videocon

Analysis of

Videocon’s Operations

(Consumer Durable Industry)

By

Joyner Gwendolyn Rodrigues.

Student Id – 3769537

Analysis Of Videocon‟s Operations

of 20

UNIVERSITY OF WOLLONGONG in DUBAI

College of Business

Project report

Title: Analysis Of Videocon’s Operations.

(Consumer Durables Industry)

in partial fulfilment of requirement of the subject:

TBS984 – Strategic International Business

for the Master in International Business Program

Summer One 2010

By

Ms. Joyner Gwendolyn Rodrigues

Student ID: 3769537

Submitted to: Dr. Arijit Sikdar

Date: 30th

June 2010


of 20

EXECUTIVE SUMMARY

Videocon Industries Ltd is one amongst, India‟s major business conglomerates. The

corporation operates in four key sectors, namely – Consumer Electronics and Home

Appliances, Display Industry and its component, Colour Picture Tube Glass and lastly Oil

and Gas. (Company Profile - Videocon, 2009)

This report shall analysing the Consumer Electronics and Home Appliance sector of

Videocon Industries Ltd i.e. Videocon‟s Consumer Durable Operations.

In the second part of the report circles around the international business environment

of the Consumer Durable Industry, in terms of the products available, the market

segmentation and demand, and the structure of the industry‟s value chain.

The third part of the report will emphasise on the operations of Videocon Industries

Ltd, in terms of the strategies followed by the company, the structure of the company‟s value

chain and how the company has developed and evolved over the last couple of years.

The last part of the report i.e. the fourth part will state how the Global Consumer

Durable Industry is changing and the future trend the industry will face. Based on the altering

scenario of the industry, conclusions and recommendations have been made for Videocon

Industries Ltd – Consumer Electronics and Home Appliances sector, so that the company can

have a completive advantage.


of 20

TABLE OF CONTENTS

I. GLOBAL CONSUMER DURABLES INDUSTRY – CONSUMER

ELECTRONICS AND HOME APPLIANCES ............................................5

A. Products and Market .................................................................................... 5

a) Consumer Electronics ............................................................................................................. 5

b) Home Appliances .................................................................................................................... 5

c) Market ..................................................................................................................................... 6

B. Integration and Responsiveness in the Industry .......................................... 6

C. Value Chain ................................................................................................. 7

II. VIDEOCON INDUSTRIES LTD ..........................................................9

A. Company Snapshot ...................................................................................... 9

B. Experience Change .................................................................................... 10

C. Operations .................................................................................................. 11

a) India ...................................................................................................................................... 13

b) Mexico .................................................................................................................................. 14

c) Italy ....................................................................................................................................... 15

III. THE FUTURE STRATEGY .........................................................17

A. Consumer Durable Industry – Consumer Electronics and Home

Appliances ................................................................................................. 17

B. Videocon Industries Ltd ............................................................................ 18

IV. REFERENCES .................................................................................19


of 20

I. GLOBAL CONSUMER DURABLES INDUSTRY – CONSUMER

ELECTRONICS AND HOME APPLIANCES

Any manufactured goods purchased by consumers for long-standing and lasting use

are classified as Consumer Durables. They are merchandises which are planned to undergo

regular usage for a number of years or longer before substitution are required. (WiseGEEK,

2010) From Cars to Communication Devices, Furniture to Refrigerators can be classified

under Consumer Durables.

The Consumer Durables Industry can be three main categories specifically

White Good - Refrigerators, Washing Machines, Air Conditioners, Speakers

and Audio Equipments

Brown Goods - Mixers, Grinders, Microwave Ovens, Iron, Electric Fans,

Cooking Range, Chimneys

Consumer Electronics - Mobile Phones, Televisions, MP3 Players, DVD

Players, VCD Players, etc. (Corporate Finance International, 2007)

For the purpose of this study, we shall only analysis the Consumer Electronic Industry

along with the Home Appliance industry as Videocon Industries Ltd is engaged in the

products of these two types of consumer goods.

A. Products and Market

a) Consumer Electronics

Electronics which are used for entrainment and communication everyday are

classified as consumer electronics. Televisions, Music Systems, MP3 players,

Personal Computers, Telephones, Camcorder etc are considered as Consumer

Electronics.

b) Home Appliances

Electronic that are primary for household use like cooking, cleaning and

ventilation are known as Home Appliances. Microwaves, Air Conditions,

http://en.wikipedia.org/wiki/Personal_computer

http://en.wikipedia.org/wiki/Telephone


of 20

Refrigerators, Washing Machines etc are some of the commodities that come under

Home Appliances.

c) Market

All countries in the world are a market place for consumer electronics and

home appliances. There is no specific market place. Similarly they are no specific

production place, as manufactured by companies all over the globe. at present the

companies from Japan, South Korea and the USA control the International Consumer

Electronic Industry and Home Appliance Industry.

