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 K.J. Somaiya Institute of Management Studies & Research

Contents Table

Sr. Particulars Page

No No.
1. Introduction 2

2. History of Consumer Electronics in India 5

3. Current Scenario 7

4. Industry Analysis 8

5. Company Overview 15

6. Corporate Governance 18

7. Audit Report 21

8. SWOT Analysis 24

9. Brand Values & Integrated Marketing Communications 26

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INTRODUCTION:

Every business organization that caters to a customer develops a perception in the mind of the
customer. Today, in this competitive world every organization needs to discern the perception
in the mind of the customers. In order to gain mind share or heart share of customers along
with the market share is the main lookout for the organizations. Especially in consumer
electronics sector, where the products are more or less same, the only way to leave positive
impact on customer’s mind and to gain competitive advantage is providing best possible
services to the customers.

Introduction part of this report is classified into two different sections.

1. Problem Statement

The principle cause behind this project is to know that to what level customers are enjoying
the services offered by Videocon and the awareness of Videocon TV offered by the company
and what further improvement can be implemented in future in this area so as to get brand
awareness.

2. Objective

 To have an overview of Videocon.

 To know the reputation of Videocon T.V. in the market.
 To study the consumer preference towards the brand of Videocon TV.
 The main objective is how to increase the reputation, positioning and image of
Videocon TV brand in the market.
 To understand its competitors in business.
 To understand the 4 Ps used by Videocon in business.

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The Overview of the Industry:

INDUSTRY SCENARIO

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, 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.

Consumer durables market is expected to grow at 10-15% in 2009-2010. It is growing very

swiftly because of rise in living standards, easy access to consumer finance, and wide range
of choices, as many foreign players are entering in the market. Consumer durables are the
products whose life expectancy is at least 3 years. These products are hard goods that cannot
be used up at once.

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.

4. Clocks and Watches

5. Mobile Phones

ABOUT CONSUMER ELECTRONICS INDUSTRY

1. History of Consumer Electronics in India

The Electronics Industry in India took off around 1965 with an orientation towards space and
defence technologies. This was rigidly controlled and initiated by the government. This was
followed by developments in consumer electronics mainly with transistor radios, Black &

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White TV, Calculators and other audio products. Colour Televisions soon followed. In 1982-
a significant year in the history of television in India – the government allowed thousand of
Colour TV sets to be imported into the country to coincide with the broadcast of Asian
Games in New Delhi. 1985 saw the advent of Computers and Telephone Exchanges, which
were succeeded by Digital Exchanges in 1988. The period between 1984 and 1990 was the
golden period for electronic goods during which the industry witnessed continuous and rapid
growth.

From 1991 onwards, there was a first economic crisis triggered by the Gulf War, which was
followed by political and economic uncertainties within the country. Pressure on the
electronics industry remained though growth and developments have continued with
digitalization in all sectors and more recently the trend towards convergence of technologies.

In recent years the electronic industry is growing at a brisk pace. It is currently worth $ 20
Billion but according to estimates, has the potential to reach $ 40 billion by 2010. The largest
segment is the consumer electronics segment. While is largest export segment is the
consumer electronics segment. While is largest export segment is of components.

The breakup of the production in various segments of the industry is shown

below:

1950s Radios -imported & Sold

Late 1960s B&W TV Transmission started

1970s Manufacturing of B/W TV started

1982 Colour TV Transmission, Manufacturing of CTV started

1992 Economic Liberalization Process initiated

1993-94 Dismantling of controls such as licences,

Ban on use of Foreign Brand Names etc.

1994-95 Entry of MNCs – Panasonic, Sony, LG, Samsung etc.

Lowering of Import duties.
Cable TV Started.

1995 Till Date Entry of Many MNCs & Rapid Growth,

Continuous Lowering of Import Duties

2001 Non tariff Barriers on Imports removed.

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2004 Free Trade Agreement (FTA) with Thailand implemented, resulting in

reduction of import duties to 0% on Colour Television sets, Colour
Picture Tubes, Refrigerators and Air Conditioners, thus more
competition.

2005 DTH Services Started

2007 Entry of Organised Retail

2008 FTAs with other countries & FDI in retail likely.

2. CURRENT SCENARIO

The consumer durables market in India is valued at US $ 4.5 billions currently. In 2008,
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. . 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.

On the brick of rapid economic growth, India has witnessed the dynamic change in country's
consumer electronics industry. In last few years the industry has been witnessing significant
changes in retail boom, growing disposable income and availability of easy finance schemes.
One electronic gadget that has brought new revolution in Indian Electronic Industry is
Television Set. Today, India is fast emerging as the key driver in the global television market
both as a manufacturer and consumer. In recent years, the market for televisions in India has
changed rapidly from the conventional CRT technology to Flat Panel Display Televisions
(FPTV).

