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Television India Electronics
Indian Television Industry: An Analysis
1.1 Pre-Liberalisation Period:
Television in India began in 1959 for the purpose of education and spreading knowledge about family planning and by 1964-65; there were about 551 imported television receivers in Delhi for educational purposes. In 1975, the reach of television satellites was expanded to cover Andhra Pradesh, Bihar, Karnataka, Rajasthan, Madhya Pradesh and Orissa.
In 1969, keeping in mind the government’s plans to use televsion as a mean of mass communication, the Central Electronics Engineering Research Institute offered the television set know-how to private Indian firms. The first four Indian firms to enter production were JK Electronics, Polestar Electronics Telerad Pvt Ltd and Weston.
In 1969, demand exceeded supply of television sets and this made the government to issue licenses liberally for domestic production of sets. As a result of the increase in licenses productive capacity, it rose from 5000 units in 1969 to 410,000 units in 1978. On the other hand, demand only rose to 238,833 in 1977. An important link we can draw out in this period, is the strong correlation between growth rate of television industry and growth rate of TV transmitting stations.
The TV industry in the pre-liberalisation period was an oligopolistic industry. JK Electronics which emerged as the market leader initially gave way to Weston in 1975 and being closely followed by Televista. The TV industry before 1990s thus, was an oligopolistic market with the market control being in the hands of a few companies.
A key point to note about the TV industry during this period was the constant shortfall of raw materials and the uncertain government policy. Most TV set producers were not producers in the true sense of the word and were only assemblers. Thus, the industry was constantly struggling against raw material shortages such as picture tubes and uncertain government policy.
1.2 Post-Liberalisation Period:
The liberalisation reforms have had a lasting impact on the television industry that is very much visible today. With opening up of the economy, a number of multinational companies came in the market and started giving stiff competition to the domestic producers who had grown complacent in an oligopolistic market. Initially, the MNCs did face certain problems in building a strong base in India, against the domestic competition. But soon, with the help of their advanced technology, their constant R&D and their strong fiscal strength, they managed to set and develop a strong base in the Indian market.
In the last 10 years, the colour television(CTV) industry has seen a drastic change in the level and extent of competition. MNCs have not only introduced programs like free gifts, prizes, popular competitions and exchange schemes that have made the CTV industry vibrant and ever changing but they have also introduced technologically advanced products that were not possible with domestic players in the market.
The industry has been growing at a rapid rate due to increasing income levels of the masses, the spread of organized retail and the highly competitive prices of CTV being offered by companies today. The industry is thus enjoying a whole new environment with a very different market structure than before. The market leader position of domestic players like Onida, BPL, Videocon has been challenged and taken over by MNCs like LG, Sony, Samsung etc. Companies are now constantly anyalyzing and modifying their strategies, trying to be one step ahead of their competitors that has led to a rise in consumer surplus of the consumers and thus, a fall in dead weight loss.
With liberalisation and acceptance of WTO norms, there was also a steep fall in import duty, which led a fall in CTV prices yet again and it is now being seen as a consumer essential rather than a luxury product.
1.3 Industry Overview
Between 1990-91-2002-2003, CTVs in India have enjoyed a growth of 17% per annum. However, this overall trend is conceling some short term oscillations in demand. The production of CTVS fell by 15% in 2000-01, which is not revealed by the overalltrend. There are about 75 millions television households in India, with 35 million of them with access to cable or satellite network. In about five years from now, it is expected that there will 120 million television households in India.
A large part of the Indian CTV market is made up of mid-size segments. The 14 inch segment is expanding at a faster rate than the 20. It is 21 inch segment that is growing the fastest rate. Most MNCs and Indian brands produce and sell the highest number CTVS in this segment. With Godrej foraying into the television market, the price of 14 inch CTVs has fallen to Rs. 6000 only.
The market for large LCD s and Plasmas is on a rise, thanks to the competetive price cuts employed by most companies since 2006. LCD prices have fallen by 30% and are now starting of Rs. 30,000 only. In 2006, the Plasma and LCD market was pegged around 200,000 units in 2003 and is expected to be about 900,000 units in 2008. In this segment, LG and Samsung have about 80% of the market share while Onida only has 3 %.
