A RESEARCH PROJECT

ON

A STUDY ON ROLE OF WHITE GOODS IN RURAL MARKET OF RAJASTHAN

SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE DEGEE OF

MASTER OF BUSINESS ADMINISTRATION

2006-2008

Under the supervision of :- Submitted by:-Mr. SURJEET KUMAR SANDEEP GARHWAL(LETURER IN MANAGEMANT) Enro 06061505106SCMIT SIKAR M.B.A. (M.M.)

SHEKHAWATI COLLAGE OF MANAGEMENT & INFORMATION TECHNOLOGY (SIKAR)

SUBMITTED TO:-

Directorate of Distance EducationGuru Jambheshwar University of Science

and Technology, Hisar

CANDIDATES DECLARATION

This is certified that my self SANDEEP GARHWAL I have done complete my project title of the project "A STUDY ON ROLE OF WHITE GOODS IN RURAL MARKET OF RAJASTHAN" This project is completed by me and with the help of supervision Mr. SURJEET KUMAR.

I certified that this project report has not submitted to any other universities MBA programs. Above information is true to the best of any knowledge and if found other wise, Stand liable to be rejected by discretion of university authority.

Place:SANDEEP GARHWAL

Date: MBA (MM)

ACKNOWLEDGEMENT

I feel great pleasure in presenting this project report of "A STUDY ON ROLE OF WHITE GOODS IN RURAL MARKET OF RAJASTHAN"

I wish to express sincere thanks to Mr. RANGEET SINGH Director of SCMIT SIKAR .

I would like to thank Mr. SURJEET KUMAR (lecturer of management) of business management for has wonderful and guiding me to prove my self and also thanks to Mr. Amit Sharma for guiding &instructing me when I required.

Knowledgement are also due to my family members &friend whose continuous faith &inspiration have helped me to complete this project.

Last but not least I wish to express my thanks to all those who directly &indirectly helped my to produce this report.

Place: SANDEEP GARHWAL Date: MBA (M.M)

GUIDE CERTIFICATE

Certified that work done by Mr. SANDEEP GARHWAL Enroll No.

06061505106 is in original & is of the standard expected to be M.B.A.

student.

Guide signature DirectorWith seal sign. &with seal

CERTIFICATE

This is to certify that research project entitled "A STUDY ON ROLE OF

WHITE GOODS IN RURAL MARKET OF RAJASTHAN" Submitted in

fulfillment for the degree of Master of Business administration to the

Department of business management GJU. Hisar is a bonafied research work

carried out by SANDEEP GARHWAL under my supervision and no part of

this project has been submitted for any other degree.

This assistance and help received the cource of investigation has been fully

acknowledged.

Mr. SURJEET KUMAR (Lecturer in management) SCMIT (SIKAR)

CONTENTS

SR. NO. Description

Particulars

Acknowledgement

Preface

1. Introduction

2. Data analysis & Interpretation

3. Analysis & Interpretation

4. Finding & Suggestions

5. Bibliography

INTRODUCTION

Marketing is the pivot of economic development in rural areas. It is an essential component in income and employment generation in farm and non-farm sectors. Since marketing is one of the pre-requisites for income generation, this article attempts to throw some light both on marketing of rural produce to other areas and improving marketing environment within the rural areas.

THE RURAL MARKETING

Broadly rural marketing incorporates the marketing of agricultural products, rural industries products and services of many kind. The trade channels for different types of commodities available in rural areas private, cooperatives, processors, regulated markets and state agencies. In no sense, a social cluster or village economy as at whole can, be developed without effective and efficient rural marketing. Very little attention has been paid in the planning era towards the development of rural marketing. In fact marketing is a dynamic state of affairs and is part and parcel of the whole economy. Thus production and marketing are the two facets of a coin. Rural marketing constitutes the nerve centre of rural development activities.

Rural marketing is a two way marketing process. The content now encompasses not only marketing of products which flow to rural areas, but also products which flow to urban areas from rural areas. So a broad definition of rural marketing is concerned with the flow of goods and services from urban to rural arid vice-versa. In addition, it also include the marketing in the rural areas.

As the rural marketing is a two-way process, this article attempts to highlight both the aspects. It examines the marketing aspects of rural produce with special reference to agriculture while on, the other hand it covers and suggests .strategies for promoting marketing within the rural

areas The emergence of rural markets as highly untapped potential emphasizes the need to explore them. Marketers over the past few decades, with innovative approaches have attempted to understand and tap rural markets. Some of their efforts paid off and many back fired making rural markets still an enigma.

Academic scholars in rural marketing mapped the organizational efforts and suggested alternative approaches to tap rural markets. Surge in the publications on rural marketing is an indicator of the interest in this emerging domain of knowledge. However, studies have been widely fragmented and time has come to consolidate the knowledge that has evolved over the past years. In consolidating the efforts, setting future directions would be possible.

The conference on "Marketing to Rural Consumers – Understanding and Tapping the Rural Market Potential" addresses this need and seeks participation from the interested academic and practicing fraternity. The conference is scheduled during 3, 4, 5 April 2008 and will be conducted at Indian Institute of Management, Kozhikode campus. The conference offers an opportunity for exchange of research and practical insights related to marketing to rural consumers and disseminate the knowledge generated.

 

INTRODUCTION OF INDIAN RURAL MARKET:-

The Indian rural market with its large size and demand base offer a huge opportunity that companies cannot afford to ignore. With 128million household the rural population is nearly three times urban. As a result of growing affluence fuelled by successive good monsoon and the increasing agriculture output to 200million tones from 176million tones in 1991 rural India has a large consuming base with 41% of india’s middle class and 58% of total disposal income. The importance of the rural market for some FMCG and durable marketers is underlined by the fact that the rural market accounts for close to70% of toilet soap users and 38% of all two wheeler purchased.

India is the second largest consumer market in the world. 70% of the India's population lives in 627000 villages in rural area. According to the NCAER study there are almost twice as many lower middle income households in rural areas as in the urban area. At the highest income level there are 2.3 million household against 1.6 million households in rural areas. A middle and high income households in rural India is growing from 46 million to 59 million. Thus the absolute size of rural India is expected to be double that of urban India.

The success of the brand in the Indian rural market is as unpredictable as rain it has always been difficult to gauge the rural market. Many brands, which should have been successfully, have failed miserably. Therefore marketers need to understand the social dynamics and attitude variation within each village though nationally it follows a consistent pattern.

The Indian rural market with its best size and demand base offers great opportunities to marketer. Two thirds of countries consumers live in rural areas and almost half of the national income is generated here. It is only natural the rural markets from an important part of India. Our nation is classified in around 450 districts and approximately 63000 villages which can be stored in different parameters such as literacy level, accessibility, income level penetration distances from nearest towns etc,

Rural market growth rate is high as compared to urban market. Purchasing power of the rural area is continuously increasing due to various reasons like better irrigation facilities use of fertilizer and conversion of baron land into fertile one etc. All these factors lead to increase in yields resulting in the increase of more disposable income with farmer hence or purchasing power. One third of the premium luxury goods are now sold in the rural market. Two third of the middle-income households are now in the rural market. According to one study, if the rural income in India goes up by 1% there would be a corresponding increase of about Rs.10000 crore in buying powers Among the mass media at some point of the time in the late 50’s and 60’s radio was considered to be a potential medium for communication to the rural people. Another mass media is television and

cinemas. Statistics indicate that rural areas account for hardly 2000 to 3500 mobile theatres, which is far less when compared the number of villages. The Indian rural market has a huge demand base and offers great opportunities to marketers. Two-thirds of Indian consumers live in rural areas and almost half of the national income is generated here. The reasons for heading into the rural areas are fairly clear. The urban consumer durable market for products like colour TVs, washing machines, refrigerators and air conditioners is growing annually at between 7 per cent and 10 per cent.

The rural market is zooming ahead at around 25 per cent annually. "The rural market is growing faster than urban India now," says Venugopal Dhoot, chairman of the Rs 989 -crore(Rs billion) Videocon Appliances. "The urban market is a replacement and up gradation market today," adds Samsung's director, marketing, Ravinder Zutshi.

Reasons for improvement of business in rural area Socio-economic changes (lifestyle, habits and tastes,

economic status) Literacy level (25% before independence – more than

65% in 2001) Infrastructure facilities (roads, electricity, media) Increase in income  Increase in expectations

MART, the specialist rural marketing and rural development consultancy has found that 53 per cent of FMCG sales lie in the rural areas, as do 59 per cent of consumer durable sales, said its head Pradeep Kashyap at the seminar. Of two million BSNL mobile connections, 50 per cent went to small towns and villages, of 20 million Rediffmail subscriptions, 60 per cent came from small towns, so did half the transactions on Rediff's shopping site.

