Consumer durable industry in

india
Swot Analysis…

Vindhey Gaurav

School Of Management Studies

Motilal Nehru National Institute Of Technology
 Consumer durable industry in india, Swot Analysis

Table of Contents

Overview...................................................................................................................3

Some Facts.................................................................................................................3

Introduction...............................................................................................................4

Sector Outlook...........................................................................................................4

Swot Analysis............................................................................................................7

Classification.............................................................................................................8

Consumer Electronics................................................................................................8

Demand Drivers in Consumer Electronics Sector.....................................................8

Challenges Facing the Consumer Electronics Industry.............................................9

Major Players in Consumer Electronics Industry....................................................10

Scope.......................................................................................................................11

Current Scenario......................................................................................................11
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Future Scenario........................................................................................................12

List of Companies....................................................................................................13

School Of Management Studies

Motilal Nehru National Institute Of Technology
 Consumer durable industry in india, Swot Analysis

Overview
With the increase in income levels, easy availability of finance, increase in consumer awareness,

and introduction of new models, the demand for consumer durables has increased significantly.

Products like washing machines, air conditioners, microwave ovens, color televisions (CTVs) are

no longer considered luxury items. However, there are still very few players in categories like

vacuum cleaners, and dishwashers.

Consumer durables sector is characterized by the emergence of MNCs, exchange offers,

discounts, and intense competition. The market share of MNCs in consumer durables sector is

65%. 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. However, the

penetration level of the consumer durables is still low in India. An important factor behind low

penetration is poor government spending on infrastructure. For example, the government

spending is very less on electrification programs in rural areas. This factor discourages the

consumer durables companies to market their products in rural areas.

Some Facts
1. Bargaining power of suppliers in consumer durables sector is limited due to threat of imports
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and intense competition.

2. Some of the entry barriers in consumer durables sector are distribution network, capital, and

ability to hire purchases.

3. Demand is seasonal and cyclical.

4. Competition among players is on the basis of difference in prices and well-acknowledged

brands.

School Of Management Studies

Motilal Nehru National Institute Of Technology
 Consumer durable industry in india, Swot Analysis

Introduction

Before the liberalization of the Indian economy, only a few companies like Kelvinator, Godrej,

Allwyn, and Voltas were the major players in the consumer durables market, accounting for no

less than 90% of the market. Then, after the liberalization, foreign players like LG, Sony,

Samsung, Whirlpool, Daewoo, Aiwa came into the picture. Today, these players control the

major share of the consumer durables market.

Consumer durables market is expected to grow at 10-15% in 2007-2008. It is growing very fast

because of rise in living standards, easy access to consumer finance, and wide range of choice, as

many foreign players are entering in the market.

On the flip side, the presence of a large number of players in the consumer durables market

sometimes results in excess supply.

Sector Outlook
There has been strong competition between the major MNCs like Samsung, LG, and Sony.

LG Electronics India Ltd. has announced its extension plan in 2006. The company is going to

invest $250 million in India by 2011 and is planning to establish a manufacturing facility in

Pune. TCL Corporation is also planning to establish a $22 million manufacturing facility in
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India. The Indian companies like Videocon Industries and Onida are also planning to expand.

Videocon has acquired Electrolux brand in India. Also, with the acquisition of Thomson Displays

by Videocon in Poland, China, and Mexico, the company is marking its international presence.
According to isuppli Corporation (Applied Market Intelligence), country's fiscal policy has

encouraged Indian consumer electronic industry. The reduction on import duty in the year 2008-

09 has benefited many companies, such as Samsung, LG, and Sony. These companies import

School Of Management Studies

Motilal Nehru National Institute Of Technology
 Consumer durable industry in india, Swot Analysis

their premium end products from manufacturing facilities that are located outside India.

Indian consumers are now replacing their existing appliances with frost-free refrigerators, split

air conditioners, fully automatic washing machines, and color televisions (CTVs), which are

boosting the sales in these categories. Some companies like Samsung Electronics Co. Ltd. and

LG Electronics India Ltd. are now focusing on rural areas also. These companies are introducing

gift schemes and providing easy finance to capture the consumer base in rural areas.