Currently, the split between CRT and FPTV is around 97% and 3% respectively. In addition
to this, one of the most striking changes sweeping across the colour television market in
Indian market is the exponential growth of the flat panel television (FPTV) market, in
common parlance called the liquid crystal display (LCD) and plasma televisions. Moreover,
as per recent research data available, the global market for FPTV is expected to grow from 51
million units in 2006 to 127 million by 2010.

Looking at the present scenario, over the last couple of years, the LCD prices have even
dropped by around 30 per cent annually. Some of the important factors that boasted this
growth also include the increasing awareness of the advantages of LCD televisions, the
growing availability of the product across dealer counters and the Finance schemes in the
market. Besides this, as a manufacturing hub, the television industry is improving more and
more. There are many domestic and MNC companies that have increased their production
bases in the country. Easy availability of low cost skilled labour and the emergence of SEZs,

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which are tax-free zones are some of the key factors that have resulted in growth of these
manufacturing units. In fact, encouraged by tax-breaks, new manufacturing units are coming
up in less-developed regions now.

Today, India is one of the few emerging countries to have an excellent component supply
base in terms of manufacturing facilities for glass and color picture tubes, so it helps it a good
choice for all those companies who are looking to take benefit of this emerging market.

In present scenario top player for colour television are,

1. LG 5. ONIDA
2. VIDEOCON 6. PHILLIPS
3. SAMSUNG 7. SANSUI
4. SONY 8. BPL

3. INDUSTRY ANALYSIS- 5 FORCES MODEL

Michael Porter’s Five Forces Model provides a robust and time-tested framework for
analysing any industry, reflected in the strength of the five forces (industry competitors,
potential entrants, threat of substitutes, power of buyers and power of suppliers). The
collective strength of the five forces determines the ultimate profit potential in an
industry, where profit is measured in terms of long-term returns on capital invested. The
elements of each of the above forces and the extent and /or effect of each element in the
context of the television industry have been analysed and enumerated below.

The Porter’s Five Forces tool is a simple but powerful tool for understanding where
power lies in a business situation. This is useful, because it helps you understand both the
strength of your current competitive position, and the strength of a position you’re
looking to move into. With a clear understanding of where power lies, you can take fair
advantage of a situation of strength, improve a situation of weakness, and avoid taking
wrong steps. This makes it an important part of your planning toolkit. Conventionally, the

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tool is used to identify whether new products, services or businesses have the potential to
be profitable. However it can be very illuminating when used to understand the balance of
power in other situations.

1. COMPETATIVE RIVALRY AMONG INDUSTRY (VERY HIGH)

2. BARGAINING POWER OF BUYER (VERY HIGH)

3. BARGAINING POWER OF SUPPLIER (LOW)

4. BARRIER TO ENTRY (LOW)

5. THREATS OF SUBSTITUTES (LOW)

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3.1 Degree of Rivalry

Degree of rivalry denotes the intensity of competition within the industry. Videocon, LG,
Samsung, Sony, Onida, are the big competitors in television industry. Although Videocon
being amongst the major players, another major player has managed to hold its own in the
midst of the onslaught from the Korean majors and so profits have suffered. Other large
Indian companies at the top of the list are Mirc Electronics. While Mirc Electronics is
managing to hold its share by adopting value for money strategy, BPL is facing tough time,
experiencing drastic decline in market share. Sony, Philips, Akai, Sansui, Aiwa, Toshiba and

now Hyundai are the other foreign brands in the market. The industry is based on numbers
game and companies will have to maintain a fine balance between catering to lifestyle
requirements and meeting the needs of average consumer.

3.1.1 Competitor Analysis

A detailed analysis of some of the major players is done below:

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LG ELECTRONICS
LG Electronics rightly understood the consumer motivations to create magnetic products,
price them strategically, position them sharply and keep making the magnetism more potent.
Having understood the finer differences in consumer motivations, it opted for sharp- arrow
‘reasons-to-buy’ differentiation over the ‘blanket-all approach’ taken by most of the other
players. It is an aggressive marketer. It focuses on low and medium price products.

SAMSUNG
Initially the strategy of Samsung in India was to create premium image by emphasising
global brand. After facing stiff competition from another Korean major- LG, Samsung also
started playing price game. In 2004 it reverted back to its premium positioning, although it
resulted in some loss of market share. In line with the Global Digital Initiative of the Parent
Company, Samsung India is seeking to acquire digital leadership in India by introducing its
digital ready televisions like the 40" LCD Projection TV, 43" Projection TV and the Plano
series of Flat Colour televisions.

