A

PROJECT OF
Channels Of Distribution Of Blue Star Company
Bachelor of Management Studies

Semester V

Submitted
In Partial Fulfillment of the requirements
For the Award of Degree of
Bachelor of Management Studies

By

Om Vilas Patil
23

Vidya Prasarak Mandal’s

K.G. Joshi College of Arts
& N. G. Bedekar College of Commerce
Chendani Bunder Road, Thane 400601
DECLARATION

I am Om Vilas Patil studying in T.Y. Bachelor of Management Studies declares

that I have completed the project on Channels Of Distribution of Blue Star
Company. As required by the university rules, I state that the work presented in
this thesis is original in nature and to the best my knowledge, has not been
submitted so far to any other university.
Whenever references have been made to the work of others, it is clearly indicated
in the sources of information in references.

Student

(Om Patil)

Place:
Date:
ACKNOWLEDGEMENT

I would like to acknowledge the following as being idealistic channels and fresh
dimensions in the completion of this project.
I take this opportunity to thank the University of Mumbai for giving me chance to
do this project.
I would like to thank my Principal, Dr. Mrs. Shakuntala A. Singh Ma’am for
providing the necessary facilities required for completion of this project.
I take this opportunity to thank our Coordinator Prof. Mr. D.M. Murdeshwar for
her moral support and guidance.
I would like to express my sincere gratitude towards my project guide Prof. Ms.
Urmila Shetve whose guidance and care made the project successful.
I would like to thank my College Library, for having provided various reference
books and magazines related to my project.
Lastly, I would like to thank each and every person who directly or indirectly
helped me in the completion of the project especially my Parents and Peers who
support me throughout my project.
 INDEX

SR. NO TOPIC PAGE NO

Executive Summary 5
Objectives Of Study 6
Research Methodology 7
Chapter. Introduction To Marketing 8-18
1 1.1 Meaning
1.2 Definition
1.3 7Ps Of Marketing
1.4 New Trends In Marketing
Chapter. Channels Of Distribution 19-25
2 1.1 Meaning
1.2 Factors Affecting Channels Of Distribution
1.3 Types Of Channels Of Distribution
Chapter. Company Profile 26-44
3 1.1 Introduction
1.2 History
1.3 Vision, Mission & Objectives
1.4 Market Share
1.5 Indian A/C Market Composition
1.6 Blue Star Products
1.7 Indian & Global Market Regarding Blue Star
1.8 SWOT Analysis
Chapter. 1. Channels Of Distribution 45
4 2. Warehousing 47
3. Transportation 49
4. Challenges In Channels Of Distribution 54
Recommendations 58
Conclusion 59

Bibliography 60
EXECUTIVE SUMMARY

The project which I choose is on Blue Star Company, Blue Star is India’s leading
air conditioning and commercial refrigeration company. I have made this project
and studied the Channels of Distribution of Blue Star. Blue Star is a Multinational
Company and its business is worldwide.

This project covers the following topics:

The introduction and the history of the company, Strategic planning of this
company like Vision, mission statement, types of products, market share of Blue
Star and it’s market composition. The project also covers the Seven P’s of
marketing (Product, Price, Place, Promotion, People, Physical evidence &
Process).

It also covers information about the various channels of distribution, it’s types &
factors affecting channels of distribution.

At last, my conclusion about the whole Channels of Distribution about Blue Star
Company.

I also give the reference of those websites which had provided me relevant material
and the recommendations about this project.
OBJECTIVES OF THE STUDY

Management is a course which teaches the student to get the work done
properly from different available sources viz. man, machine, material, money etc.
So there can be a satisfaction from the organization side and the workers side who
play a significant role in achieving success. So far the fulfillment or the
management course, it gives emphasis to project work and students learn how to
plan in practical terms rather in terms of theory only. Student tends to develop
analytical and problem solving skill. We necessary become motivated and
competitive, in fact all the learning that goes on for the two year term become so
much the part of our thinking that we developed a well all rounded personality.

The following are the objectives and purpose of the study-

i) To care and contact with the working of an organization and to see the
different types of marketing activities. The main emphasis is on the
distribution Channel aspect of the organization.
ii) Whatever the subject taught in the class room of BMS course that is
completely theoretical. So during the training period we compare how
the marketing research (sales) activities (practical) of our organization
with the theories.
iii) Find the depth and width of distribution channel adopted by Blue Star
and compare them with those followed by competitors.
RESEARCH METHODOLGY

In order to conduct the research an appropriate methodology became necessary.

The information provided in this project has been collected from various sources.

The data – the material for the project has been collected keeping in view the
objectives of a project and accordingly data has been found out from the following
two sources:

Primary Data

The primary data has been collected by conducting interview of Executives at Blue Star
Limited.

Secondary Data
The Secondary data has been collected by referring various books, websites,
magazines and other sources related to the company. Collection of information for
the project is done from different kinds of books and through internet.
Chapter 1

INTRODUCTION OF MARKETING

“Marketing begins and ends with the customer.” Nothing remains permanent
in the field of marketing. Everything is subject to change. The only thing that is
permanent is the change itself. Marketing has evolved through several changes,
some deliberate, some unintentional. One major factor influencing change in the
marketing is unprecedented growth of technology – may it be electronics,
computer technology or telecommunications. Messages are being transmitted
almost instantly and internet has shrunk the world. Marketing has facilitated
exchanges to satisfy human needs and wants. Marketing is the key function of
management. It brings success to business by producing goods and services
making them available to buyers. Marketing is directly responsible to generate
income and contribute to the growth of the business whereas other management
functions centre around cost and allocation of scarce resources.
1.1 MEANING OF MARKETING

Marketing can take place any time a person or form tries to exchange
something of value with another person or firm. Primarily, marketing is an
exchange process. In this sense marketing consists of activities designed to
facilitate exchanges to satisfy human needs and wants. Marketing deals with
customers, it manages profitable customer relationships. Marketing works at two
levels – firstly to attract new customers by promising superior value and secondly
to keep and increase current customers by delivering satisfaction.

