MIRC ELECTRONICS LTD

IN
CONSUMER ELECTRICAL AND
ELECTRONICS INDUSTRY

Strategic Management Project Report

by
Ashish Virmani
Bhuvana Ramachandran
Neeraj Tharwani
Tarun Saxena
Yogesh Thombre
(PGSEM 2011)

TABLE OF CONTENTS
1

Company Background.......................................................................................... 4

Consumer Durables/ Appliances Industry.............................................................4

2.1

Structural Analysis Porters five forces........................................................5

The Internal Environment..................................................................................... 6

3.1

SWOT analysis............................................................................................... 6

3.2

Revenue contribution by business segments.................................................6

3.3

Revenue and profit trend over the years.......................................................7

3.4

Revenue distribution and trend Traded vs Manufactured goods..................7

3.5

Current strategy - RoE vs Market share.........................................................8

3.6

Key businesses............................................................................................... 9

3.6.1

Television................................................................................................. 9

3.6.2

Air Conditioners..................................................................................... 12

3.6.3

Mobiles.................................................................................................. 13

3.7

Competitor Analysis..................................................................................... 13

3.7.1

Product Line........................................................................................... 13

3.7.2

Positioning............................................................................................. 14

3.8

Onida vs Competition................................................................................... 14

Internal Challenges............................................................................................ 14

Business Plan..................................................................................................... 15
5.1

Key Recommendations.................................................................................15

5.1.1

Build brand............................................................................................ 15

5.1.2

Nurture innovation.................................................................................15

5.1.3

Expand financial resources....................................................................15

5.2

Recommended Courses of Action................................................................15

5.2.1

Rural Market The Next Big Opportunity...............................................15

5.2.2

Mobile, LED/LCD Ride on high growth wave........................................16

5.2.3

CTV, AC Sustain growth & profitability................................................16

5.3

Dropped Alternatives................................................................................... 17

5.3.1

Divest declining growth businesses.......................................................17

5.3.2

Expand into global markets...................................................................17

5.3.3

Vertical integration................................................................................18
2

5.3.4
5.4

Diversify to leverage on economies of scope........................................18

Plan for implementation...............................................................................18

5.4.1

Product Marketing, Sales & Distribution................................................18

5.4.2

Production or operation.........................................................................18

5.4.3

Engineering and R&D............................................................................ 18

5.5

Structure and systems................................................................................. 19

5.6

Budget and financial projections..................................................................19

5.7

Milestones.................................................................................................... 22

5.8

PEST............................................................................................................. 22

5.9

Assumptions & Contingency plans...............................................................23

References......................................................................................................... 23

Appendix............................................................................................................ 23
7.1

Consumer Electronics Industry - Porters five forces analysis......................23

7.2

India Household Income Growth [Source: McKinsey Global Institute Reports]

27

7.3

Digital marketing......................................................................................... 29

1 Company Background
Mirc Electronics founded by Mr. GL Mirchandani and Mr. Vijay Mansukhani in the year 1981
has successfully completed 30 years, while tiding over the changes in the market, with a
strong focus on innovation and consumers. Through its brands Onida and Igo the
company manufactures and markets LCD & LED TVs, air conditioners, DVD, washing
machines, mobile phones, microwave oven, projectors & display products and LED lighting
equipments. The companys distribution network consists of 33 branch offices, 208
Customer Relation Center's and 41 depots across India. The company has state of the art
manufacturing plants in Wada and Uttarakand.
Television/CTV (36%), AC (21%) and mobiles (12.5%) sales are the primary contributors to
the total revenues of the company in this fiscal year. The company has achieved a milestone
of 2000 crores this year with a 48.55% growth in PAT over the previous year. Its on its way
to becoming a $1 billion company.

2 Consumer Durables/ Appliances Industry

While Indian economy is projected to grow by 8.7 per cent during the fiscal year 2011-12,
the consumer durables industry grew by 12%-13% over the last year. The market for
consumer durables is estimated at Rs 300 billion and is expected to reach Rs 500 billion by
2015 as per the study undertaken by Assocham (Dec 2010) on Rise of Consumer Durables
in Rural India. India ranks first in the Nielsen Global Consumer Confidence survey released
in January 2011.