B. Integration and Responsiveness in the Industry

Pressures of Global Integration Pressures Of Local Responsiveness

Cost reduction due to Economies of scale. Regional and local channel for distribution.

Convergence and similarities of consumers

taste and preference worldwide.

Regional and Local government standards.

Competition face globally by all companies. Other local norms and standards.

The entire world a market, so new market

for a particular company to enter.

Gains access to raw materials and other

resources worldwide.

Cost reduction by investing in countries

according to its comparative advantage.

E.g. R&D in Europe while Manufacturing

in India or China

The learning curve and experience curve


of 20

Each and every industry in the world is faced several pressures that oblige the

industry to integrate globally. While there are some pressure that make an Industry to act

more locally responsiveness towards a country. The table on the previous page distinguished

between pressures which force the Consumer Durable i.e. – Consumer Electronic and Home

Appliance Industry to integrate global and to be local responsiveness. From the table it is

visible that the Consumer Durable Industry in terms of Consumer Electronics and Home

Appliance is more of a global industry. However the products have some minute modification

made based on the local regional standards and small demand. E.g. India consumers demand

a higher level of cleaning in washing Machines as the whiteness of clothes represent

cleanliness, Danes prefer spin dry while Italian and Greek prefer clothes line.

C. Value Chain

When applying the

Michael Porter Value

chain Analysis to many of

the firms in the Consumer

Durable Industry (Consumer

Electronics and Home

Appliance) it becomes

visible that the value chain

of the industry is completely

global.

In term of the

supporting activities, the

companies within this industry have R&D centre across many countries in the world,

especially in Japan, Korea and Europe. Many firms Human Resource as most of the

companies establish them self as a diverse cultural company catering to the whole

world need. Procurement of components is also done true supplier who all spread

across the world.

Primary Activities of companies in this industry has integrated globally.

Manufacturing Plants of most companies are located in countries where labour cost

Figure 2.1 (Bua Consulting , 2010)

Value Chain Analysis by Michael Porter


of 20

are low in Mexico, China, India, Brazil and other low cost areas. The industry has a

standardize marketing plan for the entire globe, due to the convergence of customer

taste and preferences worldwide. Presently, various companies in the Industry give a

global warranty and after sales service.


of 20

II. VIDEOCON INDUSTRIES LTD

“Experience change”– spot on to its tagline, Videocon Industries Ltd is a company

which positions its self as the a corporation which grows and changes as per the dynamic

scenarios of the global environment.

A. Company Snapshot

In 1985 Shri Nandlal Madhavlal Dhoot founded the Videocon Industries Ltd and

developed the first coloured television in India. With the passage of time the company got

engaged into developing, manufacturing and distribution of colour televisions, along with

other home appliances like refrigerators, washing machines, air conditioners, microwave

ovens etc. (Hem Securities Limited, 2010) Today Videocon Industries underneath the

umbrella of the Videocon Group, has emerged as the 2.5 billion USD company. (Company

Profile - Videocon, 2009) The Company, along with its subsidiaries, operates in Consumer

Electronics and Home Appliances, Display Industry and its component, Colour Picture Tube

Glass and lastly Oil and Gas. The company operates not only from India but also from other

main regions in the world. With new horizons on the break, there is merely no pause on the

company‟s growth and the world is the Videocon playing field.

Figure 3.1 (Milestone - Videocon, 2009)


of 20

The Group is rated among India‟s Top 15 Business Houses along with being rated as

one of the 100 Emerging Giants of the World according to a Boston Consulting Group study

in addition to being rated amongst the Top 15 of India‟s „buzziest brands‟ by agencyfaqs in

2010. (Videocon Group, 2010)

B. Experience Change

Within two decades since its incorporation in 1985, Videocon has made many

changes in all aspects of it business. The company has changed its logo, appeal and also its

corporate strategy in order to adjust to the recent global environment and stay in the race.

