A Note on Television Industry

Prepared By
Nilesh Sen

Submitted To Prof. Joel Sarosh

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Distribution of manufacturers of CTVs in terms of production volume Production p.a Less then 500 501 - 2500 2501 - 5000 5001 - 10000 10001 50000 50001 - 100000 100001 - 200000 Share (%) of Top 5 companies Top 10 12/22/12 companies 44 64 29 50 32.5 52.00 Year 1982 1985 1989 17 9 5 3 31 32 16 10 20 9 46 24 12 8 27 2 1

The Indian TV Market and its Future

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VIII Five Year plan Targets for TVs ( Quantity in millions , value in Rs. Millions ) (Base Price _1988)

year 1990-91 1991-92 1992-93 1993-94 1994-95 B&W Qty Value Colour TV Qty Value

5.5 11,000

6 12,000

6.5 13,200

7.3 14,600

8.0 16,000

2.0 13,500

2.5 16,850

3.0 21,000

3.5 20,500

4.0 30,000

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Saturation Levels of TV as on 1991 Income Category Less then 12500 12501 25000 25001 40000 40001 50000 Greater then 50000 No of sets owned (000s) B&W 4000 9000 7300 1700 1100 Colour 700 10500 9300 3500 2300 Total 4700 10500 9300 3500 2300 % Saturation (household) 5.6 27.3 64.5 92.5 111.8

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Estimated Number of House Hold Income Class wise (000) (As on 1990) Income Category Less then 11000 11001 22000 22001 36000 36001 50000 Greater then 50000 Total Rural 68,914 24,445 7,232 1,191 552 1,02,334 Urban 14,895 13,940 7,175 2,591 1,505 40,106

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TV sets Owned per (000) Inhabitants World Algeria Egypt Canada Mexico USA Brazil Japan 69 84 586 124 812 194 589 Asia Singapore Hong kong China Thailand Vietnam Malaysia India 315 426 127 108 37 144 33

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Exports of TV
1989s Scenario Price of Indian TVs Growth in 1990
B & W tube and Colour tube

Major Exporters
USSR,South East Asia,West Asian

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Marketing of TVs
Price
Promotion

Dealer Network

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Government Policy
Excise Duty formed a Significant Component of the Final price of a TV in India. The Government saw TVs as luxury items and hence TVs were subject to increase in taxation in Virtually every budget. In 1991-92 the production had fallen to as low as o.8 ML. sets as compared to the peak level of 1.3 ML sets in 1988. In 1991-92 budget excise duties on both colour picture tubes and Colour TVs were increased. The Special excise duty on Tvs increased from 5% to 10% and excise duty on B&W TVs abolished. The result was a drastic reduction in sales of TVs in 1991-92. The drop in CTV sales was especially sharp from 1.2 ML to 0.92 ML.

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Excise Duty Absorption by Income Categories

Year
1985 1986 1987 1988 1989-90 1991

Majority Buyer of CTV Income Category (Rs. P.A.)

50,000 36,000 36,000-50,000 36,000-50,000 22,000-36,000 11,000-22,000

Excise Duty Paid On TV

900 1500 1750 2000 2375 3125

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Foreign Brand Names

According to Libralisation Policy the Govt. alowed the use of Foreign Brand names. At these prices and tariff rates the Indian market is to small and not attractive enough to attract Japanese.

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Import-Export Policy

In Budget for 1991-92 the customs duty on raw material,individual parts,capital goods and finished componentsfor the electronics industry had been reduced by 10%. Import of capital goods was liberalized with a concessional duty of 15% linked to export obligation. According to an analysis of 1992-93 the export would suffer by 31%.
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Electronics Industry Analysis

Porters five forces model (a framework for analyzing a particular industry)

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Threat of New Entrants (Low)

Barriers to Entry Product Differentiation Capital Requirements Switching Costs Technology, Know-how and Innovation Government Policy

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Bargaining Power of Suppliers (Medium)

Suppliers exert power in the industry by: * They raise Prices Powerful suppliers can in industry make profitability

Very low Manufactures of B & W and CTV sets. Suppliers are forced to cut their prices or go out of business

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Bargaining Power of Buyers

(Low to Medium)

Products are fairly undifferentiated Buyers face few switching costs

Buyers compete with the supplying industry by:

* Prices

Buyers are price sensitive and demand high quality

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Threat of Substitute Products (Low)

Products with similar function limit the prices firms can charge There are few substitutes from other industries, if any.

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