Semi-urban and rural markets only account for 40% sales, while the urban market(with 30% demographic share) has about 60% of sales. As the television companies start focusing more on rural markets, this is likely to change. Many CTV companies are focusing on rural penetration for future growth. LG and Samsung for instance, get about 50-55% revenues from rural markets. This shift is possible due to over-saturation in urban markets.
The competition in the industry has been heating up. Exchange deals, value gidts, discounts, easy financing and other incentives are some of the moany promotional schemes used by the TV manufacturers to increase the vibrancy of the market. The tying-up of TV manufacturers with Financing banks is one of the main factors for the rise in growth of the industry.
The industry is now facing a new market profile. The established leadership of indian market leaders like Videocon, BPL, Onida etc have been questioned by MNCs like Aiwa, Akai, Sony, Samsung, LG etc.
Most international brand, for instance, Panasonic were launched at a premium price. But Akai, another international brand, was one of the pioneers in introducing innovative customer schemes to Indian customers. They introduced discounts and gave one TV free with another. Now, many premium brands are sold at very competetive prices that suit many Indian customers.
LG and Samsung, the two Korean brands, have emerged strongly as the market leaders in CTV industry in India. Other companies like Aiwa and Sony do also have considerable market presence.
Moving to the black and white TV industry, we see that with the 2003 increase in excise duty in B&W Tvs, the gap between production and consumer pruchases is likely to increase. The B&W TV market is likely to shrink further to around 2.5 million units, with a negative growth of 16%.
Analysis of ratios
The performance of the consumer electronics industry consisting of audio equipment, TV, DVD and VCR has been analysed from 1998-1999 to 2002-2003, due to paucity of data.
The exhibits show important ratios for electronics industry. The D/E ratio had been falling till 2001, but start rising thereafter, indicating a rising debt burden on the industry. This may be because of the aggressive marketing and advertising strategies followed by the industry to maintain its lead.
The return on new worth increased between1998-99 to 2001-02 but became -3.3% in 2002-03. Due to an increased emphasis on R&D, technology and competitive pricing, the profit margins for the players seems to be declining. This shows the increasing control of the buyers on the industry.
The Operating Profit/net sales shows a fluctuating patter in the reporting period. It fell to about 4.4 in 2003-03, which indicates the pressure on the bottom line due to increased competition.
The industry has enjoyed a stable utilisation of assets, evident by the stable Net Sales/Total assets ratio.
The four ratios indicate that the television industry in undergoing a difficult transition period, with increasing debt, fall in net worth and low asset utilisation. The entry of MNCs has led to aggressive marketing and pricing, thus challenging the profitability of Indian players.
2. Competitor Analysis
2.1 LG Electronics
Established in 1997, after clearance from the Foreign Investment Promotion Board (FIPB), LG Electronics India Pvt Ltd., is a wholly owned subsidiary of LG Electronics, South Korea. It has been in India for a decade now and is a market leader in consumer durables and recognised as a leading technology innovator in the information technology.
It has a manufacturing facility in Greater Noida, since 1998, which manufactures its broad range of products including colour televisions, washing machines and air conditioners. The manufacturing of LCD television sets and colored monitors is taken up at the Pune plant which has been set up in 2004. The plants are state of the art and match the international standards; they are the most eco-friendly as well. In the past ten years LG has been able to craft out a premium brand positioning in the Indian market and is today the most preferred brand in the segment.
- Flat panel display
- Colour television
- Digital audio video
- Computer products
- Mobile phones
- Washing machine
- Vacuum cleaner
- Air conditioner
2006: Launched the interactive TV refrigerator developed the world’s first 100- inch LCD TV. Launched the world’s largest Full HD 102- inch Plasma TV (1080p).
2007: Launched 120 Hz Full LCD TV.
2008: Introduces new Global brand identity: “Stylish design and smart technology, in products that fit out consumer’s lives”, With launch of Scarlet
2.2 MIRC Electronics
Onida was started in 1981 in Mumbai. In 1982, Onida started assembling television sets at their factory in Andheri, Mumbai. Superior products and the combination of a distinctive voice, a cutting –edge advertising strategy and purposeful marketing ensured that Onida became a household name. It is well reputed for intelligent and pioneering application of technologies.