Marketing links producers and consumers together for mutual benefits.

Production will be meaningless if goods produced are not supplied to consumers
through appropriate marketing mechanism. Modern marketing is global in
character. Customer is the cause and purpose of all marketing activities. According
to Drucker, the first function of marketing is to create a customer. Marketing deals
with identifying and meeting human and social needs. It is described as “meeting
needs profitably.”

Example: When Colgate Palmolive (India) Ltd. launched Herbal Toothpaste,

it touched the pulse of the market because consumers have cultivated the habit of
patronizing herbal products. It converted human need into a profitable business
opportunity.
1.2 DEFINITION OF MARKETING

• According to Philip Kotler, “Marketing is human activity directed at

satisfying needs and wants through exchange process.”

• According to American Marketing Association, “Marketing is the activity,

set of institutions and processes for creating, capturing, communicating,
delivering and exchanging offerings that have value for customers, clients,
partners and society at large.”
 1.3 7P’S OF MARKETING MIX

Marketing Mix – 7P’s That Defines The Meaning Of The Marketing Mix.

The marketing mix is a set of decision that needs to be considered prior to

introducing a new product. These variables are also called the P’s of marketing.
They help an industry in making strategic decisions required for the smooth
running of an organization. These variables are:

1. Product:

This is the 1st ‘P’ which is the unit that an organization wants to supply in
the market. It might be a tangible object or an intangible service. Tangible products
are items such as consumer goods (soaps, toothpaste, and spoons) while intangible
can be services like tourism. This is the most crucial thing in an organization.

A tangible product should have certain characteristics such as direction of

usage, warranty, service, ingredients or contents, manufactured date and the expiry
date. In addition, a product should have distinguishing characteristics that is,
Unique Selling Proposition (USP). This will assist you to differentiate a product
from another. Moreover, the packaging concept and the phenomena of originality
play a very crucial role.

It is as very essential to understand the nature and dynamics of the product

in question. Each item that the marketing strategist considers consists of levels of
products. There are just three levels of products. They include augmented product,
actual product and core product.
2. Price:

This is the 2nd ‘P’ which is simply the amount paid by a consumer for the
product. It is the amount that a firm will charge a customer for offering the product
to him. This is another very crucial step whereby if the pricing of certain item is
too low, the general trend of the consumers that the item is of sub-standard quality,
shows on the sale. Alternatively, if the pricing of an item is too high, very few
people would be interested with the product since the price tag shocks them off.
However, it is also hard to decide on the pricing strategy as at times some of the
consumers tends to believe that if a product charges high it has to be good.

3.Place:

This is the 3rd ‘P’ that also contributes very much to the marketing mix.
Place is the location where an item can be bought and it focuses more on the
availability of an item at the desired place and time. This strategy becomes an
obligation as the items have to be available to the consumers when they want them.
These places might be virtual stores such as e-malls and e-market, online while
physical stores are like departmental stores and supermarkets. This encourages the
consumer to pay heed to the item and this offers the place utility to the customer.

4.Promotion:

This is the 4th ‘P’ that involves publicizing of the product. This
characterizes of all the communications that a promoter can use in the marketplace
to raise the awareness of the product along with its benefits to the aimed segment.
 Promotion has four different elements: public relation, advertising, sales
promotion and personal selling. Another effective and cheap way of promoting a
product is

internet. Promotion is better started before the product is introduced in the market
since it increases the interest of the customers and gets him eager to find out what
the item is.

Promotion also determines the positioning of the item as well as the

segmentation targeting. The right way of promoting affects all the above three
variables, the product, price and place. If there are effective promotions the
distribution points might go up, the price might increase due to increasing brand
equity of the item and get the support to introduce other products. Nevertheless, the
amount of cash required for broad promotions are high.

5. People or Personnel:

To incorporate people as the part of the marketing mix is also very essential.
They are the ones who make the products and services a success along with that
they are the ones who have the strength to tarnish the product’s image. This is
mostly applied if the product offered is a service.

6. Physical evidence:

Physical evidence is interesting when thinking about a service. If you attend

a concert what tangible material is in your possession after words? With that in
mind a company can introduce a unique/collectable ticket. Bands sell merchandise
such a T-Shirts with this theory in mind. Other attributes of physical evidence are
staff uniforms and store presentation.

7. Process:

This is refers to the process and methods of offering a service. For instance,
the method of handling sales, processing of orders and after-sale service can be
very important elements of the marketing mix. It is good to have a detailed
knowledge of whether the services are useful to the consumers.

Hence the 8Ps explain the meaning of marketing mix in a detailed manner.
They give the overall appearance of a product.
1.4 NEW TRENDS IN MARKETING

The marketing concept is the philosophy that companies should focus on and
strive to satisfy customer needs while also making profits. More specifically, it
involves identifying target customers, understanding the needs and wants of
customers, and developing products or services according to those needs--thereby
satisfying the needs better than competitors.
Modern trends in marketing include relationship marketing, business
or industrial marketing, and societal marketing . Modern marketing is also
inseparable from the digital realm. E-marketing and online marketing are essential
tools for modern firms. Internet marketing is sometimes considered to be broad
in scope, not only referring to the Internet, but also including e-mail and
wireless media as well as driving audiences from traditional methods like radios
and billboards to Internet properties or landing pages.