ONIDA
Its popular devil ad although had engendered a strong emotional pull towards the brand,
technologically it represented no advancement. The company plugged the gap by touting its
digital technology. Like Videocon, it has also been able to hold its market share. The world-
class quality of Onida has enabled the company to make a breakthrough on the export front.
It has technical tie- up with the Japan Victor Company, better known as JVC. So focused is
Onida on positioning itself on the premium, high- tech plank that it is even planning to push
its own envelope on obsolescence, much. The strategy is aimed at further broad basing the
product offering of the company, which has largely dominated the top-end of the television
market, across multiple market segments.

VIDEOCON
Videocon has always been a price player and has an image of a low price brand. This entails
providing more features at a given price vis-à-vis competitors. It has taken over multinational
brands to cater to unserved segments, like Sansui- to flank the flagship brand Videocon in the
low to mid priced segment, essentially to fight against brands like BPL, Philips, Onida and
taken over Akai- tail end brand for brands like Aiwa.

Videocon is one of the largest manufacturers of television and its components in India and
thus has advantages of economies of scale and low cost due to indigenisation. It has the
widest distribution network in India with more than 5000 dealers in the major cities. It also
has a strong base in the semi-urban and rural markets. Due to its multi-brand strategy, it has
at present multiple brands at the same price point. This has led to a state of diffused

positioning for its brands. It has also led to a cannibalisation of sales among these brands. The
flagship brand Videocon has lost market share due to the presence of Sansui in the same
segment. Because of reduction in import duties on CPT the cost advantage of Videocon is
also on the decline. Hence it is facing rough weather and also trying to boost exports.

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Besides understanding the strategy adopted by different players, several other factors like
industry growth, concentration and balance, corporate stakes, fixed cost, and product
differences need to be analysed to determine the extent of rivalry between the
existing players.

3.2 The threat of potential new entrants (low)

High capital required for entering into television industry, which needs large investment on
technology, distribution, service outlets and plant. Difficulty for customers in switching cost,
when they are satisfied with their current product as well as difficultly for new entrants to
have product differentiation because customers are already familiar with those already
established consumer electronics and their companies, therefore new entrants have to spend a
lot on branding and customer knowledge. It is difficult to obtain a license; successful
applicant has to undergo through a form of competitive evaluation, such as a comparative
evaluation process. Threat of entry is determined by the entry barriers, which act to prevent
new firms from entering the industry. A lower entry barrier makes it difficult for the existing
producers to remain profitable for long. When profits increase, additional firms will enter the
market to take advantage of the high profit levels and over time drive down profits of all
firms in the industry. When profits decrease, some firms will exit the market, thus restoring
the market equilibrium. Barriers to entry arise from several sources:

3.2.1 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 company’s 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
centres and 200 distributors in any town with more than 1 lakh population.
All BPL dealers are linked via VSAT nodes, ensuring online availability of information on
inventory status and sales movement.
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.

3.2.2 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 amortising the cost of sponsoring international
events across a larger footprint straddling multiple countries.

3.2.3 Capital Investment and Economies of Scale

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Television industry is capital intensive and players have made huge investments in putting up
state of the art manufacturing facilities. Videocon has seven manufacturing site in India Sony
India had a production capacity of 300,000 CTV sets with capacity utilisation of 66%.
Samsung is investing $4 mn to expand its CTV manufacturing capacity at Noida to 800,000
units per year. The existing capacity of the plant is around 600,000 units. Other players like
Mirc Electronics, LG have also set up manufacturing facilities in India. The market players
need sales volume to achieve economies of scale, which is difficult because of large number
of competitors. Apart from investments in manufacturing the industry requires huge
working capital to manage inventories.

3.3 Threat of Substitutes goods (low)

In Porter’s model, substitute products refer to products in other industries.there is few
substitutes from other industry if any. Most of them seem to be obsolete or have one foot out
of door. Internet though emerging as an infotainment medium is very low in penetration.
Moreover the industry has responded to the future threat by introducing a TV that can
provide functions of the Internet along with regular features, e.g., BPL digital that includes
Internet and cellular facilities.

3.4 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:

3.4.1 Buyer Concentration

The industry is akin to consumer durables whose end users are fragmented. Hence buyers do
not have any specific influence on producers.

3.4.2 Buyer Switching Cost

The cost incurred by consumer in switching from one television 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.