Special features of rural market

Unlike urban markets, rural markets are difficult to predict and possess special characteristics. The featured population is predominantly illiterate, have low income, characterized by irregular income, lack of monthly income and flow of income fluctuating with the monsoon winds.

Rural markets face the critical issues of Distribution, Understanding the rural consumer, Communication and Poor infrastructure. The marketer has to strengthen the distribution and pricing strategies. The rural consumer expects value for money and owing to has unsteady and meager status of weekly income; increasing the household income and improving distribution are the viable strategies that have to be adapted to tap the immense potential of the market.

Media reach is a strong reason for the penetration of goods like cosmetics, mobile phones, etc., which are only used by the urban people. Increasing awareness and knowledge on different products and brands accelerate the demand. The rural audience are however critical of glamorous ads on TV, and depend on the opinion leaders who introduce the product by using it and recommending it.

Opinion leaders play a key role in popularizing products and influence in rural market. Nowadays educated youth of rural also influences the rural consumers. Rural consumers are influenced by the life style they watch on television sets. Their less exposure to outside world makes them innocent and fascinated to novelties. The reach of mass television media, especially television has influenced the buying behaviour greatly

Creating brands for rural India

Rural markets are delicately powerful. Certain adaptations are required to cater to the rural masses; they have unique expectation and warrant changes in all four parameters of product, price, promotion and distribution.

A lot is already emphasized on adapting the product and price in terms of packaging, flavouring, etc and in sachets, priced to suit the economic status of the rural India in sizes like Rs.5 packs and Re.1 packs that are perceived to be of value for money. This is a typical penetration strategy, that promises to convert the first time customers to repeated customers.

The promotion strategies and distribution strategies are of paramount importance. Ad makers have learnt to leverage the benefits of improved infrastructure and media reach. The television airs advertisements to lure rural masses, and they are sure it reaches the target audience, because majority of rural India possesses and is glued to TV sets!

Distributing small and medium sized packets thro poor roads, over long distances, into deep pockets of rural India and getting the stockiest to trust the mobility is a Herculean task. Giving the confidence those advertisements will support. Sales force is being trained to win the confidence of opinion leaders. Opinion leaders play an important role in popularizing the brand. They sometimes play the role of entry barriers for new products.

The method of promotion needs to be tailored to suit the expectations of the market. Techniques that have proved to be successful are Van campaigns, edutainment films, generating word of mouth publicity through opinion leaders, colourful wall paintings. The Wide reach of television has exposed the other wise conservative audience to westernization. Panchayat televisions in Tamilnadu carries message that are well received and contribute to community development.

Dynamics of rural markets differ from other market types, and similarly rural marketing strategies are also significantly different from the marketing strategies aimed at an urban or industrial consumer. This, along with several other related issues, have been subject matter of intense discussions and debate in countries like India and China and focus of even international symposia organized in these countries. 

Rural markets and rural marketing involve a number of strategies, which include:

* Client and location specific promotion

* Joint or cooperative promotion

* Bundling of inputs

* Partnership for sustainability

Client and Location specific promotion involves a strategy designed to be suitable to the location and the client. Joint or co-operative promotion strategy involves participation between the marketing agencies and the client. 'Bundling of inputs' denote a marketing strategy, in which several related items are sold to the target client, including arrangements of credit, after-sale service, and so on. Media, both traditional as well as the modern media, is used as a marketing strategy to attract rural customers.

Partnership for sustainability involves laying and building a foundation for continuous and long lasting relationship.

Innovative media can be used to reach the rural customers. Radio and television are the conventional media that are reaching the rural audience effectively. But horse cart, bullock cart and wall writing are the other media, which can carry the message effectively to the rural customers. 

Rural marketing is an evolving concept, and as a part of any economy has untapped potential; marketers have realized the opportunity recently. Improvement in infrastructure and reach, promise a bright future for those intending to go rural. Rural consumers are keen on branded goods nowadays, so the market size for products and services seems to have burgeoned. The rural population has shown a trend of wanting to move into a state of gradual urbanization in terms of exposure, habits, lifestyles and lastly, consumption patterns of goods and services. There are dangers on concentrating more on the rural customers. Reducing the product features in order to lower prices is a dangerous game to play.

There is considerable awareness on various latest products that are available in the market. This has been possible due to the penetration of cable and satellite channels that have brought down the world at the finger tips of the common man. The media influenced the mindset of the rural

consumer to such an extent that people who had money started purchasing the products unmindful of the costs, just to satisfy their needs as well as their ego. But, the growth of rural market could be attributed to many other reasons that in one way increased the sales as well as the profits of the companies. Some of the important causes for the growth of rural markets are –

* The rise in disposable income of the rural families* The economic boom* Timely rains* Rural population involved themselves in business other than agriculture* Increase white-collar jobs in nearby towns* Commercialization of agriculture* Saturation of the urban markets* Media penetration in rural areas (particularly satellite channels)* Globalization* Economic liberalization* Revolution in the Information Technology* Women empowerment* Improving infrastructure

However, there was a significant role of the corporate enterprises simultaneously in the development of rural market. Their timely intervention into the rural areas, their appropriate planning, their perception and identification about the growth of rural markets and the use of marketing strategies all have equally contributed for the progress of rural markets. Even though corporate houses were hedged with so many problems in the rural areas, they saw a galore of opportunities in the rural market and converted all the pessimistic characteristics of the rural market into affirmative attributes. They satisfied themselves with the availability of limited infrastructure, saw a sign of prosperity rather than fear during the entry of competitors into the rural markets, showed excitement at the availability of satellite channels in the rural households, visualized their cash bells ringing with the increase in purchasing power of the rural masses that came equivalent to their urban counterparts.

They traced a constant rise in the demand for those products that were once confined mostly to the urban houses. But, blame it on the kind of awareness created by the companies – people started using the products for other purposes as seen earlier.

In many villages, one can see today the alternate use of the products other than for their actual purpose. People in the state of Bihar feed the cattle with Horlicks as a health drink to fatten them! Similarly, people in Punjab use washing machine not for washing clothes but to make frothy lassi in huge quantities! Animals are rubbed with Iodex on their skins to relieve them from muscular pains after a day's hard work. Paints meant for houses are used on the horns of cattle for easy identification and theft prevention! The weavers in North India wear condoms on their fingers as gloves to weave fine threads while its lubrication allows them fine control on threads and protect their sensitive fingers! If companies felt happy with their increased sales and profits through this means and thought that they captured the rural markets, then it is time for them to review their marketing strategies. They should understand that these results do not coincide with the application of the marketing tools and the technical expertise that are generally used to satisfy the customers as well as the company objectives. The implications of 4 Ps of marketing mix or the use of 4 As for successful rural marketing have produced wrong results.

All companies usually claim that they provide the right product at the right place at right price with right kind of promotion. Then why was a right product accepted by the rural consumer used for different purpose? Why did he afford to spend either much or less on the product that has not derived him the kind of benefit as claimed by the manufacturer? Why did the place of offer differ than to where and to whom it actually was supposed to be available? Why the right promotion has created wrong awareness in the minds of the target customers?

There was something missing in the marketing strategies of the companies while serving the rural markets. Otherwise, the results should have been more astonishing where the sales turnover or the balance sheet would have shown much

more than what is presently achieved. Though, only few products were used by the consumers in this way, that use might be the result of the accidental or wrongful application by the rural consumers. The marketer's planning about the product and the communication with the target customers should be perfect that produces the desired results.

The Marketer's Plan:

If the marketer truly understands the needs of the rural consumers, he should strive to provide them with those products and services that would meet their requirements. The marketer has to focus on his core competencies like the technological expertise to design the products for the rural masses. Companies like Cavin Care who launched their shampoo in sachets, Britannia who conveniently packaged its Tiger brand biscuits with low price tag are the best examples of understanding the rural customer's needs and providing them with the desired products.

The marketer's basic need is to understand the pulse of the rural masses and serve them accordingly. The companies need to make proper assessment while marketing for the rural India. This could most probably happen in one way by changing the profile of their managers. As most of them are management graduates bred in urban areas and are taught marketing principles and strategies applicable for the western countries, there is a mismatch in their thinking and the requirements of the rural consumers. Hence, hiring professionals who have expertise in rural marketing would go a long way to improve the situation as they can truly understand the rural traditions and cultures, understand the feelings of rural people before designing and actually launching the product. It is very essential for the rural marketer to understand the psychology of their consumers in terms of their usage habits and shopping behavior along with their emotions and value systems. The integration of both technological and managerial knowledge would help them to develop the various marketing strategies for the rural Indian markets. This will further lead to technologically superior, robust and low cost products that would be in resemblance with the Indian tradition and culture.

