Indian Television Industry: A Strategic

Analysis*
Seema Gupta1

Abstract
The Indian Television industry is going through turbulent transformation. Companies are relooking at
their strategies and are desperate for growth. The entrenched position of the Indian market leaders in
CTVs’ like Videocon, BPL and Onida has been challenged by the MNCs such as LG, AIWA, Akai,
Panasonic, Samsung, Sony, Philips and Sharp; some in a perceptible way and others threatening to do
so. The changing environment demands fresh thinking to gain the cutting edge advantage. This paper
attempts to look at the various macro and micro environmental factors operating in the industry using
the model of strategic analysis by George Day, i.e. to analyse the bargaining power of buyers and
suppliers, the threat of new entrants, threat of substitutes, intensity of rivalry, impact of technological
changes, growth and volatility of the market and the influence of government and regulatory interventions.
These variables affecting the industry have been categorised as favourable or adverse depending on the
influence on the profitability of the industry. Some strategic initiatives, which can be adopted, to leverage
the favourable forces and prevent the adverse ones have been identified.

1. INTRODUCTION AND OVERVIEW witnessing a new scenario with a new

In the last five years colour television
industry (CTV) has witnessed drastic
changes in the intensity of competition.
Exchange schemes, free gifts, price offs,
prizes, deferred payment schemes and
other incentives as promotional tools have
been deployed by the players, which
certainly have made the market, vibrant
and pulsating. A major factor contributing
to the growth has been availability of
consumer financing schemes.
Concomitantly, the industry has been
market profile. The entrenched position
of the Indian market leaders in CTVs’ like
Videocon, BPL and Onida has been
challenged by MNCs such as LG,
Samsung, Sony, Philips, AIWA, Akai,
Panasonic, Sansui and Sharp; some in a
perceptible way, others threatening to do
so. The industry is going through
turbulent transformation. Companies are
relooking at their strategies and are
desperate for growth. This paper attempts
to analyse the various macro and micro

* Received June 23, 2006, Revised August 17, 2006

The author acknowledges the anonymous reviewer for valuable comments.
1
Visiting Faculty (Marketing), Indian Institute of Management, Bangalore
Email: seemag@iimb.ernet.in
196 Vilakshan, XIMB Journal of Management
environmental factors operating in the
industry to provide a basis for devising
strategy.
2. INDUSTR Y PERFORMANCE
The performance of the Consumer
Electronics industry comprising
television, audio equipment, DVD, VCR
has been analysed from 1998-99 to 2002-
03 (Exhibit 1). Important performance
indices such as Debt-Equity ratio (D/E),
Return on Net Worth (RONW) (Post tax),
Net Sales/Total Assets and Operating
Profit/Net Sales are as depicted in charts
1-4. Chart 1 depicts the declining trend of
D/E till 2001, but rising trend thereafter,
showing that the industry is shouldering
an increasing debt burden. This may be
because of the need to pump more funds
for aggressive marketing. RONW (Post
tax) as depicted in chart 2, has increased
from 7.3 in 1998-99 to 10.2 in 2001 but
plummeted to 7.6% in 2001-02 and
became –3.3 in 2002-03. Profit margins of
all the players have decreased due to
falling prices and increasing marketing
and R&D costs. This indicates that the
industry, in general, is in a state of
turbulence and there are fluctuations in
financial performance driven by changes
in competition and consumer centric
promotions. In chart 3, the ratio of
Operating profit/Net Sales exhibits the
fluctuating pattern over the years with
drop to an all time low of 4.4 in 2002-03.
This indicates increasing pressure on
bottom line due to heightened
competition. Chart 4 shows a more or less
stable Net Sales/ Total Assets (Asset
Turnover ratio) hovering between 1.09-
1.22. This indicates that there is relatively
stable utilisation of assets (CMIE-
Financial aggregates, 2004; CMIE-
Corporate sector, 2004).
These four indices taken together show
that the consumer electronics industry is
passing through a difficult phase from
year 2000 onwards, characterised by
increasing debt, erosion of net worth,
declining profits and low asset utilisation.
The industry is undergoing changes in the
levels of competition and hence there are
fluctuations in financial performance. The
entry of MNCs in the market has given
rise to aggressive marketing and thus
eroding the profitability of well-
entrenched Indian players. Given the
turbulence in the environment there is a
need for an in-depth analysis to decipher
the impact of various factors.
3. INDUSTR Y 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 (Porter,
1980). 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.

Porter’s framework, however, does not
address three important variables-
Government and Regulatory
Interventions, Technological Changes,
and Growth and Volatility of Market
Demand. These variables have been
included in the model proposed by
George Day (Day, 1990), which evolved
from Porter’s model and have been
analysed in this study (Exhibit 2).
3.1 Degree of Rivalry
Degree of rivalry denotes the intensity of
competition within the industry. LG is the
market leader with 26% market share
followed by Samsung and Onida (Exhibit
3). Although LG is the market leader, its
average realisation is lower than the
industry average due to competitive
pricing. India is one of the biggest global
markets for LG, therefore its strategies are
much more aggressive to ensure huge
growth. On the other hand, Samsung is
far stronger than LG globally, and while
India is a key market, there is no crushing
need to ensure immediate big growth
numbers. The company expects the Indian
arm to contribute 10% of the total
worldwide turnover by 2010. According
to Crisil, the company has been growing
at CAGR of 24% between 2001 and
2004.The Company sells a large portion
of its wares on a cash-and-carry basis, and
has a return on capital employed of 43%.
Despite being big in size, the company is
operating in a tough market, which
explains why it has a net profit margin of
only 5%. Videocon, another major player
has managed to hold its own in the midst
Gupta, Indian Television Industry... 197
of the onslaught from the Korean majors,
though profits have suffered. Other large
Indian companies in 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. The sales value of the
top six CTV players (Exhibit 3) has
increased more than proportionately to
the corresponding increase in their market
shares. Although the top players have
drastically reduced prices, they have
gained more volume due to increasing
market size and higher penetration levels,
coupled with conscious shift towards flat
colour televisions (FCTVs).
3.1.1 Competitor Analysis
A detailed analysis of some of the major
players is done below:
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
198 Vilakshan, XIMB Journal of Management