1.Relationship Marketing
Relationship marketing was first developed through direct response
marketing campaigns emphasizing customer retention and satisfaction, rather than
a dominant focus on sales transactions. Relationship marketing differs from other
forms of marketing in recognizing the long-term value of relationships and
extending communication beyond intrusive promotional messages. Relationship
marketing refers to a short-term arrangement where the buyer and seller have
an interest in providing a more satisfying exchange. This approach tries to

transcend the simple post-purchase exchange with a customer to make a deeper

connection by providing a holistic, personalized experience to create stronger ties.
 Relationship marketing is often applied when there are competitive
alternatives for customers to choose from and when there is an ongoing and
periodic desire for the product or service.
The practice of relationship marketing has been facilitated by several
generations of customer relationship management software that allow the tracking
and analysis of customer preferences, activities, tastes, likes, dislikes, and
complaints. With the growth of the Internet and mobile platforms, relationship
marketing has continued to evolve as technology opens more collaborative and
social communication channels. This includes tools for managing relationships that
go beyond simple demographic and customer service data. A key principle of
relationship marketing is the retention of customers through varying means and
practices to ensure repeated trade from pre-existing customers by satisfying needs
better than the competition. The overall goals of relationship marketing are to find,
attract, and win new clients; nurture and retain those the company already has;
entice former clients back into the fo ld; and reduce the costs of both marketing and
also servicing clients.

2.Business/Industrial Marketing
Business marketing is the practice of selling products and services to other
companies or organizations that either resell them, use them as components in
products or services they offer, or use them to support their operations. Also
known as industrial marketing, business marketing is at times called business-to-
business marketing, or B2B marketing.
 The tremendous growth and change in business marketing is due to three
"revolutions" occurring around the world today. First is the technological
revolution. Technology is changing at an unprecedented pace, speeding up the pace
of new product and service development.

Second is the entrepreneurial revolution. To stay competitive, many companies

have downsized and reinvented themselves. Adaptability, flexibility, speed,
aggressiveness, and innovation are the keys to remaining competitive. Marketing is
taking the entrepreneurial lead by finding market segments, untapped needs, and
new uses for existing products; and by creating new processes for
sales, distribution, and customer service.
The third revolution is occurring within marketing. Companies are looking
beyond traditional assumptions and adopting new frameworks, theories, models,
and concepts. They are also moving away from the mass market and being
preoccupied with transactions. Relationships, partnerships, and alliances define
marketing today. The cookie cutter approach is out. Companies are customizing
marketing programs to individual accounts.

3.Societal Marketing
Societal marketing holds that the organization's task is to determine the
needs, wants, and interests of a target market and to deliver satisfaction more
effectively and efficiently than competitors in a way that preserves or enhances
social, ethical, and ecological well-being. It is linked with corporate social
responsibility and sustainable development. The main focus of societal marketing
is on customer satisfaction and the welfare of society at large, which can be
attained through providing eco-friendly products--for example, those that remove
social and environmental ills like drugs and pollution.
 In terms of societal marketing, products can be classified in terms of long-
term benefits and immediate satisfaction:
 Deficient products bring neither long-run or short-term benefits;

 Pleasing products bring a high level of immediate satisfaction, but can cause harm
to society;

 Salutary products bring low short-term satisfaction, but benefit society;

 Desirable products combine long-run benefits and immediate satisfaction.

Societal marketing suggests that, for the well-being of society, deficient products
should be eliminated; products should be modified to reach the fourth category by
incorporating missing short-term benefits into salutary products and long-term
benefits into pleasing products; and a company's ultimate goal should be to
develop desirable products.
Chapter 2

CHANNELS OF DISTRIBUTION

2.1 MEANING OF CHANNELS OF DISTRIBUTION

A distribution channel is a chain of businesses or intermediaries through

which a good or service passes until it reaches the end consumer. It can include
wholesalers, retailers, distributors and even the internet itself. Channels are broken
into direct and indirect forms, with a "direct" channel allowing the consumer to
buy the good from the manufacturer, and an "indirect" channel allowing the
consumer to buy the good from a wholesaler or retailer.

A distribution channel is the path by which all goods and services must
travel to arrive at the intended consumer. Conversely, it is also used to describe the
pathway that payments make from the end consumer to the original vendor.
Distribution channels can be short or long, and depend on the amount of
intermediaries required to deliver a product or service.

However, goods and services are sometimes passed to consumers through

multiple channels, a combination of short and long. While increasing the number
of ways in which a consumer can find a good can increase sales, it can also create a
complex system that sometimes makes distribution management difficult. In
addition, the longer the distribution channel, the less profit a manufacturer might
get from a sale due to the fact each intermediary charges for its service.
2.2 FACTORS AFFECTING CHANNELS OF DISTRIBUTION
Important factors affecting the choice of channels of distribution by the
manufacturer are:

(A) Considerations Related to Product

When a manufacturer selects some channel of distribution he/she should
take care of such factors which are related to the quality and nature of the product.
They are as follows:

1. Unit Value of the Product:

When the product is very costly it is best to use small distribution channel.
For example, Industrial Machinery or Gold Ornaments are very costly products
that are why for their distribution small distribution channel is used. On the other
hand, for less costly products long distribution channel is used.

2. Standardised or Customised Product:

Standardised products are those for which are pre-determined and there has
no scope for alteration. For example: utensils of MILTON. To sell this long
distribution channel is used.

On the other hand, customised products are those which are made according
to the discretion of the consumer and also there is a scope for alteration, for
example; furniture. For such products face-to-face interaction between the
manufacturer and the consumer is essential. So for these Direct Sales is a good
option.
3. Perishability:
A manufacturer should choose minimum or no middlemen as channel of
distribution for such an item or product which is of highly perishable nature. On
the contrary, a long distribution channel can be selected for durable goods.

4. Technical Nature:
If a product is of a technical nature, then it is better to supply it directly to
the consumer. This will help the user to know the necessary technicalities of the
product.

(B) Considerations Related to Market

Market considerations are given below:
1. Number of Buyers:
If the number of buyer is large then it is better to take the services of
middlemen for the distribution of the goods. On the contrary, the distribution
should be done by the manufacturer directly if the number of buyers is less.