Flat panel TVs grew 80%, while refrigerators, air-conditioners and washing machines showed
a 12.5%, 44% and 10% growth respectively, in 2010 calendar year. The industry has been
suffering due to hike in metal prices with the increase in copper at 45%, steel 16%, resins
18% and aluminium 23% over August last year.
LG and Samsung lead the pack of competitors for Mirc, along with Sony, Philips and
Videocon, Godrej amongst the local players.

2.1 Structural Analysis Porters five forces

The industry is fairly attractive despite intense rivalry and threat of substitutes, due
its high growth potential. There are low government protections ensuring a global
competitive arena. The landscape is fast changing with a high pace of innovation
and quick obsolescence. The high weight to rivalry amongst competitors indicates
that industry is highly competitive, a factor that overshadows all other factors.
Attractiveness
Lo
w
1

3 4
*

Barriers to entry

Power of buyers

Power of suppliers

Threat of
substitutes
Government
action
Overall
attractiveness

Weight
s

High due to high

growth

3.13

50.00%

Low as exit is easy

2.33

10.00%

Moderate

2.89

5.00%

3.50

10.00%

2.88

5.00%

1.75

15.00%

2.67

5.00%

Hig
h

Rivalry among
competitors
Barriers to exit

Remarks

*
*
*

Lots of buyers and

sellers
Suppliers
geographically
concentrated but
dependent
Low cost substitutes
available
Not much protection,
globally

100.00
%
5

1.5
6
0.2
3
0.1
4
0.3
5
0.1
4
0.2
6
0.1
3
2.8
3

3 The Internal Environment

Mirc has been fairly a long time player in the TV, AC and washing machine
segments, with its core competencies built around technological innovations, quick
time to market and profitability on traded goods. It continuously strives to connect
the chasm between consumers unrealized needs and market offerings, through
product development driven largely by Consumer Connect outcomes. The company
has recently expanded into adjoining consumer electronics segments to latch onto
high growth in markets such as mobiles etc.

3.1 SWOT analysis

The company is well poised to grow with its share of strengths and weaknesses as
captured below.

3.2 Revenue contribution by business segments

TV, AC and mobile businesses are the top 3 contributors to the companys topline.
This aligns with the growth potential of these segments in the industry.

3.3 Revenue and profit trend over the years

The company has seen gradual growth in the last decade, with its revenue and
profitability reflecting the economys recessionary and inflationary trend.

3.4 Revenue distribution and trend Traded vs Manufactured goods

The company maintains a balance between trading and manufacturing activities,
with a higher focus on trading for competing in the new markets and technologies,
and manufacturing goods for the stable markets and technologies. The company
has no history of importing technology.
7

3.5 Current strategy - RoE vs Market share

The below graph illustrates that the company is making negative economic profit,
as it hasnt been able to recover the cost of equity fully, though it has limited its
market share. The company has been going through periods of focus on cost
leadership or differentiation and therefore does not have a clear and successful
strategy. Note that cost of equity has been taken to be 15% to match the market
returns for the last decade.

RoE

15%
30%
Onida

Market share

3.6 Key businesses

3.6.1 Television
The Indian CRT CTV market at 18 million sets in 2010 has registered a decline of 4.6
percent over the last year. Onida, at sales of 1.4 million sets, accounted for 7.8
percent. Size-wise sales indicate that 14-inch TVs remained a popular choice
commanding 51.5%.
The LCD television market in India stands at 3 million sets in 2010, having doubled
from 1.5 million sets in 2009. Samsung, LG and Sony continue to dominate the
segment with a combined market share of 72.5 percent. (Source - Indian TV Industry
Source ad media annual report 2011)
Mirc has an established market position in the Indian color television (CTV), with its
popular products in CTV market being:

