Analysis of Videocon’s Operations (Consumer Durable Industry

)

By Joyner Gwendolyn Rodrigues. Student Id – 3769537

Analysis Of Videocon‟s Operations

UNIVERSITY OF WOLLONGONG in DUBAI
College of Business Project report Title: Analysis Of Videocon’s Operations. (Consumer Durables Industry) in partial fulfilment of requirement of the subject: TBS984 – Strategic International Business for the Master in International Business Program Summer One 2010 By Ms. Joyner Gwendolyn Rodrigues Student ID: 3769537 Submitted to: Dr. Arijit Sikdar Date: 30th June 2010

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Analysis Of Videocon‟s Operations

EXECUTIVE SUMMARY
Videocon Industries Ltd is one amongst, India‟s major business conglomerates. The corporation operates in four key sectors, namely – Consumer Electronics and Home Appliances, Display Industry and its component, Colour Picture Tube Glass and lastly Oil and Gas. (Company Profile - Videocon, 2009) This report shall analysing the Consumer Electronics and Home Appliance sector of Videocon Industries Ltd i.e. Videocon‟s Consumer Durable Operations. In the second part of the report circles around the international business environment of the Consumer Durable Industry, in terms of the products available, the market segmentation and demand, and the structure of the industry‟s value chain. The third part of the report will emphasise on the operations of Videocon Industries Ltd, in terms of the strategies followed by the company, the structure of the company‟s value chain and how the company has developed and evolved over the last couple of years. The last part of the report i.e. the fourth part will state how the Global Consumer Durable Industry is changing and the future trend the industry will face. Based on the altering scenario of the industry, conclusions and recommendations have been made for Videocon Industries Ltd – Consumer Electronics and Home Appliances sector, so that the company can have a completive advantage.

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TABLE OF CONTENTS
I. GLOBAL CONSUMER DURABLES INDUSTRY – CONSUMER ELECTRONICS AND HOME APPLIANCES ............................................5
A. Products and Market .................................................................................... 5
a) b) c) Consumer Electronics ............................................................................................................. 5 Home Appliances .................................................................................................................... 5 Market ..................................................................................................................................... 6

B. Integration and Responsiveness in the Industry .......................................... 6 C. Value Chain ................................................................................................. 7

II. VIDEOCON INDUSTRIES LTD ..........................................................9
A. Company Snapshot ...................................................................................... 9 B. Experience Change .................................................................................... 10 C. Operations .................................................................................................. 11
a) b) c) India ...................................................................................................................................... 13 Mexico .................................................................................................................................. 14 Italy ....................................................................................................................................... 15

III.

THE FUTURE STRATEGY .........................................................17

A. Consumer Durable Industry – Consumer Electronics and Home Appliances ................................................................................................. 17 B. Videocon Industries Ltd ............................................................................ 18

IV.REFERENCES .................................................................................19

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I.

GLOBAL CONSUMER DURABLES INDUSTRY – CONSUMER ELECTRONICS AND HOME APPLIANCES
Any manufactured goods purchased by consumers for long-standing and lasting use

are classified as Consumer Durables. They are merchandises which are planned to undergo regular usage for a number of years or longer before substitution are required. (WiseGEEK, 2010) From Cars to Communication Devices, Furniture to Refrigerators can be classified under Consumer Durables. The Consumer Durables Industry can be three main categories specifically    White Good - Refrigerators, Washing Machines, Air Conditioners, Speakers and Audio Equipments Brown Goods - Mixers, Grinders, Microwave Ovens, Iron, Electric Fans, Cooking Range, Chimneys Consumer Electronics - Mobile Phones, Televisions, MP3 Players, DVD Players, VCD Players, etc. (Corporate Finance International, 2007) For the purpose of this study, we shall only analysis the Consumer Electronic Industry along with the Home Appliance industry as Videocon Industries Ltd is engaged in the products of these two types of consumer goods.

A. Products and Market
a) Consumer Electronics Electronics which are used for entrainment and communication everyday are classified as consumer electronics. Televisions, Music Systems, MP3 players, Personal Computers, Telephones, Camcorder etc are considered as Consumer Electronics. b) Home Appliances Electronic that are primary for household use like cooking, cleaning and ventilation are known as Home Appliances. Microwaves, Air Conditions,

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Refrigerators, Washing Machines etc are some of the commodities that come under Home Appliances. c) Market All countries in the world are a market place for consumer electronics and home appliances. There is no specific market place. Similarly they are no specific production place, as manufactured by companies all over the globe. at present the companies from Japan, South Korea and the USA control the International Consumer Electronic Industry and Home Appliance Industry.