The marketers may also consider depending more on traditional media when marketing for rural consumers. This unconventional method acts as an effective way to create awareness as mass media is unreliable as it is too glamorous and interpersonal for the rural market. Uses of skits, magic shows, and education by NGOs are some of the most preferred traditional media which the marketers can usually use as it goes well with the tastes of the rural consumers.

In the consumer durables segment, sales for refrigerators will grow by 12 per cent as against 5 per cent during April-September 2003, while air conditioners will grow at 25 per cent (12 per cent), washing machines at 7.8 per cent and microwave oven at 25 per cent, FICCI said.

In the consumer electronics category, overall growth is projected at 9 per cent while colour TVs will grow by 15 per cent against a negative growth of 10 per cent and VCDs/ DVDs are slated to post an increase of 30 per cent in sales in the April-September 2004 period, said the survey. The electronic components segment will grow by 19 per cent as against 18 per cent during the first 2 quarters of the last fiscal.

FICCI conducted the survey of industries in the consumer durable goods sector and interacted with the representatives of industry, allied organisations, and associations, government and public sector undertakings.

The survey said the rate of growth in production has been more in terms of quantity or in volume growth rather than in value terms for a number of products. This is because of constantly falling prices over the years due to competition among the major players, aggressive marketing strategies and declining import tariffs.

Quality products with superior technology and technology upgradation have helped the industry to achieve higher growth in terms of volume and also higher realisation in value terms. Removal of licensing restrictions has encouraged capacity addition by both the domestic and multinational companies. The share of un-organised segment has come down sharply to only 8 to 10 per cent from 40 to

50 per cent because of growth in production in the organised segment and domestic availability of branded products due to lowering of import duties and other liberal measures, FICCI said.

The price difference between branded and unbranded goods has narrowed down and with branded players providing good after sales services and support consumer prefer to buy branded products. The survey said the increase in production in the organised segment will help in generating more revenue for the government.

The consumer durables industry appears to have 2 clearly differentiated segments. The MNCs have an edge over their Indian counterparts in terms of technology combined with a steady flow of capital.

The domestic companies compete on the basis of their well-acknowledged brands, an extensive distribution network and an insight in local market conditions.

Purchase necessarily is done only during the harvest, festive and wedding seasons - April to June and October to November in North India and October to February in the Southern India. Rural India, which accounts for nearly 70 per cent of the total number of households, offers plenty of scope and opportunities for the white goods industry.

The urban consumer durable market for products including TV is growing annually by 7 to 10 per cent whereas the rural market is zooming ahead at around 25 per cent annually, FICCI said.

Increasing consumer awareness and preference for new models have added to the demand. Products like air conditioners are no longer perceived as luxury products but are treated as necessities in the changed socio-economic environment with changed life styles, it said.

Cracking the Rural Market in India

To a marketer, India's rural market presents a challenge like no other. While marketers salivate at the prospect of making their marketing millions in rural India, none has yet been able to understand what makes rural India tick. Harish Bijoor says that so far marketers have sought to thrust cornflakes and dog biscuits alike at rural Indians. He makes a plea to preserve the sanctity of Rural India and discover commerce and sense in it all - by creating brands that keep in mind rural imperatives. The rural market for brands is a powder keg of an opportunity waiting to be explored - not exploited!

I spent the first four years of my career entirely in rural markets. I used every mode of travel to enter into the gut and gore of the slice of market I had the privilege to look after. The bullock-cart, the camel-driven cart and the boat were all means to penetrate a terrain no MBA in his right mind wanted to. Dirty rat-infested lodges, police-raids that had me ashamed of my neighbours in the rooms around and food that had me running to the nearby field even in broad daylight are tales my early life in the rough and tumble of Indian marketing is made of. These four years taught me one thing clearly! There are two Indias! Real India and Virtual India!

Real India was this piece of terrain I sold tea, coffee, spices and condoms to. It was a big chunk of the land mass. It occupies bulk of the landmass and houses 742 million people as of now! It is populous, multi-cultural and multi-faceted. India started here. This is the residence of the arts, the culture, the food, the ethnic fashion, the agricultural practice, the nuance of language and diction and everything else that we in Urban India have morphed to our needs as of today. Remember, in the very beginning there was no urban at all! It was all rural! All real! Virtual India was where I came from. Virtual India was where I was shaped into a being capable of commercial, social and cultural existence. The size of pie of land I came from was an urban island of sorts.

An aberration even! The populace that lives here comprised a fourth of the size of the population of India on the whole.

There sure was a Matrix at play! While politics of the nation was governed largely by what Real India had to say, government policy did not necessarily tread the very same path. There was this huge gap in understanding what was right for the masses and what was politically expedient. In the bargain, policy was hijacked by the politician. While politics was the domain of the politician and the bureaucrat that ran the nation in many ways, commerce was largely played in the very same way. Till the wave of liberalization set in. And when this happened, Indian businesses actually steered Virtual India. What’s more, Virtual India took charge of the way Real India was to be run as well.

And in Virtual India, the businesses that dictate the soap that needs to be placed in your toilet and the detergent in your bathroom and the cooking gas in your kitchen, actually ran Real India. Real India is today run by Virtual India. The largest part of land-mass and the larger part of the population base is controlled in many-many ways by the way the urban man in urban India wants it run. A true blue hegemony of the Urban Indian!

Remember again that all marketing men and their kin in advertising, market research and branding are mostly urban souls. Many in disguise as well! Real India (read as: rural India henceforth) is fast morphing to the needs, wants, desires and aspirations discovered by the urban man. Television as a medium has created awareness, a raging interest in brands, a latent desire to consume and possess what is shown on the not-such-an-idiot-after all-box! Television has spurred on consumptive action and has acted as a brand consumption catalyst in many ways. And television has continually shown us images that make everything Urban desirable and everything Rural as something that is basic….too basic!

Look keenly at the statistics that tell us the growth of urbanisation. In 1951 we had 2,843 Urban Agglomerations(UA) and towns. Today, the number is close to 4000! The Urban population in 1951 stood at 17.3 per cent of total. Today, the number is a proud and unidimensional 27.8 per cent! In the last fifty years, we have had what I would call creeping urbanisation. In the next fifty, it is time to expect a galloping rate! Thanks to television…and thanks fundamentally to the Brand movement, which is poised to make a big movement in the heart and hearth of the rural dweller! The two Indias mean two sets of peoples. The rural man, woman, child, dog and cat for a start! Remember, dog-food and cat-food companies will definitely want to invade the vast rural hinterland sometime in the future for sure!

How then does one go about creating brands for the rural person in the rural dwelling? There are two ways really. The first is the insensitive way most marketers

have adopted to date. The second is a more sensitive rendering of what marketers and brand-evangelists in the future could adopt. The first is really the easy way. Pioneer marketers in rural areas used it to good advantage. Take the urban brand,

1. Tweak the product a wee bit (read: make it rustic, rugged and even lower-quality if necessary),

2. Lower the price (read: offer inferior grade teas to the rural market and superior grades to the urban one in the same brand),

3. Extend the brand to Low Unit Packs (read: lower unit packs will be cheaper in price and inferior in quality as well. Higher unit packs will take in superior quality. Urban markets use High unit packs and rural markets use LUPs)

4. Modify the packaging marginally (read: add the brand name in Hindi and four other prominent vernaculars)

5. Advertise (read: Take the English rendering of the standard urban storyboard and make a film in Hindi. Take this film and dub it in the vernacular. Never mind the lip sync even….in the early days!)

6. Promote (Read: Use Cinema widely. Use wall-site paintings. Sponsor the local boat race and the temple festival alike! Use rural publicity vans to percolate the brand message through television sets that would carry a VCR and a large-format screen as well)

7. Market Research (Read as: find out more about the rural dweller. Use the intrusive and alien questionnaire format to find out more. Use probes of every kind. Use the focus group at times if you are feeling particularly qualitative in your yearnings for data.)

