project report group 5 indian

7/28/2019 Project Report Group 5 Indian

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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



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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



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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



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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%)


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


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


Average Collection period

Series1

1.19

1.61 1.69 1.76 1.65


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


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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project report group 5 indian

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