B. Integration and Responsiveness in the Industry

Pressures of Global Integration
Cost reduction due to Economies of scale. Convergence and similarities of consumers taste and preference worldwide. Competition face globally by all companies. The entire world a market, so new market for a particular company to enter. Gains access to raw materials and other resources worldwide. Cost reduction by investing in countries according to its comparative advantage. E.g. R&D in Europe while Manufacturing in India or China The learning curve and experience curve

Pressures Of Local Responsiveness
Regional and local channel for distribution. Regional and Local government standards.

Other local norms and standards.

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Each and every industry in the world is faced several pressures that oblige the industry to integrate globally. While there are some pressure that make an Industry to act more locally responsiveness towards a country. The table on the previous page distinguished between pressures which force the Consumer Durable i.e. – Consumer Electronic and Home Appliance Industry to integrate global and to be local responsiveness. From the table it is visible that the Consumer Durable Industry in terms of Consumer Electronics and Home Appliance is more of a global industry. However the products have some minute modification made based on the local regional standards and small demand. E.g. India consumers demand a higher level of cleaning in washing Machines as the whiteness of clothes represent cleanliness, Danes prefer spin dry while Italian and Greek prefer clothes line.

C. Value Chain
When applying the Michael Porter Value Value Chain Analysis by Michael Porter

chain Analysis to many of the firms in the Consumer Durable Industry (Consumer Electronics Appliance) and it Home becomes

visible that the value chain of the industry is completely global. In supporting term of the the

Figure 2.1 (Bua Consulting , 2010)

activities,

companies within this industry have R&D centre across many countries in the world, especially in Japan, Korea and Europe. Many firms Human Resource as most of the companies establish them self as a diverse cultural company catering to the whole world need. Procurement of components is also done true supplier who all spread across the world. Primary Activities of companies in this industry has integrated globally. Manufacturing Plants of most companies are located in countries where labour cost
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are low in Mexico, China, India, Brazil and other low cost areas. The industry has a standardize marketing plan for the entire globe, due to the convergence of customer taste and preferences worldwide. Presently, various companies in the Industry give a global warranty and after sales service.

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II.

VIDEOCON INDUSTRIES LTD
“Experience change”– spot on to its tagline, Videocon Industries Ltd is a company

which positions its self as the a corporation which grows and changes as per the dynamic scenarios of the global environment.

A. Company Snapshot
In 1985 Shri Nandlal Madhavlal Dhoot founded the Videocon Industries Ltd and developed the first coloured television in India. With the passage of time the company got engaged into developing, manufacturing and distribution of colour televisions, along with other home appliances like refrigerators, washing machines, air conditioners, microwave ovens etc. (Hem Securities Limited, 2010) Today Videocon Industries underneath the umbrella of the Videocon Group, has emerged as the 2.5 billion USD company. (Company Profile - Videocon, 2009) The Company, along with its subsidiaries, operates in Consumer Electronics and Home Appliances, Display Industry and its component, Colour Picture Tube Glass and lastly Oil and Gas. The company operates not only from India but also from other main regions in the world. With new horizons on the break, there is merely no pause on the company‟s growth and the world is the Videocon playing field.

Figure 3.1 (Milestone - Videocon, 2009)

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The Group is rated among India‟s Top 15 Business Houses along with being rated as one of the 100 Emerging Giants of the World according to a Boston Consulting Group study in addition to being rated amongst the Top 15 of India‟s „buzziest brands‟ by agencyfaqs in 2010. (Videocon Group, 2010)

B. Experience Change
Within two decades since its incorporation in 1985, Videocon has made many changes in all aspects of it business. The company has changed its logo, appeal and also its corporate strategy in order to adjust to the recent global environment and stay in the race. Videocon changed it logo from the traditional giant solid silver “V" to a more fluid lava type “V”. (Videocon Group, 2009)

Figure 3.2 (Flubber-based Logo - Brand New, 2009)