2. Types of Buyers:
Buyers can be of two types: General Buyers and Industrial Buyers. If the
more buyers of the product belong to general category then there can be more
middlemen. But in case of industrial buyers there can be less middlemen.

3. Buying Habits:
A manufacturer should take the services of middlemen if his financial
position does not permit him to sell goods on credit to those consumers who are in
the habit of purchasing goods on credit.
4. Buying Quantity:
It is useful for the manufacturer to rely on the services of middlemen if the
goods are bought in smaller quantity.
5. Size of Market:
If the market area of the product is scattered fairly, then the producer must
take the help of middlemen.

(C) Considerations Related to Manufacturer/Company

Considerations related to manufacturer are given below:
1. Goodwill:
Manufacturer’s goodwill also affects the selection of channel of distribution.
A manufacturer enjoying good reputation need not depend on the middlemen as he
can open his own branches easily.

2. Desire to control the channel of Distribution:

A manufacturer’s ambition to control the channel of distribution affects its
selection. Consumers should be approached directly by such type of manufacturer.
For example, electronic goods sector with a motive to control the service levels
provided to the customers at the point of sale are resorting to company owned
retail counters.

3. Financial Strength:
A company which has a strong financial base can evolve its own channels.
On the other hand, financially weak companies would have to depend upon
middlemen.

(D) Considerations Related to Government

Considerations related to the government also affect the selection of channel
of distribution. For example, only a license holder can sell medicines in the market
according to the law of the government.
 In this situation, the manufacturer of medicines should take care that the
distribution of his product takes place only through such middlemen who have the
relevant license.

(E) Others
1. Cost:
A manufacturer should select such a channel of distribution which is less
costly and also useful from other angles.

2. Availability:
Sometimes some other channel of distribution can be selected if the desired
one is not available.

3. Possibilities of Sales:
Such a channel which has a possibility of large sale should be given weight
age.
1.3 TYPES OF CHANNELS OF DISTRIBUTION

Different types of channel of distribution are as follows:

Manufacturers and consumers are two major components of the market.

Intermediaries perform the duty of eliminating the distance between the two. There
is no standardised level which proves that the distance between the two is
eliminated. Based on necessity the help of one or more intermediaries could be
taken and even this is possible that there happens to be no intermediary. Their
description is as follows:

A. Direct Channel or Zero Level Channels:

When the manufacturer instead of selling the goods to the intermediary

sells it directly to the consumer then this is known as Zero Level Channel. Retail
outlets, mail order selling, internet selling and selling
B. Indirect Channels:

When a manufacturer gets the help of one or more middlemen to move

goods from the production place to the place of consumption, the distribution
channel is called indirect channel. Following are the main types of it:

1. One Level Channel:

In this method an intermediary is used. Here a manufacturer sells the goods
directly to the retailer instead of selling it to agents or wholesalers. This method is
used for expensive watches and other like products. This method is also useful for
selling FMCG (Fast Moving Consumer Goods).

2. Two Level Channel:

In this method a manufacturer sells the material to a wholesaler, the
wholesaler to the retailer and then the retailer to the consumer. Here, the
wholesaler after purchasing the material in large quantity from the manufacturer
sells it in small quantity to the retailer.25

Then the retailers make the products available to the consumers. This
medium is mainly used to sell soap, tea, salt, cigarette, sugar, ghee etc.

3. Three Level Channel:

Under this one more level is added to Two Level Channel in the form of
agent. An agent facilitates to reduce the distance between the manufacturer and the
wholesaler. Some big companies who cannot directly contact the wholesaler, they
take the help of agents. Such companies appoint their agents in every region and
sell the material to them.

Then the agents sell the material to the wholesalers, the wholesaler to the
retailer and in the end the retailer sells the material to the consumers.
Chapter 3

COMPANY PROFILE - BLUE STAR LTD.

3.1 INTRODUCTION

Blue Star is India's leading air conditioning and commercial refrigeration

company, with an annual turnover of over ₹3500 crores, a network of 35 offices,
5 modern manufacturing facilities, 2300 employees, 2200 dealers and 600
retailers. Blue Star's integrated business model of a manufacturer, contractor and
after-sales service provider enables it to offer an end-to-end solution to its
customers, which has proved to be a significant differentiator in the market place.
In fact, every third commercial building in the country has a Blue Star product
installed.

The Company fulfills the cooling requirements of a large number of

corporate, commercial as well as residential customers. The Company also offers
expertise in allied contracting activities such as electrical, plumbing, fire-fighting
and industrial projects, in order to offer turnkey solutions, apart from execution of
specialised industrial projects.

Blue Star's other businesses include marketing and maintenance of

imported professional electronics and industrial products and systems, which is
handled by a wholly owned subsidiary of the Company called Blue Star
Engineering & Electronics Ltd.
 Blue Star has business alliances with world-renowned technology leaders
such as Rheem Mfg Co, USA; Hitachi Medical Corporation, Japan; Danfoss,
Denmark; Bitzer, Germany; Emerson, USA; Aeroflex, USA; Kitz, Japan; and
many others, to offer superior products and solutions to customers.

The Company has manufacturing facilities at Dadra, Himachal, Wada and

Ahmedabad, which use modern, state-of-the-art manufacturing equipment to
ensure that the products have consistent quality and reliability. The Company has
a manufacturing footprint of about 1 lakh sq m, manufacturing over 300 models
across 25 product lines. The Company's mainstay of product development and
R&D has been energy efficiency, coupled with eco-friendly and sustainable
products.
3.2 HISTORY

Blue Star was founded in 1943 by Mohan T Advani, an entrepreneur of

exemplary vision and drive. The Company began as a modest 3-member team
engaged in reconditioning of air conditioners and refrigerators.