3.4.3 Price Sensitivity

Market is highly price conscious and promotion driven. With the onslaught of VIDEOCON’s
major price cuts and promotional schemes, this market has now become a promotion driven
one. To successfully compete in this industry, even premium players like Sony, LG have had
to come up with schemes. LG and Philips have been the most aggressive amongst industry
leaders as far as pricing is concerned and hence their realisations have been lower than
industry average. Industry leaders like LG focus on low- medium priced CTV, while
Samsung has moved gradually towards higher priced CTVs. The domestic high-end CTV
prices will follow the global price trend of declining prices. However, the prices of domestic
products would be higher than those of global products due to negligible demand in the
domestic market and hence most likely to be met through imports. Market is highly price
sensitive as the demand has increased with fall in prices.

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3.5 Bargaining power of supplier (low)

In television industry, there is low bargaining power of Supplier’s 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. The most critical component in manufacturing television is the picture
tube. It constitutes around 50% of the cost of television. While Black and White picture tubes
are made in India, many manufacturers still need to import colour picture tubes.

The other important components include electronic circuit boards, tuners, high-tension
transformers and moulded plastic casings. The demand for colour picture tubes (CPT) has
been rising steadily. But at the same time owing to customs and import liberalisation, they
had to face competition from imports during1993-1997. A sharp reduction in import duty
from 85% to 40% between 1994-96 and further down to 20% by 2004 was announced to gear
the manufacturers of picture tubes to face competition from foreign players. As a result of
spurt in demand in 1990s, the CPT manufacturers expanded capacities, which resulted in
excess capacity in the domestic market. Samtel Colour, LG Hotline and JCT electronics are
the major domestic CPT manufacturers. The picture tube industry is both technology and
capital-intensive industry.

At the same time bulk orders in raw material procurement fetch more discounts, which gives
the larger players an advantage over their smaller counterparts. The CPT, the most critical
component in a CTV has no alternate use and therefore, the CPT industry is solely dependent
on CTV players, mainly domestic and partly exports. Hence larger players like LG, Samsung
and Mirc etc. are able to negotiate better deals unlike other players.

3.6. CONCLUSION

The variables affecting the industry with regard to each of the five forces have been
categorized as favourable or adverse. Favourable variables have the potential to improve
profitability, while adverse variables reduce profitability of the industry. Some strategic
initiatives, which could be adopted to leverage the favourable forces and protect themselves
from the adverse ones, are as follows:

 R&D and Marketing will have to work closely together. R&D will have to play a role
in cost innovation, which can cut component cost and raise performance. The number
of defectives has to be reduced at negligible levels. The quest should be to do even
better. Each assembly line can be made to compete with the other.

 Vital to the spread out is the re-haul of distribution network. Home appliances have
necessitated separate dealers, many of them specialists. For sharper focus on all
categories individually, the market has to be opened wider.

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 Brand building will be important, so as to ensure brand preference. Marketers will

have to strategise to pull the consumer up the value escalator. A good fraction of sales
if come from high margin products as flat TVs and projection TVs would improve
profitability of companies. Sharply differentiated products with effective

communication on a continuous basis would be the key for future. Challenge lies in
creating higher order universal benefits and sensitising the larger audiences to it.

 Buyers are easily swayed by costs, which are also verified by the presence of large
number of product offerings. Focus would be on providing value for money to the
consumer, with more brands in the economy segment. The challenge before marketers
is to span out, and address a wider set of needs. They will have to identify segments
not addressed by them so far and also introduce low price-point products aimed at
rural markets.

 Besides catering to the cost conscious segment, marketers need to segment the market
on the basis of psychographics, which will help in inducing brand loyalty through
lifestyle and experiential marketing.

 The increase in disposable incomes, more number of households above the threshold
income, declining prices, shortened replacement cycle and the demand for multiple
TV, all these factors are expected to sustain the growth momentum at 10-12 per cent
during 2008-09 to 2010-11.

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COMPANY Overview

Brief Profile

The Videocon group emerges as a USD 2.5 Billion global conglomerate continuing to set
trends in every sphere of its activities from a conference room sized assembly line in 1979.

Today the group operates through 4 key sectors:

1. Consumer durable
2. Thomson CPT
3. CRT glass
4. Oil and gas

Consumer Electronics, Home Appliances & Compressor manufacturing in India

We enjoy a pre-eminent position in terms of sales and customer satisfaction in many of our
consumer products like Colour Televisions, Washing Machines, Air Conditioners,
Refrigerators, Microwave ovens and many other home appliances, selling them through a
Multi-Brand strategy with the largest sales and service network in India. Our compressor
manufacturing technology in Bangalore further supports refrigerator manufacturing.

Display industry and its components

With the Thomson acquisition Videocon has emerged as one of the largest Colour Picture
tube manufacturers in the world operating in Mexico, Italy, Poland and China, continuing to
lead through new innovative technologies like slim CPT, extra slim CPT and High Definition
16:9 format CPT.

