Consumer Durable

Industry

Consumer DurablesOverview
Mass market heavy goods such as washing
machines, refrigerator etc. intended to last
3 or more years. Also called hard goods

Consumer Durable Industry

White/Brown

Characteristics Consumer Durable

Industry

Rapid Innovation
Dynamic market place
Highly competitive industry
Significant time to market
pressure
Significant cost pressure
Rapid rate of market
penetration
Rapid transition of
technology

Consumer Durable Sales (USA)

Source: Consumer Electronics Association

Key Findings - Global

Asia-Pacific region is the most lucrative area for the consumer electronics

industry, as most of the markets are still untapped.

MP3 players continue to drive the audio market worldwide.
Wi-Fi networking is expected to become a key enabler for the delivery and

redistribution of content in homes, particularly for retail consumer

electronics hardware.
Mobile camera phone market has emerged as the single largest market for

image sensors, surpassing the entire consumer electronics segment,

including digital still cameras worldwide.
The strongest growth in consumer electronics segment is expected to

come from China by 2012, as the demand for consumer electronics is

rising with the rapid pace of economic development and low cost
consumer electronics manufacturing.
On the back of this strong demand, China will become the second largest

Top 5 Emerging Nations

(Consumer Electronics)
1.
2.
3.
4.
5.

CHINA
INDIA
BRAZIL
MEXICO
SOUTH AFRICA

. The Top 5 Emerging countries contributed $37.6 billion to the global

consumer electronics industry in 2007, with a CAGR of 10.9% between
2003 and 2007
. In 2012, the market is forecast to have a value of $51.2 billion, with a
CAGR of 6.4% over the 2007-2012 period.
. China is the leading country among the Top 5 emerging nations, with
market revenues of $21.6 billion in 2007
Source: Consumer Electronics Association

Indian Consumer DurablesPre liberalization , onlyOverview

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.
Post 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

43
%

Indian Durable Industry- PEST Analysis

Political Factors:
I. Anti-dumping duty on imported color picture
tubes.
II. FDI (100%), High Tax Incidence
III. Resolution to reduce emission of carbon
footprints in the atmosphere

Effect of GST & DTC

Reduction in overall tax incidence (1416% from 20- 25%)
More disposable income
Efficient SCM
Prices of goods to reduce in the medium
term

Indian Durable Industry- PEST Analysis

Economic Factors:
I. Growth of retail sector expected to reach 16% by
2011-12 from 4% in FY07
II. Easy fin schemes to consumer
III. Economic reforms by the government higher
purchasing power
IV. Emergence of organized retail market with large
players like Croma, next, reliance digital etc leading
to lower prices and higher varieties
VI. Indian incomes are likely to grow three-fold over the
next two decades

Indian Durable Industry- PEST Analysis

Social Factors :
I. Disposable Income roughly doubled since 1985
II. Changing perception of luxury to necessity
III. Rural market constraints
IV. Demand of the consumer durables is seasonal
V. Decrease in average household size
Source- CRISIL, NKP Research

Indian Durable Industry- PEST Analysis

Technological
I. Power efficient
II. Higher quality products
III. Technological advancements
TV

Washing Machines AC

LCD,HD,OLED,3D,LP
D

Direct Drive, Fuzzy

Logic, Silver Nano,
Waterless (90%)

DEVap ( Desiccant
enhanced evaporative
AC) developed by NREL

Indian Durable industry SWOT

Indian Durable Industry- Porters

5 forces
Supplier Power
Indigenous supply base
limited - most raw
materials are imported

Threat of New Entrants

Most current players are
global players
New entrants will need to
invest in Brand, Technology
and Distribution

Competitive Rivalry
Number of well established players,
with new players entering
Good technological capability
Many untapped potential markets

Threat of
Substitutes
Technological

Customer Power
Multitude of brands across
price points - wide variety
of choice for customers

Indian Durable Market

The Indian durables market,

with a market size of US$
27.38 billion in 200809, has
grown by 7.1 per cent over
the previous year.

The compounded annual

growth rate (CAGR) for the
industry has been recorded
at 20.3 per cent between
2004 and 2009.

Consumer Electronics
Production in the consumer electronics industry is US$
6.7 billion in 20092010.
The segment registered a growth of 18 per cent in
20092010 from US$ 5.5 billion in the previous year.
The consumer electronics segment contributes about
27 per cent to the total hardware production in the
country.

Source: Department of Information Technology, Minister of

Communication & IT, Government of India., &

Consumer Electronics

Sources: Consumer durables: Durable enough for tough times, The Economic Times,
December 13, 2009; Department of Information Technology, Minister of Communication &
IT, Government of India.