most of the other players. It is an its own envelope on obsolescence, much

aggressive marketer. It focuses on low and like Intel has been doing in its own
medium price products. industry. The strategy is aimed at further
broad basing the product offering of the
SAMSUNG
company, which has largely dominated
Initially the strategy of Samsung in India the top-end of the television market,
was to create premium image by across multiple market segments.
emphasising global brand. After facing
Besides understanding the strategy
stiff competition from another Korean
adopted by different players, several
major- LG, Samsung also started playing
other factors- industry growth,
price game. In 2004 it reverted back to its
concentration and balance, corporate
premium positioning, although it resulted
stakes, fixed cost, and product differences
in some loss of market share. In line with
need to be analysed to determine the
the Global Digital Initiative of the Parent
extent of rivalry between the existing
Company, Samsung India is seeking to
players.
acquire digital leadership in India by
introducing its digital ready televisions VIDEOCON
like the 40" LCD Projection TV, 43" Videocon has always been a price player
Projection TV and the Plano series of Flat
and has an image of a low price brand.
Colour televisions. This entails providing more features at a
ONIDA (MIRC ELECTRONICS) given price vis-à-vis competitors. It has
taken over multinational brands to cater
Its popular devil ad although had
to unserved segments, like Sansui- to
engendered a strong emotional pull
flank the flagship brand Videocon in the
towards the brand, technologically it
low to mid priced segment, essentially to
represented no advancement. The
fight against brands like BPL, Philips,
company plugged the gap by touting its
Onida and taken over Akai- tail end brand
digital technology. Like Videocon, it has
for brands like Aiwa. Videocon is one of
also been able to hold its market share.
the largest manufacturers of television
The world-class quality of Onida has
and its components in India and thus has
enabled the company to make a
advantages of economies of scale and low
breakthrough on the export front. Onida
cost due to indigenisation. It has the
is a leading brand in Gulf market and also
widest distribution network in India with
exports its models to Africa, Bangladesh,
more than 5000 dealers in the major cities.
Sri Lanka and Nepal. It has technical tie-
It also has a strong base in the semi-urban
up with the Japan Victor Company, better
and rural markets.
known as JVC. So focused is Onida on
positioning itself on the premium, high- Due to its multi-brand strategy, it has at
tech plank that it is even planning to push 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.
3.1.2 Industry Growth
The industry has been witnessing robust
demand; fuelled by revival in economy,
increase in individual disposable income
and liberal incentive schemes by banks
and financial institutions. The demand for
CTV grew at 15% during 1985-89 but
witnessed a slump from 1990-94. With the
entry of MNCs and thereby aggressive
marketing, the period between 1995-96 to
1999-00 saw a surge in growth rate to 29%.
Thereafter the market has been growing
but at a decreasing rate due to increasing
penetration and near saturation in urban
households (Exhibit 4). This is in spite of
the fact that CTV penetration in India is
as low as 23%, more so in rural markets
and hence has potential for growth
(Exhibit 5). According to the Francis Kanoi
report “CTV in India in 2010”, the possible
demand for CTVs in India in 2010 is likely
to be at least 18.2 mn or 12 mn in the worst
scenario. This figure is not very far from
that in Europe with a market size of 30
mn sets and China at 24 mn sets as of 1999.
It has been further predicted that if power
ceases to be an impediment in the growth
of CTV market, especially in the rural
Gupta, Indian Television Industry... 199
sectors, a GDP growth of 7% could take
the CTV demand in 2010 to 20 million. The
report also assumes that economic
expansion will lead to increase in
prosperity levels down the income strata
and the technological advances in
transmission, reception etc. will compel
replacement (Financial Express, 2001).
The entry of Star TV, Zee TV, BBC, CNN
among a host of other private channels has
given choice to the consumer.
Proliferation of niche as well as mass
entertainment channels has led to the
purchase of multiple television sets per
household. World cup and cricket
tournaments are key drivers in the
increase of CTV sales. Host of cricket
tournaments like Series with Australia
and Pakistan, Mini World Cup, World
Cup are a major attraction for cricket
crazy India and companies are tapping
this opportunity by sponsoring cricket
related events and running promotions
around them.
3.1.3 Concentration and Balance
The Herfindahl Index of concentration is
0.092 for the year 2002-03, which means
that the market share is dispersed and
there is low concentration. Hence many
rivals none of whom has a significant
market share characterise the industry.
(The index takes values between 0 and 1,
where 0 indicates no concentration at all
and 1 indicates monopoly) This means
that the industry is not disciplined and
has high degree of rivalry (CMIE-
Industry: Market size & shares, 2004).
200 Vilakshan, XIMB Journal of Management
3.1.4 Corporate Stakes
In the year 2002-03, the gross fixed assets
of consumer electronics industry were Rs.
5994.3 cr, net worth Rs. 2823.7 cr and
capital employed Rs. 6077.6 cr. Thus
corporate stakes in the consumer
electronics industry are quite substantial
(CMIE- Corporate sector, 2004; CMIE-
Industry Financial aggregates & ratios,
2004).
3.1.5 Fixed Cost and Value Added
The television industry is highly capital-
intensive due to the requirement of
technology and costly components like
picture tubes. The fixed cost as a
proportion of value added is quite
significant and had gone down from 45%
in 1998-99 to 37% in 2000-01 but again
increased to 45.4% in 2002-03 (Exhibit 6).
For the purpose of analysis, Fixed Charges
have been taken as (Employee Cost +
Interest + Depreciation). Value Added has
been defined as (Net Sales- Cost of
Material- Cost of Power & Fuel). The
value addition is slowly increasing due
to decreasing costs of input material and
higher sales realisation due to aggressive
marketing. But at the same time
Depreciation doubled in 2002-03 from
2001-02, which is the major reason for
increase in the fixed cost as a proportion
of value added. Selling costs have
increased drastically from Rs567 cr in
1998-99 to Rs1518 cr in 2002-03. (CMIE-
Industry: Financial Aggregates & Ratios,
2004).
3.1.6 Product Differences & Brand
Identity
In a competitive environment substantial
investments in brand building becomes a
necessary condition for survival as it is the
value and perceptions related to the brand
that act as differentiators. Onida launched
14” TV sets named “Candy” with
coloured cabinets. The product is
essentially customised for the 12-25 year
olds who are increasingly looking out for
personalised products to cater to their
tastes. BPL launched a “convergence” TV
under the name BPL digital that
combined the Internet and cellular
services with the television’s traditional
features. LG introduced “Golden Eye”
series, incorporating advanced
technology. While Sony and Samsung
have managed to create premium image,
LG offered compelling reasons to
purchase. Onida and BPL have laid
emphasis on quality and innovation and
Videocon has been perceived as value for
money brand. Akai, Aiwa, Sansui, Philips
have the image of providing good bargain
to the consumers.
3.2 Threat of Entry
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. 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. Videocon has implemented
ERP system, which helps in integrating
the manufacturing, marketing,
procurement and distribution services
with the corporate office. BPL’s
distribution network is a combination of
37 C&FAs, 33 Branch Offices, above 300
Service Centres with 400 sales personnel
across product groups working to reach
over 2500 dealers and distributors.
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. As exhibit 7 shows, market
leaders LG and Samsung have highest
Gupta, Indian Television Industry... 201
sales per dealer and hence gain crucial
competitive advantage over their rivals.
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.
LG sponsored ICC World Cup 2003 along
with Pepsi and Hero Honda and got
tremendous mileage in terms of increased
sales and brand building. Similarly
Samsung sponsored the Indo-Pak series
in 2004. Domestic players are constrained
in their brand building due to not being
global in their operations.
3.2.3 Capital Investment and
Economies of Scale
Television industry is capital intensive
and players have made huge investments
in putting up state of the art
manufacturing facilities. Sony India had
a production capacity of 300,000 CTV sets
with capacity utilisation of 66%. But since
the demand for its products in India was
much less than the plant capacity, Sony
finally closed down its plant. 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 Videocon, Mirc
202 Vilakshan, XIMB Journal of Management
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.
Supply chain management and inventory
management thus becoming crucial to
determining profitability. With regard to
sourcing funds, MNCs are better placed
than their Indian counterparts as they
manage to get funds from their parent
companies at low rates of interest. Huge
capital requirement thus can act as barrier
to entry.
3.3 Threat of Substitutes
In Porter’s model, substitute products
refer to products in other industries.
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 Buyer Power
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. The
television market can be broadly
segmented into following categories
(Project Report, 2002):
A. THE UPGRADERS
This segment of buyers has upgraded
from Black and White TV to Colour
television. This segment is by far the
largest in the Indian TV market and
constitutes approximately 62% of the
market. The principal reason behind the
up gradation is the C&S (cable and
satellite) boom that has hit India and the
increasing coverage of major sports events
like cricket tournaments and Olympics.
The consumer in this segment usually
goes for active information search. This
segment normally builds its product
knowledge from advertising and other
product communication that it gets
exposed to & the dealer. This segment also
normally shows a distinct preference for
multi brand outlets and the primary
reason for this is to compare brands and
process relative and unbiased
information.
Interestingly, the 14” CTV, which is
primarily positioned as a second
purchase, is a big favourite with this
segment. 14”CTV which accounted for 20
per cent of the total CTV demand in 2005-
06, is expected to witness a gradual
decline to 10-12 per cent of total sales by
2010-11 (Exhibit 8). Demand would come
from buyers upgrading from B/W sets to
CTVs; commercial enterprises & shops;
and multiple CTV set purchasers.
However the extent of price reduction by
industry players would depend on the
market leader-LG-, which dominates sales
in this segment. Vis-vis the 20” and 21”
CCTVs, the 14” CTV has a loyal following,