Videocon changed it logo from the traditional giant solid silver “V" to a more fluid

lava type “V”. (Videocon Group, 2009)

The solid silver “V" with the two “E” symbol, which stood for strength and

robustness along with the passion for global impact by being a group that was interest in a

wide spectrum of interest ranging from „Electronics to Energy‟ was what how the brand

perceived itself before. (Videocon Group - Seth Nandlal Dhoot Hospital , 2006)

When one glances at the company‟s new logo, it is visible that the company is trying

to portray itself as an eco friendly company with a fresh outlook and to give a feel that the

Videocon always on the move. With its Videocon is trying to strike a chord with young

audience (Videocon Group, 2009) and thus targeting the present youth of the globe. The new

Figure 3.2 (Flubber-based Logo - Brand New, 2009)


of 20

logo also gives a feel that the company‟s going global. Using the colour of nature, i.e. green,

Videocon has give a feel that it product are environmentally aware and with respect to world

environmental standards.

According to Mr. Kim, C.E.O of Videocon, the rationale behind company‟s brand

change comes from the company‟s regular attempt to listen and respond to evolving market

dynamics all over the world. He also adds that the new tag line – “Experience Change”, will

mark the commencement of transform for customers of durable products. (Experience change

with eco-friendly identity of Videocon - Televisoinpoint.com, 2009)

In 2008 Mr Kim became the C.E.O of Videocon Industries, (Videocon Group, 2009)

this goes to show that the company changed its Corporate Structure which was a family

owned and managed business to a more global Corporate Structure.

C. Operations

Videocon Industries has emerged as a truly global company in last decade,

Integration – Responsiveness Framework explains why the company has gone global.

The Pressure for Global Integration for Videocon are

New Market worldwide

Gets Economies of Scale from Global Production

Threat and Completion from other Foreign and Indian Multinationals in India.

Getting worldwide technology by investing in R & D in developed countries.

Corporate Vulnerability of Indian Firms to Foreign Firms.

Need of Foreign Exchange

Universal needs and demands of customers for white goods all over the globe.

Having a universal supply chain helps to reduced cost.

The Pressures of Local Responsiveness for Videocon are

Meet Indian Government‟s Rules and Regulations along with the standards of

other nations.

Respond to Indian Local Competition.


of 20

As seen from above the

pressures of globalizations for

Videocon is more than the pressure

of for Videocon to be a locally

responsiveness to Indian markets.

More over Videocon deal with

consumer durables which are

standardise products all over the

world. These products are not

influenced by culture or social

traits in a particular country. There

exist minute modifications

deepening on the product necessities

in different countries. E.g. the power

cord for the product may be

different in different parts of the world. Another example could be the language on the

packaging and on the manuals of the product may demand English and the country language.

(Aswathappa, 2005).

In order to fit a global strategy Videocon as segregated the company‟s value chain

across many countries, so that it can get the maximum profits and reduction of cost. Beside

India, the Group has several manufacturing and R&D Centres stretched across The Americas,

Europe and Australasia that are continuously functioning and operating towards establishing

universal quality products by deploying the most state-of-the-art technology. (Videocon

Group, 2010). Besides having its presence in India, the Indain Mulinational has its presence

in Poland, Italy, Korea , China , Dubai, Oman, and Japan.

Based on the Porter's Diamond of National Advantage by Michael Potter we view

why Videocon has set up certain regions of the world. For the purpose of this study ,I have

three main countries, Inda, Mexico and Italy.

Figure 3.3 Integration – Responsiveness Framework

(Griffin & Pustay, 2009)


of 20

Figure 3.4 (Porter, 1980)

a) India

Vediocon is an Indain Mulinational, in this section we shall see how having its

headquaters and manufacturing units in India, has helped the company to have some

competive advantage based on the Poter Diamond.

Demand Conditions – With the increse of disposal income in the in India,

the demand of consumer durables has also increased. The indian consumers

are demanding, new innovations in the consumer durable and also goods

with the latest technology. In the recent year, India consumer good market

has beeing growing at a very high pace.

Factor Conditions – India is a labour intensive country and thus labour is

cheap in country. Thus is benfical for the Vediocon to set up manufacting

unit in India. Vediocon has set up manufacturing units in states of Gujrat

and Maharashtra in India. Vediocon has also and R&D centre in India at

Banglore, the technology hub of India. The location of India also help

Videocon, to trade outside India.


of 20

Related and Supporting Industies – In India Videocon is supporeted by the

small Indian supplier who supply commponets to the manufacturing and

assembly units in India. Moreover the Indian governments supports the

Firm finalcialy. The Information Technology industry in Indai aslo

supports the firm.