The solid silver “V" with the two “E” symbol, which stood for strength and robustness along with the passion for global impact by being a group that was interest in a wide spectrum of interest ranging from „Electronics to Energy‟ was what how the brand perceived itself before. (Videocon Group - Seth Nandlal Dhoot Hospital , 2006) When one glances at the company‟s new logo, it is visible that the company is trying to portray itself as an eco friendly company with a fresh outlook and to give a feel that the Videocon always on the move. With its Videocon is trying to strike a chord with young audience (Videocon Group, 2009) and thus targeting the present youth of the globe. The new
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logo also gives a feel that the company‟s going global. Using the colour of nature, i.e. green, Videocon has give a feel that it product are environmentally aware and with respect to world environmental standards. According to Mr. Kim, C.E.O of Videocon, the rationale behind company‟s brand change comes from the company‟s regular attempt to listen and respond to evolving market dynamics all over the world. He also adds that the new tag line – “Experience Change”, will mark the commencement of transform for customers of durable products. (Experience change with eco-friendly identity of Videocon - Televisoinpoint.com, 2009) In 2008 Mr Kim became the C.E.O of Videocon Industries, (Videocon Group, 2009) this goes to show that the company changed its Corporate Structure which was a family owned and managed business to a more global Corporate Structure.

C. Operations
Videocon Industries has emerged as a truly global company in last decade, Integration – Responsiveness Framework explains why the company has gone global. The Pressure for Global Integration for Videocon are         New Market worldwide Gets Economies of Scale from Global Production Threat and Completion from other Foreign and Indian Multinationals in India. Getting worldwide technology by investing in R & D in developed countries. Corporate Vulnerability of Indian Firms to Foreign Firms. Need of Foreign Exchange Universal needs and demands of customers for white goods all over the globe. Having a universal supply chain helps to reduced cost.

The Pressures of Local Responsiveness for Videocon are   Meet Indian Government‟s Rules and Regulations along with the standards of other nations. Respond to Indian Local Competition.
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As seen from above the pressures of globalizations for Videocon is more than the pressure of for Videocon to be a locally responsiveness to Indian markets. More over Videocon deal with consumer durables which are

standardise products all over the world. These products are not influenced by culture or social traits in a particular country. There exist minute modifications

deepening on the product necessities Figure 3.3 Integration – Responsiveness Framework in different countries. E.g. the power (Griffin & Pustay, 2009) cord for the product may be different in different parts of the world. Another example could be the language on the packaging and on the manuals of the product may demand English and the country language. (Aswathappa, 2005). In order to fit a global strategy Videocon as segregated the company‟s value chain across many countries, so that it can get the maximum profits and reduction of cost. Beside India, the Group has several manufacturing and R&D Centres stretched across The Americas, Europe and Australasia that are continuously functioning and operating towards establishing universal quality products by deploying the most state-of-the-art technology. (Videocon Group, 2010). Besides having its presence in India, the Indain Mulinational has its presence in Poland, Italy, Korea , China , Dubai, Oman, and Japan. Based on the Porter's Diamond of National Advantage by Michael Potter we view why Videocon has set up certain regions of the world. For the purpose of this study ,I have three main countries, Inda, Mexico and Italy.

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Figure 3.4 (Porter, 1980)

a) India Vediocon is an Indain Mulinational, in this section we shall see how having its headquaters and manufacturing units in India, has helped the company to have some competive advantage based on the Poter Diamond.  Demand Conditions – With the increse of disposal income in the in India, the demand of consumer durables has also increased. The indian consumers are demanding, new innovations in the consumer durable and also goods with the latest technology. In the recent year, India consumer good market has beeing growing at a very high pace.  Factor Conditions – India is a labour intensive country and thus labour is cheap in country. Thus is benfical for the Vediocon to set up manufacting unit in India. Vediocon has set up manufacturing units in states of Gujrat and Maharashtra in India. Vediocon has also and R&D centre in India at Banglore, the technology hub of India. The location of India also help Videocon, to trade outside India.
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 Related and Supporting Industies – In India Videocon is supporeted by the small Indian supplier who supply commponets to the manufacturing and assembly units in India. Moreover the Indian governments supports the Firm finalcialy. supports the firm.  Firm Stratergy , Structure and Rivarly – Competition in India from both domestic players as well as foreign companies like LG, Whirpool who have entered into the Indian maerket, has helped Videocon to change it struture and to enter in new venture, so that the company can face and sustain compitition. This competion has helped Videocon, emerge as a vigrous world leaders in counsumer durable. The Information Technology industry in Indai aslo