which is expected to continue, though at
a slower pace (CRIS INFAC, 2006).
Certain attributes that are common across
segments are evaluated and are cable TV
compatibility, number of channels, sound
system and fully operational remote.
Some of the influencers that act as
clinchers are discount offers, deals, trade-
in offers and instalment offers.
B. FIRST TIME BUYERS
This constitutes people who are
purchasing a colour television for the first
time. They comprise 18 per cent of the
market. They primarily belong to nuclear
families. The structure of these families is
either DINK (double income and no kids)
or SINK (single income and no kids). The
other section that makes up this segment
is the bachelors living alone for the
purpose of jobs or higher studies. The
fixed or planned budget and the
compatibility with the small
establishment are two major factors that
drive the nature and direction of
information search in this segment.
In this situation, the wide screen models
are mostly out of the consideration set of
the purchasers in this segment. The role
of the wife in the information processing
and decision-making stages is a
significant characteristic of this segment.
There is preference for technically
intensive data that come from a
professional source and not necessarily a
blind preference for personal data
sources. Interestingly, the technical,
largely feature and benefit based
evaluation gets interspersed with
Gupta, Indian Television Industry... 203
aesthetic considerations like shape, etc.
because of the influencing role that the
wife plays in the decision making process.
Hence, important differentiating factors
in this segment are: shape; colour of the
cabinet; size of the speakers; position of
speakers and other accessories. Although
price plays an important part in the
decision making process, discounts and
trade-ins do not enjoy as much popularity
with this segment as with the previous
one.
The inclusion of a warranty contract or the
promise of after sales service do not play
a very important role in the decision
making process. Brand loyalty is not very
high as loyalty is more to the technology
and its rapid development and up
gradation (implying rapid obsolescence of
existing technology) than to any single
brand. This implies that the brand
claiming to offer the latest and most
consumer friendly technology will be
preferred more.
C. MULTIPLE SET PURCHASERS
This segment represents those people that
are purchasing more than one set and are
looking for specific need gaps to fill. They
comprise the lowest share of the market
in terms of volume with just 8% being
commanded. The family demographics of
this segment are mostly joint families and
full nests. The principal reason behind
most of the purchases is an increasing
family size and desire to own a personal
TV set. The credibility of the dealer is not
high at all in this segment and the
company sources of information with a
204 Vilakshan, XIMB Journal of Management
high technical content are mostly
preferred. Price is not the most important
criterion for purchase decision-making.
This segment was more prone to purchase
from the grey market till 1995, as they
wanted to purchase foreign brands that
were not available through popular
channels at that time. However, this
characteristic has changed over time and
these people patronise the foreign labels
appreciably. Warranty and after sales
service do not play an important part in
this segment.
D. REPLACEMENT PURCHASERS
This segment usually trades in its old CTV
for the new models. It forms around 12%
of the market and holds immense
potential in the future. The expansion of
innovative technology and cable
compatibility has thrown the old sets,
with their eight programmable channels,
completely out of favour. This segment
also shows a keen interest in the grey
market and is not completely against the
idea of purchasing a feature-laden brand
from the unorganised market. Neither the
price of the set nor the offers of warranty
periods and promotional sops, is an
important criterion. With increasing
disposable incomes and the introduction
of new models and declining prices,
replacement demand has surged over the
years. Replacement demand is expected
to account for 55-57 per cent of total CTV
sales by 2010-11. With increased
penetration levels of CTVs in semi-urban
as well as rural areas, the growth in the
number of first time CTV purchasers
would be lower in these areas, as
compared to the growth in replacement
demand (CRIS INFAC, 2006). 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
Akai’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 realisation
shave been lower than industry average.
Industry leaders like LG focus on low-
medium priced CTV, while Samsung has
moved gradually towards higher priced
CTVs (Exhibit 9). 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. Exhibit 10 indicates that
the market is highly price sensitive as the
demand has increased with fall in prices.
3.5 Supplier Power
Supplier’s 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
during 1993-1997. 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
Gupta, Indian Television Industry... 205
excess capacity in the domestic market.
Samtel Colour, LG Hotline and JCT
Electronics are the major domestic CPT
manufacturers (Exhibit 11).
The picture tube industry is both
technology and capital-intensive
industry. Samtel India imports
technology from Mitsubishi and JCTE
from Hitachi. Uptron had collaboration
with Toshiba. BPL has entered into a
strategic alliance with Toshiba
Corporation of Japan to manufacture pure
flat picture tubes for the first time in India.
Philips Electronics and LG Electronics
have formed a joint venture to become a
global giant with almost $6 bn sales (CIER,
2002). Hence manufacturers are
dependent on suppliers for important
components and hence suppliers enjoy
high bargaining power. Many
manufacturers have integrated
backwards to gain cost advantage over
their competitors. 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.
206 Vilakshan, XIMB Journal of Management

4. INDUSTR Y ANALYSIS- GOVERNMENT low import content in most products

AND REGULATORY INTERVENTIONS (except high-end products) but will
benefit MNCs more as they rely more on
The role of the government as the supra-
imports. Colour picture tube players are
environment for business, creating the
taken aback due to recent rollback in
rules for competition is crucial. It creates
customs duty in glass parts. Glass parts
boundaries within which the industry
are being used in manufacturing picture
must operate. Following its policy of
tubes. Imports of glass parts were levied
liberalisation, the Indian government
with a uniform 20% basic customs duty.
completely delicensed the television
Following the Free Trade Agreement with
sector in November 1996. In the year 2004,
Thailand, the import duty on CPT and
custom duty on television sets was
CTV was fixed at 10% and for its inputs
reduced from 25% to 20% and the Special
glass parts the duty was 20%. In the
Additional duty of 4% was dispensed
process there is a lopsided duty structure
with. Reduction in customs duty is
wherein the import duty on inputs are
unlikely to affect the industry in a major
higher than the output, which is not
way because a substantial chunk of the
conducive for domestic manufacture/
industry’s products is manufactured in
value addition. Except Sony, all major
India. The key benefit will be to the brand
domestic colour TV manufacturers like
owners with high-end models that are
Samsung, LG and Videocon source their
primarily imported. Abatement rate on
requirements from Samtel. Thus the duty
CTV has been hiked from 35% to 40%.
structure favours brands like Aiwa,
Excise duty on CTV was brought down
Sansui and also the top-end CTV models,
from 18% to 16% in 2001 whereas on B&W
which are imported. Hence Indian players
TV it has been hiked from 4% to 8%.
like Onida, BPL, Videocon are at a
Companies may benefit marginally from
disadvantageous position vis-à-vis their
increase in excise duty on B&W TVs to
multinational counterparts.
8%, as they would now be able to claim
CENVAT credit for the excise paid on raw Industry wants that there should be
materials. Hence so long as the industry customs duty differential of 5% between
is vigilant against large scale dumping of CTV, colour picture tube and colour glass
television sets from countries like China, parts to encourage value addition.
these measures are largely positive for the Industry also wants that excise duty on
industry in bringing down the cost. The non-dual use components of B&W TV i.e.
customs duty and excise duty on B&W picture tube, B&W glass shell, B&W
components has been reduced to 20% and deflection yoke and mechanical tuner
16% respectively. But this is unlikely to should be reduced from 16% to 8%, i.e. at
be major benefit because of the relatively par with B&W TV.