Colour Picture Tube Glass

Videocon is one of the largest CPT Glass manufacturers in the world with a high level of
experience and technical expertise operating through Poland and India. Videocon will

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leverage on this synergy after the Thomson acquisition to internally source glass for its CPT
manufacturing increasing efficiencies and lowering costs.

Oil and Gas

An important asset for the group is its Ravva oil field with one of the lowest operating costs
in the world producing 50,000 barrels of oil per day. The group has ambitious plans for
expansion in this.

Brand Basket

Partner Product Nature of Tie-up

Samsun Electronics Fly Back, Tuners, Technical Support
Transformers

Matsushita Electric Washing Machine Technical * Collaboration

Matsushita Electric Air Conditioner Design & Drawing

Matsushita Electric Refrigerator Design & Drawing

Sansui Electric Co. Ltd Audio Products ODM for Indian Market

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And Colour TV

Techneglas Glass Shell Technical Collaboration

Akai Audio Products ODM for Indian Market

And Colour TV

Hyundai Colour TV ODM for Indian Market

Electrolux AB Sweden Refrigerator, 1.ODM & Indian Market

Air Conditioner and 2.Sourcing of components
Washing Machine for Global Market
3.ODM for Global market

HISTORY

 Colour & B/W TV

 Washing Machine

 Home Entertainment Systems

 Electric Motors
 AC

 Refrigerators

 Coolers

 Glass Shells for CRT

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 Kitchen Appliances

 Crude Oil

 Compressor

 Compressor Motors

 Phillips Colour TV Plant Take-Over

 Electrolux India Three Plants Take-

Over
 Thomson CPT Acquisition

Corporate Governance

Company's Philosophy on Code of Governance:

The company's philosophy on corporate governance enshrines the goal of achieving the
highest levels of transparency, accountability and equity in all spheres of its operations and in
all its dealing with the shareholders, employees, the government and other parties. The
company believes in the philosophy on code of corporate governance, which provides a
structure by which the rights and responsibility of different constituents, such as the board,
employees and shareholders are carved out. In carrying out this, it is ensured that the
company\'s objectives are well defined and performance against those objectives are
adequately measured and monitored.

Corporate governance is considered as an important tool for shareholders protection and

maximization of their long -term values. The cardinal principal such as accountability,
responsibility, transparency and fair disclosure serve as the means for achieving this.

R&D
The company gives utmost importance to the R & D activities, which are carried out, at in-
house R & D center. The company carries on new innovations in product development, cost
reduction, quality improvement, process implementations, process controls.

1) Specific areas in which R & D is carried out by the company

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During the year, the company has carried out Research and Development in the following
areas.

 Home theatres - High-end models and HTIB Models.

 Larger Screen Television i.e. 32 Inch and 38inch.
 True Flat Televisions
 Plasma Televisions
 Cosmetic design and new out look to the TVs
 Manufacturing of components for CTV, Refrigerators and Air-conditioners.
 Efforts to reduce power consumption of all its final products.

2) Benefits derived as a result of the above R& D.

The company has derived the following benefits as a result of the Research and
Development:

 Development of new design in product and launching of various new models.

 Able to compete with the foreign players in the Indian Markets by cost reductions and
 Offering innovation features and to maintain market leadership in Television under
 Videocon umbrella.
 Increase in productivity.
 Reduction in power consumption of some of the products.

3) Future Plans of action

In the coming days company is aiming to achieve development in the following areas through
Research & Development:

 Manufacturing of components for consumer Electronics Products.

 Multimedia TV.
 Plasma Televisions.
 Launching of New Brands & Sub-brands under Videocon umbrella.
 Composite Home Entertainment system with internet adaptability.
 To work on better features, better quality & improved reliability with reduced/low
prices.

Your company always attempts to use the latest and advanced technology in production
process. Keeping pace with the technological developments, the company keeps on adding
sophisticated equipments with focus on automation to minimize manual intervention in the
manufacturing process thereby ensuring quality of the final products.

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Future Plans

To strengthen and maintain & its leadership status, the Videocon group has clearly charted
out its course for the future. Aggressive development is in full swing at the R & D Centres to
bring out state-of-the-art technologies including True Flat, Slim, Extra Slim, Plasma & LCDs,
at the earliest.

Cost rationalization processes - are in various stages - including rationalizing factories in

Europe, increasing automation and improvement of efficiency in China, accessing flass shells
from India for international CPT facilities and a lot more – are in various stages of
implementation.

Internationally all existing client relationships are being strengthened. The cost
competitiveness and increase in capacity in Mexico and Polland has opened up big
opportunities in the OEM business.