The easy way is the insensitive way to create and build brands in the rural markets that still remain on the landscape. My clarion call: Forget the easy way you have used all these years. Take the tough route of branding in the rural market. Preserve rural India and what it represents. Bring back pride to rural India in terms of what it has to offer in its multi-variable format. But why? Is this a return to socialism? A form of retro-appeal? Of retro-fashion? No, the logic is strong enough for us to pursue the new rules of branding for rural India.

For one, take the case of the fertilizer and pesticide situation. In the very beginning, all of India was organic. We grew everything we did to cater to a population size that was manageable without the use of pesticides and fertilizers. Natural organic manure and very innovative natural practices that used plant and animal waste distinguished the agricultural practices of India. And then came the revolution everyone wanted. The men in the Gandhi caps (except Gandhiji of course) wanted a bigger yield from the land and the cow and the factory alike. Practices morphed and India became yet another dumping ground for the pesticide and fertiliser that came from far and near. The countryside morphed. Yields doubled.

The year is 2003! The world is discovering health and the joy of consuming the organic produce. It’s back to nature…the pure way! And India has lost it! Imagine a situation where India could emerge as a 100 per cent producer of the organic product! And remember still that the organic produce today commands a premium in the key consumption markets of the world! We lost it! The rural terrain we still boast of can be preserved. I seek a sensitivity among the marketing man. A sensitivity that promises not to harm commercial intent, which is the salient driving force of all business intent. Sensitivity that could well carve out for the marketing man a commercial space one can be truly proud of.

The case I present in this piece therefore, is a case that seeks to preserve the sanctity of Rural India and discover commerce and sense in it all! A plea to really stop this one-sided movement that seeks to make the rural man a consumptive animal of cornflake and dog biscuit alike! Create brands keeping in mind rural imperatives then. Here goes the ideal rural brand map. My ultimate want as a Marketing man.

Reverse-engineered brands

Rural markets are different than the urban. Understanding is the key point. Reverse-engineer the brand quite unlike what we have done in the past. Go to the rural market and find out its wants, needs, aspirations, dreams and expectations. Go and meet up with a million villagers and create the product that is relevant to their needs. Stop depending on research numbers that run in the hundreds and a few thousands at the best! Ask the rural man what he wants. Engineer the product and the brand appeal and get back to him for a ratification. This time round as well, go back to the million hearts you reached out the first time to. Show it to him. Get it ratified. Insulate it all from the urban paradigm you have operated thus far within.

What's in a name? Everything!

Seek out the vernacular. Seek out the different. Seek out the name that is futuristic for sure, but seek it out in the ethos of the land the brand will sell within. Seek it out within the social milieu it will swim in. And don’t pass value judgement on the name that you seek out wearing tinted urban glares! And this goes for the slogan, the colour, and every component of brand appeal you will build for your brand of biscuit or bubblegum or bottle-cleaner or whatever!

Sensitivity in Advertising

Tread carefully here. Don’t for heaven’s sake decimate rural dress, culture, lingua franca, habit and rustic appeal. The point is to preserve and not decimate. Preserve and not clonalise! Watch out for the attitude that you covey. Look carefully for those hidden meanings that the hegemony of the urban marketer has cultivated in all of us. Take it through a thorough check and weed out the urban bias with a candour that will come more out of practice than upbringing and education. The fashion statement, the habit burr and the style-irreverence modern advertising seeks to throw at the viewer in the marketplace can on most occasions swim against the tide of social acceptance. Watch out for these signs and avoid them like the SARS!

Do a consciously aggressive rural job

Generations of wrong advertising and marketing norm has punctured the ego of the rural market for a while now. Go out there into the rural market with a passion to set right these wrongs. Do such an aggressive job on it that you will make rural a fashion statement even! Enough to make the urban man sit up and want to ape!! Position the rural ethos right. Position it uniquely with a yen to create a differentiation that is truly a world apart. Very few developed economies can boast a size of rural population that is multi-variegated as ours! Use it to advantage!

Packaging Right

Look for the ways and means that packaging will deliver freshness and maintain equity with the environment as well! The plastic revolution we witness today in urban markets is proving to be disaster! Fortunately for India, this revolution is as yet at a nascent stage in our rural markets. Imagine what would happen if the key issues of disposal were to affect three fourths a mass larger than it affects today in the country! The problem would multiply by a factor of four! Avoid this altogether and invent for the rural market forms of packaging that will be close to the environment we want to gift to our grandchildren marketers! Break away from the quality differentiation standards adopted by the modern marketer for Urban and Rural marketer. No apartheid here dear marketer! Equal money must deserve equal value!

The Price and Promotion Mechanics

The rural consumer has been through the throes of the games the urban marketer has played in terms of price and promotion. The rural dweller is tired really of collecting those inane sets of combs and tumblers and calendars alike. The rural consumer needs to be approached with a savvy sense of understanding his needs. Is it value that he seeks? If so what kind of value? Is it a value dictated by price? By quality? By quantity? Or by appeal? Functional or Emotional?

Creating brands for rural India is a science that will require many ardent students who are willing to participate in this great big task of doing the different thing altogether in branding. It will require quite a bit of swimming against the tide of all that we have done in marketing in the past. It will require decimating many a myth. It will demand many years of hard work, something the urban marketer will find daunting. The rural market for brands is a powder keg of an opportunity waiting to be explored……not exploited! The traditional means of taking the urban brand and its appeal into the rural heartland will only destroy the fragile rural mind and milieu.

I really hope the harm has not already been done! If it has, I rest my case…..a defeated soul in search of the ideal rural market!

Indian White Goods Sector's Big Challenge

It's a debate that is currently the flavour of the season among financial analysts and the international media. Can India become the second China and match up to the  spectacular growth that the Chinese economy has achieved in the last decade? India is increasingly being recognised for its prowess in information technology and in fact it is in this area that the Chinese are lagging behind the Indians. But a constant worry for India is its inability to rack up foreign investment. Compared to China's  FDI inflows of $50 billion, India has managed just $5 billion. While analysts argue that India, as a foreign investment destination, is a much more secure place, given that it is a democracy and has a well established judicial system, the fact remains that this argument is not translating into greater investment in the short term. Lack of infrastructure, unfavourable labour laws, corruption, barriers in doing business and bureaucratic delays in getting necessary approvals continue to be the all important reasons for India's inability to attract more foreign investment.

The Indian appliance industry however has had no dearth of foreign investors. Virtually every large multinational - including Philips, Electrolux, Whirlpool, Samsung, LG among others - has set up production facilities in India to manufacture appliances. What's more, some of these companies are outsourcing their R&D and design and innovation cells to India. So, what has been the impact of foreign investment on the Indian white goods sector? And will the industry help the country to take India to the next level of the value chain? Can it empower India to become an economy that is more than just an offshoring destination because of its low-cost advantage, but a nation that is sought after because of its superior quality of human resources and its ability to value-add in the high-end technological areas?

But before we discuss the potential, let's take a look at what foreign investment in the white goods sector has meant for the industry. Foreign investment in the white goods sector in India has proved beneficial in not just raising Indian

manufacturing standards to global ones but it has also led to a tremendous improvement in quality of products and productivity of employees. The overall trend towards higher foreign participation in this sector has also translated into government reducing levies and duties. For instance, duties on air conditioners have come down to 16 per cent from the all time high of 40 per cent. Besides consumers have benefited hugely as they now have products that meet global quality standards as well as offer more consumer-friendly features such as energy efficiency.

In terms of the sheer size of appliance markets, India is nowhere near China. Indian markets for most appliances are simply not large enough. Colour televisions and refrigerators, to some extent, have volumes on their side: a 10 million CTV market and a 3.7 million market for refrigerators. But the numbers are still small in the majority of the other product segments like washing machines (1.6 million), air conditioners (1.2 million), microwave ovens (650,000). India's competitive advantage in manufacturing lies in products with mechanical-electro-mechanical features. India can capitalise on its large pool of workers to leverage its  labour cost advantage. As a result, India has emerged as a world leader in the manufacturing of auto components. In electronics and  plastics India is simply not competitive on input costs. Until this deficiency is overcome, India will have to continue to import electronic and plastic components for use in appliance manufacturing.

To grow the domestic market for appliances, a number of barriers have to be overcome, including unavailability of cheap and reliable power in rural areas as well as in many of the urban areas; lack of infrastructure and poor condition of roads. Purchasing power of a vast majority of the Indian population too continues to be low and therefore is a major barrier in terms of growth of demand. The problem of poor infrastructure dogs industries as well. For instance, one of the major reasons for Electrolux pulling out of India was the fact that two of its factories were located in areas that had very bad roads and the power situation was abysmal. The accelerating costs of transportation became an unviable proposition for the company. Therefore it is necessary that

the government take up immediate steps to improve infrastructure and ensure that industries have access to reliable power supply that is reasonably priced.