5. INDUSTRY ANALYSIS- TECHNOLOGICAL
CHANGES
The manufacturing of electronic items
relate mainly to assembly line operations.
Since this is a technology driven industry,
companies need to constantly improvise,
innovate and customise their products.
Coloured cabinets, headphones, 3-D 360
degree sound technology and e-mail TV,
plasma TV and golden eye technology are
just a few examples.
Till now, TV makers have played with one
or more of the three elements of a TV-
picture, sound, features- on an analog
signal. So one had a sharper picture with
Philips’ Powerchip, flatter screens in
plasma TV, increased channels in
hyperband, programme summary on
screen, cordless headphones, top dome
speakers and Nicam stereo sound inputs.
Digital gives marketers a fresh platform
to play with all of these features. The
promotion strategies and product features
of a majority of the players have
emphasised more and more on the latest
technology factors. All the players
whether domestic or multinational are
introducing technologically advanced
and feature rich products. Salora
International launched high-end
televisions under brand name “Promax”
which had 250-programme memory, 250
personal preference channels and a video
lock to block undesirable content. Sony
(Wega series) enjoys good brand equity,
mainly because of its Trinitron picture
tube. Samsung flat TV models are
equipped with the 100 Hz scan, which
Gupta, Indian Television Industry... 207
reduces flickering of the screen and
visibility of scanning lines. These are also
equipped with game mode, a child lock
and a sleep timer. LG Flatron models have
features like PIP-2 tuner and woofer with
350 watts and 3 graphic games. Another
model that the company is launching has
swing speakers, advanced multi window
PIP, a digital virtual Dolby, a PC and
teletext. BPL has also launched flat TV
models under sub brand name “matrix”
which have all the features that come with
systems of this range. Philips India has
launched 29 inch TV incorporating its
pioneering digital natural motion
technology and priced it higher than
industry levels following the strategy of
low market share but high revenues.
Hence the market players are investing in
R&d and improving technology on a
constant basis to offer innovative
products. In the fiscal 2004-05, the market
for high-end televisions witnessed a
phenomenal growth over 2003-04, though
the market base still remains very small.
The market for projection TVs is estimated
at 13, 500 units followed by plasma TVs
and LCD TVs at 6, 700 and 2, 850 units
respectively. The projection TV market is
highly competitive. At present, Sony leads
the projection TV segment with sales of
4,000 units in 2004-05. LG occupies the
second position with sales of 3000 units.
Samsung and Philips closely follow with
sales of 2,500 and 2,200 units respectively.
Onida and Toshiba are then other major
players in this segment. LG is the leader
in plasma TV segment with a market
share of 30 per cent, followed by Samsung
208 Vilakshan, XIMB Journal of Management
at 22 per cent. LG and Samsung have been
engaged in competition for numero uno
position for LCD TV, which has also been
growing significantly. For the next few
years, the markets for high-end televisions
will continue to grow phenomenally and
it is estimated that by the end of 2007 the
market for high-end TVs would cross
100,000 units milestone.
In view of the higher technical nature of
television and rising expectations of
consumers in general, marketers now
need to strengthen the service network
since there is a paucity of service facilities
and consumer dissonance is built around
service facilities. Most Indian consumers
are techno phobic and are uncomfortable
with instruction manuals. Thus assurance
of comprehensive service to these
consumers is a strategy that a number of
these marketers use effectively to sell.
6. GROWTH AND VOLA TILITY OF MARKET
The last few years have seen a quantitative
and qualitative change in TV technology
and software. With the advent of several
local and foreign satellite channels,
demand for CTVs has seen a rise. Exhibit
12 shows the increase in sales value for
CTVs over the years. Aggressive and
innovative marketing strategies and
technological advances have led to strong
brand differentiation and prices. In the
process the industry has evolved with
products available at different price
points at all levels. This process was also
facilitated by growth in production in the
organised segment and domestic
availability of multinational brands due
to lowering of import duties and other
liberal measures. The television industry
appears to have two clearly differentiated
segments. The MNCs have an edge over
their Indian counterparts in terms of
technology, aggressive marketing
strategy, economies of scale in branding
through international events and
associations combined with a steady flow
of capital. The sale of TVs also tends to be
event driven. During the Cricket World
Cup in 1999, CTV sales recorded a
phenomenal rise of 40-50% after which the
industry has grown at around 10-12%.
Rural market is expected to grow by 25%
compared to expected growth of 7-10%
for urban area. One of the notable
developments have been that the rate of
growth in production has been more in
terms of quantity or in volume terms
rather than the growth in value terms.
This has happened because of the
constantly falling prices over the years
due to competition among major players,
aggressive marketing strategies and
declining import tariffs. With penetration
levels being deplorably low, the industry
is focusing on semi urban and rural
segment for scaling up demand. For basic
models, the market is reaching saturation
limit in urban market, and hence value
addition, differentiation and superior and
new product introduction only can bring
high growth in urban areas. Exhibit 13
indicates market segmentation region
wise. Despite the robust volume growth
expected over medium to long term, the
profitability of CTV players is likely to
remain strained. The reduction in raw

material costs, the declining CPT prices
and chassis costs will be partially offset
by the increase in selling costs resulting
from the intense competition.
7. CONCLUSION
The variables affecting the industry with
regard to each of the five forces have been
categorized as favourable or adverse
(Exhibit 14). 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.
• Brand building will be important, so
as to ensure brand preference.
Marketers will have to strategise to
Gupta, Indian Television Industry... 209
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.
LG and Samsung are likely to retain
top positions
• 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. For instance,
LG has launched Cineplus, a low
priced TV to compliment its brand
Sampoorna in the same category.
• 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.
LG has attempted it by sponsoring
ICC Cricket World Cup 2003.
210 Vilakshan, XIMB Journal of Management
Marketers need to generate demand
and let dealers service it, rather than
shunting products down the
distribution system. This will require
close consumer proximity.
• The industry has a number of players
but there will be shakeout triggered
by ever increasing intensity of
competition. Some of the national
brands may exit the market within
few years. Unorganised CTV brands
like Oscar, Weston and Texla have
almost exited the market. Rural
consumers will play an increasingly
important role and that sales from
these markets are expected to exceed
75% of the industry’s total turnover
in future. CTV companies need to
launch low priced models and tap the
switch over of black and white TV
buyers to colour televisions. The
rationalisation of sales tax and
additional excise levies has made
black and white sets highly unviable.
CTV companies need to price
competitively and get into organized
distribution in rural and semi-urban
markets. Companies operating in
higher end segments will have to
challenge commoditisation. Market
shares are expected to consolidate.
Leading players like LG and
Samsung are likely to continue to
occupy the top slots, competition is
expected to intensify among the
players vying for third to sixth slot-
Mirc, Videocon, Philips and Sansui.
The recent entry of players like
Hyundai and Haier is not expected
to affect significantly the market
shares of leading players.
• 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 2006—7 to 2010-11. The
demand for 21-inch and 29-inch CTVs
is likely to be robust. Despite the
projected growth momentum in sales
volume, sales value growth is
expected to remain low at 4.5 per
cent. But the price reductions will be
lower than have been in the past and
the sales volume will be high.
Average realisation is likely to go
down as prices of 21-inch and 29-inch
Flat CTV should decline in future.
There is a likelihood of the 21-inch
FCTVs being cannibalised by the 29-
inch FCTVs by 2009-10 when the
price differential between the two
segments is expected to reach Rs
5000-6000. Market leaders like LG,
Samsung, Mirc and Videocon would
be future beneficiaries since their
current product prices are lower than
industry average (CRIS INFAC,
2006). The demand for FCTV will rise
as has been the trend since 2001
(Exhibit 15).
• The share of 21-inch and 29-inch
FCTV is likely to increase to 75-80

percent of total CTV sales by 2010-11.
Players like, Samsung, LG, Sony and
Mirc who are focusing on these
categories and pricing them
competitively are expected to gain in
the long term. The reducing price
differential, the prime reason for the
shift to FCTVs is expected to narrow
further, almost wiping out the market
for the 20-inch and 21-inch
conventional CTVs by 2010-11.
Regional and small players like
Crown, Salora, Texla, Oscar and
Beltek who sell primarily
conventional and small sized CTVs
are expected to lose further. If LG
continues with its aggressive
marketing and distribution, it is likely
to retain the top slot with market
share of 25-30 per cent. Although LG
commands a clear lead, further fast
paced growth in market share would
be restricted a s the industry players
like Samsung, Onida, Videocon,
Philips and Sony would probably
move towards similar pricing and
product mixes. Lead players like
Samsung and Onida differ on market
shares by mere 350-400 basis points,
hence the situation between the two
is likely to remain competitive. Entry
of new players like TCL, Haier, and
Hyundai etc will intensify
competition but such players will
Gupta, Indian Television Industry... 211
have to establish their presence
through a robust distribution
network, which can only be built over
a period of time (CRIS INFAC, 2006).
REFERENCES
Centre for Industrial and Economic Research
(CIER) and INTECOS (2002), Market Forecast
and Indicators: emerging market in India 2002-
2012, New Delhi: Industrial Techno-
Economic Services P Ltd, pp 798
Centre for Monitoring Indian Economy (CMIE),
(April 2004), Corporate Sector
Centre for Monitoring Indian Economy (CMIE),
(May 2004), Industry: Financial Aggregates and
Ratios
Centre for Monitoring Indian Economy (CMIE),
(July 2004), Industry: Market size and shares
CRIS INFAC Colour Television Annual Review
(2006), CRISIL Product & Services:
www.crisinfac.com
Day, G.S. (1990), Market Driven Strategy: Process
for Creating Value, The Free Press: NY, pp 110-
123, Financial Express, Mumbai, May 2001
Porter, M.E. (1980), Competitive Strategy:
Techniques for Analyzing Industries and
Competitors, The free Press: NY, pp 129-130
Project Report (2002) on “Analysis of Colour
Television Industry” submitted by students
of MICA in partial fulfillment of the
requirements of Strategic Marketing course
ISI Emerging Markets: www.securities.com
India Infoline: www.indiainfoline.com
212 Vilakshan, XIMB Journal of Management