Within three years, the Company obtained the sole agency of US-based
Melchoir Armstrong DessauCompany and several other companies
manufacturing air conditioning and refrigeration equipment. Shortly after, the
Company was selected by Worthington, the US leader in air conditioning, as its
India based partner - these were the first of numerous foreign associations to
follow. An expanding Blue Star then ventured into the manufacture of ice candy
machines and bottle coolers, and also began the design and execution of central
air conditioning projects. This was followed by the manufacture of water coolers.
In 1949, the proprietorship company set its sights on larger expansions, took on
shareholders and became Blue Star Engineering Company Private Limited.

Ever since, there has been a constant and profitable growth. Blue Star
diversified and tied up with agencies for Material Testing Machines and Business
Machines. The export arena beckoned and the Company began exporting water
coolers to Dubai, where, in fact, 'Blue Star' soon became the generic name for
water coolers.

The sixties and the early seventies witnessed Blue Star continuing to
expand and flourish. A team of dedicated professionals aided Mohan T Advani in
ever furthering his vision of a profitable company dedicated to its ideals of
professionalism and success. Employee strength crossed the 1000 mark and the
Company went public in 1969 to become Blue Star Limited, as it continues to be
called today.

In 1970, the Company took up the all-India distributorship of Hewlett-

Packard products, a business relationship which continues till date, and has grown
ever stronger through the years. As the Company's reputation for delivering
goods in the most challenging of air conditioning projects grew steadily, the early
seventies saw a series of prestigious projects being entrusted to Blue Star -
skyscrapers such as Air India Building, Express Towers, the Oberoi Hotel in
Mumbai, apart from (among) several others. Revenues touched the ₹10 crore
mark and staff strength doubled to exceed 2000.
3.3 VISION, MISSION, OBJECTIVES

 To deliver a world class customer experience.

 Focus on profitable company growth.
 Be a company that is a pleasure to do business with.
 Work in a boundary – less manner between divisions to provide best
solutions to customers.
 Win our people’s hearts and minds.
 Place the company’s interest above one’s own.
 Encourage innovation, creativity and experimentation in what we do.
 Build an extended organisation of committed business partners.
 Be a good corporate citizen.
 Honour all personal and corporate commitments.
 Maintain personal integrity.
 Ensure high standards of corporate governance.
3.4 Market Share

In Central Air-conditioning (30 tons and above)

This market has remained stagnant since past three years. Margins from this
segment are as low as 7-8%, which makes it less attractive compared to others.
Leading players in this segment are shifting their focus towards the faster growing
segment-Room ACs.

COMPANIES MARKET SHARE (%)

Blue Star 38
Voltas 17
Carrier Aircon 9
ETA 13
Suvidha 3
KPC/MCO 1
Trane 1
ABB-Flakt 1
Thermax 9
Others 8
In Ducted System (5-20 tons)
This is a segment, which lies in-between central and room ACs. These are
packaged air conditioners (PAC), fitted with scroll compressors, which are more
reliable because it has only three moving parts within the compressor, compared to
15 moving parts otherwise. And more importantly it ensures saving of energy cost
to the consumer.
Companies such as Blue star, who are leaders in central ACs are now vouching on
about 50% future revenues from packaged air conditioners.

COMPANIES MARKET SHARE (%)

Blue Star 33
Carrier 29
Amtex 7
Voltas 21
Others 10
In Mini Split Air-conditioners (1-3 tons)
The unitary products would include the window ACs and the mini-splits
(without ducts). These ACs are ideal for rooms with low heat loads. They are
available in the capacity range of 0.5 TR to 3 TR. The room AC sector caters to
residential premises, offices and small establishments. Overall growth rate in this
segment is about 15%.

Split ACs are so named because the unit is 'split' into two parts. The
compressor and the condenser forming an outdoor unit and the cooling coil
remaining as an indoor unit. Split units can be with or without ducts. In PAC’s, the
unit is placed in a separate room and the cold air is carried through ducting to the
required areas. It is suited for those establishments that are not large enough to go
in for a central system.

This segment is growing at 25%. With many more show rooms and
commercial establishments companies the future looks bright for this segment.

COMPANIES MARKET SHARE

(%)
Carrier 42
Voltas 22
Amtrex 14
Blue Star 9
Videocon 3
Godrej 1
Others 9
3.5 INDIAN AC MARKET COMPOSITION

The AC market in India presents a fragmented scenario with more than 25

players from all over the world. Voltas, Blue Star, Godrej, Videocon, Fedders
Lloyd and Onida represent the Indian manufacturers. The Japanese companies
include Daikin, Hitachi, Fujitsu General, Carrier Toshiba, Panasonic, Mitsubishi
Electric, Mitsubishi Heavy Industries and Sharp. Carrier, Trane and Whirlpool are
the American multinationals in the arena. The Korean chaebols LG and Samsung
are strong players. The Chinese majors Carrier Midea and Haier are also quite
active. Zamil Air Conditioners of the U.A.E. entered the market two years back.
Tecumseh and York brands are also present in small numbers. Kenstar of
Videocon Group and IFB have announced their intentions to enter the market.
 3.6 BLUE STAR PRODUCTS

CENTRAL AIR CONDITIONING

 VRF SYSTEMS
 SCREW CHILLERS
 WATER COOLED CENTRIFUGAL CHILLERS
 SCROLL CHILLERS
 WATER COOLED DUCTED SPLIT ACS
 PACKAGED ACS & DUCTED SPLITS
 HIPER PACKAGED ACS
 HIPER GREEN PACKAGED ACS
 CONCEALED SPLIT AC
 CONDENSING UNITS
 HOT WATER GENERATOR
 ROOM AIR CONDITIONERS

 WINDOW AIR CONDITIONERS

 SPLIT AIR CONDITIONERS
 CASSETTE AIR CONDITIONERS
 VERTICOOL SPLIT ACS
 COMMERCIAL REFRIGERATION

 DEEP FREEZERS
 ICE MACHINES
 WATER COOLERS
 BOTTLE COOLERS
 MILK COOLERS
 BOTTLED WATER DISPENSERS
 COLD STORAGES

 MODULAR COLD ROOMS

 REFRIGERATION UNITS
 PUF INSULATED PANELS
 RIPENING CHAMBERS
 SPECIALITY COOLING PRODUCTS

 PROCESS CHILLERS
 MORTUARY CHAMBERS

EXPORTS
Blue Star exports its products to the Middl e East, Africa, SAARC and
ASEAN countries, where our products stand the test of time in some of
the most difficult climatic conditions in the world.

