11
Mar
'12
Symphony 23% 30% 28% 27% 26%
Voltas 8% 7% 9% 9% 6%Godrej 22% 15% 21% 18% 19%
Whirlpool 5% 7% 9% 8% 7%
Videocon 19% 24% 20% 19% 19%
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Net Profit Margin % Mar '08 Mar '09 Mar '10 Mar '11 Mar '12
Symphony 21% 19% 19% 19% 20%
Voltas 6% 5% 7% 6% 6%
Godrej 17% 14% 19% 16% 14%
Whirlpool 2% 3% 5% 5% 4%
Videocon 9% 10% 5% 6% 5%
Analysis: - With high sale amount and better OPM Symphony and godrej are performing better
in the industry as compare to its peers. Low debt and better machinery reduce a huge burden of
interest and optimize their capacity and raw material usage so that they can survive at low
costing and better quality.
NET SALES Mar'08 Mar'09 Mar'10 Mar'11 Mar'12
Symphony 73 124 190 233 250
Voltas 3045 4033 4542 5135 5170Godrej 892 1096 1274 2394 2975
Whirlpool 1801 1943 2541 3072 3043
Videocon 8285 9754 9163 14410 12650
21% 19% 19% 19% 20%
6% 5% 7% 6% 6%
17%14%
19%16%
14%
2% 3%5% 5% 4%
9% 10%5% 6% 5%
Mar '08 Mar '09 Mar '10 Mar '11 Mar '12
NPM % -Indian
Symphony Voltas Godrej Whirlpool Videocon
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Analysis: - Videocon have the highest sales fig over the period of 5 years. On the other hand
symphony have increased their sales by approx. 350% from Mar 08 to Mar 12.
73 124 190 233 250
30454033 4542
5135 5170
892 1096 12742394
29751801 1943
2541 3072 3043
8285
97549163
14410
12650
Mar'08 Mar'09 Mar'10 Mar'11 Mar'12
Symphony Voltas Godrej Whirlpool Videocon
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NET SALES Mar'12
Symphony 250
Voltas 5170
Godrej 2975
Whirlpool 3043
Videocon 12650
Analysis: -Sales of Videocon is highest among all its peers (53%) in the year 2012whereas Sales
of Symphony is lowest among all(i.e,1%).This is may be because of Share Capital of Videocon
is highest(334 cr) whereas Share Capital of Symphony is low among all (7 cr).Net Sales of
Godrej and Whirlpool is nearly about same. (12% and 13% respectively)
1%
21%
12%
13%
53%
Mar'12
Symphony Voltas Godrej Whirlpool Videocon
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Manufacturing Cost factors
Expenditure Symphony Voltas Godrej Whirlpool Videocon
raw Material 82 3922 901 1495 2669
Power & fuel
cost 0 3 97 20 28employee cost 15 552 118 213 58
Expenditure Symphony Voltas Godrej Whirlpool Videocon
raw Material 32.65% 75.38% 29.06% 46.29% 20.66%
Power & fuel
cost 0.04% 0.06% 3.14% 0.61% 0.22%
employee cost 5.99% 10.61% 3.80% 6.61% 0.45%
Analysis: -From the Expenses table It can be clearly seen that all the company is spending too
much in procuring Raw Materials. Again in the year 2012 the second highest component is
Employee Cost for all the Companies. It can be seen that in the year 2012 Raw MaterialExpenses is highest expense Component for Voltas which nearly 75% of Net Sales and
Employee Cost is 11% of Net Sales again it is too high because adding both i.e., Raw Materials
& Employee Cost the total expense as percentage of Sales is almost 86% which shows that the
company has only 14% of revenue left from which the company has to use it for other expenses
and also save some percent as profits. Power & Fuel Cost is highest for Godrej among all its
peers (i.e., 3%)
Symphony Voltas Godrej Whirlpool Videocon
employee cost 5.99% 10.61% 3.80% 6.61% 0.45%
power&fuel cost 0.04% 0.06% 3.14% 0.61% 0.22%
raw Material 32.65% 75.38% 29.06% 46.29% 20.66%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
90.00%
100.00%
AXISTITLE
COST FACTORS
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Analysis: - This ratio is very important to know the financial soundness of the company. If the
proportion of debt is high then the creditors have taken more risk and the owners have taken less
risk. Videocon has borrowed highest in the year 2012 which is almost 104% more than other
companies borrowing. Videocon is borrowing high amount of loans over the years. Whirlpool
have least debt to equity ratio as it has made no borrowings past 2 years.
Debt/equity
Symphony 1.049Voltas 1.130
Godrej 1.411
Whirlpool 1.000
Videocon 2.874
0.000
0.500
1.000
1.500
2.000
2.500
3.000
3.500
Symphony Voltas Godrej Whirpool Videocon
Debt/Equity
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Debtors Turnover
Symphony 1.89
Voltas 1.67
Godrej 1.91Whirlpool 1.91
Videocon 1.64
Analysis: - The ratio shows how efficiently the money is collected from debtors after sales.
Higher ratio is good for the company which means that the company has not blocked its fund.The credit management of Godrej and Whirlpool is good for the current year 2012.
1.89
1.67
1.91 1.91
1.64
Symphony Voltas Godrej Whirpool Videocon
Debtors turnover Ratio
Series1
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Average collection
period
Symphony 193
Voltas 218
Godrej 191
Whirlpool 191Videocon 222
Analysis: - Symphony, godrej and Whirlpool have better understanding with their customers and
due to this they have optimal ACP. This also shows that this companies have high end running
products in the market with low credit limit
Creditors turnover Mar '12
Symphony 1.19Voltas 1.61
Godrej 1.69
Whirlpool 1.76
Videocon 1.65
193
218
191 191
222
Symphony Voltas Godrej Whirpool Videocon
Average Collection period
Series1
1.19
1.61 1.69 1.76 1.65
Symphony Voltas Godrej Whirpool Videocon
Creditors Turnover
Series1
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Analysis: - This ratio measures the velocity with which the creditors are turned over in relation to
purchases. The objective of the company is to delay the payment. The delay can be made
keeping goodwill of the company into consideration as it doesnt hurt future relation of the
company. In the year 2012, Symphony is using its goodwill well in paying back of money.
Average payment period
Symphony 306.54
Voltas 226.89
Godrej 215.65
Whirlpool 207.79
Videocon 221.78
Analysis: - This is the ratio use to calculate the average payment period of the company. Higher
number of days is good for the company which means the company is getting that many days to
delay the payment. The company can use the money for some other purpose efficiently. Here
Symphony has highest credit days which is good for the company.
306.54
226.89 215.65 207.79221.78
Symphony Voltas Godrej Whirpool Videocon
Average Payment periodSeries1
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Production capacity and its utilization
Companies
production
capacity sales quantity optimization
Videocon 10881869 10854280 100%
Symphony 649956 501165 77%Godrej 4592500 4015000 87%
Voltas 3285680 2987332 91%
Whirlpool 2356422 1577530 67%
Analysis: - Videocon had made best utilization of their resources which is near about 100% with
high sales quantity. All the companies are doing well in their production capacity where they are
achieving the target of at least more than 75% except for Whirlpool which is 67%. The reason
for this difference between production and sales may be lack of innovation and outdated
technology, competitors etc.
0%
20%
40%
60%
80%
100%
120%
0
2000000
4000000
6000000
8000000
10000000
12000000
videocon symphony godrej voltas whirpool
Capacity Utilization
production capacity sales quantity optimization
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