Ultra Slim TV (superb audio output, USB connectivity, low price) Onida
continues to pursue improvements in CTV segment due to significant sales in
the rural market, though being viewed as a declining market by its urban
competitors.
LCD/LED TV - causes less strain to eyes. Developed ICare technology which
reduces harmful UV rays by 99%. Use of this technology results in 95%
reflection free viewing leading to better readability. Ships with Dual HDMII,
VGA Port, USB.
9

20.56

27.78

LG
Videocon
Samsung

17.22
13.88

Onida
Others
ELCOT

7.78

12.78

Graph 1: CRT Market Share 2010

17.4

22.7

LG
Videocon
Samsung

4.5

Onida
Others
21

13.6

ELCOT

Graph 2: LCD/LED Market Share 2010

Due to non-availability of Manufacturing COGS for TV segment, we can analyze
profit margin for Traded TVs.

10

Profit Margin (Traded)

30
25
20
Profit Margin (Traded)
15
10
5
0
2005-06

2006-07

2007-08

2008-09

2009-10

2010-11

Graph 3: Onida CTV Profit Margins for Traded Qty over the years
With LCD TV sales in India LCD TV revenues are expected to rise to `12,000 crore in
2011, up by 60 percent from `7,540 crore in 2010.
Onida has seen an average growth in CTV segment over last few years.
8000000
7000000
6000000
5000000

Installed Capacity

4000000

Total Sales Qty

3000000
2000000

Sales Qty (Traded)

Sales Qty (Manufactured)

1000000
0
2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

Graph 4: Onida CTV Sales Turnover

The television industry is projected to grow at a compound annual growth rate of
13-15 per cent and reach about $11.45 billion by 2014.
11

3.6.2 Air Conditioners

Onida enjoys a high market share of 15% in this market segment, next only to the
market leaders share of 25%. The company primarily trades in split air conditioners
with limited presence in window ACs. As of July 2011, Onida has 46 varities of ACs in
the market. The AC segment contributes upto 21% of Onidas annual revenue. With
the AC no longer perceived as a luxury good, huge potential for growth from lower
tier cities is foreseen in the coming years. The companys latest innovation of precooled ACs coupled with marketing campaign 'SMS gone AC on' has attracted good
response, which is reflected in its sales growth.
The design and development of ACs is done in-house but over the years, Onida has
moved away from production and have started outsourcing the production as it is
cheaper. No import tax is imposed on finished goods. Whereas, import duty is
charged on raw materials. This makes production with international standards raw
materials / parts costlier. With the Indian economy on a rise and rural market
growing at about 40%, the demand for ACs are projected to grow at about 20% in
the coming years. With the lag effect on the summer season, Onida is maintaining
higher inventory in the Air Conditioners segment towards the end of FY11.

3.6.3 Mobiles
Mobile handset business characterized by high growth of over 35%, and high
competition with as many as 50 odd players in the Indian market is touted as the
second largest mobile handset market in the world after China. Incumbents have
been transitioning away from in-house production of end-to-end solutions by
focusing internally on their core competencies in the value chain. This has triggered
a series of mergers/acquisitions/joint ventures (Seimens acquired by BenQ, Sony
Ericcson) and spin-offs (Mobile platform providers such as Freescale and Infineon
were spun-off by Motorola and Seimens). Also, given the technology complexity and
12

wide range of component and software requirements, most players sell or license
HW/SW components to each other. These along with ODM/OEM based product
development models make for easy entry by new players.
Given that penetration in urban areas is fast approaching 100 percent, future
growth is expected to be primarily driven by the rural market where it is just 23%,
and secondarily by product replacement sales and buyers of alternate phones for
personal/business use.
3.6.3.1Company snapshot
Onida entered the mobile market in 2008 and currently holds just 1.5% market
share, with a 2011 net sales of 104Cr in 2011 and volume of 1.5M. With gross profit
margin of 25%, Onida solely trades mobiles and does not manufacture them.
3.6.3.2Industry snapshot
There has been stiff competition for global players with local manufacturers having
captured 17.5% of the market share. With India contributing to approximately 10%
of worldwide sales, it is an important market for global players as well.