Sector Financials                                                                                      In Rs

  31/03/2007 31/03/2008 31/03/2009

Sales 37,331m 30,100m 43,096m
Sales Growth - -19.4% 43.2%
Gross Profit Margin 10.7% 6.6% 4.3%
Profit After Tax (PAT) 1,019m 940m -1,202m
PAT Growth - -4.3% -209.5%
Market Capitalization 1,787m 2,392m 2,359m
P/E Ratio 7.0 7.6 -7.9
Return on Capital Employed
13.9% 23.1% 6.9%
(ROCE)

Growth in 2009-10

Consumer Durables Growth

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Air Conditioner 20-25%

Refrigerator 5-10%
Microwave Ovens 25%
Washing Machines 5-10%
Color Televisions (CTVs) 15-20%
Black & White Televisions -20%
Clock 10%
Watch 10%
VCDs 30%

School Of Management Studies

Motilal Nehru National Institute Of Technology
 Consumer durable industry in india, Swot Analysis

Consumer Electronics (Overall) 9%

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 vis a vis the unorganized

sector.

Weaknesses
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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

School Of Management Studies

Motilal Nehru National Institute Of Technology
 Consumer durable industry in india, Swot Analysis

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 2008-09

2. Cheap imports from Singapore, China and other Asian countries

Classification
Consumer durables Sector can be classified as follows:

1. Consumer Electronics includes VCD/DVD, home theatre, music players, color televisions

(CTVs), cameras, camcorders, portable audio, Hi-Fi, etc.

2. White Goods include dishwashers, air conditioners, water heaters, washing machines,

refrigerators, vacuum cleaners, kitchen appliances, non-kitchen appliances, microwaves, built-in

appliances, tumble dryer, personal care products, etc.

3. Moulded Luggage includes plastics.

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4. Clocks and Watches

5. Mobile Phones

Consumer Electronics

Consumer electronics are the products that are used everyday by the consumers. Consumer

electronics include the products that come under the category of office products,

School Of Management Studies

Motilal Nehru National Institute Of Technology
 Consumer durable industry in india, Swot Analysis

communications, and entertainment.

Classification of Consumer Electronics Goods :-

Consumer electronics can be classified into personal computers, telephones, calculators,

playback, digital video disk (DVD), video compact disc (VCD), video home systems (VHS),

home theatre, music players, color televisions (CTVs), cameras, camcorders, portable audio, Hi-

Fi, etc.
Demand Drivers in Consumer Electronics Sector :-

Increase in disposable income, changing tastes of consumers, increase in nuclear families,

increasing number of workingwomen, growth in per capita income, greater variety of choices,

growth in entertainment sectors, increasing consumerism, etc.

Indian Consumer Electronics Export

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Growth

School Of Management Studies

Motilal Nehru National Institute Of Technology
 Consumer durable industry in india, Swot Analysis

In India, the demand of video products, such as color televisions (CTVs), VCD/DVD

players, and set-top boxes account for 90% of the consumer electronic market.

Easy availability of finance is an important factor driving growth for consumer electronics

market. Some companies are also taking advantage of this factor by teaming up with banks to

offer attractive loan schemes to consumers.

According to isuppli projects (India market intelligent service), consumer electronics industry in

India is growing at a compounded annual growth rate (CAGR) of 11%. 

Challenges Facing the Consumer Electronics Industry

With the increase in price wars due to the entry of new players in the market and increase in

manufacturing capacity by some original manufacturers, the profitability and margins of the

companies are adversely affected. Poor distribution network in semi-urban and rural areas. Low

awareness of consumer electronics products in rural India. Presence of gray market in consumer

electronics products, especially in DVD player, music players. Companies need to increase focus

on product differentiation to address various segmental specific needs.

With the increase in access to Internet information, and availability of wide range of choices,

consumers have become quite smart. They want the product that is easy-to-handle, good in

quality and low in price. Most importantly, consumers want some guarantee for the product that

they are buying. They look for the product that can be used for many years. The role of

electronic companies doesn't end on the sale of the product, but continues till the end of
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guarantee period.

Major Players in Consumer Electronics Industry

The major players in the sub-categories of consumer electronics are:

Personal Computers

School Of Management Studies

Motilal Nehru National Institute Of Technology
 Consumer durable industry in india, Swot Analysis

• Samsung, Wipro, HP, Compaq, Dell

VCD/DVDs

• Sony, Panasonic, Pioneer, Toshiba

Hi-Fi/Music Systems

• Samsung, Sony India, Thompson, BPL Sanyo Technologies, Videocon Industries, Mirc

Electronics, Philips India, Baron International, Eastern Micro Electronics, Matsushita Television

and Audio Ltd

Video Projectors

 Phil Systems, Keltron Projectors, Birla 3M, Samrat Video Vision

Colour Television

 LG Electronics, Philips, Sony; Sansui, Samsung, BPL, Videocon, Onida, Aiwa, Akai,