It enjoys a strong equity among consumers. It constantly introduces products of substance which offer best technology and finest design. Its shares are listed on the NSE and the MSE. It has also seen a transition from a family owned business to a professionally managed company.
- LCD TV
- Home theatre systems & DVD
- Air conditioner
- Washing machines
- Mobile phones
- Microwave oven
- Projectors and display product
MIRC is aiming at Rs 40 billion turnover in the next three years. And also planning that only 50% of its revenues come from television sales. It has entered into new categories such as air conditioners, microwave ovens etc.
During the quarter that ended March 20th 2008 ,the profit of the company climbed 26.88% to Rs 65.60 million from Rs 51.70 million in the same quarter last year. It reported earnings of Rs 0.46 a share during the quarter, registering 27.78% decline over prior year period.
Samsung India Electronics Private Limited (SIEL) is the Indian subsidiary of the US $55.2 billion Samsung Electronics Corporation (SEC) headquartered in Seoul, Korea. It is the hub of Samsung’s South West Asia Regional Operations, and looks after its business in Nepal, Bangladesh, Maldives & Bhutan besides India.
SIEL commenced operations in India in December, 1995. Initially, a player only in the Colour Televisions segment, it later diversified into colour monitors (1999) and refrigerators (2003). Today, it is recognized as one of the fastest growing brands in the sphere of digital technology and enjoys a sales turnover of over $ US 1 billion in a just a decade of operations in India. SIEL has its manufacturing facility at Noida, U.P
- Home Appliances (HA) Business
- Information Technology (IT) Business
- Consumer Electronics (CE)/Audio Visual (AV) Business
Samsung firmly believes that continuous innovation is the key to making path- breaking improvements to increase productivity. It uses many tools such as “Reduced 7 type of Wastage” & Six Sigma. Samsung India is also instrumental in carrying out Hardware Research & Development at its Noida R&D centre.
It aims at customization of products to better meet needs of the Indian customers. Samsung designed the DNIe vision series of Flat CTV’s. It is planning on growing through by increasing its reach with multi-brand outlets and increasing the number of brand outlets to 200 by end of 2008. The company is also keen on now stepping into tier-II and tier-III cities.
Samsung Electronics Co Ltd posted a lower-than-expected quarterly profit and faces a tough second half with a sluggish memory chip market and lower margins in flat screens and mobile phones. Operating profit for April-June rose to 1.89 trillion won from 911 billion won a year ago, below the 2.08 trillion won predicted by analysts. First-quarter operating profit was 2.15 trillion won.
April-June revenue rose to 18.14 trillion won from 14.63 trillion won a year ago.
Videocon started as a conference room sized assembly line in 1979, and today emerges as a USD 2.5 billion global conglomerate. It believes in setting trends in every sphere of its activities. Videocon has worldwide presence in China, Korea, Italy, Mexico, Poland. In India, it has plants set up in Aurangabad, Bangalore, Bharuch and Kolkata.
- Consumer Electronics, Home Appliances & Compressor manufacturing
- Display industry and its components
- Colour Picture Tube Glass
- Oil and Gas
Videocon launched its new range of LCD TVs – the Integra Classic LCD TV. Integra classic LCD TV is India’s first LCD TV with cinema surround system and 1000W PMPO sound output. This LCD is designed with Sound Port Unit to enjoy the unique cinematic experience.
The TV comes with a specially designed sound port. Also, Videocon International Ltd. has been merged with Videocon Industries Ltd. Aggressive development is in full swing at the R & D Centres to bring out state-of-the-art technologies including True Flat, Slim, Extra Slim, Plasma & LCDs, at the earliest.
Videocon Industries Q3 net up 4%. It announced a net profit of Rs 255.07 crore for the third quarter ended June 30, a 4.06 per cent growth from that in the corresponding period a year-ago. The firm had a net profit of Rs 245.11 crore in Q3 of FY'08
The total income rose 15.67 per cent to Rs 2,620.43 crore in the quarter under review, from Rs 2,265.35 crore in the same period a year ago.
3. Porter's Five Forces Model
We will try and segment the market conditions into the five forces suggested by Porter and analyze each aspect separately.