EXHIBIT 1
Consumer Electronics Industry Performance

Chart 1: Debt/Equity

2
Debt/Equity

1.5 1.64
1.19 1.18 1.35
1 1.14
0.5
0
1998-99 1999-2000 2000-01 2001-02 2002-03
Years

Chart 2: PAT/Net Worth

15
PAT/Net Worth

10 10.3 10.2
7.3 7.6
5
0
1998-99 1999-2000 2000-01 2001-02 -3.3
2002-03
-5
Years

Chart 3: Operating Profit/Net Sales

Operating profit/

10
Net Sales

7.8 7.2
6.6 6.4
5 4.4

0
1998-99 1999- 2000-01 2001-02 2002-03
2000
Years

Chart 4: Net Sales/Total Assets

Net sales/Total

1.3 1.27
Assets

1.2 1.22
1.16 1.13
1.1 1.09
1
1998-99 1999- 2000-01 2001-02 2002-03
2000
Years
 Gupta, Indian Television Industry... 213

EXHIBIT 2
Industry Analysis Model

Threat of New
entrants

Government &Regulatory Technological

Intervention Inter-firm Changes
rivalry

Bargaining Bargaining
power of power of buyers
suppliers

Threat of substitutes
Growth & Volatility of Market

(Source: Day, G S, 1990, Market-Driven Strategy: Process for creating Value, Free Press: NY)

EXHIBIT 3
Realisation and Sales Value Market Share (2005-06)

Lead Players Average Realisation Market share

LG 8690 26.4
Samsung 9237 15.1
Onida 9234 11.0
Videocon 8190 7.9
Philips 9163 7.4
Sony 15439 9.4
Industry Average 8814 100
Source: CRIS INFAC Colour Television Annual Review, 2006, CRISIL Product & Services
EXHIBIT 4
CTV Industry Demand over the years
Period Growth Rate (%)
1985 to 1989 15.0
1990 to 1994 3.0
1995-96 to 1999-00 29.0
2001-02 to 2004-05 11.0
2004-05 to 2005-06 7.1
Source: CRIS INFAC Colour Television Annual Review, 2006, CRISIL Product & Services
214 Vilakshan, XIMB Journal of Management

EXHIBIT 5
Penetration of CTVs (per 1000 households)
Urban Rural
1992-93 16.0 1.6
1995-96 21.2 2.6
1999 23.5 2.9
2003-04 Composite-110
Target 2008 Composite 225
(Source: Economic Times 28 April 2001: NCAER for first two rows, ORG-MARG for third
row and ISI Emerging Markets for last two rows; figures not strictly comparable)

EXHIBIT 6
Cost Structure of Television Industry (Rs Crore)
1998-99 1999-00 2000-01 2001-02 2002-03
Net Sales 7885.0 8783.4 10809.2 10947.3 12472.8
Raw Material & Stores 5907.9 6562.5 7974.0 7723.2 8934.4
Power & Fuel 55.2 55.0 59.9 60.4 82.3
Wages & Salaries 276.9 298.3 359.0 360.9 403.9
Interest 358.9 407.1 434.5 512.4 535.1
Depreciation 217.2 209.0 240.9 313.8 629.6
Value added 1921.9 2165.9 2775.3 3163.7 3456.1
Fixed Charges 853.0 914.4 1034.4 1187.1 1568.6
FC/VA 44.4 42.2 37.3 37.5 45.4
Selling Costs 567.0 614.6 1130.9 1096.9 1517.7
(Source: CMIE Industry: Financial Aggregates & Ratios May 2004)

EXHIBIT 7
Dealer Efficiency of key CTV Players EXHIBIT 8
(2004-05) Size Variation
Players Sales per Dealer Type Share (%)
14” 21
LG 1182
Samsung 809 20” 33
Onida 547 21” 42
Videocon 391 25” 2
Sansui 379 29” 2
Sony 372
Philips 305 (Source: Centre for Industrial and Economic
Research (CIER) and INTECOS (2002), Market
Source: CRIS INFAC Colour Television Annual Forecast and Indicators: emerging market in
Review, 2006, CRISIL Product & Services India 2002-2012)
 Gupta, Indian Television Industry... 215

EXHIBIT 9 EXHIBIT 10
Player-wise focus on Price CTVs: Price vs Demand
Low Medium High Nominal Demand
LG Y Y - Price* (Rs) (million units)
Samsung Y Y - 2000-01 12,200 5.1
Onida - Y -
2001-02 10,000 5.4
Videocon Y Y -
2002-03 9000 7.3
Sansui Y Y -
Philips - Y Y 2003-04 8500 6.7
Sony - Y Y 2004-05 8000 7.8
2005-06 7500 8.4
Source: CRIS INFAC Colour Television Annual
Review, 2006, CRISIL Product & Services *Nominal Price is the street price of 21” CTVs
Source: CRIS INFAC Colour Television Annual
Review, 2006, CRISIL Product & Services

EXHIBIT 11
Trends in Market Shares: 1997-2001
Television Picture Tubes (per cent)
1998-99 1999-00 2000-01 2001-0
Samtel Color 32.95 30.59 29.71 31.62
L G Hotline CPT 17.85 17.75 20.05 20.26
BPL Display Devices 7.62 11.51 13.07 17.91
JCT Electronics 13.08 19.05 18.37 11.26
Hotline Teletube & Components 2.70 2.02 2.06 3.20
Samtel (India) 5.35 3.55 2.79 2.97
Prakash Industries 4.79 3.09 2.47 2.50
Rama Vision 2.42 2.05 1.87 1.68
Bestavision Electronics 1.29 0.50 0.15 0.16
Import 9.93 9.89 9.44 8.45
Herfindahl Index of Concentration 0.170 0.178 0.181 0.189
Source: CMIE, Industry: Market Size & Shares, August 2003)

EXHIBIT 12
Sales Value for Television including Spares & Kits
(Rs. Crore)
Year Sales Value
2000-01 7500.0
2001-02 7500.0
2002-03 8000.0
2003-04 8500.00
2004-05 9000.00
(Source: CMIE, Industry: Market Size & Shares, Feb 2006)
216 Vilakshan, XIMB Journal of Management

EXHIBIT 13
Market Segmentation
Segment Share (%)
North 28
East 17
West 29
South 26
Rural 40
Urban 60
(Source: Centre for Industrial and Economic Research (CIER) and INTECOS (2002), Market
Forecast and Indicators: emerging market in India 2002-2012)

Forces acting on Industry
Degree of Rivalry
Threat of Entry
Threat of Substitutes
Buyer Power
EXHIBIT 14
Favourable Adverse
• Healthy growth rate • Fragmented industry
• High brand identity • High fixed cost/ value
added
• High Corporate stakes
• Low economies of scale • Limited access to
• Brand salience distribution channels
• High capital investment • Liberalization
• Unique infotainment • Low switching cost
• Fragmented buyers • High price sensitivity

Supplier Power • Reduction in • High input costs

import duty
• Feasible backward • Technology driven
integration supplies

EXHIBIT 15
CTV Industry Composition- Conventional CTVs v/s Flat CTVs
Conventional CTVs Flat CTVs
(per cent) (per cent)
2001-02 97.3 2.7
2002-03 92.4 7.6
2003-04 85.9 14.1
2004-05 71.4 28.6
2005-06 53.1 46.9
Source: CRIS INFAC Colour Television Annual Review, 2006, CRISIL Product & Services
 Perspective

Organisational Life Cycle: Leadership

Roles and Competencies*
Manu Parashar1

Abstract
Life cycle metaphor has been extensively used to describe the birth, growth, maturity and eventual
decline of organisations. The life cycle model identified in this paper has four stages - inception, growth,
maturity and elaboration\renewal. In each of these stages organisational priorities are different. Leadership
roles and competencies need to evolve to match organisational priorities in each of the evolutionary
stages. These priorities lead to different leadership roles for each stage. Four roles are identified:
entrepreneur, coordinator, integrator and visionary. Competencies are attached with each of these roles.
The competencies are divided into strategic\ transformational and operational competencies. A leadership
development approach to developing these competencies is suggested. The main contribution of this
work is to link literature from organisational life cycle, leadership competencies and leadership development
streams. The framework developed here would be especially useful in fast evolving organisations. Given
that competencies have a learned element, leadership development can play a major role in helping
organisations to have effective leadership in evolving conditions.