 CHILLERS
 AIR SIDE PRODUCTS
 ROOM AIR CONDITIONERS
 SPECIAL APPLICATIONS
 REFRIGERATION
3.7 INDIAN MARKET AND GLOBAL MARKET REGARDING
BLUESTAR LIMITED

INDIAN MARKET

Blue Star is India's largest central air-conditioning company with an annual

turnover of Rs. 600 crores, a network of offices in 29 cities and three modern
manufacturing facilities.
Blue Star became a public limited company in 1969 with its corporate
headquarters at Kasturi Buildings in Mumbai.
Blue Star is India's largest and most preferred air-conditioning and
commercial refrigeration company.
With six decades of experience in providing expert cooling solutions, Blue
Star has been associated with the most prestigious corporate and commercial
installations in the country.

INTERNATIONAL/GLOBAL MARKET
Blue Star's air-conditioning expertise extends beyond Indian horizons, from
Indonesia in the East to Libya in the West. Blue Star has competed with other
European companies on International terrain and satisfied demanding foreign
consultants.
Blue Star has set up a joint venture in Malaysia with Arab Malaysian
Development Berhad (AMDB). The joint venture company has executed large
turnkey Central Airconditioning Contracts - 21-storey Bangunan AMDB, Kuala
Lumpur, 35-storey Menara Dion, Kuala Lumpur, 22-storey Menara Pelita,
Kuching, Sarawak, 48-storey Plaza MBF, Kuala Lumpur, 18-storey Tower A and
Tower B AMCORP Trade Centre, Petaling Jaya Selangor Darul Ehsan, 364-room
Vistana Hotel, Kuala Lumpur, 269-room Ritz Carlton Hotel, Kuala Lumpur, Arab-
Malaysian SGB factory, Nilai, Negeri Sembilan, 275-room Castle Inn Hotel cum
Office, Johor Baru, Johor Darul Takzim, 340- room Hilton Hotel, Seremban,
Nageri Semibilan Darul Khusus, 420-room Hotel, AMCORP Trade Centre,
Petaling Jaya, Selangor Darul Ehsan and Summit Centre Shopping Complex,
Selangor Darul Ehsan. And the list of projects completed abroad is too long to be
enumerated. Some of the most notable are: Syria's Presidential Palaces Complex at
Damascus, the University, Railway and Radio and TV Establishments at Baghdad,
the State Bank of Mauritius, the Kewalram Indonesia P.T. Bandung, Henrick
Hotel, Kuala Lumpur, U.S. Geological Survey, Saudi Arabia and Hotel Krom,
Russia.
3.8 SWOT ANALYSIS

SWOT ANALYSIS OF THE BLUE STAR COMPANY

Strengths:
 Only Blue Star manufactures open-type centrifugal chillers with ozone
friendly refrigerant HCFC 123
 Only Blue Star manufactures variable air volume systems for economic
localized cooling control
 Only Blue Star manufactures air handling units with dependable ratings to
factory precision and the widest choice with single skin, double skin,
horizontal, vertical, ceiling suspended and unitary.
 Air-conditioning of the largest number of synthetic fiber plants in India
exceeding 25,000 Tons and 36 customers
 Largest Industrial air-conditioning contracts in India - RBI Note Mudran
Private Limited: Rs.40 crores.
 First to manufacture semi hermetic reciprocating compressors in India to
international standards
 First air-conditioning company to introduce the concept of a Comfort Shop.
 It has a strong setup, Willis Carrier Engineering Center, to provide
technological support to develop new products and upgrade existing ones.
 It has successfully introduced finance schemes that have taken air-
conditioners out of the luxury category and made it affordable for the
homebuyer.
Weaknesses
 Considered as premium brand so middle class people think it is
unaffordable.
 Although BLUE STAR protects its Position in Domestic AC market but is
regularly losing market share.
 Market penetration is still very low.
 Low qualities resulting in exports prices being non competitive .

Opportunities
 Confederation of Indian Industry (CII) has urged the government to reduce
special excise duty (SED) on air-conditioners from 16% to 8% in the
forthcoming budget.
 Opportunity to influence Growing Indian middle class in influencing their
decisions with regard to the products offered by Blue Star through
comparatively lower prices.
 Advent of Internet provides an excellent opportunity to reach to a large base
of customers and cut costs.
 The increasing presence of multinationals in India for manufacturing be it
Samsung, LG, Carrier, Hitachi, thus providing an opportunity for upgrading
the quality of manufacture in the country.
Threats:
 Likely to face fierce competition from domestic companies as they have well
acknowledged brands, an extensive distribution network and better insights
about the local market conditions.
 Increased threat from cheaper imports, especially from China.
 MNC’s like Samsung, Carrier, LG and Voltas are continuously raising their
share while Blue Star despite of increasing sales is losing its market share.
Chapter 4

4.1 Channels Of Distribution Of Blue Star

Blue Star has around 180 systems dealers who exclusively deal in the
Company's systems businesses consisting of packaged air conditioning and cold
rooms. These dealers are provided technical expertise, installation and service
competence of a high order. On the other hand, room air conditioners and
refrigeration products, which are simple to install, are sold through a larger
network of approximately 600 dealers. Most of them deal exclusively with Blue
Star products in the HVAC domain. A few are multi-brand, multi-product dealers.
The Company has established a Channel Management Centre to oversee the policy
framework, certification and development of dealers and also put in place a
Training Department for training channel partners. During the year, the Company
implemented a number of initiatives in order to strengthen the competence of the
dealer channels and make them more robust. A Management Development
Program (MDP) for systems dealers was held to impart the essentials of managing
a business professionally. Systems dealers were also put through a Sales
Management training programme in order to enhance their sales competence.
BLUE STAR USES THE FOLLOWING DISTRIBUTION
CHANNELS:

A. Direct Channel or Zero Level Channels:

When the manufacturer instead of selling the goods to the intermediary

sells it directly to the consumer then this is known as Zero Level Channel. Retail
outlets, mail order selling, internet selling and selling

B. Indirect Channels:

When a manufacturer gets the help of one or more middlemen to move

goods from the production place to the place of consumption, the distribution
channel is called indirect channel.