Top 5 players in the Indian market Samsung, LG, GFive, Micromax, Spice
Mobiles
Top 5 local manufacturers - Micromax, Karbonn mobiles, Spice Mobiles, Videocon,
Lava

3.7 Competitor Analysis

3.7.1 Product Line
Big global players like LG, Samsung, Sony and Videocon have a wide product range
compared to Onida which helps them target customers from all segments. The
Consumer Electronics industry is rapidly evolving in terms of technology which
improves/enhances features, aesthetics, picture rendering source (such as LCD,
CRT, LED). Thus this is a highly R&D driven industry.
Company
Onida
LG
Samsung
Videocon

R&D budget as in 2010 (as % of

total expense)
0.58
2.7
6.6
0.1

3.7.2 Positioning
The global players like Samsung, Sony are perceived to be better companies in
terms of technology, reliability and for futuristic products and high brand identity.

13

3.8 Onida vs Competition

Onida began to lose its sheen in the mid-90s in the face of an onslaught by the
Korean and Japanese brands. The international brands came in with superior
technological knowhow and a wide range of productsOnida only sold TVsand,
importantly, they had financial muscle. They overwhelmed the Indian brand with
massive advertising and marketing budgets, pushing it into near-oblivion.
Onidas biggest mistake, especially when foreign competition came in, was to not
invest in the brand, says Francis Xavier, CEO of Chennai-based market research
agency Francis Kanoi Marketing
. They should have challenged the Koreans in the 90s
itself. (Source Business Outlook)

4 Internal Challenges
4.1.1.1Declining profits
The major problem dogging the firm is the erosion of its after tax profit margins
despite increasing sales and a clear growth over the years. While the sales revenue
has doubled between 2003 and 2011, the PAT has declined.
4.1.1.2Marginal player in growing segments
Mobile segment is the highest growth segment of consumer electronics. It is also a
segment where the company has a passing presence. It is the fast growing segment
in the consumer electronics market and the company needs to tap into this growth.
In the other segments where it has bigger presence, its brand value has eroded
over the years and it is but a marginal player. The small profit margins do not afford
it a niche player tag.
4.1.1.3Limited financial resources
The company focuses largely on innovation, but has a meagre budget to account for
it. The problem, however, lies in the visibility of the innovation in the consumer
market. The brand recall is limited to audio-visual products. Consumer is not aware
of the innovations the company is doing and hence the potential of revenue
generation through these is limited. Advent of global players has compounded the
problem by grabbing a bigger public mindshare with bigger marketing budget and
cutting edge innovations.
4.1.1.4High promoter equity and high debt
Being a family owned business, the company has a strong promoter bias. The
promoter family owns 55% stake in the company and raising equity from the market
against a decreasing share of the promoter family is not an option. This limits the
finance options, which are needed in a period of rapid growth.

14

The following sections will elaborate on how the companys strengths and
opportunities can be leveraged upon to overcome these challenges and exploit the
huge growth potential in the external market.

5 Business Plan
5.1 Key Recommendations
With the company being limited to a low market share in most of the segments, we
recommend focused differentiation for increased revenue growth and profitability.

5.1.1 Build brand

The companys brand value has significantly eroded in the market place, since it
reigned supreme in the colour TV segment in the 1990s. The proposal is to adopt a
three pronged approach of brand building through focused marketing for its new
lineage of products, better sales-distributor relationships and improved after sales
service and support.

5.1.2 Nurture innovation

The company should nurture incremental innovation to identify uncontested market
spaces and leverage on economies of scope.

5.1.3 Expand financial resources

The company should expand its financial resources to enable further growth by
floating additional equity, to make increase in market share a reality. The company
is currently burdened by high debt interest payments which impacts its bottomline.

5.2 Recommended Courses of Action

Given the diversity of product lines and market segments that the company
operates in, we recommend a divide and rule policy for the companys growth.
Disparate strategies have been proposed in the following sections based on their
market share (high vs low). But the common vein of innovation would bind all these
units together, helping the company build on its core competencies to fuel further
growth. The proposal is to have the company emerge as a technologically
innovative company, as against a manufacturing company.