Firm Stratergy , Structure and Rivarly – Competition in India from both

domestic players as well as foreign companies like LG, Whirpool who have

entered into the Indian maerket, has helped Videocon to change it struture

and to enter in new venture, so that the company can face and sustain

compitition. This competion has helped Videocon, emerge as a vigrous

world leaders in counsumer durable.

b) Mexico

After the acquisition of Thomson's CPT, vediocon gain control of the

Thomson‟s plant in Mexico. Vediocon decided to keep the plant and manufacture

thre because -

Demand Conditions – Demand for Slim and sleek consumer electronics in

the Americas. Demand for quality air condition in the Americas

Factor Condition – The factor conditions in Mexico are the main reasons

by Videocon kept the Mexican plant. Labour cost are cheap in Mexico.

Mexican government has started to give insentive to companys to establish

in Mexico. Due to the free trade argrrement, between the America‟s

manufacturing in Mexcio has has help the company to enter the markets of

The United States of American as well as in Canada‟s Markets. Mexico is

also one of the low cost regions in the world.

Related and Supported Industies – Mexico has many supporting indutries

for Videocon like its glass manufacturing industry and steel and metal

manufacturing industry. The presence of air conditionor compressors also

supports Videocon plant in Mexico.

Firms Strategy, Suture and Rivalry - Many of Videocon‟s rival companies

have plant set up in Mexico, thus being close to competition helps. More

over as the firm re structures itself to become a global company, having


of 20

manufacturing plant in Mexico helps them to enter the North America‟s

Market through NAFTA.

c) Italy

Videocon entered Italy by acquiring the Thomson CPT plant in January 2005

(Videocon, 2009). The factors that contribute to Videocon expansion in Italy are as

below

Demand Conditions – The demand for high quality consumer durables

worldwide. Also the global demand of low cost but better quality product in

the world market. The LCD television segment is also growing rapidly in

Italy.

Factor Condition – Italy is one of the low cost manufacturing sites in

Europe. Being a part of the European Union, Italy paved the way for

Videocon to enter the European market. Italy also gave the company an

access to advanced technology and thus Videocon has opened a R&D

centre in Italy. In Italy the company also has government support.

Related and Supporting Industries – Close to the Poland plant of Videocon.

Italy has a network of Research and Development firms and the

technological savvy network of Italy also supports Videocon. The free

trade and common market between of European Union Nation which Italy

is a part of also supports Videocon

Firms Strategy, Structure and Rivalry – The global competition in the

consumer durable industry is also a factor that has help Videocon establish

in Italy. By acquiring a plant in Italy, the firm can enter the European

Market.


of 20

VID

EO

CO

N C

ON

SU

ME

R D

UR

AB

LE

VA

LU

E C

HA

IN A

CR

OS

S T

HE

WO

RL

D


of 20

III. THE FUTURE STRATEGY

A. Consumer Durable Industry – Consumer Electronics and Home

Appliances

I, re -quote Thomas Friedman words that the world is becoming flatter day by

day. Due to the integration and liberation economies of countries the globe has

becoming a levelled playing field for all companies to play on.

If at the present, the International Consumer Durable Industry in term of

Consumer Electronics and Home Appliance sis globally integrated, then due to the

increasing convergence of consumer needs and wants, cut throat competition between

various Multinationals...etc will drive the industry to be more globally integrated in

the future.

In terms of products, the industry looks to be developing new and innovative

products with the help of technology. E.g Televisions in the past last three year have

innovated itself from Plasma‟s, to LCD‟s and now to LED‟s and Blue Ray. Some

companies have made comment on a 3D television. With the pressure of reducing

carbon footprints in the world, many manufactures are planning and in the process of

developing eco – friendly goods. As water conservation is also a main issues across

the globe, many home appliance with water conservation will be developed. More

over even available water for drinking isn‟t always pure and clean and with a growth

in new germs and bacteria, the need for better water purifiers will be needed.

The industry in the future may continue to set up plans in even lower cost

production areas like Philippines, Brazil, Portugal, and Sri Lanka. R&D may even

move to countries like India, where the country is advancing a technological hub of

the future.


of 20

B. Videocon Industries Ltd

As the global industry is changing, so will Videocon have to change so as to

withstand competition. In terms of products I recommend that the company along

with production of Television and Audio Video products, they should start

manufacturing communication devices like computers and laptops. The company

should start a line of eco friendly products also.

In terms of strategy, I recommend the company should open a production plant

in Brazil as it already has an oil plant there. Opening a plant in Brazil would give the

company the benefit of low cost production as well as an entry point into the Latin

American Market. The company must invest more in Research and Development that

company can come up with new innovative product. Videocon should be more cost

rationalized in various stages of its value chain.