3.1 Degree of Rivalry
It denotes the level of intensity in competition within the industry. In this atmosphere of rivalry, the company that is most responsive to customer needs will be the winner. LG is the market leader with 26% share. Its average realization is lower than the industry average; it is majorly due to competitive pricing, and reducing margins. It is not so strong globally but India is amongst the biggest global markets for LG, so to hold ground here, it has set its foot and is going for aggressive market capturing strategies.
Samsung on the other hand, is a global leader but is not very strong in India. It is, however, not going for such strategies and is content with the share of the market it has now. Samsung aims at increasing its market shatre gradually. But due to the competitive pricing having a negative impact on margins, its gains have decreased.
Mirc electronics portrays itself as a value for money brand, and manages to be in the race. One major player in the past, BPL has suffered severe competition, and has lost its share has reduced drastically. Videocon is also one such company which has faced decline in profits, but is maintaining its presence
Although all the players have reduced their prices drastically and comparatively the sales volumes have seen a boost. This increase in sales makes up for the declining price. All the players are now concentrating on penetrating to the lower levels rather then profit maximization.
LG aims at creating the right product, pricing them properly and targetting different segments LG aims at differentiating between the varied groups rather than taking a “One fits all “approach.
Onida / Mirc Electronics
Onida has been in the market for quite some time. It made an emotional connect with the consumers, and its “DEVIL” advertising strategy also helped it in boosting up sales. It is currently aiming at targeting the high end segment of the market, it continuously revamps its products range By doing this it is actually boosting up its exports also.
Samsung earlier targeted to be the market leader, but then after facing competition from the Chinese/ Japanese TVs and LG, it changed its strategy. It aims at offering the lowest prices and being the frontrunner in the technology front. It has a series of products ready for launch: the newest ones being 40" LCD Projection TV, 43" Projection TV and the Plano series of Flat colour television
Videocon enjoys the most widespread network of distribution channels and dealers. It positions itself as a low priced brand and has good penetration in sub rural population. Due to the wide spread network and demand, it enjoys economies of scale and thus costs are low. It has launched several models in the low ranged prices and has a diffused perception across the board. It faces the major competition with Sansui, as the export duties have been reduced, and both these players target the low price segment.
3.2 Threat of Entrants
If the barriers to entry are low the existing players face a strong competition. Similarly if the entry barriers are high, the market is split between the existing players and thus they enjoy their shares without the threat of entries. Of course if the business turns unprofitable any of the players can decide to opt out of the business and chose to exit. The factors that are kept in mind before entering the Television industry are:
- Brand – The brand image needs to be fostered amongst the consumers. Big players have the advantage. For example, LG sponsors Cricket matches and other major events and thus gains a leverage and strong brand building. New entrants might not have that advantage.
- Investment – Investment is a big hitch. To operate efficiently, a company needs to have large production capacity. Sony in the past had a plant with the capacity of 300,000 CTV sets but due to low demand, it had to shut it down. To gain the advantage of Economies of Scale, these players need greater sales but if they aim at expanding, a major cost factor comes into play in the form of working capital costs, so companies having a strong backing can still do that whereas the new entrants do not have that advantage.
- Distribution – a company would not enjoy profits even if its production is top notch until the distribution channels are in place. Establishing a distribution channel is costly and takes time. A major reason for LG’s success is the fact that it has well established channels and more sales per dealer.
3.3 Threat of Substitutes
With the generation Y into action, the sources of entertainment are varied now. People have an option of internet, which is rapidly catching on. But a majority of Indian population is rural so penetration to that level still is credited to televisions so as of now the threats to Television industry are still not strong enough.
3.4 Buyer Power
Buyer forms an integral part of the purchase cycle, in today’s economy, it’s the buyer who holds the most important place. It’s his preferences, demands, and wishes that the companies compete to fulfil. Conversely, the buyer also goes for a product, when he sees a correlation between what he wants, and what is being offered. He has separate needs and reasons to buy a TV setThe decision of purchase is however guided by the class and the strata of the buyer
As the price cuts by Akai have instigated a rush in the players, and the war is on a price basis, even the majors have been forced to cut the prices. Every player has to be sensitive to the market needs, although the amount of decrease in prices is interrelated. While LG and Philips have been battling it out, Samsung has chosen to move towards the High end range, and shows, its intent of growing gradually, rather then fiercely competing.