1. INTRODUCTION and on creativity. The second type was

The notion that in different stages of
organisation different types of leadership
is required has been around for some
time. Chandler (1962) identified two types
of leadership that are required in different
stages of organisation growth. He called
the type required in the beginning of an
organisation life as ‘empire building’ and
the type required in the latter part of the
organisations life as ‘organisation
building’. In the first type the emphasis
was on growth, getting resources to grow
focused around building structures,
processes and systems that would ensure
long term survival of the organisation. A
useful metaphor that has been used in
literature has been that of organisational
life cycle (OLC). A number of authors
have used this metaphor (Ichak, 1979;
Mintzberg, 1973; Gailbraith, 1982;
Greiner, 1972; Quinn and Cameron, 1983;
Smith et. al. 1985; Mintzberg, 1984;
Cameron and Whetten, 1981) to describe
the birth, growth, maturity and eventual

* Received July 10, 2006

1. Fellowship (Doctoral) Student, Indian Institute of Management, Bangalore, India,
e-mail: parasharm04@iimb.ernet.in
218 Vilakshan, XIMB Journal of Management
decline of organisations. The basic
features of these models have been
changes that occur in organisations in a
pattern of developmental stages; these
stages happen sequentially; have a uni-
directional progression not easily
reversed and involve a wide range of
organisational processes and activities
(Quinn and Cameron, 1983).
The roles and competencies expected of
the leadership in these developmental
stages would be different depending on
the needs of the organisation. OLC
conceptualizations to a certain extent have
been used to determine organisations
structures and leadership roles that
organisations need at each evolutionary
stage. However, this literature has not
been translated into implementable
implications for organisations. This paper
seeks to achieve an integration between
the OLC\ leadership roles literature and
the competency literature, which would
be further integrated to the leadership
development literature. Competencies by
definition have a learned component to
them and are amenable to leadership
development. The framework of
competencies developed for each
evolutionary stage would be of great
importance to fast evolving organisations.
This is extremely important in the current
context where OLCs are getting shorter.
For example Google Inc. launched in 1998
with $100000 capital (http://
www.google.com/intl/en/corporate/
history.html) in less than 8 years has risen
to a market capitalization of $128 billion
(NASDAQ on 30/01/2006 share price
quoted at $426.82).
This paper would survey representative
literature on the topic of organisational
life cycle (OLC) and develop an
understanding of the needs of the
organisation in each of the stages. On the
basis of these organisation needs the roles
and competencies of leadership required
to fulfil these needs would be developed.
The outcome of this exercise would be a
leadership development programme
based on the leadership roles and
competencies required in each of the
developmental stages. The leadership
development literature looks at largely
two ways of leadership development,
through training or through experience.
Yukl (2002) speaks of three distinct ways
of developing leadership competencies.
These are leadership training,
developmental activities and self help
activities (Yukl, 2002). This framework
would be used to develop a leadership
development programme for various
stages in the life-cycle of an organisation.
2. ORGANISATIONAL LIFE CYCLE
There are multiple models of
organisational life cycle. Adizes (1979)
laid out seven stages of organisational
development. These were courtship stage;
infant organisation; go-go stage;
adolescent stage; prime stage; mature
stage and aristocratic stage. He suggested
a constellation of four roles that would
result in effective management at each
stage. These were production role
(produce results on the basis of goals);
administrative role (timely and
appropriate decision making);

entrepreneurial role (adaptation through
creativity and risk taking) and integration
role (team building role). The roles were
presented as a constellation (PAEI). The
roles that dominated in any stage had
capital letters. In the early stages
production and entrepreneurial roles
dominated and in the latter stages the
administrator and integration roles.
Mintzberg (1973) spoke of three stages of
development in any organisation. The
first stage is the inception stage where the
entrepreneurial mode characterized by
active search for new opportunities
dominates. The second stage is the growth
phase where the analyst plays a major role
in strategy making and the focus is on
systematic decision making and
integration. The last stage is maturity
where the adaptive mode (‘science of
muddling through’ as Mintzberg puts it)
dominates. Smith et al (1985) also used a
three stage model comprising inception,
high growth and maturity. They looked
at the priorities that the top management
would have at each of these stages. At
inception and maturity the technical
priority (concern with efficiency and goal
achievement) is important. The
organisational coordination priority
(concern with building organisational
synergies) dominates in the high growth
phase and political support priority
(maintaining personal power and
support) is important at the maturity
stage.
Another interesting model of
organisational life cycle is from Gailbraith
Parashar, Organisational Life ... 219
(1982). This is a five stage model
comprising the stages of prototyping,
model shop, start-up natural growth and
strategic manoeuvring. For leadership
roles sports metaphor is used. The roles
are quarterback, player\coach, coach,
manager and strategist respectively.
Greiner (1972) also came up with a five
stage model comprising creativity (focus
on creating products and markets),
directive (sustaining growth through
directive leadership), delegation
(decentralized structure for continued
growth), coordination (formal systems to
achieve coordination) and collaboration
(inter-personal and team management).
Quinn and Cameron (1983) after
reviewing nine models of organisation
developed a four stage model of
organisational life cycle. The first stage
was ‘creativity and entrepreneurship
where the focus was on marshalling
resources, creating an ideology and
forming an ecological niche. In the second
stage the ‘collectivity’ stage focus was on
building high commitment and cohesion
and on face to face communication and
informal structures. The ‘formalization
and control’ stage comprised putting
procedure and policies in place,
increasing conservatism and reduced
flexibility. The last stage was ‘elaboration
of structure’ where decentralization,
domain expansion and renewed
adaptability are key elements. Mintzberg
(1984) used a model comprising four
stages. The four stages are stage of
220 Vilakshan, XIMB Journal of Management
formation; stage of development, stage of
maturity and stage of decline. The major
difference from Quinn and Cameron is the
last stage, Mintzberg sees it as the stage
of decline while the Quinn and Cameron
see it as a stage of renewal. Miller and
Friesen (1984) after an extensive review
postulate five stages birth, growth,
maturity, revival and decline. However,
the characteristics of their decline stage
are very similar to maturity. An
organisation after maturity will either go
into decline or will attempt a revival.
Overall if you closely look at the models
presented above then the life cycle models
broadly have four stages. The first stage
is the inception stage that is characterised
by entrepreneurial activity with the firm
trying to find its ecological niche. The
second phase is the phase of rapid growth
where attendant problems administration
and coordination come in. In the maturity
phase the focus shifts to developing
efficiencies, building synergies and
integration of strategies and systems. The
last stage the author chooses to
characterize as the renewal\elaboration
stage where the organisation looks for
new opportunities and monitors the
external environment to renew itself.
These four stages will be used to decipher
organisational priorities at each of these
stages. These priorities will then translate
into leadership imperatives. These
imperatives would then be translated into
roles that leadership needs to play and the
competencies it needs to deploy.
3. ORGANISATIONAL LIFE CYCLE:
ORGANISATIONAL PRIORITIES &
LEADERSHIP ROLES
Organisational priorities would differ at
every stage in the organisational life cycle.
Leadership roles would vary as per the
organisational priority at that moment.
Leadership role is said to emerge from the
total organisational characteristics
(Moqvist, 2002) which would vary in
different stages of the organisation.
In the inception stage the key priorities
would be creativity and entrepreneurship
(Quinn & Cameron, 1983; Adizes, 1979);
creating products & markets (Greiner,
1972), acquisition of resources (Quinn &
Cameron, 1983) and effiency (Smith et al
1985). The leadership here has to be
extremely creative as well as has very little
slack available to it. Also required is a risk
taking and ability to explore new product-
market spaces. Some of the roles
suggested in the literature are:
Entrepreneur (Mintzberg, 1973, Adizes,
1979); Key Player (Gailbraith, 1982) and
Producer (Adizes, 1979). In summary the
role here is clearly that of an entrepreneur.
In the high growth stage the organisation
would be growing at a rapid pace and
would require increasing amounts of
formalization and centralization.
Processes and systems hitherto not
needed would need to be put in place. The
key organisational priorities would be
coordination (Smith et. al. 1985);
commitment and cohesion (Quinn &
Cameron, 1983), systematic decision

