Consumer Durable Industry

Presented by-
Kasturi Mandal
A Vijay Kumar
Sasi Kumar
Umesh G
S Arun Kumar
Barun Bardhan
 Consumer Durables- Overview
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 market for
consumer electronics, after US.
 Top 5 Emerging Nations
(Consumer Electronics)
1. CHINA
2. INDIA
3. BRAZIL
4. MEXICO
5. 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 Durables- Overview
• Pre liberalization , 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.
• 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 (14-16% 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,LPD Direct Drive, Fuzzy Logic, DEVap ( Desiccant enhanced

Silver Nano, Waterless evaporative AC) developed by NREL
(90%)
Indian Durable industry - SWOT
 Indian Durable Industry- Porter’s 5 forces
Supplier Power Threat of New Entrants
Indigenous supply base limited • Most current players are global
players
- most raw materials are • New entrants will need to invest in
imported 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 Customer Power

Multitude of brands across price
Technological points - wide variety of choice for
Enhancement customers
 Indian Durable Market
• The Indian durables market, with a
market size of US$ 27.38 billion in
2008–09, 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
2009–2010.
• The segment registered a growth of 18 per cent in 2009–2010 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., & http://www.mit.gov.in/dbid/eproduction.asp#2
 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.

2009–2010
Rs.bn
Others AC
29% 38%

Sewing
5%

Washing M/C
7%
Electric Fan Refrigerator
8% 14%

Source- www.ibef.org/download/consumer_durable
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) 2006-07 2007-08 2008-09 % Growth 2007-08 % Growth 2008-09

Exports 2690.5 2809.3 3697.1 4.4% 31.6%

Imports 15057.3 17320.4 18505.8 15.0% 6.8%
*excluding computer in physical form
Source: Ministry of Commerce and Industry, Government of India, Annual Report 2008–09.
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
LG
Others 26%
22%
Godrej
6%
Wirlpool Samgsung
16% 16%

Videocon
14%

Source- CRICIL
 Television Market Share
FY 2007-08
LG
Others 19%
31%

Videocon
22%
Mirc
13%

Samgsung
15%

Source- CRICIL
 Washing Machine Market
Share
FY 2007-08
LG
Other 23%
14%
Whirlpool
15%

Samgsung
Videocon 17%
Godrej 20%
6%
IFB
5%

Source- CRICIL
 Mobile Phone Market
Share
FY 2007-08
Others
20%

Motorola
6% Nokia
Samgsung 59%
7%
Sony
8%

Source- CRICIL
 DTH TV Market Share
FY 2007-08
SunTV
Dish TV 4%
6% TATA Sky
4%
Big TV
2%
Airtel
1%
Cable
83%

Source- CRICIL
 Consumer Durables
SCM
IMPORTANCE:
• Product Proliferation
• Multiple players
• High competition
• Benchmarking and TQM
• Production Demand mismatch
• Ever Increasing Targets
• Bargaining power of Retailers
OBJECTIVES:
• 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 Franchisee
Managed Stores Traditional Retailing Showrooms

Reverse Logistics E-Retailing

Individual Consumers Institutional Consumers

Consumer Durable Supply Chain

COMPANY E Retail
SHOWROOM
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. Nokia India • India being the second largest growing
2. LG Electronics India Ltd economy with huge consumer class has
3. Samsung India Electronics resulted in consumer durables as the fastest
4. Sony India growing industries in India
5. Philips India
6. Whirlpool Appliances • LG, SAMSUNG the two Korean companies
7. Titan Industries has been maintaining the lead in the
8. Siemens industries with LG being leader in almost all
9. Videocon Industries the categories. 
10. Blue star

Source: http://www.naukrihub.com/india/consumer-durables/companies-list/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 communications Digital appliance
• CDMA Handsets • Air Conditioners
• GSM Handsets • Refrigerators
• 3G Handsets • Microwave Ovens
• Cellular Phones • Washing Machines

Digital display Digital media

• Plasma TVs • Home Theater Systems
• LCD TVs • DVD Recorder
• Micro Display Panel TVs • Notebook PCs
• Monitors • Desktop PCs
• Car Infotainment

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

LG Technology Collaboration
 LG Global Financials
Sales KRW (bn) Net Profit KRW (bn)
51%
30,513
209% 2,052
27,638
24,659 23,774
23,171 23,502
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- www.lg.com
 LGIL- SWOT Analysis
Strength: Weakness:
• Manufacturing Unit at tax incentive area • Transportation cost
• Wide range of products to serve all • Demand fluctuation handling capacity
category • Service quality
• 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
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 Mach...

26%
Refrigera...

19%
Colo...

40%
Micro...

Leader in all the above categories

Source- CRICIL
 LG Logistic Organization Structure
Corporate Logistics

Team Head Distribution &Planning Operation & Traffic

 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 has “Golden eye technology” Air
conditioner has “Health air system” and microwave ovens
have the “Health 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