3.5 Supplier Power
There goes along, a strong process of negotiation amongst the suppliers and the manufactures. Considering the scenario of the Television market, in the production of a TV set 50% of the costs are due to the Picture tube. Traditionally, India has been producing Black and White Picture tubes but still has to depend largely on the imports for Coloured Picture Tubes.
The reduction in the Duties from 85% to 20% has spurred the supply and the costs have been reduced, but still the suppliers hold the power to Negotiate in their hand. Conversely, the manufacturers also have the advantage as these tubes do not have any use apart from the TV sets. The winner here turns out to be the major player because of bulk sales, he is able to strike a deal and margins are maintained, the smaller player suffers and has to compromise on the margins.
The major suppliers in the Indian scenario are:
- Samtel India imports technology from Mitsubishi
- JCTE imports technology from Hitachi.
- Uptron had collaboration with Toshiba
BPL is making efforts to get into collaboration with Toshiba, and make Tubes in India itself, whereas Philips and LG have agreed to get into a joint venture, to increase profits, and decrease costs.
4. Classification of Customers
Depending upon the various needs, and various specifications that a consumer needs in the TV sets, we can broadly divide the consumer base, into four main categories. They are:
- THE UPGRADERS: These are the people, who have recently upgraded from a Black and White TV to a CTV. A major attributing factor to this shift is the boom in the cable and satellite industry. The programs that are featured now have a great variety. They encompass major events to cricket matches. Thus the consumer feels the need to go for a better model of TV set. They are not that well informed, and make a decision based on the information available to them. Their choice is based on factors such as cable TV compatibility, number of channels, fully functional and operational remote, colour quality. Amongst them, 14” CTV is in popular demand and has shown an increase in the past. Demand is expected to decline in the future owing to better technology and greater disposable incomes.
- FIRST TIME BUYERS: These are the people who are buying a CTV for the first time. They basically belong to the nuclear families and are majorly DINK (double income, no kid) or SINK (single income, no kid). A large part is constituted by the bachelors who have migrated to a new city for work purposes. A consideration while making a choice here is the fact that they have limited budget. The key factors under consideration are technology, shape of the set, colour, size of the speakers, and aesthetic sense.
- MULTIPLE SET PURCHASERS: These are the people who buy more then one set. These are generally FULL nests and have a growing family size. Price is not a factor here and these are more prone to grey market deals as they are keen on getting foreign models that are still not available in India.
- REPLACEMENT PURCHASES: With the disposable income rising and people enjoying increased purchasing power, TV sets are no longer a luxury item. Due to the widespread penetration of TV sets in the modern household and newer technology coming out each day, there is a bright opportunity of replacement purchases. For status conscious people and technology enthusiasts it is a trend to switch sets as and when the new technology comes. Similarly, in lower middle class, a great number of households are switching from Black and White to CTV sets. Thus if this opportunity is capitalised in the right manner these players will get major sales order and will be able to grow on it with newer technology.
5.1 Industry Analysis: Government and Regulatory Interventions
The role of the government as the supervisor for business, creating the rules for competition is crucial. It creates boundaries within which the industry must operate. Following the liberalization policy of 1992, the Indian government completely delicensed the TV sector by November 1996. The government has been regularly reducing the import duty on television sets from the reform period. From 20% duty in 2004, it has been reduced to only 12.5% presently.
However, reduction in the import of television set is unlikely to have a significant impact on the industry as most of the TV sets are produced domestically. However, the customers who purchase high end product, that are largely imported, are benefited by such cuts in import.
Excise duty on CTV was brought down by half in 2001 from 16% to 8% and this excise rate continues till date. The excise duty on B&W TVs are at 16% as well.
Moving beyond television sets, the import and excise duty on television components has been reduced as well. Cathode Ray monitor tubes that are an essential raw material of televisions have a custom duty of 12.5% in the last budget. The import duty on the same is 16%. The duties have been brought down from 16% and 20% in earlier years. This cut in import duty is likely to not have an impact on the domestic players as they do not rely significantly on imports. However, the cut will have a beneficial impact on high-end product consumers and MNCs who are more dependent on import of raw materials for CTV.