b) Mexico After the acquisition of Thomson's CPT, vediocon gain control of the Thomson‟s plant in Mexico. Vediocon decided to keep the plant and manufacture thre because  Demand Conditions – Demand for Slim and sleek consumer electronics in the Americas. Demand for quality air condition in the Americas  Factor Condition – The factor conditions in Mexico are the main reasons by Videocon kept the Mexican plant. Labour cost are cheap in Mexico. Mexican government has started to give insentive to companys to establish in Mexico. Due to the free trade argrrement, between the America‟s manufacturing in Mexcio has has help the company to enter the markets of The United States of American as well as in Canada‟s Markets. Mexico is also one of the low cost regions in the world.  Related and Supported Industies – Mexico has many supporting indutries for Videocon like its glass manufacturing industry and steel and metal manufacturing industry. The presence of air conditionor compressors also supports Videocon plant in Mexico.  Firms Strategy, Suture and Rivalry - Many of Videocon‟s rival companies have plant set up in Mexico, thus being close to competition helps. More over as the firm re structures itself to become a global company, having
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manufacturing plant in Mexico helps them to enter the North America‟s Market through NAFTA. c) Italy Videocon entered Italy by acquiring the Thomson CPT plant in January 2005 (Videocon, 2009). The factors that contribute to Videocon expansion in Italy are as below  Demand Conditions – The demand for high quality consumer durables worldwide. Also the global demand of low cost but better quality product in the world market. The LCD television segment is also growing rapidly in Italy.  Factor Condition – Italy is one of the low cost manufacturing sites in Europe. Being a part of the European Union, Italy paved the way for Videocon to enter the European market. Italy also gave the company an access to advanced technology and thus Videocon has opened a R&D centre in Italy. In Italy the company also has government support.  Related and Supporting Industries – Close to the Poland plant of Videocon. Italy has a network of Research and Development firms and the technological savvy network of Italy also supports Videocon. The free trade and common market between of European Union Nation which Italy is a part of also supports Videocon  Firms Strategy, Structure and Rivalry – The global competition in the consumer durable industry is also a factor that has help Videocon establish in Italy. By acquiring a plant in Italy, the firm can enter the European Market.

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VIDEOCON CONSUMER DURABLE VALUE CHAIN ACROSS THE WORLD

Analysis Of Videocon‟s Operations

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III.

THE FUTURE STRATEGY

A. Consumer Durable Industry – Consumer Electronics and Home Appliances
I, re -quote Thomas Friedman words that the world is becoming flatter day by day. Due to the integration and liberation economies of countries the globe has becoming a levelled playing field for all companies to play on. If at the present, the International Consumer Durable Industry in term of Consumer Electronics and Home Appliance sis globally integrated, then due to the increasing convergence of consumer needs and wants, cut throat competition between various Multinationals...etc will drive the industry to be more globally integrated in the future. In terms of products, the industry looks to be developing new and innovative products with the help of technology. E.g Televisions in the past last three year have innovated itself from Plasma‟s, to LCD‟s and now to LED‟s and Blue Ray. Some companies have made comment on a 3D television. With the pressure of reducing carbon footprints in the world, many manufactures are planning and in the process of developing eco – friendly goods. As water conservation is also a main issues across the globe, many home appliance with water conservation will be developed. More over even available water for drinking isn‟t always pure and clean and with a growth in new germs and bacteria, the need for better water purifiers will be needed. The industry in the future may continue to set up plans in even lower cost production areas like Philippines, Brazil, Portugal, and Sri Lanka. R&D may even move to countries like India, where the country is advancing a technological hub of the future.

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B. Videocon Industries Ltd
As the global industry is changing, so will Videocon have to change so as to withstand competition. In terms of products I recommend that the company along with production of Television and Audio Video products, they should start manufacturing communication devices like computers and laptops. The company should start a line of eco friendly products also. In terms of strategy, I recommend the company should open a production plant in Brazil as it already has an oil plant there. Opening a plant in Brazil would give the company the benefit of low cost production as well as an entry point into the Latin American Market. The company must invest more in Research and Development that company can come up with new innovative product. Videocon should be more cost rationalized in various stages of its value chain. Besides having a good product line, the company needs to invest more on it marketing, advertising and promotion techniques. It is mainly because if not concentrating on it marketing strategy, that the company has lost market share in India.