As the Indian economy integrates into the global economy, purchasing power is bound to grow. With almost a million new homes being added as potential buyers of appliances every year, the industry is banking on big time growth in the not-too-distant future. As domestic consumption grows, the industry is bound to develop further and attain global competitiveness.

Another major difference between India and China is in the so-called economic model of growth that the two countries follow. India is focused on an entrepreneurship-based growth model. As a result entrepreneurs are reluctant to invest in projects that have a high gestation period. Chinese projects, on the other hand, have strong government support and the Chinese state makes funds available to business groups to set up huge plants that offer economies of scale. Take for instance the DVD players market. The Chinese government saw the potential in the innovation - which was developed by Philips - and invested huge sums of money to set up plants to manufacture DVD players and allied products. The government's proactive strategies have helped China to become a leading player in the global consumer electronics scene. The Indian government as well as the industry need to recognise the fact that Indian products and processes have to continuously move up the value chain and only that can enhance India's global competitiveness. So, for instance, if nanotechnology is likely to play a big role in the future in appliance-manufacturing, India needs to invest more heavily in this field so that it has appropriate human resources, technology and other resources to benefit from this and take the Indian white goods industry into the next level of technological upgradation. Such a national strategy would help in quickly enhancing India's global competitiveness in

this sector.

It's a twin-pronged strategy that has worked brilliantly for LG Electronics, India. Two years ago the comp At one level, the company figured it needed new cheaper products to lure the rural buyer. At another level, it figured that more offices in smaller towns and cities were the need of the hour.any's top brass was LG moved quickly on both fronts. At one level, it has introduced cheaper products like it Sampoorna television range. At another it has gone on an office-opening spree in India's smaller towns. Currently, it has 40 branch offices. That will climb to 150 by year end.

Says Anil Arora, head, marketing, LG India: "A chunk of our revenue was coming from that segment and there was potential to grow it even further. Greater penetration has meant greater focus."

But LG isn't the only white goods manufacturer that is striking deep into rural India. There's also Mirc Electronics which late last year launched its Operation Vistaar (meaning expansion).

Mirc is already selling a second-string brand Igo which is slightly cheaper than its Onida range. Mirc says that both Igo and Onida are selling in the rural areas. Recently the company has hired another 100 people for its Igo team.

Cracking the rural market has become the holy grail for scores of Indian companies. Now the white goods manufacturers are hoping to catch the eye -- and the wallets -- of the out-of-towners in a bigger way than ever before. As a result a rural bloodbath between white goods giants is

clearly on the cards. The reasons for heading into the rural areas are fairly clear. The urban consumer durable market for products like colour TVs, washing machines, refrigerators and airconditioners is growing annually at between 7 per cent and 10 per cent.

By comparison, the rural market is zooming ahead at around 25 per cent annually. "The rural market is growing faster than urban India now," says Venugopal Dhoot, chairman of the Rs 989-crore (Rs billion) Videocon Appliances. "The urban market is a replacement and upgradation market today," adds Samsung's director, marketing, Ravinder Zutshi.

Leading the way is LG. In 2002, 60 per cent of its turnover came from the urban market. Today, that's down to 40 per cent. The majority of LG's revenues are now coming from smaller towns like Hapur, Trichy, Jorhat and Asansol.

Videocon, which sells about 40 per cent of its products in the rural areas, has just begun a fresh thrust to boost sales outside the metros. It's hoping that by year end about 55 per cent of total sales will come from the rural areas. But it isn't designing new products for rural customers.

Some companies are playing the game slightly differently. Samsung, for instance, insists that it's a high end technology driven player. That's why the urban areas are still a focus area for it and only 30 per cent of revenue comes from rural and semi-urban India. "We have always been a hi-end technology driven player and want to keep that equity," says Zutshi.

Nevertheless, in the last two years, Samsung has looked at increasing awareness and penetration of its products in second rung cities like Bhuj, Porbandar and Jalandhar. The Samsung Dream Home road shows across the length and breadth of the country have been a step in this direction.

"We don't have a rural model or different pricing strategy. But the products are focused on semi-urban or urban markets," says Zutshi.

Similarly, Mirc says it had to be careful about diluting the Onida brand. Igo, at Rs 5,000 for a 14-inch TV is priced Rs 500 to Rs 700 lower than the national brands.

"We didn't want to dilute Onida's mid to premium brand equity by making it mass market," says V Chandramouli, vice president- marketing, sales and service, Mirc Electronics Limited.

At another level, there's Godrej Appliances that has learnt its rural lessons through trial and error. Today, it is present in 900 towns of which 450 have a population above 100,000. Another 250 are towns with less than 100,000 residents.

Says Soumitra Ghatak, executive vice president, Godrej Appliances, "There is money today in the rural household. So clearly we're looking at dropping anchor The fear is not being on their radar."

To match its new aims, for the first time, Godrej will be advertising on Doordarshan. Till now the company has always advertised on cable television. The company has also redefined its target group from SEC A, B and C to SEC D as well. Godrej's direct cool refrigerator range starts at Rs 6,500.

Godrej admits that it fumbled on the way when it tried to sell cheaper products. Two years ago it tried to sell a stripped- down fridge called Champion with only half a freezer.

However, sales did not pick up so it had to be rejigged and relaunched with a full freezer. "Product features are important, rural customers are just as aware as the urban," says Ghatak.

But LG's example shows that revenues can rise quickly if you get the mix right. The company says that earlier a single branch office catered to Chandigarh, Jammu & Kashmir, Punjab and generated Rs 18 crore (Rs 180 million) per month.

Now with more branches, revenue in the same area has gone up to Rs 50 crore (Rs 500 million) per month. Similarly other

states like Rajasthan now have two branches -- Jodhpur and Jaipur -- instead of one. The company has also taken other initiatives like 65 Remote Area Offices under the branch offices that are empowered to directly link to the central billing system for orders, 230 service centres and 2,600 mobile authorised service personnel for villages having below 10,000 residents. All these moves are part of LG's efforts to push turnover to a whopping Rs 7,000 crore (Rs 70 billion) by year-end.

All this is great music for rural dealers. A city dealer will today sell a CTV by cutting into his margin, closer to the dealer price rather than the  marked retail price. So while he makes 5 per cent to 7 per cent, rural dealers make 7 per cent to 10 per cent on a sale. "Volume makes up in the city whereas value makes up in the rural area," says an industry observer.

Also, the increased rural focus doesn't mean the urban market will suffer. Samsung, Onida and even LG are aggressively looking at the urban replacement market for their hi-end premium product range.

Who will emerge winner in this battle? Industry players warn of dangers in the aggressive rural ramp up. For one, stripping product features in order to lower prices, as some brands are known to do, players say is a dangerous game to play. Then there are other external problems to surmount like the irregularity of electricity supply and lack of finance options.

"Cracking the rural market is easier said than done," says Godrej's Ghatak. Adds an industry observer, "The rural market will not be about pricing but about how the customer is serviced and treated. If one consumer is not happy, the entire village will know and the company can then kiss that market goodbye.

DATA ANALYSIS AND INTERPRETATION

 

With Indian economy increasingly witnessing structural transformation from a rural, agricultural one to more urban industrialized one, consumer durable goods sector is fast emerging as an important segment of the economy.

Consumption of manufactured consumer goods is recognized as one of most widely accepted measures of standard of living and quality of life. Consumer goods manufacturing industry provides the driving force for stimulating rapid economic growth. The growth rate of manufacturing and consumer goods industry normally surpasses that of agriculture and service sectors. It is for this reason that the manufacturing and consumer goods durable industry is considered the backbone of economy.

 

BACKGROUND

 

Prior to liberalization, the Consumer Durables sector in India was restricted to a handful of domestic players like Godrej, Allwyn, Kelvinator and Voltas. Together, they controlled nearly 90% of the market. They were first superceded by players like BPL and Videocon in the early 1990s, who invested in brand-building and in enhancing distribution and service channels. Then, with liberalization came a spate of foreign players from LG Electronics to Sony to Aiwa.

Rs 23,000-crore consumer durables industry can be divided into two types: consumer electronics and consumer utilities. Consumer electronics is basically entertainment systems like television, VCRs, audio systems and home theater systems. Consumer utilities are other household appliances like refrigerators, washing machines, air conditioners, food processors, and vacuum cleaners. On most third world countries, consumer durables like the refrigerator and television are most popular. Out of these, the television segment is undoubtedly the largest segment. Products in the

white goods segment come next to the CTVs in the purchasing hierarchy of the Indian consumer.