But the domestic players can breathe a sigh of relief. Recently, the commerce ministry has raised concern over the dumping on CPTs from Malaysia, China, Korea and Thailand. It has recommended an anti-dumping duty of 10% to ensure that the domestic players have a level playing field. The MNCs are up in arms regarding this anti-dumping duty and raise their concern about the hike in price of CPT being ultimately passed on to consumer. The duty will raise the price of manufacturing TVs in India and it is predicted that the price of TV may go up by 10% to 20%, varying with the TV size.
An important raw material in production of TV sets is insulated glass. Continuing the trend of falling duties in all goods, the excise and import duty has been reduced in glass as well to 16% from 20%.
After the Free Trade Agreement with Thailand, the import duty on CPT and CTV was fixed at 10% and for glass parts at 20%. In this scenario, the duty on finished good is lower than the duty of the raw material that is not encouraging for domestic value addition. All major domestic TV producers except Sony, source their requirements from Samtel, an Indian company. Therefore, the duty structure favours the imported brands, putting the domestic players like BPL, Onida and Videocon at a disadvantage.
The lower duties on CRT tubes and finished TV sets as compared to the raw materials is sending a wrong signal to the industry and discourages domestic value addition in the industry. A serious look needs to be taken at the duty structure to remove all discrepancies and provide the right environment for growth to the domestic players and encouragement to the MNCs.
There has been much talk about the steep growth trajectory that India has been on for the past few years. After liberalisation, India’s GDP from growing at the Hindu rate of about 2-3%, has started growing at 7-8%. In 2006-07, the per capita income rose by 8.1%, enabling Indians to spend more on consumer goods including durables goods like Televisions.5.2 Industry Analysis: Economic Scenario
Availability of readily available and cheap finance is one of the main drivers of growth of the TV industry. The TV producers realising the importance of consumer financing, have tied up with banks to provide easy finance to consumers at cheap rates. Schemes such as zero percent interest rate financing have given a strong push to the industry growth. LG and Whirlpool have employed “zero” financing schemes to increase their penetration in the market. BPL has tied up with banks like ICICI to provide easy financing to consumers. The availability of finance has allowed the usually price sensitive Indian consumer to increase his spending by a great deal.
In the last year, the Rupee has appreciated by a great deal against the dollar. While this has spelled trouble for the Indian exporters and the Indian Finance Minister and RBI together have tried to stop the appreciation of the rupee, the appreciation has been a blessing for CTV industry. Raw materials make up about 75% of the total manufacturing cost and for MNCs these raw materials are largely imported. Thus, with appreciation of the rupee, the raw material costs and hence the final production cost of televisions will come down, which may be passed on the consumer.
With the world oil crisis and supply side mismanagement in the Indian economy, the inflation rate has touched a a 13 year high of about 13%. Inflation has been rising in india for the past few months and this has had a significant impact on the spending power of people. With rising inflation and constant income, people’s spending on food and other necessary items as a percentage of income has shot up dramatically, thus, leaving little disposable income for consumer durables like TVs.
Many consumers who were considering upgrading to technologically superior products have deferred their decision to later period. In an attempt to control inflation, the RBI has been hiking CRR and this interest rates have been rising in all sectors and all banks. This also has had a negative impact of the sales in the industry. Consumer financing companies like GE Money, ICICI Bank and Citi Bank have left the consumer financing segment. Fewer financing options are sure to have a negative impact on sales in the industry.
5.3 Industry Analysis : Social
There has a strong change in the perception and lifestyles of people in India in the last two decades. From being a luxury item, television and in particular the colour television has become a necessary good for the middle class and upper class. Moving deeper into the demand pattern, it has been noted that it is the colour television that is more in demand as opposed to the B&W TV, even in the lower middle class. With the opening up of the economy, the aspirations of the people have increased to mirror that of the western world and there is a strong demand for technologically superior goods with flat screens, digital sound etc.
Thus, with Indian favouring colour TVs over B&W and plasma over older televisions, there is a huge market for replacement demand and this has supported the rapid growth of the Indian TV industry.
In the Indian TV industry, it has been noted that demand for televisions is usually seasonal and cyclical. Demand for television is strongly impacted by festivals such as Onam, Dusshera, Diwali and Christmas. Every Diwali sets the benchmark for the highest TV sales in any month in a year for most TV companies.
The companies keeping this in mind, spend about 40% of their annual advertising budget during the festive season. LG for instance set its Diwali target sales at about Rs. 400 crores in 2006. Presently, it expects sales to increase by 30% in the festive season.