Consumer Appliances
The consumer appliances market is estimated at US$4.34
billion, with imports valued at US$ 1.22 billion in 2009
2010.
Most imports are in the finished goods categories such as
watches, electric coffee makers, food grinders, electric
heaters, etc.
20092010

Others; 29%

AC; 38%

Sewing; 5%
Washing M/C; 7%

Refrigerator; 14%

Electric Fan; 8%

Source-

Rs.b
n

Key Players

Key Players

Product Mix Of Key Players By

volume

Electronic Goods EX-IM

Every year India imports electronics and appliances in huge quantity.

More that 70 per cent of Indian electronics market depends on import of

both finished goods and components.

India imported worth US$ 18.5 billion and exported worth US$ 3.69 billion
of electronics goods between April 2008 and February 2009
USD
(mn)

% Growth 2007- % Growth 20082006-07 2007-08 2008-09

08
09

Exports 2690.5 2809.3 3697.1

15057. 17320. 18505.
Imports
3
4
8

4.4%

31.6%

15.0%

6.8%

*excluding computer in physical form

Source: Ministry of Commerce and Industry, Government of India,

Annual Report 200809.

Sales Trend- Consumer

Electronics

Source- CRICIL

Consumer Durable- Growth

Drivers

Appreciation of
Indian Rupee

Consumer Durable- Growth

Drivers
Availability of financing
Source- CRISIL, NKP Research

Consumer Durable- Growth

Drivers
Income Growth

Refrigerator Market
Share
FY 2007-08
Others; 22%

LG; 26%

Godrej; 6%
Samgsung; 16%
Wirlpool ; 16%
Videocon ; 14%

Source- CRICIL

Television Market Share

FY 2007-08

Others; 31%

LG; 19%
Videocon; 22%

Mirc; 13%
Samgsung; 15%

Source- CRICIL

Washing Machine
Market Share
FY 2007-08

Other; 14%

LG; 23%

Whirlpool; 15%
Samgsung; 17%
Godrej; 6%
Videocon; 20% IFB; 5%

Source- CRICIL

Mobile Phone
Market Share
FY 2007-08
Others; 20%
Motorola; 6%
Samgsung; 7%
Sony; 8%

Source- CRICIL

Nokia; 59%

DTH TV Market
Share
FY 2007-08

Dish TV; 6%

SunTV; 4%
TATA Sky; 4%
Big TV; 2%
Airtel; 1%

Cable; 83%

Source- CRICIL

Consumer
Durables SCM
IMPORTANCE:

OBJECTIVES:

Product Proliferation
Multiple players
High competition
Benchmarking and TQM
Production Demand
mismatch
Ever Increasing Targets
Bargaining power of
Retailers

Efficient Sourcing
Demand Planning
Inventory Optimization
Order Management
Tracking
High Inventory for High
Demand Periods
Reverse Logistics

Benefits of Efficient SCM

Reduced vendor payments due to better on-time delivery
and improved availability
Increased revenues from improved availability of high
fast moving inventory
Working capital reduction due to improved inventory
management and reduced order cycle times
Fixed capital reduction due to effective asset utilization

Consumer Durables
Channel

Company
Managed
Stores

Traditional
Retailing

Reverse
Logistics

Individual Consumers

Franchisee
Showrooms

E-Retailing

Institutional Consumers

Consumer Durable Supply

Chain

COMPANY
SHOWROO
M

E Retail

Planning and
Forecasting
Annual Forecasts based on previous year sales and
current trends. These sales are disaggregated into
monthly sale plans
Catering for the seasonal variations in demand
Interaction between production and marketing
departments for better quality of forecasts and demand
utilization.

Consumer Durable Value

Chain

Durable- Top 10 Players (Indian) by

sales FY 2009-10
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

Nokia India
LG Electronics India Ltd
Samsung India Electronics
Sony India
Philips India
Whirlpool Appliances
Titan Industries
Siemens
Videocon Industries
Blue star

India being the second largest

growing economy with huge
consumer class has resulted in
consumer durables as the fastest
growing industries in India

LG, SAMSUNG the two Korean

companies has been maintaining
the lead in the industries with LG
being leader in almost all the
categories.