Over the years, demand for consumer durables has increased with rising income levels, double-income families, changing lifestyles, availability of credit, increasing consumer awareness and introduction of new models. Products like air conditioners are no longer perceived as luxury products. According to Indian Readership Surveys (1999-2004) the following durable categories have registered a healthy double-digit growth.

              

 

 

 

 

                                                Source: Indian Readership Surveys (1999-2004)

 While TV draws its share from both urban and rural

refrigerators and washing machines are still inclined towards

urban.

Current Scenario

Most of the segments in this sector are characterized by intense competition, emergence of new companies (especially MNCs), introduction of state-of-the-art models, price discounts and exchange schemes. MNCs continue to dominate the Indian consumer durable segment, which is

Durable Categories Growth Rate (1999-2004)

Television Sets 16%

Washing Machine 17%

Refrigerators 14%

apparent from the fact that these companies command more than 65% market share in the colour television (CTV) segment.

  Steady growth of CE at 13-15% (’03–23%)

  HA falling behind CE on account of growth

  Steady growth of CE+HA - yet low penetration

 

 

INDUSTRY SIZE

        Rs 23,000-crore consumer durables industry can be divided into two types: consumer electronics and consumer utilities. Consumer Electronic industry has a size of around Rs. 102 billion. The Indian television industry has a size of around Rs 96 billion, comprising colour television (CTV) of Rs 91 bn and B&W TV market of Rs 5 bn and  other markets (primarily video equipment) of Rs. 4-6 billion. In terms of volumes, the CTV market was estimated at 9.05 million units and the B&W TV market at 2 million units during calendar year 2004.             

       Refrigerators constitute the second largest product segment within the Indian consumer durables sector in India, with an estimated annual turnover of Rs 39 bn during FY2005 with an estimated sale of 4.1m units.

         The size of the room Air-conditioners industry is estimated at 1.1 m in volume terms, and Rs 24 bn in value terms. Washing machines sales in India aggregated an estimated 1.37m during FY2004 or around Rs 11 bn in value terms.

 

MAJOR PLAYERS

The major players in the consumer durables industry, operating in different sectors such as air conditioners, washing machines, refrigerators & television: Blue Star Ltd., Mirc Electronics Ltd., Whirlpool of India Ltd., Philips (India) Ltd., BPL Ltd., Sony Corporation Ltd., Samsung India Ltd., LG Electronics India Ltd., Videocon International Ltd., Thomson Ltd. & Daewoo Ltd.

 

 

 

 

 

  

DEMAND/SUPPLY

Supply growth is high across all the segments. But the organized sector has gained substantial market share from the unorganized segment in recent years. However, there are fewer players in segments like dishwashers and vacuum cleaners.

Cyclical and seasonal. Demand is high during festive season and is generally dependent on good monsoons. There are certain factors in the consumer durables industry, which are considered as demand drivers. They are:

1. The degree of distribution network in the market.

2. The advertising and marketing strategy adopted by the

players in the industry.

3. The brand image of the product as perceived by the

consumer.

4. The technology used by the company viz. state-of-art

technology or an older version.

5. The ability of the company to introduce newer products

and newer product features

6. The capability of the company to service its products

'The discount schemes and consumer finance facility

available

7. The market positioning of the product 

8. The cost competitiveness and pricing strategy of the

company

9. The financial strength of the players

 

 

 

CONSUMER DURABLE: URBAN & RURAL INDIA

In the top 5 million households, in affluence terms,

96 percent of households have color televisions,

82 percent own refrigerators, and 44 percent own

washing machines.

In the next 7 million households, penetration of

color TVs is 69 percent, 58 percent for

refrigerators, and 19 percent for washing

machines.

In the next tier of affluent households - numbering

approximately 12 million - 50 percent own color

TVs, 35 percent own refrigerators, and 8 percent

own washing machines.

Rural India too is set to see an increase in the number of high-income households. An additional 4.6 million high-income households and 13 million middle-income households by 2006 to 2007 will take the number of rural households from 122.8 million to 139 million. This constitutes a huge opportunity for marketers - 60 million households or 300 million consumers with the capacity to buy consumer appliances and other products is an attractive market for any global player. And it seems that global appliance players who have established brands in the Indian market are likely to benefit from this great big push towards consumerism

SUCCESS FACTOR FOR CONSUMER DURABLE INDUSTRY

Indian consumer durables industry is going through a consolidation phase with MNC companies going in for strategies to increase market share. Certain success factors for this industry are identified as follows:

1.      Technology: Rising competition has resulted in

major competitors introducing technologically superior

products at competitive prices. This means the

technology input is gaining more and more importance.

In this regard, the large MNC players score over their

Indian counterparts as they can always source

technology from their parents. On the other hand,

Indian companies rely on the outside sources for their

technology requirements.

2.      Knowledge of the local market: Indian consumer

durables market is different from other markets. Hence

understanding these peculiarities is important for the long-

term survival. For example, Samsung launched the 'Super

Horn" brand after it discovered that Indian consumers

prefer loud noise. Indian companies are better placed in

this regard as they know the market pretty well.

3.      Strong distribution network: Tough competition

means that a proper mindshare of the consumer has to

be maintained and the product has to be made visible.

Volumes in this business are narrow and profitability

comes from volumes. To achieve volumes, deep

penetration of the market is necessary. Indian

companies score a point here as being in the market for

a longer time; they have developed strong distribution

channels.

4.      Good brand image: Perception of a particular brand

plays an important role in purchase decision. A typical

Indian consumer looks for value for money when he

makes purchase of white goods, as the price involved is

significant and unlike developed markets, Indians do

not have the buy, use and throw mindset. Hence,

consumer also looks for reliability of the product. All this

is conveyed through strong brand awareness.

 

Consumer Outlook: The Change in Consumer

India is a country in a hurry – changing continuously and also trying hard to keep pace with these changes. The ‘me too’ syndrome is no longer valid as consumers seek customized products. “The Indian consumer consumer’s evolution in the last decade has thrown up some interesting trends:

1. Consumer base becoming younger. Nearly a third of the

country’s population is under the age of 14years.

2. Kids graduating from pester power to decision makers.

3. People with buying power living longer and developing

distinct health needs.

4. Multi-tasking consumers fighting paucity of time and

new consumer trends.

5. Huge increase in High Income Groups and spend now-

save later mentality leading to high disposable income.

6. Consume wants to be treated as an individual not as

part of a large physical mass and the consumer looks

for a ‘post buy’ relationship to enhance the value of her

brand decision making.

SWOT ANALYSIS: CONSUMER DURABLE INDUSTRY

STRENGTH WEAKNESS

  

o       “Accessory to Necessary” Air-conditioners are no longer perceived to be a item of luxury.

 

o       Advancement of technology which gives the companies ability to introduce new products and new product features.

 

o       High Growth. Key drivers being Urban and Rural.

 

o       Government Policies in favour of Industry includes infrastructure development, reduction in excise duty and so on.

 

 

o       Supply continues to outstrip Demand. Demand Cyclical and seasonal.

 

o       Volatile performance of the agricultural sector have a negative impact on demand. The sector's performance is highly dependent on monsoon and reforms, which has failed often.

 

 

 

OPPORTUNITY THREAT

 

o       Diversification. Developing new products for new markets.

 o       Easy availability of finance has stimulated consumers to buy durables.

 o       Changes in Consumer Outlook from spend now-save later mentality leading to high disposable income. 

 

o       Dozen companies operating in the white goods segment. Prices would continue to remain depressed and margins will be under pressure.

 o       Threats of cheaper imports from China and other South East Asian countries

 

  ENVIORNMENT ANALYSIS: PORTER’S MODELS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TELEVISION: CTV

 

POTENTIAL ENTRANTS MEDIUM

In the CE industry, although there are not

prohibitively high costs of entry, the critical success factors are brand image, brand allegiance, and distribution networks.

INDUSTRY COMPETITORS INTER FIRM RIVALRY

HIGH The Indian industry consists of players of domestic origin as well as multinationals. Of late, the multinationals have gained a sizeable presence in the Indian CE market at

the cost of domestic players.

BARGAINING POWER OF BUYERS

HIGH

With the intensification of competition the bargaining power of the buyer has increased.

SUBSTITUTES

LOW TO MEDIUM

The consumer electronics (CE) sector is characterised by continuous technology advances that may result in substitution within the product category.