Besides the festive season, the TV industry is also impacted by the cricket season. India, being a cricket crazy nation, sees a high correlation between the sales of Televisions in India and how well the Indian team is performing in tournaments. For instance, this year during the IPL, there was a 15% growth in sales of CTVs as compared to 2007 in the same period. Both LG and Samsung have experienced a 20% growth in the sales during the period.
There was a strong demand for flat screen TVs, mainly in the metros and B&W and smaller TVs in the smaller cities. Many companies took advantage of this series, and launched special TVs to reap more benefits. Onida launched its Xaria series especially for the IPL, while LG launched its Scarlet series during the period to capitalise on the IPL craze.
5.4 Industry Analysis: Technological Scenario
The manufacturing of televisions in India, is largely an assembly type job. The TV industry is a technological driven industry, therefore, companies need to continuously innovate, improve and customise their products. The new innovations like golden eye technology, dolby digital sound and High-Definition televisions are examples of the same.
The TV companies have been innovating and customising on mainly three fronts : TV Picture or Screen, Sound and additional features. LG had introduced Golden Eye technology that provides a better picture and more vibrant colours on the TV screen. Philip's Powerchip model gave clearer picture, plasma screens were flatter than the older television screens and hyperband allowed for a larger number of channels. These for just a few of the recent technological innovations in television sets.
New technology gives the companies and the marketers a significant point of diffrentiation over other producers and gives them a fresh chance to market these features. In the recent years, there has been an increasing trend and emphasis on the latest technological aspect of the model. All the players have started becoming more and more dependent of introducing latest technology as the means to garner market share.
This was started by the MNC firms initially but even the Indian players have realised the need for innovative features and products to remain competitive. For instance, Salora, an Indian brand, launched “Promax”, a high end product, with 250 program memory, 250 channel reference and a child lock to block unwanted content.
On the MNC front, many new technologies have been introduced by Sony, LG, Samsung etc.
Sony, already enjoys good brand equity and respect mainly because of its Trinitron technology for picture tubes. Not to rest on its laurels, it has introduced the Sony Bravia series, which builds on Sony's strength, the picture tube quality, in an LCD TV supplying high quality images along with powerful side speakers.
Sony has introduced this brand in three variants W, V and S at economical prices. Certain Sony models also offer features such as dividing the screen into 4 parts to watch more channels at once.
Thin is in now and this stands true for television sets as well. Hitachi has introduced the Hitachi 1.5, which is the “world’s first ultra thin full HD LCD.” This stylish television is 1/3 the depth of conventional LCD s. LG, also trying to capitalize on the plasma and LCD trend has introduced the stylish Scarlet series. Besides the Scarlet series, LG's Flatron models have features like PIP-2 tuner, woofer and graphic games. Samsung's flat TV is fitted with 100HZ scan, that reduced TV flickering and makes lines less visible. It has games, child lock and sleep/on timer.
As we can see, the industry players have been investing heavily in R&D and providing the customers with better technology constantly. In the FY 2004-05, the premium segment TV market saw a startling high growth over the previous fiscal. Industry insiders say that the growth rate presently is close to 100%, though the market base remains small. The market demand for plasma and LCD s is estimated to be 6700 and 2850 units respectively.
The market for projection TV in India is put around 13, 500 units. Sony, which was the market leader in projection TVs stopped production in 2007, letting LG take over the market leader position. Samsung, Philips, Onida and Toshiba are the other major players in this segment.
The plasma market in India is not doing as well as expected. Sony India, has recently quit the Plasma TV market and Panasonic seems to be in trouble as well. LG also is unhappy with the sales of Plasma in India. The Plasma segment had a growth of 30% last year, compared to 141% of LCD. However, LG is continuing on with its R&D in this segment and has launched the first frame less plasma TV in the market and hopes to garner about 30% of the flat screen market with the launch. Besides LG, Samsung is a strong competitor as well in the market as well.
The LCD market in India is the fastest growing LCD market in the world. LG and Samsung are strong competitors here as well. Sony has a 26% market share in the segment and hopes to increase it with launch of Bravia. LG, is about to launch a LCD TV with Bluetooth wireless networking to maintain its edge in the segment.