1.Three Level Channel:

Under this one more level is added to Two Level Channel in the form of
agent. An agent facilitates to reduce the distance between the manufacturer and the
wholesaler. Some big companies who cannot directly contact the wholesaler, they
take the help of agents. Such companies appoint their agents in every region and
sell the material to them.

Then the agents sell the material to the wholesalers, the wholesaler to the
retailer and in the end the retailer sells the material to the consumers.
4.2 WAREHOUSING:

Every company has to store its finished goods until they sold. A strong
facility is necessary because production and consumption cycles rarely match.

Warehousing is not a simply storing activity but a package of services that

enables the smooth running of the industry.

The stores must be in constant touch with the use department in order to
provide uninterrupted services to the manufacture and its decision since working
capital is locked up in the warehousing stores in equal to money.

The stores functions can be organized in the following manner:-

a) To receive raw material components equipments etc.

b) To meet the demand of use department by issuing the order
c) Accounting the transaction properly.
d) Minimizing obsolescence surplus and scrap by right identification and
using correct preservation method.
The company supply finished products frequently to different distributors as
per the demand.

Every distributor keeps a minimum stock of different products of the

product line so that the uninterrupted supply could not affect.

In the industrial sector service of optimization where boils down to any

exercise of optimization where limited available resources are to be distributed
equitably. The problem arises from the material that are in stock the form of capital
cost, storage loss, pilferage obsolescence, insurance, handling, documentation etc.
Services level that can be maintained and hence the concept stores in money
should be understood by everybody in the organization.
 Blue Star has located its warehouses right at their manufacturing facilities
which are located across India. These warehouses are located at:

1. Ahmadabad in the state Of Gujarat

2. Dadra in U.T. Of Dadra & Nagar Haveli
3. There are two warehouses as well as Manufacturing facilities at Kala
Amb in the state of Himachal Pradesh
4. Wada in the state of Maharashtra
4.3 TRANSPORTATION:

Transportation is a key element in successful supply chain

management. For some manufacturing firms, transportation costs can be as much
as 20 percent of total production costs. For service companies involved in the
distribution of retail items such as catalog sales, it can be even higher. In one year
L. L. Bean ships approximately 11 million packages, 650,000 in a week, which is
about 19 tractor-trailer loads. During the Christmas season, it will fill a 40-foot
UPS trailer every 20 minutes.

Transportation costs depend largely on where a company is located relative to its

suppliers, warehouses, distribution centers, and customers. The level of customer
service--speed and frequency of delivery--required by a company's customers can
determine the mode of transportation and costs. Inventory levels within a
company's supply chain are affected by the mode of transportation used and how
close it is to the company's physical facilities. The transportation mode selected by
a company can dictate the type of material handling, packaging, loading, and order
processing systems used.

The five principal modes of transportation within India and between

other countries are railroads, highways (trucking), water, air, and pipelines. In the
United States the greatest volume of freight is shipped by railroads (approximately
one third of the total), followed by trucking, pipeline, and inland waterways. By far
the smallest volume is carried by air. The cheapest modes of transportation are
pipelines and water, each averaging less than 2 cents per ton-mile (one ton of
freight carried one mile), with rail costs slightly higher at 3 cents per ton-mile.
 Truck costs are a little less than 40 cents per ton-mile and air freight
over twice as high as trucking at about 90 cents per ton-mile. Air is obviously the
fastest form of transportation, and water and pipeline are the slowest. Trucks are
faster than railroads for short distances, and they are about even over longer
distances. However, because of different shipping requirements and the availability
of different modes of transportation as goods move between regions of the country
and between countries around the world, different modes of transportation are
often combined. This is referred to as intermodal transportation.

1.Rail Transport

Railways are the most important means of transportation in India. The

improvement in railway communications in recent times has played a most
important part in the internal development of the country. They have brought the
different parts of the country closer. The advent of the railway has been of special
advantage to the peasantry. Social and political influences from railway
construction have been no less.

Advantages of Railways

 Travelling has become cheaper;

 Defense of the country is less difficult.
 Greater peace and order is maintained in the country, and
 The spirit of nationalism has very greatly developed.
2.Road Transport

India has a vast network of roads, both metalled and unmetalled.

However, this means of transport and communication are still inadequate for our
needs. The vehicles that are mainly used on village roads are motorbuses, trucks,
and bullock carts.

Before the advent of railways, roads were the only means of

communication for the exportation of surplus produce. With the extension of the
railway system, it has become more and more necessary to construct roads to feed
the railways.

At present, the economic loss caused by the inaccessibility of many

agricultural districts in the rainy season is very great. In sandy, hilly, and forest-
covered tracts and in other parts of the country, where railways have not
penetrated, road transport still holds an important share of long-distance traffic.

The opening of railways has created a demand for road-construction,

which must be met by the local and provincial bodies. The question of developing
the roads is also of vital importance. We cannot expect any significant progress in
our rural economy unless there are good road connections between villages and
towns.
3.Waterways

Water transport is the oldest and cheapest form of transport. It is one of

the most important external and internal means of transport in all the civilized
countries of the world. It is useful for the carriage of bulky and heavy goods.