Last but not the least, in the domestic market consolidation with multiple brands paves the
way for an unassailable lead in the market.

In the Oil & Gas business, having all the basic operator capabilities of a prospecting entity,
the group is looking to add more explorations and production depth as also oil bearing assets.
The group will also get into gas distribution in India significantly.

Board Of Directors

Mr. Venugopal N Dhoot

Mr. Pradeepkumar N Dhoot
Mr. K C Srivastava
Mr. Kuldeep Kumar Drabu
Mr. Satyapal Talwar
Mr. S Padmanabhan
Maj. Gen. S C N Jatar
Mr. Arun L Bongirwar
Mr. Didier Trutt (Nominee - Thomson S.A)

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Mr. Johan G Fant (Nominee - AB Electrolux (Publ) )

Mr. B Ravindranath (Nominee - IDBI Limited)
Mr. Ajay Saraf (Nominee - ICICI Bank Limited)

ORGANIZATION STRUCTURE CHART:

AUDIT REPORT

We have audited the attached Balance Sheet of VIDEOCON INDUSTRIES LIMITED, as on

31st march 2009, Profit and Loss Account and also The Cash Flow Statement of the
Company for the year ended on that date Annexed thereto. These financial statements are the
responsibility of the Company management. Our responsibility is to express an opinion on
these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in India.
Those Standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes

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examining, on a test basis, evidence supporting the amounts and disclosures in financial
statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our opinion.

ANNEXURE REFERRED TO THE AUDITORS REPORT

Statement referred of the Auditors Report of even date to the Members of VIDEOCON
INDUSTRIES LIMITED on the financial statements for the year ended 31st march 2009.

(i) (a) The Company has maintained proper records showing full particulars including
quantitative details and situation of fixed assets.

(b) As per the information and explanations given to us, physical verification of fixed
assets, other than those under joint venture, has been carried out at reasonable intervals in
terms of the phased programme of verification adopted by the company and no material
discrepancies were noticed on such verification. In our opinion, the frequency of verification
is reasonable, having regard to the size of the company and nature of its business.

(ii) (a) As per the information and explanations given to us, the Inventories (excluding stock
of crude oil lying at extraction site with the Operator) have been physically verified during
the year by the management. In our opinion, having regard to the nature and location of
Stocks, the frequency of the physical verification is reasonable.

(b) Procedures of physical verification of inventory followed by the management are

reasonable and adequate in relation to the size have the Company and the nature of its
business.

(c) The Company is maintaining proper records of inventory. As per the information and
explanations given to us, the discrepancies noticed on physical verification of stocks were not
material in relation to the operations of the Company and the same have been properly dealt
with in the books of account.

(iii) As per the information and explanations given to us, the company has not granted or
taken any loans, secured or unsecured, to/from Companies, firms or other parties covered in
the register maintained under Section 301 of the Companies Act, 1956.

(iv) In our opinion and according to the information and explanations given to us, there are
adequate internal control systems commensurate with the size of the Company and the nature
of its business with regard to purchases of inventory and fixed assets and for the sales of
goods and services. During the course of our audit, we have not observed any continuing
failure to correct the major weakness in the internal controls systems.

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(v) (a). Based on the audit procedures applied by us and according to the information and
explanations provided by the management, we are of the opinion that the particulars of
contracts or arrangements referred to in Section 301 of the Companies Act, 1956 have been
entered in the register required to be maintained under that section.

(b) In our opinion and according to the information and explanations given to us, the
transactions made in pursuance of contracts or arrangements entered in the register
maintained under Section 301 of the Companies Act, 1956 and exceeding the value of
Rupees Five lakh, in respect of any party during the year, have been made at prices which are
reasonable having regard to prevalling market price at the relevant time.

(vi) The Company has not accepted any deposits from the public within the meaning of the
provisions of Section 58A and 58AA or any other relevant provision of the Companies Act,
1956 and rules made there under.

(vii) In our opinion, the Company has an internal audit system commensurate with its size
and nature of its business.

(viii) The Central Government has prescribed maintenance of the cost records under Section
209(1)(d) of the Companies Act, 1956 in respect of the Companys products. As per the
information and explanations provided to us, we are of the opinion that prima facie, the
prescribed records have been made and maintained. We have however not made a detailed
examination of the records with a view to determine whether they are accurate or complete.

(x) There are no accumulated losses as at 31st march 2009. The company has not incurred
any cash losses during the year covered by our Audit and the immediately preceding financial
year.

(xi) Based on our audit procedures and the information and explanations given by the
management, we are of the opinion that the Company has not defaulted in repayment of dues
to financial institutions, banks or to debenture holders during the year.