Thompson, Panasonic

Cameras/Camcorders

 Sony, Canon, Olympus, Fuji film, Nikon

Scope
In terms of Purchasing Power Parity (PPP), India is the 4th largest economy in the world and is

expected to overtake Japan in the near future to become the 3rd largest. Indian consumer goods

market is expected to reach $400 billion by 2010. India has the youngest population amongst the

major countries. There are a lot of young people in India in different income categories. Nearly
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two- thirds of its population is below the age of 35, and nearly 50 % is below 25. There are 56

million people in middle class, who are earning US$ 4,400- US$ 21,800 a year. And there are 6

million rich households in India. The upper-middle and high-income households in urban areas

are expected to grow to 38.2 million in 2007 as against 14.6 million in 2000.
     Rural sector offers huge scope for consumer durables industry, as it accounts for 70% of the

Indian population. Rural areas have the penetration level of only 2% and 0.5% for refrigerators

School Of Management Studies

Motilal Nehru National Institute Of Technology
 Consumer durable industry in india, Swot Analysis

and washing machines respectively. The urban market and the rural market are growing at the

annual rates of 7%-10%and 25% respectively. The rural market is growing faster than the urban

market. The urban market has now largely become a product replacement market.

The bottom line is that Indian market is changing rapidly and is showing unprecedented business

opportunity.

Current Scenario
The consumer durables market in India is valued at US $ 4.5 billions currently. In 2006,

microwave ovens and air conditioners registered a growth of about 25%. Frost-free refrigerators

have registered significant growth as many urban families are replacing their old refrigerators.

Refrigerator sales amounted to 4.2 millions in 2006, whereas the production of the refrigerators

went up by 17% as compared to the preceding year. Washing machines, which have always seen

poor growth, have seen reasonable growth in 2006. More and more Indians are now buying

electrical appliances due to change in electricity scenario. The penetration level of color

televisions (CTVs) is expected to increase 3 times by 2010

According to National Council for Applied Economic Research (NCAER), Indian consumer

class is growing at a fast rate. This in turn is benefiting the consumer durables manufacturers.

Future Scenario
With easy availability of finance, emergence of double-income families, fall in prices due to
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increased competition, government support, growth of media, availability of disposable incomes,

improvements in technology, reduction in customs duty, rise in temperatures, growth in

consumer base of rural sector, the consumer durables industry is growing at a fast pace. Given

these factors, a good growth is projected in the future, too.

The penetration level of consumer durables is very low in India, as compared with other

countries. This translates into vast unrealized potential.

School Of Management Studies

Motilal Nehru National Institute Of Technology
 Consumer durable industry in india, Swot Analysis

For example, in case of color televisions (CTVs), the penetration level of various countries is:

India 24%
Brazil 11%
China 98%
US 333%
France 235%
Japan 250%

Demand and Penetration Level of White Goods in India

  1995-1996 2005-2006 2009-2010

Demand 3.43 million 8.72 million 13.14 million
149 per 1,000 319 per 1,000 451 per 1,000
Penetration level
households households households

In a study conducted by Frost & Sullivan and commissioned by India Semiconductor

Association (ISA), the demand for Electronic Appliances is projected to grow exponentially at a

compounded annual growth rate (CAGR) of 30%.

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School Of Management Studies

Motilal Nehru National Institute Of Technology
 Consumer durable industry in india, Swot Analysis

In billions

List of Companies
Some of the companies in consumer durables sector are:

1. AIWA
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2. Akai India

3. BenQ Corporation

4. Blue Star Ltd.

5. Bose Corporation

6. BPL

7. Canon India

School Of Management Studies

Motilal Nehru National Institute Of Technology
 Consumer durable industry in india, Swot Analysis

8. Carrier Aircon Ltd.

9. Daewoo India

10. Electrolux-Kelvinator

11. Godrej

12. Haier India

13. Hitachi Ltd.

14. Khaitan India Ltd.

15. LG Electronics India Ltd.

16. MIRC Electronics Ltd.

17. Mitsubishi Electronic Corporation

18. Nokia India

19. Onida

20. Pace Micro Technology

21. Panasonic

22. Philips India

23. Samsung India

24. Samtel

25. Sansui India

26. Siemens
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27. Sony India

28. Thomson Ltd.

29. Titan Industries

30. Toshiba Corporation

31. Videocon Industries

32. Whirlpool Appliances

School Of Management Studies

Motilal Nehru National Institute Of Technology
 Consumer durable industry in india, Swot Analysis

The top 10 players in consumer durables sector are:

 Nokia India

 LG Electronics India Ltd.

 Philips India

 Titan Industries

 Samsung India Electronics

 Whirlpool Appliances

 Siemens

 Sony India

 Videocon Industries

 Blue star
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School Of Management Studies

Motilal Nehru National Institute Of Technology