BARGAINING POWER OF SUPPLIERS LOW TO

MEDIUM

Most of the raw materials are available easily and in . Some high-end raw materials such as larger-size picture tubes for flat TVs are imported.

BACKGROUND

The television industry started in India in 1970 with the production of B&W

TV sets. The initial TVs were all 20-inch (or 51-cm) sets. For 13 years, this

was the only size offered in the B&W TV market, till 14-inch TVs were

launched in 1984. . The Government policy on B&W TVs in the initial

period was characterized by licensing of manufacturing units for capacity in

excess of 10,000 per annum and encouragement to the small sector industry

(SSI) sector to set up production facilities with capacities in the range of

2,500-5,000 per annum. The year 1983 saw the removal of restriction on

capacity expansions and of the ceiling on capacity to be licensed, although

the restrictions on foreign technology continued. A notable development was

the launch of the 14-inch B&W TVs in 1984, which evoked an even better

response from the market, especially since they were affordable for

households in the lower economic strata, in both rural and urban areas.

The birth of CTV in India can be traced to the Asian Games (ASIAD) held

in New Delhi in 1982. After the ASIAD, Doordarshan Kendras were set up

in many parts of the country. The euphoria over cricket following India's

victory in the Prudential World Cup in 1983 and in the Benson and Hedges

cricket championship in Australia in 1985 (with the high-quality telecast of

Channel Nine) provided a great impetus to CTV demand. The Government

encouraged this sector, and various State Governments came up with their

own TV companies like Uptron, Keltron and Meltron. Older players in the

B&W TV market, like Weston, Dyanora and Televista, also diversified into

CTVs. By 1989, there were around 200 players in the market.

The second phase of CTV growth came on the heels of the 1991-initiated

economic liberalization programme, after which there was a reduction in

both excise and import duties. Simultaneously, with the opening up of Indian

skies to foreign satellite channels in 1991-92 and the coming of cable TV,

the demand for TVs grew further. This was also the period when private and

more aggressive domestic players like Videocon, BPL and Mirc Electronics

consolidated their presence in the CTV market through their focus on both

product promotion and technology--the latter through collaborations with

international bigwigs (BPL with Sanyo, Japan, Mirc Electronics with JVC,

Japan, and Videocon with National, Japan). Since the mid-1990s, the Indian

TV market has witnessed the entry of global brands like Akai, Aiwa, Sansui,

LG, Samsung and Toshiba. At present, while LG and Samsung operate

through fully-controlled Indian operations, the Akai, Sansui and Toshiba

brands are marketed by Videocon (Akai was initially with Baron

International, and later sold to Videocon). Aiwa is now a subsidiary of Sony.

The other multinationals (including Sony, LG, Samsung) entered on their

own and quickly captured the imagination of the market with innovations in

product quality and features.

 

PLAYERS AND MARKET SHARE

The major brands in the Indian CTV industry are LG, Samsung, BPL,

Onida, Videocon, Onida, Sansui, Sony, Akai, Aiwa, Philips, Panasonic,

Sharp, Thomson and Daewoo. Competition has also intensified with

Chinese consumer electronics player Haier, German company G-Hanz

and Japan's Hitachi having leaped into the colour TV market. The

companies marketing their CTV products under these brands are as

follows:

Company Brands

BPL Limited BPLVideocon International Limited Videocon, Akai, Sansui, Toshiba

Mirc Electronics Limited Onida and IgoSony India Private Limited Sony

LG Electronics India Limited LGSamsung India Electronics Limited SamsungNational Panasonic India Limited/Matsushita Television and Audio Private Limited

Panasonic

Kalyani Sharp India Limited SharpThomson Consumer Electronics India Limited Thomson

 

The Indian television industry has a size of around Rs 96 billion,

comprising colour television (CTV) of Rs 91 bn and B&W TV market of Rs

5 bn. The top four players (LG, Samsung, Videocon group and Onida) have

consolidated their position. Today, they account for 69 per cent of the

market, up from 43 per cent a couple of years ago. Two or three factors have

caused this change. BPL, once a leader with over 20 per cent market share,

has dropped to 5.2 per cent. Second, multinationals brands like Sony,

Panasonic, Thomson, and Sharp have lost ground. Third, regional brands like

Oscar, Texla, Weston, and Beltek have lost market share. The reason behind

this is that the consumer electronic and the CTV market is characterized by

continue innovation and use of state of art technology which these

companies have been unable to keep pace.

REFRIGERATOR

 

BACKGROUND

 

 Refrigerators have been manufactured in India since 1950s. Till the 1980s,

players like Godrej, Kelvinator, Allwyn and Voltas controlled almost 90% of

the market. Earlier, the white goods sector was categorized as a luxury goods

industry and was subject to oppressive taxation and licensing. The situation

changed after the liberalization of the Indian economy in the early 1990s.

The government removed all restrictions, and now there is no restriction on

foreign investment, and licenses are no longer required. Post-liberalization, a

number of foreign companies entered the market and many domestic players

also diversified into refrigerators. BPL and Videocon who already had a

presence in the consumer electronics market, leveraged their strengths to

enter the durables sector.

           In India, refrigerators have the highest aspirational value of all

consumer durables, with the exception of televisions. This accounts for the

high growth rate of the refrigerator market. Refrigerators are presently being

manufactured in two basic designs which are referred to as Direct Cool (DC)

and Frost Free (FF) refrigerator. The direct cool segment continues to

dominate Indian refrigerator market compared to more expensive frost-free

models. The growth in this segment though marginal, has been driven by

factors like availability of low priced models as due to competitive pricing

and a growing middle class. Manufacturers of refrigerators claim to have

improved the quality of the product particularly the reliability of the

Compressor. In so far as new technology is concerned, the concept of Frost

Free refrigerator has been gaining popularity. Capacity-wise also, there is a

shift in Refrigerator Market. Till about two years back, 165 Litres had a

larger share and now units of capacity 185-300 Litres are having increasing

market share. Manufacturers are encouraged to adopt environment friendly

technology like usage of non-CFC (non- Chloro-Fluro-Carbons) refrigerant

based air conditioners, Non-CFC refrigerators are manufactured in the

country but because of their high initial cost, the demand is somewhat

sluggish.

 

PLAYERS AND MARKET SHARE

           The refrigerator industry has become highly competitive as a

number of brands have entered the market and the consumer has a wide

choice.

Company Brands

BPL Limited BPLVideocon International Limited Videocon, Akai

LG Electronics India Limited LGSamsung India Electronics Limited Samsung

Whirlpool of India Ltd  WhirlpoolGodrej & Boyce Mfg. Co. Ltd. GodrejVoltas Limited VoltasElectrolux Kelvinator Electrolux Kelvinator, Electrolux and

Allwyn

 

   Refrigerators constitute the second largest product segment within the

Indian consumer durables sector in India, with an estimated annual turnover

of Rs 39 bn during FY2005 with an estimated sale of 4.1m units. According

to FICCI Survey April-March 2003-2004 Whirlpool and Godrej are the top

two players with market shares of 27 per cent and 20 per cent respectively.

Electrolux Kelvinator and LG compete for third and fourth position with

market shares of 16 per cent and 14.5 per cent respectively. Videocon (11

per cent), Samsung (6), BPL (4), Voltas and Akai are other significant

players.

 

 

 

 

 

 

AIR-CONDITIONER

 

BACKGROUND    

In 1902, Dr. Willis Haviland Carrier invented and secured the patent for a

weather control concept - air conditioning. Ever since, life hasn't been the

same. The air-conditioner market is hotting up as more and more people

appear to be convinced about the comfort of an air-conditioner (AC). The

extremely hot summers have stirred the demand for ACs and the industry is

experiencing a significant change.                                                                

Types of Air-conditioner 

Air conditioning products are divided into Non Ducted products & Ducted

systems .The Non Ducted products are divided into two parts: window ACs

& the mini splits. The ducted systems are divided into central plants,

packaged ACs, ducted ACs. Window ACs account for about 54% of the total

market for ACs with an estimated market size of about Rs20bn.

Room air conditioners operate on electricity or gas and are enclosed in a

single cabinet. They blow the conditioned air directly into the room and do

not have air ducts leading to and from them. The three chief types are

window air conditioners, consoles and self-contained air conditioners.

Window air conditioners fit into the lower part of a window and can be

moved from window to window and thus the name, Window ACs. Self-

contained air conditioners are the large room air conditioners.  Central air

conditioners also use electricity or gas. They can supply conditioned air to a

number of rooms or to an entire building from one central source. Fans blow

the conditioned air through air ducts from the air conditioner to the rooms.