In India, we have many great river systems. However, they are

unevenly distributed, some of them are fully utilized for irrigation purposes, and
some others are naturally unfit for navigation.

In some parts of India, however, waterways are still extensively used

for navigation purposes.

In India, more navigable rivers and canals should be made. And, a

systematic policy for the development of the inland water transport should be
pursued.

The question of shipping has also great importance in a country like

India with a large coastline.
4.Air Transport System

Proper attention must also be given at the same time to air transport as another
means of national and international communication. India possesses some natural
advantages in this respect and they have to be fully exploited for development of
airways.

The Government is taking a keen interest in the expansion of civil

aviation not only for its importance as a means of transport but also because of its
strategic value in the matter of national defense. There are also a large number of
aerodromes in the country.
4.4 CHALLENGES IN CHANNELS OF DISTRIBUTION

Challenge 1 - Gain a Clear Picture of Demand

Distributors need to ensure that all business resources and operations are optimally
aligned with demand. Working to demand projections or sales forecasts is a very
poor substitute for a single, complete and up-to-date picture of demand. The single
most important initiative for distributors is to provide organizations-wide access to
information that lets managers and supply chain partners make fast, strategic
decisions. Distributors need the agility to scale their operations to match demand.

Challenge 2 - Achieve Visibility to Control Inventory and Costs

Distributors need access to real time inventory data to drive proactive, responsive
sales operations, make good purchasing decisions, and minimize inventory
costs. Companies need the ability to identify redundant and slow moving
inventory. Two key metrics are the cash cycle and inventory turn. Without full
visibility, distributors cannot measure and improve company performance.
Challenge 3 - Improve Execution and Coordination with Suppliers and
Customers

Speed or business velocity determines success in the distribution industry. Poorly

integrated systems, reliance on manual processes, or re-keying data already
available in one system but not accessible to others is always bad news —a major
cause of delays and a common source of errors. Along with being responsive to
customers, distributors also need to ensure that suppliers rely on them as trusted
trading partners. Distributors that make doing business easy and enjoyable for
suppliers and customers can maintain strong relationships. Distributors whose
systems integrate easily with supplier systems gain a cost advantage.

Challenge 4 - Position for Growth With Improved Customer Service

Distributors work in very competitive markets. For the external customer, the
speed of response, the accuracy of information such as lead-time data, and quality
care across all contact points affects future orders. Getting customer service right is
a “must” for sustained business growth!

Challenges 5 - Revenue loss

The manufacturer sells his product to the intermediaries at costs lower

than the price at which these middlemen sell to the final customers.
 Therefore the manufacturer goes for a loss in revenue. The intermediaries
would never offer their services to the manufacturer unless they made a
profit out of selling his products. They are either made a direct payment by
the manufacturer, for instance shipping costs or as in the case of retailers by
selling the product at costs higher than the price at which the product was
bought from the manufacturer (also known as markup). The manufacturer
could have sold at this final price and made a greater profit if he had been
managing the distribution all by himself.

Challenge 6 - Loss of Communication Control

Along with loss over the revenue the manufacturer also loses control over
what message is being conveyed to the final customers. The reseller may
engage in personal selling in order to increase the product sale and
communicate about the product to his customers. He might exaggerate about
the benefits of the product this may lead to miscommunication problems
with end users. The marketer may provide training to the salespersons of
retail outlets but on the whole he has no control on the final message
conveyed.

Challang 7 - Loss of revenue

Intermediaries make a profit for their part in the distribution process. They are
either made a direct payment by the manufacturer, e.g. shipping costs plus a
mark-up, or they sell the products to retailers at a higher price than they bought
the goods from the manufacturer (again, by adding a mark-up).
The manufacturer therefore sells the product to the intermediaries at costs lower
than the price at which the intermediaries sell to the final customers. A greater
profit would be made if the manufacturer been able to manage the distribution.

Challenge 8 - Loss of communication control

The manufacturer loses control over what message is being conveyed to the
final customers. The reseller may engage in personal selling in order to increase
product sales and may possibly exaggerate the benefits of the product. There is
potential for miscommunication with end users.

Challenge 9 - Loss of product importance

The importance given to a manufacturer’s product by the members of the

distribution channel is not under the manufacturer’s control. A competitor’s
product may gain greater importance to the intermediary if that business is
offering a higher promotional incentive.
CHAPTER 5

Suggestions

 Maintain dominance in Air-Conditioning segment.

 Many new players are trying to enter Indian market so it should formulate new
strategies so as not to lose market share.
 Grow volume sales at least 10% p.a. over the next years.
 One new major product should launch every year.
 They need to maintain high standards and should be careful that there product
should impress the customers.
 They should improve service facility of the products.
 They should reduce the price of existing products.
 Company should not increase the price of the products on regular basis.
 They should produce small and less priced A/Cs at affordable price.
 They can improve their advertisement by adding different Brand Ambassadors
at the time of festivals.
 Company should introduce products that would save electricity usage.
 They should improve the quality of A/Cs.
Conclusion

Blue Star is the largest single source for air-conditioning equipment in India.

• Blue Star is India's largest and most preferred air-conditioning and commercial

refrigeration company.

• Through its strategic long-term tie-ups with key and critical auxiliary

manufacturers, Blue Star provides its customers many benefits.

• The brand’s vision is to deliver excitement to the consumers, by providing

comfort at its best.

• Complete control over core components & technology.

• The company has strong potential to grow & that through greater innovations.

• In addition to corporate sector the company has the option to step into the local

households by understanding their psychology.

• Blue Star is India's largest central air-conditioning company.

• In short it can be said that the company is still growing by making constant

efforts.
Bibliography

Bluestarindia.com

http://www.investopedia.com

http://ishrae.in