(xii) The Company has not granted any loans and/or advances on the basis of security by way
of pledge of shares, debentures and other securities.

(xvi) The term loans raised during the year were applied, on an overall basis, for the purposes
for which the loans were obtained.

(xvii) The balance sheet of the Company, we report that the Company has not used funds
raised on short-term basis for long-term investments.

(xix) The Company has not issued any secured debentures during the year. The Company has
created security in respect of debentures issued in earlier years.

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(xx) During the year the Company has not raised any money by way of public issue.

(xxi) According to the information and explanations given to us, no fraud on or by the
Company has been noticed or reported during the fiscal year 2008-2009.

SWOT Analysis

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Strengths
 Videocon has largest distributed capacity manufacturing base across India with 17
facilities and plant in china, Poland, Italy, Mexico.
 Manufacturing capacity is 1, 40000 units.
 Videocon has a network of 400 plus service and 85 mobile service vans to give better
service to their customers.
 Tie up with the Matsushita electric company of Japan add to the goodwill of
Videocon.
 Customers are aware about Videocon’s products.
 Company has good brand name.
 Strong backward integration.
 Videocon has largest distribution manufacturing based across in India.
 Large brand basket.
 Multi brand strategy.
 3rd largest picture tube manufacture in India.
 Cheap price.
 Globally acceptance.

Weaknesses
 Less investment on advertisement of Videocon CTV.

 Fewer margins to the distributor/dealer.

 Weak promotional strategy of CTV.

 No proper approach of target customer.

 Wide brand basket, which might lead to conflict of interest unless effectively
managed

 CRT technology is losing popularity.

 Less focus on unconventional channel.

 Not providing good service.

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 No exclusive show rooms

Opportunities
 Videocon takes over the Electrolux.

 Videocon buy Thomson color picture tube manufacturing plant.

 Videocon international is going global.

 Videocon exploring whole new segment

 During the climate of Jaipur becomes hotter day by day and coolers do not fully
satisfy the customers requirement. This provides a great opportunity for ac
manufacturers.

 Growing semi urban market.

 Industry is in increasing phase.

 Price has come down; now more and more people are going for it.

 Due to financial facilities even the medium segment is going for it.

 Purchasing power of people is increasing day by day.

 Moving into new attractive market segments.

 Focused on unconventional channels.

 Mergers joint venture of strategic alliances.

Threats
 Entrance of global competitor like china.

 Brand loyalty is more of LG & other company.

 Market condition like slumps in market.

 A new competitor in your home market.

 Competitor has a new innovative substitute product or service.

 Increased trade barrier.

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 Brand reputation is not good.

 Competition in global CPT market especially from integrated players such as LG,
Phillips, Samsung, and Matsushita is intense.

BRAND VALUES & INTREGATED MARKETING COMMUNICATIONS

Re-Branding Videocon

Videocon Group, the Rs 5,000-crore conglomerate, has embraced a new brand identity. The
brand has shed its solid steel 'V' for a more fluid, lava like 'V', coupled with a new
proposition – 'Experience change'.
Prior to this, the brand has banked on other propositions, such as 'Technology for health and
pleasure', 'Bring Home the Leader', 'New Improved Life', 'The Indian Multinational',
'Whatever role life gives you, play it big', as well as the most recent one, 'Eco Logic for
sustainable life'.
Similarly to the concept of PLC i.e Product Life Cycle, there exists a Brand Life Cycle also.
Videocon has been one of the most longest surviving indian international consumer durables
and electronics brand. This change in brand identity and re-positioning was due for quite a
longtime for two reasons. First, Brands like Hitachi, Panasonic, Samsung etc are aggressively
promoting themselves as ECO-FRIENDLY brands. Hence sooner or later Videocon had to
put itself on the GREEN TURF to survive the onslaught of these global brands. Second point
is REPOSITIONING: We all know, India is the YOUNGEST NATION on the globe with
approximately 52% of population around 25 years of age. This makes it most viable and
sensible to target the audience in this younger age group. Since in our own childhood we
have seen usually parents prefer videocon washing machine or television and also popular
amongst families. With emergence of new indi, young professionals, nuclear families and
high exposure to international brands, products and markets, videocon has to create an image
which appeals not only to indian population in india but at the same time indian diaspora
abroad, since videocon is now a multi national company.
The company unveiled its new tagline recently, at an event promoting the 2009 chapter of the
IIFA awards. The new logo was unveiled in San Francisco, by the Videocon brand
ambassador, Shah Rukh Khan.
The task at hand was challenging, keeping in mind the brand equity and recall Videocon
already enjoys. So, keeping in mind that the brand was getting into new age categories, it was
decided to get rid of the static nature of the brand and getting it to move on. Hence, the new
identity will bring energy into the brand.
Chouw and Mouw are 'live' characters, and will be used through a series of short videos to
tell simple stories, each depicting a positive dimension of Videocon's new tagline,
'Experience Change'.