making (Mintzberg, 1973) and
administration (Adizes, 1979). Here
coordination between continuing on the
path of growth and developing an
efficient organisation would be required.
Some of the roles defined in the literature
are: Enterpreneur-Administrator (Adizes,
1979); Coach (Gailbraith, 1982) and
Planner (Mintzberg, 1973). In sum, the
role seems to be that of a coordinator.
In the maturity stage the growth slows
down, the firm starts to operate in a very
competitive market and the slack
disappears (Smith et al, 1985). The focus
then turns to efficiency. The key
organisational prioties at this point are:
Integration (Adizes, 1979; Greiner, 1972);
efficiency through planning and control
(Smith et al, 1985) and administration
(Adizes, 1979). The leadership role here
is to deliver efficiency by integrating
various systems, processes and strategies
to discover synergies. The roles that the
literature describes in this stage are:
Administrator-Integrator (Adizes, 1979)
and Strategist\ manager (Gailbraith,
1982). Overall, the role here is that of an
integrator.
In the renewal stage the firm faces crisis
of survival. Growth slows down or starts
to decline. The organisational priorities at
this stage are: Domain expansion,
renewed adaptability, environment
monitoring (Quinn & Cameron, 1983) and
innovation (Miller and Friesen, 1984). The
challenge here is of two kinds, to be able
to maintain the current business and run
it efficiently while looking for new
Parashar, Organisational Life ... 221
opportunities. This is the time for change.
The leadership role required here is that
of a change agent and a strategist. The
overall role is that of a visionary who can
handle the ambiguity of this phase and
provide forward looking vision.
4. ORGANISATIONAL LIFE CYCLE:
LEADERSHIP COMPETENCIES
“Competencies consist of knowledge,
skills and other behavioural dispositions
necessary to reach desired standards of
job performance, and these are developed
through formal education and training or
informal work experience” (Nybo, 2004).
Organisations can also have competencies
in terms of abilities or capabilities. If a
competency view of leadership is taken,
leadership becomes a wholly learned skill
(Kroek et al, 2004). This brings leadership
development to the centre of leadership
in organisations. Competencies can be
then matched to leadership roles and
programmes put in place to develop
them. This is where this paper seeks to
contribute.
There is a lot of literature on leadership
competencies. However the challenge is
to identify competencies that will allow
the leadership to play the role required
in each stage of organisational
development.
Competencies both in the technical area
and leadership competencies are seen as
important ingredients of leadership
(Moqvist, 2002). The leadership
competencies identified by Moqvist (2002)
are communication ability, delegation
222 Vilakshan, XIMB Journal of Management
ability, technical competence, managing
customer relations, dealing with customer
expectations and formulating a vision.
Buene and Tubbs (2004) identified the
following as the most important global
leadership competencies: communication
skills, motivation to learn, flexibility,
open-mindedness, respect for others, and
sensitivity. De Vries (2005) identifies
twelve leadership competencies
including: visioning, empowering,
energizing, designing and aligning,
rewarding and feedback, teambuilding,
outside orientation, tenacity, global mind-
set, and emotional intelligence. He has
also included resilience to stress and life
balance as competencies (De Vries, 2005).
Scholtes (1999) identified six leadership
competencies including, thinking systems
and leading systems, understanding
variability, leading learning,
understanding human behaviour,
interactions and interdependencies and
giving the organisation direction and
focus. Krejci and Malin (1997) identified
the following competencies: effective
communication, effective conflict
resolution, accurate problem diagnosis,
systems thinking, personal power,
effective group dynamics, change agency,
overcome oppressed group behaviours,
decision making\ reframing, articulation
and enactment and impact.
There have been attempts at grouping
competencies to make them more useful
in varied organisational situations. Lado
and Wilson (1994) grouped organisational
competencies into managerial, input
based, visionary and output based
competencies. In an organisational setting
3M has looked specifically at leadership
competencies grouping them into
visionary, essential and fundamental
competencies (Alldredge and Nilan,
2000). However, this classification does
not take into consideration the fact that
organisations are continuously evolving.
Here, the attempt would be look at a
simpler way of classifying competencies
and then overlaying them on evolutionary
stages. Looking at Allredge and Nilan’s
(2000) classification, the competencies can
basically be compressed into two
categories:
• Strategic\ transformational:
Competencies that drive high level
organisational priorities. These
priorities emerge out of the outlined
strategic vision of the organisation.
• Operational: These are competencies
that drive operational efficiencies of
the organisation.
For effective leadership to exist in an
organisation, competencies need to be
built in both these categories. An attempt
has been made to identify competencies
for each of the stage of organisational de-
velopment. These are the divided into the
two categories of strategic\ transforma-
tional and operational. These competen-
cies have been short-listed on the basis of
leadership roles and organisational priori-
ties (see Table 1).
 Parashar, Organisational Life ... 223

Table 1: Leadership roles and competencies

R e n e w a l \
Inception High Growth Maturity Elaboration
Characteristics
Growth Inconsistent but Rapid Positive Slowing S l o w i n g \
improving (Smith (Smith et al, 1985) Declining
et al, 1985)
Processes
Informal
(Adizes, 1979 Moderately formal; Very Formal; C o n s e r v a t i v e
(Smith et al, 1985) systems & planning & (Miller and
procedures (Smith control (Smith et Friesen, 1984)
et al, 1985) al, 1985)
People Generalists (Smith Specialists (Smith et S t r a t e g i s t s \ Status Quo
et al, 1985) al, 1985) planners (Smith et seekers (Adizes,
al, 1985) 1979)
Structure No formal Centralised formal D e c e n t r a l i s e d
structure (Smith et (Smith et al, 1985) Bureaucratic
formal (Smith et (Miller and
al, 1985; Miller and al, 1985)
Friesen, 1984) Friesen, 1984;
Adizes, 1979)
Organisational Creativity & entre- Coordination Integration Domain expan-
Priorities preneurship (Smith et. al. 1985); (Adizes, 1979; sion, renewed
(Quinn & commitment and Greiner, 1972); adaptability, en-
Cameron, 1983; cohesion (Quinn & efficiency vironment moni-
Adizes, 1979); cre- Cameron, 1983), t h r o u g h toring (Quinn &
ating products & systematic deci- planning & Cameron, 1983),
markets (Greiner, sion making control (Smith et Innovation
1972), acquisition (Mintzberg, 1973); al, 1985); (Miller and
of resources administration administration Friesen, 1984)
(Quinn & (Adizes, 1979) (Adizes, 1979)
Cameron, 1983),
effiency (Smith et
al 1985)

Leadership Entrepreneur Enterpreneur- Administrator- Change agent;

Roles (Mintzberg, 1973, Administrator Integrator strategist
Adizes, 1979); (Adizes, 1979); (Adizes, 1979),
Key Coach(Gailbraith, Strategist\
Player(Gailbraith, 1982); Planner manager
1982) ; Producer (Mintzberg, 1973) (Gailbraith,
(Adizes, 1979) 1982)
224 Vilakshan, XIMB Journal of Management

Synthesised Entrepreneur Co-ordinator Integrator Visionary

Leadership
Role
Leadership
Competencies
Strategic\ Risk taking, Team building, Systems think- Political savvy
Transforma- opportunity empowering ing; understand- vision, risk
tional spotting ing interactions taking, change
and interdepen- agency
dencies