Central conditioners have a number of advantages over other kinds. For

example, all the equipment for air conditioning a large area is located in one

place. This reduces the cost of cleaning and repairing. Central conditioners

can also be zoned i.e. they can supply air of different temperature to different

parts of a building.

 PLAYERS AND MARKET SHARE

The size of the room Air-conditioners industry is estimated at 1.1 m in

volume terms, and Rs 24 bn in value terms. According to FICCI Air

Conditioners (AC) it reveals that Indian AC industry, which has mainly

dominated by players like Carrier and Voltas, has been taken over by the

new MNCs in the last few years. AC market is dominated by four major

players—LG, Voltas, Carrier and Samsung.

         

LG is the market leader with a market share of 29 per cent followed by

Voltas (11) and by Carrier and Samsung (9.2 each) in addition to other

players like Hitachi and Videocon.

 

 

 

 

 

 

 

 

Company Brands

Mirc Electronics Limited OnidaVideocon International Limited Videocon

LG Electronics India Limited LGSamsung India Electronics Limited Samsung

Whirlpool of India Ltd  WhirlpoolGodrej & Boyce Mfg. Co. Ltd. GodrejVoltas Limited VoltasElectrolux Kelvinator ElectroluxBlue Star India Ltd Blue Star

Daikin industries, ltd. Daikin

 WASHING MACHINE

 BACKGROUND

 Washing machines as a consumer durable product has been in existence in

India for the last 10 years. During the last few years, in the Consumer

Durable Sector the market for Washing Machines has grown quite fast. The

washing machine market consists of two broad segments - semi-automatic

and fully automatic. The first accounts for a chunk of the market. In terms of

loading type, top loading machines sell in greater numbers than front-loading

ones. In this industry, it is the fully automatic segment, which in recent times

has been getting the attention of the users as more and more households have

both partners working. Consequently manufacturers have started paying

more attention to this segment and have started introducing more features in

their products. The customers now have a wide range of world class brands

to choose from.

Major growth is projected to take place in fully automatic segment, which

accounts for above 23 per cent of the total market to about 30 per cent.

There is also a trend for purchasing smaller machines in the range of 3 to 4

kg. capacity as compared to larger machines as there are more and more

nuclear families rather than joint families. In regard to emerging new

technologies in the washing machines sector mention may be made of aero

power, triple cascade tornado wash, digital intelligence, unique optical

sensor and other such innovations and adaptations which are gradually being

introduced by the indigenous manufacturers. Fully automatic machines are

gaining popularity with the change in lifestyle of consumers, increase in

income, increase in number of working couples, and due to price

competitiveness.

 

 

PLAYERS AND MARKET SHARE

  The refrigerator industry has become highly competitive as a number of

brands have entered the market and the consumer has a wide choice. Some

of the company and their brands are as follows:

 

 

 

 

 

  

 

LG Electronics has registered a remarkable growth of 36 % in the Washing

Machine Segment in H1 The Fully Automatic Washing Machines segment

has recorded a remarkable performance where volumes have grown by 22%

and value by 25% .Here again LGEIL happens to be the undisputed leader

with a 30.7 % market share in Fully Automatic Washing Machine and 33.7

% market share in Semi Automatic Washing Machine . (Source: ORG-GFK,

May 2004)

 

 

 

 

 

Company Brands

Mirc Electronics Limited OnidaBPL Limited BPL

LG Electronics India Limited LGSamsung India Electronics Limited Samsung

Whirlpool of India Ltd  WhirlpoolGodrej & Boyce Mfg. Co. Ltd. GodrejElectrolux Kelvinator Electrolux

 FUTURE SCENARIO

 Rising rate of growth of GDP, growth in disposable income, improved

lifestyles, rising purchasing power of people with higher propensity to

consume with preference for sophisticated brands would provide constant

impetus to growth of white goods industry segment makes future of

consumer durable industry beneficial will rise the expectation of consumer

durable industry, While the consumer durable market is facing a slowdown

due to saturation in the urban market, rural consumers should be provided

with easily payable consumer finances schemes.

Rural India, which accounts for nearly 70 per cent of the total number of

households, has a two per cent penetration in case of refrigerators and 0.5

per cent for washing machines, offers plenty of scope and opportunities for

the white goods industry. By the industry itself the rural market is growing

faster than the urban India now. The urban market is a replacement and up-

gradation market now.

 

Unleashing of Consumer Durable Industry

In TV segment, the 14, 20 and 21 inches segments are expected to be

the key contributors to the overall industry growth. In the air

conditioner segment, room air conditioner market is growing at the

rate of 18% per annum. Majority of the companies, understandably,

have plans to focus on these segments.

Domestic AC manufacturers plan to beef up their distribution and

service networks, while MNCs will leverage on their brands and

invest in high-powered advertising. Given the fact that household

penetration of ACs in the country is very low (0.5%), growth potential

is enormous. As running costs of the AC are very high, manufacturers

plan to introduce energy-saving models in future. Demand for ACs in

the long run will be robust due to rising income levels and also due to

higher computerization. Besides, air conditioners are no longer

perceived as luxury needs.

As per NCAER (one of the premier economic research agencies in India), the

penetration of TVs is expected to increase almost three times by FY07 as

compared to the FY99 level. Growth in even higher for other durable items like

refrigerators and washing machines. The expectations are also on the premise that

the consuming class, as a percentage of total households, is expected to grow at a

faster rate. This would benefit the consumer durable manufactures.

'000*)

 

 

Source: NCAER, * households

 

 

As per CETMA, Consumer Electronic   plus Home Appliances is

expected at 15-20% next five years.

1998-99 2006-07

Category Rural Urban All India

Rural Urban All India

TVs (colour) 48 304 121 185 723 347

Refrigerators 35 335 120 65 717 262

Washing machines

10 167 55 20 399 135

Sewing machines

71 172 100 85 152 103

 

 

 CONCLUSION AND RECOMMENDATION

 It Contributes more than 5.5% to index of Industrial Production and provides jobs to lakhs of professionals, Skilled, Semi Skilled and unskilled workers, particularly women. It improves the quality of life of people by providing Entertainment / information / education / comfort and helps reduce daily chores, particularly for housewives. But the importance of the sector in National Economy remains unnoticed.

"Lo Penetration means opportunity: The consumer electronic and home

appliance which forms the part of consumer durable industry is categorized

by low penetration. Television, Refrigerator and Air-conditioner have

penetration of 24%, 13% & 2% respectively. This means huge opportunity

and untapped market.

  

Problem Areas: Some of the reason Attributable to Industry are as

follows:

Inadequate stress on R&D

Quality - Yet an issue

After Sale Service & Customer Satisfaction

Action for Industry for Growth

Commit sufficient resources for R&D

Need to be more quality conscious

Need to improve After Sales Services

Need to Build economies of Scale

Explore exports as a viable option.

More emphasis to develop Rural Market.

 

 

PROBLEM FORMULATION:-

Physical Distribution:-

The problems of physical distributions adversely

affect the service as well as the cost aspect.

Channel management:-

The problems of channel management affect the

service as will as the cost aspect. The existent market structure consists of

primary rural market and retail sales outlets.

Promotions and marketing communications:

The structure involves Stock points in feeder

towns to service these retail outlets at the village levels

Low per capita income:-

The number of people below poverty line has not

decreased in any appreciable manner.

Most of the people of rural areas are illiterate:-

In urban areas the peoples watch advertisements

and take decisions, but in rural areas the awareness is less and most of the

people are illiterate.

Objective of the study

Create awareness

To create awareness among the rural customers about the

white goods.

Generate need

To generate need for the white goods.

Find out potential

To find to potential for the white goods in these areas.

Communication media

To find out which communication media is best for that

areas.

Persuade rural customers

To persuade customers about the utilities of these

products for them and provide right goods according their

income level.

Hypothesis

They are ready to adpopt the product but they are unfamiliar,the gap

can be found out by marketers and serve the rural market.

The urban market has most of saturation so the rural market is the only

aspect lying ahead.

Most of the population of the India living in the villages.

There is wide area remaining which is uncovered yet.

There is luck of awareness about the brand products in the areas.

BIBLIOGRAPHY

      Business World : The BW Mega Consumer Satisfaction Survey 2004

                                                                -  25th October 2004

     Impact Magazine – 15th Jan 2005

  

     Internet

            www.indiainfoline.com

www.google.com

www.hotbot.com

            www.blonnet.com

           www.lge.com