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Both have certain personality traits, based on their physical attributes. The bigger one,
Chouw, is slow but earnest; strong and silent; he is patient, good natured, kind, and maybe a
little romantic too. The smaller one, Mouw, is quick witted, energetic bordering on restless,
curious, and funny.
Physically, they can coerce their bodies into rudimentary shapes that help them to get on with
tasks at hand. The colour palette has been chosen to reflect the philosophy of the Videocon
Group, that is, the green colour is symbolic of the company's ecology drive.

As far as the characters are concerned, Joshi maintains that they will help to create buzz and
visibility around the transformation and establish the new logo in the consumer's mind
effectively.

Brand Re-Thiniking:
The brand, which has been in existence for more than two decades, has managed a fair share
in the entry/middle product segment. It is perceived as a brand for the Indian middle class --
no frills, no glamour, simple, reliable and hassle-free.

However, in the high-end products segment, Videocon is way behind Samsung and LG. For
example, it does well in the conventional CTV category but not in the LCD category. Again,
while the window air-conditioner category is doing well, not much is happening for the brand
in the split air-conditioner category.

With the present generation of consumers moving fast towards the premium segment, even
for their first buys, the brand is not being seen as the preferred one. As a result, it is not able
to cash in on the high growing segment, which is the premium category of products.

The new identity and logo is based on the consumer-centric approach of the brand and its
positioning to be closer to the consumers heart - both in terms of its values and philosophies,
as well as its servicing aspects. The brand make-over is aimed at Youth-minded consumers
who have a new global mind-set. The Videocon logo is the heart of the new brand identity.
The Fluid lava reflects the brand idea, 'Experience change'. The color palette has been chosen
to reflect the philosophy of Videocon Group i.e. the color green is symbolic to the company's
ecology drive.

The new Logo is an inverted Triangle. The colour chosen is green. The triangle being an
energy shape, is fed by the most appropraite colour - green - symbolising wood - which
means more energy to the fire. Videocon in the next 3 years will move towards Global
positioning, acquire new real estate, change its work culture, throw out old systems, and will
be in an expansion and acquistion spree.

This prompted Videocon to opt for a change. It has decided to focus on the premium segment
and would now diversify into other related high-growth categories with the launch of its

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mobile services, handsets business and IDTV/D2H (in-built set-top box with single remote).
Videocon expects to double its turnover in the next couple of years, and a large part of the
increase is expected to come from these high-growth segments.
The brand will also be positioned to make a connect with the hearts and minds of young-at-
heart consumers.
The rationale behind Videocon's brand evolution comes from its constant endeavour to listen
and respond to the changing market dynamics in India and overseas.

IMC Details:
To communicate the change in identity, the brand has engaged in strong marketing initiatives
and promotional campaigns across all the media, including print, electronic, radio and various
BTL and on-ground activities, marketing collaterals and visual merchandising.
The present campaign that announces the change comprises five TVCs, of which one is
already on-air. Each commercial is a short story of someone in need of help. Chouw and
Mouw come to the rescue and spread happiness and joy through their charm, kindness and
efforts.
Apart from this, digital, outdoor and sponsored events are also being used, while the Chouw-
Mouw jingle will be leveraged for radio. The present endorser of the brand, Shah Rukh Khan
might take a backseat, while Chouw and Mouw create the buzz.

Brand Risk / Concerns:

There can be three situations when a brand goes for a makeover -- mergers and acquisitions;
the brand not performing well or just putting some new clothes on. For Videocon, it could
have been a fear of a disconnect between the brand and the consumer. Unlike most PSU
banks, which change their logos and identity from outside and offer the same sloppy service
inside, Videocon has to offer the consumer something truly rewarding and fresh.
However this concept of chouw mouw doesnt excite us too much. Any layman will say it has
been picked up from the ZooZoo concept. Recently Virgin mobile has also come up with
cartoon characters for their messaging. But its hardly visible and least recall value. You can
make a look alike product, you can provide similar services. But using similar kind of
pneumonics and symbols in advertising to address your message to audience, is quite a risky
idea. Lets hope Videocon does well and manages to reach more households in India as well
as abroad! The younger, peppy, fresh, flowing, edgeless, green logo is surely a welcome
change for the revival of the brand. But what needs to be seen is how much this change in

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logo going be supported by improved product quality, customer service and in-shop
experience for consumers.

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