5.2.1 Rural Market The Next Big Opportunity

The rural market is expected to grow 30%-40% annually over the next few years. Good
monsoons, higher disposable incomes, and credit provisioning has made the bottom of the
pyramid something that can no longer be ignored.
As the rural market is highly price sensitive, it is required to develop the right pricing
strategy (by managing feature-cost tradeoffs), network and have an after sales service in
place. It is imperative to localize the product or services to connect with the rural
consumers.

The company should continue to sell Igo brand of products through post office
branches and other farmer bazaars.

15

To increase penetration in rural markets, it shoud work with other industry segments
to tie-up and/or leverage on the distribution channels (Hariyali Kissan Bazaar, echoupal, Hyundai rural outlets). Target
Product differentiation across the urban and rural market segments - look at clusters
of cities for market opportunities. (Source: McKinsey Report Urban world: Mapping
the economic power of cities)

5.2.2 Mobile, LED/LCD Ride on high growth wave

We recommend the following actions to improve low market share businesses in
niche segments:

Allocate R&D budget for incremental design innovation in this space, with
focus on user experience (e.g. improved battery life for handsets) and
improved ease of manufacturing. This will provide leeway for price increase
and cost reduction respectively. There will be no investment to target radical
technological innovations.
Focus on sales of medium priced phones (Rs. 2000 to Rs. 5000) in tier2/tier3
cities and rural areas, and higher priced phones in well penetrated markets.
Outsource manufacturing and continue with sales of traded goods only. This
would also obviate the need to charge depreciation and hence improve
bottomline.
Increase market share in LCD/LED TV to 10% to gain some economies of
scale and cover R&D cost

5.2.3 CTV, AC Sustain growth & profitability

5.2.3.1Colour TVs
As per market analysis, CRT demand is declining gradually and expected to be non
zero till 2014-2015. With big global players exiting from declining CRT market in
2012, owing to an increase in demand for LCD & LED TV, Onida is strategically well
placed to harvest its CRT business, by bridging the gap between demand and
supply.

16

120
100
80
CRT

60

LCD
40
20
0
2007

2008

2009

2010

2011

2012

Graph 6: Industry trend for CRT & LCD

5.2.3.2Air Conditioners
Onida should invest in R&D to ensure that the products can maintain 5-star
ratings even with increasing BEE standards. That way, the production can be
sustained for a longer time.
o 12 of the 46 ACs have a 5-star BEE rating.
o Only 3 of the above 12 will be classified as 5-star in 2013 rating levels.
By 2015 levels, only 2 of the above.
All the competitors provide 1 year warranty. Onida can increase the warranty
period from 1 year to 2 years. This will help build Onidas brand and Indian
customers will perceive Onida as a reliable brand. [Reject this can be easily
replicated by competitors. Onida might not have the expertise to repair as
the product is mostly traded.]
In the longer run, Onida should consider eco-friendly options such as
residential solar ACs.
o In India, ACs are needed mostly in summer when the sunlight is
abundant which makes the solution feasible.
o Eco-friendly initiatives enjoy a lot of tax rebates.
Customers are also concerned with shortage of energy sources and would chose
eco-friendly options.

5.3 Dropped Alternatives

Given the dynamic internal and external environment in which the company
operates, and wide ranging research in the field of strategic management, multiple
strategic alternatives are available to the company. This section discusses the major
ones and reasons why they are currently unattractive options.
17

5.3.1 Divest declining growth businesses

CRT TV segment is currently facing a period of declining growth. This has been
acknowledged by other players and most are contemplating exit in 2012. Given that
Onidas brand recognition is strong in TV segment, it is not recommended to exit
that segment. It has also been seen that there is still considerable demand in the
rural segment, which bigger global players cannot afford to play going forward.