Source: http://www.naukrihub.com/india/consumer-durables/companieslist/top-players

LG Electronics

LG Global Presence

LG Leading Player In Many

LG Electronics India Ltd

The parent company was originally established in1958 as Goldstar

producing Radio, TV, Refrigerator & AC
LG group was the merger of two companies Lucky and Goldstar
A wholly owned subsidiary of LG Electronics, South Korea
Established in India in January, 1997
State-of-the art manufacturing facility at New Delhi / Pune
Vision was to become a 'Health Partner' for its consumers
The CTV range offered by LG has 'Golden Eye' technology
Entire range of LG air-conditioners have 'Health Air System'
Microwave ovens have the 'Health Wave System
Refrigerators have the 'PN System
Washing machines have 'Fabricare System'

Vision- Global Top 3 by

2012
"Life's Good
Represents LG's determination to provide
delightfully smart products that will make your
life good

LG- Product Portfolio

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LG- Product Portfolio

Mobile
Digital appliance
communications
Air Conditioners
CDMA Handsets
Refrigerators
GSM Handsets
Microwave Ovens
3G Handsets
Washing Machines
Cellular Phones
Digital media
Digital display
Home Theater Systems
Plasma TVs
DVD Recorder
LCD TVs
Micro Display Panel TVs Notebook PCs
Desktop PCs
Monitors
Car Infotainment

Source: Corporate Website : http://www.lg.com

LG Technology Collaboration

LG Global Financials
Sales KRW (bn)
51
%

Net Profit KRW (bn)

30,513
27,638

209
%

24,659
23,774
23,502
23,171

2,052

1,546

20,177

1,222
663

703
483
239

2003 2004 2005 2006 2007 2008 2009

2003 2004 2005 2006 2007 2008 2009

http://www.lg.com/global/ir/financial-information.jsp

The challenges faced by LG when entered in

Indian market

Low brand awareness about LG in India.

One of the last MNCs entered in India (Samsung, Panasonic

entered in1995 in India).

High import duty

Competition from local market players and other MNCs in

consumer durable segment.

Price sensitiveness of the Indian consumer

LGEI over came these challenges to emerge as the Market

Leader!

LG Electronics India Ltd

Source-

LGIL- SWOT Analysis

Strength:

Manufacturing Unit at tax

incentive area
Wide range of products to serve
all category
Widest distribution network in the
industry (47 branches, 10000
trade partners)
Highest share in home appliance
market
Opportunities:
Fast growth of home appliances
market
Growing rural market in India
New technology
Increase in income level

Weakness:
Transportation cost
Demand fluctuation handling
capacity
Service quality

Threat:
Cut throat competition
Korean rivals in Indian market

Raw material import duties

Price sensitiveness of the
Indian consumer

Market share in a few

categories
2007-08
23%

Washing Machines

26%

Refrigerators

Color TV

Microwave

Leader in all the above

categories
Source- CRICIL

19%

40%

LG Logistic Organization
Structure
Corporate
Logistics

Team Head

Zonal Head
For 2 Zones
(S&W, E&N)
Branch
Logistics In
Charge
CFA &
Warehouses

Distribution
&Planning

Product Wise

Operation &
Traffic
To Deals With
trucks &
Transporter

The Situations of
Supply Chain
LGE Transportation with its annual expense exceeding $40 million, was
recognized as one of the critical areas within the companies operations
that would deliver significant value to both the top and bottom line.
Transportation Cost account for approximately 51% of total logistic cost
and was recognized as a primary target for reduction.

In order to extend the value of Oracle ERP and EXEWMS systems deeper
into the distribution network ,LGE needed to integrate a best of breed
transportation management into its existing enterprise management
systems.

The Challenge In
Supply Chain
The challenge for LGE was to achieve transparency between market demand
variability and distribution planning and execution.
To effectively manage this, LGE set out to establish integrated best practice
workflows across the entire transportation and distribution organization.
The selection criterion was focused on partnering with the best in class
transportation management solution provider, followed by the lowest overall
total cost of ownership the least rest and a rapid time to value.

Innovative Market
Strategy
LG was the first brand to enter in cricket in big way
a way, by sponsoring the 1999 world cup followed it
up in 2003 as well.
LG brought in four captains of the Indian cricket
team to endorse its products. LG invested more then
US$ 8 million on advertising and marketing in this
sport.
Launch new technologies in consumer
electronic and home appliances.
LG has differentiated its product using
technology and health benefits. CTV
hasGolden eye technologyAir conditioner
hasHealth air systemand microwave ovens
have theHealth wave system.

LG has adopted the regional distribution

channel in India.
Introduced the low-priced Cineplus and
Sampoona for the rural market.

Key Trends

LG- Future
Outlook
Although uncertainties
exist, market

demand is expected to increase along with

the IT industry recovery

Plan to focus on premium products for the

monitor business and expand buyers for
commercial display business while entering
new markets to secure profitability

Focus on profitability by launching premium

smart phones and differentiated tablet PC
products along with recovering cost
competitiveness for feature phones

Maintain market dominance in refrigerators

and washing machines while securing
competitiveness for future businesses