Besides having a good product line, the company needs to invest more on it

marketing, advertising and promotion techniques. It is mainly because if not

concentrating on it marketing strategy, that the company has lost market share in

India.


of 20

IV. REFERENCES

An Indian brand fights back - Asian Times. (2005, August 18). Retrieved June 19,

2010, from Asian Times Online:

http://www.atimes.com/atimes/South_Asia/GH18Df01.html

Aswathappa, K. (2005). International Business. New Delhi: Tata McGraw-Hill.

Bua Consulting . (2010). The Value Chain - A Framework for Business

Improvement - Bua Consulting. Retrieved June 20, 2010, from Bua Consulting

Website: http://www.buaconsulting.com/Value_Chain

Company Profile - Videocon. (2009). Retrieved June 20, 2010, from Videocon's

Corporate Website:

http://videoconworld.com/index.php?option=com_content&view=article&id=2&It

emid=3

Connect In.com. (2010). Videocon Brand Bio . Retrieved June 23, 2010, from

Connect In Website: http://connect.in.com/videocon-brand/biography-

303126.html

Corporate Finance International. (2007). Corporate Finance International -

Consumer Goods. Retrieved June 20, 2010, from Corporate Finance International

Website: http://www.cfi-network.com/SubPage.aspx?id=3679

Experience change with eco-friendly identity of Videocon - Televisoinpoint.com.

(2009, July 6). Retrieved June 22, 2010, from Televisonpoint.com:

http://www.televisionpoint.com/news2009/newsfullstory.php?id=1246884628

Flubber-based Logo - Brand New. (2009, August 20). Retrieved June 21, 2010,

from Brand New: http://www.underconsideration.com/brandnew/archives/flubber-

based_logo.php

Griffin, R. W., & Pustay, M. W. (2009). International Business. New Jersey:

Pearson Prentice Hall.

Hem Securities Limited. (2010, March 3). Hem_Videocon.pdf. Retrieved June 20,

2010, from Money Control:

http://www.moneycontrol.com/news_html_files/news_attachment/2010/Hem_Vid

eocon.pdf

Hem Securities. (2010). Company Profile - Videocon. Mumbai: Hem Research.


of 20

Krishnan, T., & Chandramohan, A. (2010). Videocon Industries. Kochi: Hedge

Equities Ltd.

Milestone - Videocon. (2009). Retrieved June 20, 2010, from Videocon's

Corporate Website:

http://videoconworld.com/index.php?option=com_content&view=article&id=8&It

emid=11

Mongabay.com. (2010). Mexico - Manufacturing Industry - Mongabay. Retrieved

June 26, 2010`, from Mongabay Website:

http://www.mongabay.com/history/mexico/mexico-manufacturing_industry.html

Porter, M. E. (1980). The Competitive Advantage of Nations. New York: Free

Press.

Pushparaj, A. (2009). What are the impact of globalization and liberalization on

business and industry? - Business Studies. Retrieved June 23, 2010, from Rajput

Brotherhood Blog: http://www.rajputbrotherhood.com/knowledge-hub/business-

studies/what-are-the-impact-of-globalization-and-liberalization-on-business-and-

industry.html

Vaish, N. (2009). Businessworld - Reinventing Videocon. Retrieved June 23,

2010, from Business World: http://www.businessworld.in/index.php/Reinventing-

Videocon.html

Videocon Group - Seth Nandlal Dhoot Hospital . (2006). Retrieved June 20, 2010,

from Seth Nandlal Dhoot Hospital : http://www.dhoothospital.com/videocon-

group/index.php

Videocon Group. (2009, October 15). Vision. Volume 1 , I (Sept - Oct 09), p. 10.

Videocon Group. (2010). Videocon - Media Room, Press Release. Retrieved June

23, 2010, from Videocon Corporate Website:

http://www.videocon.com/wps/wcm/connect/videocon.com/videocon/home/tamil

+nadu+including+chennai/media+room/pressreleases/pg_videocon+launches+gs

m+mobile+services

Videocon. (2009). Videocon Industries Limited. Retrieved June 23, 2010, from

Videocon World : http://www.ibef.org/download\videocon-limited.pd

WiseGEEK. (2010). What are Consumer Durables? Retrieved June 19, 2010, from

WiseGeek Website: http://www.wisegeek.com/what-are-consumer-durables.htm

videocon

Documents