5.3.2 Expand into global markets

Following are some principal factors that could support international operations

Perform one or more value chain activities abroad to leverage on

geographically concentrated resources (human, natural reserves, learning,
innovation), scale economies and scope economies
Mitigate and manage risks by distributing them across global markets
Onida currently outsources manufacturing to South Korea, Taiwan etc. It is
recommended for the company to leverage on high growth local market
before expanding into global markets.
Entering new segments entails huge expenses to build brand recognition.
Given Indias reputation for design innovation as against manufacturing,
Onida should consider licensing its technological innovations to foreign
markets as against selling its own products.

5.3.3 Vertical integration

Vertical integration involves expanding into activities in the segments value chain
and requires considerable resources. Given the limited financial resources available
to a low market share company like Onida, vertical integration is strongly
discouraged.

5.3.4 Diversify to leverage on economies of scope

The company recently moved to a multi-product portfolio to primarily increase shelf
space. As the company is yet to gain reasonable market share or sufficiently tap
into profits of the new markets, further diversification is strongly discouraged.
Limited financial resources would also be a deterrent.

5.4 Plan for implementation

This section captures various actions to be performed by functional groups, for the
proposed strategy to be realised at the corporate level.

5.4.1 Product Marketing, Sales & Distribution

Crowd sourcing seek ideas actively from consumers and incorporate into
product development
Use social media for advertising
Local language advertisements through local brand ambassadors for rural
markets
Use employees as brand ambassadors
Launch Onida retail stores through channel partners
18

Improve after service sales and increase warranty/guarantee period to

improve perceived quality
Unconventional methods of distribution post office, farmer bazaars
Increase distributor margins to improve sales
Launch promotional activities such as X-factor, cricket, movie launches
Promote online sales

5.4.2 Production or operation

Focus on customization in technologically evolving markets, and limit

economies of scale targets to stable technologies such as CRT TVs, where inhouse production is resorted to
Negotiate longer credit periods with suppliers and manufacturers
Enforce stricter quality standards for manufactured goods. This will allow for
increased warranty period and improve consumer perception of quality.
Innovative measures at Wada factory to save the environment and to reduce
energy consumption
Pilot launch of products within the company
Innovative incentive based compenstation scheme to hire and retain highly
talented and motivated workers

5.4.3 Engineering and R&D

Establish R&D centres in multiple geographies to leverage on local talent

pool
Introduce value added capabilities like wireless/usb connectivity, inbuilt
media players, protective coat to reduce UV emissions
In mobile segment, leverage open source products to enhance
services/features
In AC, instead of focussing on compressor, bring value by sms operability,
internet connectivity, microprocessor based temperature control and
optimization of compressor operation

5.5 Structure and systems

This section details the recommended structure, information and control systems
for fast paced industries like that of consumer durables.

Flat hierarchy
(a) Functional Manager per segment who manages revenue and
profitability for the segment
(b) Empowered managers to customize and quickly respond to changing
customer needs and competitive environment
Product based teams
(a) Formed by senior representatives from Engineering, Marketing,
Advertising, Production teams to work jointly on latest and futuristic
technologies
Better inventory management

19

(a) Deploy IMS (inventory management systems) and resort to closer

networking with manufacturers, distributors and retailers to foresee
supply and demand
Increase sales rep interaction with distributors & strengthen relationship
(a) Develop training material to update sales reps and distributors on new
and upcoming products
(b) Improve dealer confidence in product feature set and quality, to
allocate more shelf space

5.6 Budget and financial projections

We now quantify the impact of the proposed strategy, by forecasting revenue and
profit growths for the coming years, based on the following facts/assumptions:

Given that the company trades as well manufactures goods, S/A and A/E
ratios will not be maintain a constant relation.
Revenue growth
With market share and revenue known, we find market size. Market size,
market growth and target market share give us revenue for each year and
hence the growth rate.
a. Faster than revenue growth rate (12.5% faster)
i. Cost Of Traded Goods Onida moving towards traded goods.
b. Slower than revenue growth rate (12.5% slower)
i. Material cost Related to production.
ii. Assets / fixed assets
Depreciation Straight line (~10%)
Interest Decreases by 10% each year.
Tax rates are constant.
Price hike
(a) In raw material cost in 2013-14
(b) In cost of traded goods in 2014-15
Personnel expenses - 15% hike to counter inflation.
Dividend - 100%

Forecasts
1. Total / Traded / Manufactured Revenue
Increases from 2000 / 1104 / 895 crores in 2010-2011 to 3600 / 2110 / 1500
crores in 2012-13 to 8500 / 5400 / 3200 crores in 2015-16.