Keeping in mind the very high technical nature of the industry, and expectations of the customers, the marketers have to strengthen the service network to ensure the best facilities to the customer. With changing generations, the attitude towards technology is changing from techno-phobic to more experimental. Indians, on an average are more open to new technology, than Americans made evident by the higher use of MMS in India than USA. Thus, keeping the open attitude in mind, companies should develop and stress more on new technology.
- Conclusion and Recommendations:
In the last few years, the TV industry has undergone a virtual face-lift, changing both qualitatively and quantitatively. The industry has changed both qualitatively and quantitatively. The industry has grown manifolds since 2000, with an increased number of players and more intense competition.
At the same time, the quality of services being provided to the customer has also become much better than before. TV manufacturers have finally realised that with the advent of MNCs, the customer is spoiled for choices and that he is the “king”. Aggressive and strong marketing strategies have allowed the companies to differentiate themselves from others.
With competitive pricing becoming very intense, there is now a television set available at every price for every consumer. The MNCs seem to be taking the lead in the field of technology, economies of scale and aggressive and innovative marketing strategies.
The Indian consumer durables market and in particular the TV market are poised for a great expansion in the coming years. There are some peculiarities, only seen in the Indian market, such as the sales of TVs being correlated with monsoons, festivals and cricket. For basic models, the market is reaching saturation level in the urban areas, therefore only, value addition or better technology can increase market share in these areas. However, with the rural market still being virtually untapped, there is a huge opportunity for TV manufacturers to shift their focus here and reap more profits.
- Increased stress on R&D.
R&D can play a vital role in cost cutting, increasing performance and providing differentiating features between competitors. All this will help to increase profits, increase sales and get more market share.
- Develop close link between R&D and Marketing
R&D and marketing have to work closely together, to ensure that the company is developing on the same front where the customers want the change in. The marketing department has to ensure that proper information is communicated to R&D and then work closely with it, to suitably market the innovative product.
- Stress on brand building to maintain brand difference
Marketers will have to develop a plan to pull up consumers in the value chain. The TV manufacturer earns a higher profit margin on premium end television sets than the lower end. Strongly differentiated products, with a clear and effective communication strategy will ensure the profitability of the firm in the future.
- Focus on value for money
Indian customers are very price sensitive and are easily swayed by costs. There needs to a stress on providing value for money products, with an emphasis on economic brands. The virtually untapped rural market has very different needs than the metropolitan customer. By understanding this, and introducing brands intended for this purpose, the manufacturers will be able to gain more rural market share.
- Maximising Sales during Festive Season
Sales of consumer durables go up by almost 40% during festive season and by about 30% in cricket season. Keeping this in mind, companies should develop strategies to maximise their sales during this period. By giving value schemes that give value freebies to the customers during this period, they can increase their revenues. LG also tried to do this by sponsoring the 2003 Cricket World Cup.
- Distribution Network
A well spread out and connected distribution network is vital for the good performance of any consumer durable firm. The TV set manufacturers have to realise this and work on increasing their distribution network. They should also develop innovative schemes for the dealers to motivate them to deliver better performance.
- Samidha Sharma(2006), TV makers kick off price war to boost LCD volumes, Economic Times (http://economictimes.indiatimes.com/articleshow/2015639.cms)
- Bijoy Ghosh(2008), Flat-panel TV sales likely to double this year, Business Line( http://www.blonnet.com/2008/04/25/stories/2008042551701200.htm)
- Correspondant,(2008), Television manufacturers give IPL full marks for booming sales, Mint (http://www.ibef.org/artdisplay.aspx?tdy=1&cat_id=60&art_id=18810)
- Mona Mehta(2007), Value- added Freebies to bring cheer this Diwali, Financial Express (http://www.financialexpress.com/news/Valueadded-freebies-to-bring-cheer-to-shoppers-this-Diwali/212751/)
- Seema Gupta(2006), Indian Television Industry: A Strategic Analysis
- Correspondant(2008),Anti-dumping duty on CPTs concerns colour TV makers , Economic Times (http://economictimes.indiatimes.com/News/News_By_Industry/Cons_Products/Electronics/Anti-dumping_duty_on_CPTs_concerns_colour_TV_makers/rssarticleshow/3047206.cms)