Operational Resource Delegation, Conflict Problem

mobilisation, designing systems
technical and processes,
competence effective group
dynamics
• Inception:
• Strategic\ transformational: Risk
taking, opportunity spotting,
• Operational: Resource
mobilisation, technical compe-
tence
• Growth:
• Strategic\ transformational: Team
building, empowering,
• Operational: Delegation, designing
systems and processes, effective
group dynamics
• Maturity:
• Strategic\ transformational:
Conflict resolution, systems
thinking
• Operational: Understanding
interactions and interdependencies
• Elaboration\Renewal:
• Strategic\ transformational:
Political savvy, vision, risk taking,
change agency
• Operational: Problem diagnosis
resolution diagnosis
These competencies are the ones that any
leadership development programme
should seek to address. These leadership
competencies, if inculcated, could result
in superior and effective performance for
organisations. The next section looks at the
various leadership development
paradigms in operation today.
5. LEADERSHIP DEVELOPMENT
Leadership has been defined differently
over a period of time. In the recent years
Kotter (1990) has sought to differentiate
it from management by defining it as
something that is aimed at generating
change by developing a vision of the
future and strategies for making requisite
changes to fulfil the vision.
Communicating, explaining vision and
motivating\inspiring people are seen as
key ingredients. Yukl (2002) provides a
broader definition. It is seen as a “process
of influencing others to understand and
agree about what needs to be done and
how it can be done effectively, and the
process of facilitating individual and

collective efforts to accomplish shared
objectives” (Yukl, 2002:7).
Leadership development has many
dimensions to it. If we strictly stay with
Yukl’s definition of leadership as an
influencing process, things like
interpersonal intelligence (Gardner, 1999)
become important. The interpersonal
intelligence consists of social skills and
social awareness (Zacarro, 2002). This is
where the difference between leader
development and leadership
development comes in. In case of leader
development the emphasis is on
knowledge, skills and abilities associated
with formal leadership roles (Day, 2001).
While in leadership development
emphasis is on building and using
interpersonal competence (Day, 2001).
Dixon (1993) says that leadership
development involves building the
capacity for groups of people to learn their
way out of problems that could not have
been predicted. Day (2001) in keeping
with the social view of leadership as an
influencing process puts the emphasis on
building and using inter-personal
competencies as far as leadership
development is concerned.
There are various views on the way
leadership development should be done.
“Research suggests that successful
performance in most forms of work
endevours can be attributed to experience
and coaching, rather than simply to in-
born talent or early life experiences”
(Conger, 2004:137). Experience is seen as
an important contributor to leadership
development. Pernick, (2002) believes that
Parashar, Organisational Life ... 225
as far as possible leadership development
should occur on the job not away from it.
Feedback (Smither et. al., 2005) , 360
degree review (Conger, 2004); stretch
goals (Kerr and Landauer, 2004), group
coaching (De Vries, 2005), experience
(Kerr, 2004), action learning (Fulmer and
Wagner, 1999) are seen as some of the
important on job components of
leadership development. Day (2001) sees
the following as the key inputs to
leadership development: 360 degree
feedback, coaching, mentoring, networks,
job assignments, and action learning.
McCall (2004) sees only a limited role for
training. In his conceptualization,
experience leads to leadership
development depending on individual
competency. Training is just a way to build
on experience by reflecting and making
better sense of experience, substituting
experience that is not easily available, and
providing experiences not available online
(McCall, 2004). This is an important view
because it provides a clear role for training
in leadership development.
Yukl (2002) after an extensive literature
review summarized leadership
development methods into three types:
• Formal Training comprising
behaviour role modelling, case
discussion, simulation and
management games
• Developmental activities variety of
tasks & assignments, multisource
feedback, challenging assignments,
job rotation, action learning,
mentoring and coaching
226 Vilakshan, XIMB Journal of Management
• Self Help activities like practitioner
books, video tapes and interactive
computer programmes.
The role of experiential development
programmes is seen as the most important
(eg. Day 2001; Pernick, 2002). Training is
seen as a backup to on the job
development to provide experiences that
an organisation cannot easily provide
(McCall, 2004). The next section
specifically looks at these leadership
development techniques in the context of
a fast evolving organisation. An approach
to leadership development is put in place.
6. ORGANISATIONAL LIFE CYCLES A N D
LEADERSHIP DEVELOPMENT
Fulmer and Wagner (1999) believe that
leadership development should have a clear
link to organisational strategy and priorities.
This is of great importance as far as different
life stages of the organisation is concerned.
Fulmer (1997) sees leadership development
making the move from being an unique
event to being an ongoing process. Fiedler
and Macaulay (1998) as also Fiedler (1972)
have propounded that leadership situation
keeps on changing and leadership training
needs to reflect that.
There are two problems with the
leadership development approach using
organisational life cycles. The one big
challenge that is would be faced in the
process of leadership development for
different lifecycle stages in the
organisation would be that of making
people effortlessly change from one set of
roles to another. Conger (2004) has
grappled with the same dilemma:
“There are many topics that could
advance our knowledge of leadership
development, but one of the most
intriguing is whether managers and
executives can develop a leadership
capacity for great versatility in style or
approach. In other words, can managers
vary their leadership styles significantly
given changing circumstances? Or is
leadership style such a product of
personality and ingrained behaviours that
variations in style are confined to
incremental changes?” (Conger, 2004)
However, there is some evidence that
Leadership Development programmes
have a positive impact on competencies
(Krejci and Malin, 1997).
The other big problem is that the
organisation is itself in a state of evolution.
To simplify things let us consider an
organisation that is in a single line of
business that is evolving. Now the problem
is that the organisation cannot provide
online experiences for leadership roles
required in the subsequent stages. This just
leaves out the options of formal training
and self help activities as the mainstay for
leadership development. The only option
open for the organisation for live
experiences is to outplace employees to
companies that are going through the next
phase of organisational development or do
an inter-company coaching or mentorship
programme. The menu that an evolving
organisation can use for leadership
development is as follows:
• Formal Training: Simulation of
consequent life stages, Management
Games, behaviour role modelling,

appreciation of role and
competencies required at various
stages of organisational development
• Developmental Activities: Out-
placement to organisations which are
experiencing subsequent stages of
development, inter-company
coaching or mentorship programme
• Self-Help: Exposure to case studies,
appreciation of role and
competencies required at various
stages of organisational
development.
The job of leadership development in an
organisation that is evolving is quite
tough. The organisational leadership
would find it tough to adjust from one
stage to the other stage. Competencies
that would be valuable in one stage may
turn out to be of little use in subsequent
stages. Also the leadership has to develop
an appreciation for roles and
competencies required in each subsequent
stage and show flexibility of approach.
However, behaviours tend to get
ingrained due to their success in any one
stage. The leadership then has to unlearn
for the next evolutionary stage and re-
learn new ways of doing things.
Training in itself may not be enough to
learn new competencies or change
behaviours. At best training can inculcate
an appreciation for changing requirement
as far as leadership is concerned. It can
provide a tool kit, however usage of the
tool kit is not guaranteed. A change in
behaviours and learning of new
competencies would require online
Parashar, Organisational Life ... 227
experience. Some of it can be lab
experience like simulation, but real life
experience would be required. This is
where the challenge for organisations lies.
A composite developmental programme
will have to be put in place. Training
could be the base of this developmental
programme. However, some radical
solutions like inter-company mentoring
or even outplacement in companies in the
subsequent stages of evolution will be
required. Live online experience makes
for strong learning. This would be
especially required in organisations that
are evolving at a fast pace.
7. CONCLUSION
The approach to leadership development
through organisational lifecycles has led
to important insights. First, leadership
roles have been synthesised for each of the
evolutionary stages based on
organisational priorities. This is an
important step for leadership
development in fast evolving
organisations. Leadership roles provide a
basis for developing a leadership
development plan that is focussed.
Second and the most important
contribution of this paper is in the area of
identifying competencies that go with
each of the leadership roles and
organisational priorities in each of the
evolutionary stages. Competencies can be
developed through a variety of training
programmes and online job experiences.
This makes them an important factor for
leadership development in an
organisation. There is an increasing focus
228 Vilakshan, XIMB Journal of Management
on competency based approach to jobs
and roles in organisations (Alldredge and
Nilan, 2000; Nybo, 2004). The
identification of both strategic\
transformational and operational
competencies extends the application to
leadership in fast evolving organisations.
Third, the integration of the insights from
the OLC, leadership roles and
competencies with the actual process of
leadership development leads to
interesting conclusions. There is an
appreciation that leadership development
in an evolving organisation is a tough task
because behaviours have been ingrained
through feedback in people. This happens
because of positive feedback from success
attributed to certain competencies and
behaviours. These have to be unlearned
before fresh learning can take place.
Fourth, a composite development
programme needs to be put in place to
develop leadership along with the
evolutionary phases. Dependence on just
training might not be enough. A mix of
training initiatives that include simulation
and management games that give an
appreciation of evolutionary phases along
with developmental initiatives that
achieve strong online experience has to be
put in place. The challenge is to develop
leadership through providing them with
experiences that can help them develop
competencies to play the roles required
in the next stage of development.
Overall, in this paper, an integration of
diverse fields of literature is achieved,
thus providing important insights for
organisations. The implications of these
insights are brought out with
recommendations for organisations in the
area of leadership development.
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