20

2. R/E = R/S * S/A * A/E

21

22

5.7 Milestones
A strategy implementation requires a company to be committed to its path for a
minimum of 3-5 years, to realize its long term potential. Given this, it is imperative
to identify intermediate milestones that track the progress and identify checkpoints
that test the relevance of the strategy in the coming years, given the ever-changing
economic landscape.
Major milestones

Dec11 Identify products for rural and urban segments

Jan12 - Devise marketing plan (with budget) for rural and urban segments
and start execution
Mar12 Recruit sales force in rural segments and deploy them
2012 - Raise equity to finance additional assets
2013 Achieve sales revenue of $1B
2015 - Pay off outstanding loans and limit loans to 1/3 rd of equity

Checkpoints

Quarter - Review competitor focus and market share

Yearly - Review OEM agreements to identify the profitability
Yearly - Review and identify new low cost locations across geographies

5.8 PEST
The Consumer durables sector is governed by the following mix of positive and
negative political, economic, social and technological factors.
(a) Luxury products fast becoming necessities
(b) Higher disposable income
(c) Pro-market government
(d) Inflationary economic condition
23

(e) After effect of economic recession of 2008-2009 yet to wear off

Given the clear trend in rising input costs, the company is not recommended to
attempt cost leadership in any of its segments. There should however be a focus on
keeping costs low to generate high profit margins.

5.9 Assumptions & Contingency plans

The proposed revival strategy assumes the following set of external conditions to
prevail over the next few years.

Indian economy would continue to grow at 8%, driven by significant growth

in consumer durables
Key players will exit declining CTV market by 2012 as widely publicised
Zero import duties on finished durable goods will continue
Availability of skilled labor in the market to target innovation based
differentiation

The uncertainty of the subset of microeconomic conditions has already been

factored into the strategy implementation, thus allowing the company to recover
cost of equity even otherwise.

Leverage on existing idle manufacturing capacity to shift to local production

Spread out across geographies to overcome talent shortage

6 References
1.
2.
3.
4.

www.onida.com
http://www.onida.com/financial/annual_reports/Annual%20Report_2011.pdf
http://www.scribd.com/doc/50121306/Consumer-Durables-10708

The Mobile Handset Industry in Transition - By Jamie L. Anderson & Martin E.

Jonsson June 2005

5. http://www.assocham.org/arb/aep/GDP_Projections_2010-2011_mar2011.pdf
6. http://www.assocham.org/arb/afp/2010/Rise-of-Consumer-Durables-in-Rural-IndiaDec2010.pdf
7. http://www.euromonitor.com/consumer-electronics-in-india/report
8. http://www.mckinsey.com/mgi/publications/india_consumer_market/index.asp
9. http://www.mckinsey.com/mgi/publications/urban_world/index.asp
10. https://www.mckinseyquarterly.com/Four_ways_to_get_more_value_from_digital_mark
eting_2556
11. http://poweryourtrade.moneycontrol.com/research-report/brokers/mirc-electronicslimited_2903111452.pdf
12. http://www.ibef.org/india/economy/consumermarket.aspx
13. http://retail.franchiseindia.com/articles/Retail-Trends/Retail-Industry/Race-to-ruralmarket-524/
14. http://www.itcportal.com/sustainability/lets-put-india-first/choupal-saagar.aspx
- http://www.dscl.com/Business_Agree_HarKisBzr.aspx

24

7 Appendix
7.1 Consumer Electronics Industry - Porters five forces analysis
Rivalry among
competitors
Attractiveness
Lo
w