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IV.

REFERENCES
 An Indian brand fights back - Asian Times. (2005, August 18). Retrieved June 19, 2010,   from Asian Times Online:

http://www.atimes.com/atimes/South_Asia/GH18Df01.html Aswathappa, K. (2005). International Business. New Delhi: Tata McGraw-Hill. Bua Consulting . (2010). The Value Chain - A Framework for Business Improvement - Bua Consulting. Retrieved June 20, 2010, from Bua Consulting Website: http://www.buaconsulting.com/Value_Chain  Company Profile - Videocon. (2009). Retrieved June 20, 2010, from Videocon's Corporate Website:

http://videoconworld.com/index.php?option=com_content&view=article&id=2&It emid=3  Connect In.com. (2010). Videocon Brand Bio . Retrieved June 23, 2010, from Connect 303126.html  Corporate Finance International. (2007). Corporate Finance International Consumer Goods. Retrieved June 20, 2010, from Corporate Finance International Website: http://www.cfi-network.com/SubPage.aspx?id=3679  Experience change with eco-friendly identity of Videocon - Televisoinpoint.com. (2009,  July 6). Retrieved June 22, 2010, from Televisonpoint.com: In Website: http://connect.in.com/videocon-brand/biography-

http://www.televisionpoint.com/news2009/newsfullstory.php?id=1246884628 Flubber-based Logo - Brand New. (2009, August 20). Retrieved June 21, 2010, from Brand New: http://www.underconsideration.com/brandnew/archives/flubberbased_logo.php   Griffin, R. W., & Pustay, M. W. (2009). International Business. New Jersey: Pearson Prentice Hall. Hem Securities Limited. (2010, March 3). Hem_Videocon.pdf. Retrieved June 20, 2010, from Money Control:

http://www.moneycontrol.com/news_html_files/news_attachment/2010/Hem_Vid eocon.pdf  Hem Securities. (2010). Company Profile - Videocon. Mumbai: Hem Research.

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 

Krishnan, T., & Chandramohan, A. (2010). Videocon Industries. Kochi: Hedge Equities Ltd. Milestone - Videocon. (2009). Retrieved June 20, 2010, from Videocon's Corporate Website:

http://videoconworld.com/index.php?option=com_content&view=article&id=8&It emid=11  Mongabay.com. (2010). Mexico - Manufacturing Industry - Mongabay. Retrieved June   26, 2010`, from Mongabay Website:

http://www.mongabay.com/history/mexico/mexico-manufacturing_industry.html Porter, M. E. (1980). The Competitive Advantage of Nations. New York: Free Press. Pushparaj, A. (2009). What are the impact of globalization and liberalization on business and industry? - Business Studies. Retrieved June 23, 2010, from Rajput Brotherhood Blog: http://www.rajputbrotherhood.com/knowledge-hub/businessstudies/what-are-the-impact-of-globalization-and-liberalization-on-business-andindustry.html  Vaish, N. (2009). Businessworld - Reinventing Videocon. Retrieved June 23, 2010, from Business World: http://www.businessworld.in/index.php/ReinventingVideocon.html  Videocon Group - Seth Nandlal Dhoot Hospital . (2006). Retrieved June 20, 2010, from Seth Nandlal Dhoot Hospital : http://www.dhoothospital.com/videocongroup/index.php   Videocon Group. (2009, October 15). Vision. Volume 1 , I (Sept - Oct 09), p. 10. Videocon Group. (2010). Videocon - Media Room, Press Release. Retrieved June 23, 2010, from Videocon Corporate Website:

http://www.videocon.com/wps/wcm/connect/videocon.com/videocon/home/tamil +nadu+including+chennai/media+room/pressreleases/pg_videocon+launches+gs m+mobile+services   Videocon. (2009). Videocon Industries Limited. Retrieved June 23, 2010, from Videocon World : http://www.ibef.org/download\videocon-limited.pd WiseGEEK. (2010). What are Consumer Durables? Retrieved June 19, 2010, from WiseGeek Website: http://www.wisegeek.com/what-are-consumer-durables.htm

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