No. of competitors

1
*

5
*

Fixed cost

Differentiation

*
*

Openness of terms
of sales

Excess capacity

Row
avg

Hig
h

Industry growth

Switching cost

Remarks

Strategic stakes

Many big and small players

Rapid growth due to

expanding market

Low because most of the

goods are traded

Differentiated but available

to all competitors

Almost non-existent due to

interoperability

Prices are open in market

Mostly traded goods, so NA

Companies are not in

survival mode

4
3.12
5

Barriers to exit
Attractiveness
Lo
w
1
Assets specialization
Cost of exit

Remarks

Row
avg

Hig
h
2

*
*

5
Production lines are highly
specialized

Large chunk of revenue

from traded goods

25

Government
restrictions

Mostly labor laws,

otherwise not essential
goods

3
2.33
3

Barriers to entry
Attractiveness
Lo
w
1

3
*

Product
differentiation

*
*

Access to channels
of distribution

*
*

Access to
technology

Access to raw
material
Government
protection

4
*

Capital requirement

Row
avg

Hig
h

Economies of scale

Brand identity
Switching cost

Remarks

*
*

Mostly traded goods

Differentiation possible
thru innovation

High brand loyalities

Interoperable goods

5
1

Established players like

croma, direct access

Not much in traded goods

Low for traded but high for

produced goods

Increasing copper/steel
prices

Not protected, 100%FDI by

automatic route

Bargaining power of
buyers
Attractiveness
Lo
w
1

Row
avg

Hig
h
2

Number of buyers
Availability of
substitutes

Remarks

5
*

Individual Consumer hence

numerous

Internet for TV, mobiles,

coolers for AC

26

Switching cost

Just dump the old

equipment

Except some like Croma,

dealers arent big enough

Smaller suppliers from

Taiwan/china

Onida is acting as a
marketer

Buyers threat of
backward
integration
Industrys threat of
forward integration
Contribution to
quality

Contribution to cost

Minor tweaking and addons, distribution

Buyers profitability

Lifestyle goods, status

symbol in rural markets

Bargaining power of
suppliers
Attractiveness
Lo
w
1

Suppliers threat of
forward integration
Industrys threat of
backward
integration
Contribution to
quality

5
*

Switching cost

Row
avg

Hig
h

Number of suppliers
Availability of
substitutes

Remarks

*
*
*
*

Contribution to cost

Industrys
importance to
supplier

Smaller suppliers from

China/Taiwan

Specialized products

Most suppliers make

standardized products

Smaller overseas suppliers

Possible but low due to

high asset specialization

Quality largely depended

on supplier
Supplier contributes most
to the cost
Industry the primary buyer
for supplier

1
4
4

27

Threat from
substitutes
Attractiveness
Lo
w
1

Switching cost

*
*

Substitutes pricevalue
Profitability of the
producers of
substitutes

Row
avg

Hig
h
2

Availability of close
substitutes

Remarks

*
*

Internet for TV, mobiles,

coolers for AC

Just throw old equipment

Internet is expensive,
coolers are cheaper

Internet/coolers are more

profitable businesses

Government
actions
Attractiveness
Lo
w
1
Industry protection

Row
avg

Hig
h
2

Industry regulation
(pollution, etc.)
Customs and tariff
restrictions abroad

Remarks

*
*

5
100%FDI allowed via
automatic route

Assembly operation/traded
goods cause less pol.

Duties ranging 25-35% in

Africa's, low in dubai

7.2 India Household Income Growth [Source: McKinsey Global

Institute Reports]
http://www.mckinsey.com/mgi/publications/india_consumer_market/index.asp
http://www.mckinsey.com/mgi/publications/urban_world/index.asp

28
Figure 1: Trends Favoring Growth of Consumer Durables Market (Source:
www.ibef.org)

29

7.3 Digital marketing

https://www.mckinseyquarterly.com/Four_ways_to_get_more_value_from_digital_marketing_2
556

30