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Company Background:
Videocon Industries was incorporated in 1986.The company has two core activities, which include
the manufacturing, assembly, marketing anddistribution of consumer electronics and homeappliances, and exploration and production of oil andgas.The company presently has seven operatingbusiness divisions, in which major divisions areconsumer electronics, homeappliances,components, etc.
In India,Videocon has eleven manufacturingfacilities.The manufacturing facilities produce acomplete range of consumer electronics, homeappliances and critical components such ascompressors, etc. It is the only manufacturerof glass panels in India.The facility at Bharuch islargest in the world at a single location and the thirdlargest overall. Videocon is one of the major CRTmanufacturers globally, with plants in Poland, Chinaand Mexico.The Poland plant also produces glassshells. It assembles air conditioners in Oman andCTVs in Italy.
The company has emerged as one of the largest
colour picture tube (CPT) manufacturer in the worldafter the acquisition of Thomson's CPT business, andexpects this to grow its international sales to EUR782.36 million within three years.
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It is an ISO 14001 and OHSAS 18001 certified
company and has received the CE approval forexports to the EU. It has also been certified bythe VDE Testing and Certification Institute andcorresponds with British standards as well.Thecompany believes that its strategy of end to end supplychain integration with global scale and low cost base andwith entry into the global brand space through theacquisition route will transform it into a global CE & HA
powerhouse with a strong cash flow from the oil and gasbusiness.
yFactors forSuccess:
ySynergy with Eastern Europe:
The strategic acquisition of a manufacturing facility inPoland has provided Videocon with a fully integratedfacility as well as experiencedmanpower. Being cheaper than other EU nations,Polandalso acts as a low cost manufacturing base for thecompany in the EU.
An additional benefit accruing to the company is thescope offered by the Poland plant for expansion intoother areas.The company plans to optimise its glasssourcing
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by expanding the plant capacity as well as by using thesynergies with other glass factories of Videocon, so that itcan be at par with the tube capacity.
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yFocuson R&D:R&D is an ongoing process for Videocon, dueto the rapid obsolescence of technologies and
products witnessed in this industry.The company hasthree product development centres located at China,India & Italy. It has recently applied for a patent for a lowcost production process for the plasma panelmanufacturing. In the LCD space, the company havesigned a patent assignment agreement covering 70patents with a major US corporation.
yRelationship with Global Majors:Global majors AB Electrolux and ThompsonElectronics have recently acquired stakes inVideocon, their nominees are on the Board ofVideocon Industries and the resultant experience andexpertise of these companies should help it in capturing asignificant share of global markets including the EU.
y Future Plans:
yCapacity Expansion:
Videocon proposes to upgrade the facilities
acquired from Thomson SA by adding new product linesincluding Slim Tube, Plasma, LCD and other flat paneldisplays. In the long term, the company plans to developinto a global sized vertically integrated entity in thedisplay device segment along with CPT glassmanufacturing.
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This acquisition is in tandem with an increase in its
domestic CPT manufacturing capacity to 24 millionpieces per annum (presently 17 million pieces) as well asadditional capacity of five million pieces per annum fromthe alliance with BPL and JCT. It will help the VideoconGroup to transform into one of the largest players in theworld in integrated manufactur-ing of CPTs with CPT glass.
The company intends to make investmentsof over EUR 391.18 million to meet these plans,and willsource these funds from domestic or internationalmarkets at an appropriate time.
In its Italian facility, the company has re-engineered theplant and it now assembles end products suchMultinational players are making their presence felt. Thecompanys integration strategy and global scale hasenabled it to supply consumer electronics andhome appliances products in India to organised retailchains such as Reliance Retail, Pantaloon Retail andinternational brands such as Wal-Mart Best Buy etc.which would ensure a regular off-takeof products.The company plans to further leverage onthis strategy.
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y Investment Rationale:
y Videocon tolaunch mobileservices:
Videocon Group will launch its mobile services inMumbai and Chennai by March, it is planning toincrease the number of its retail outlets across thecountry to facilitate its foray. The company plans tocover the entire country with its GSM mobile serviceswithin the next 18 months. . Datacom has now been
renamed as Videocon Telecommunication Ltd, whichhas earmarked an investment of Rs9,000 crore and islooking at becoming profitable in coming years.
y Focused Oil & Gasbusiness:
The group has a strong presence in the oil explorationbusiness,both domestic and overseas. It is currentlyinvolved in exploration activities in various oil blocks. Ithas oil blocks Australia, Brazil,Mozambique andIstanbul. Videocon is planning to enter the oilextraction business and has received some proposalsfrom foreign players. The company also plans to startextraction activities in oneof its Brazilian blocks by next
year.
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y Planningtostart 500MW powerPlant inMaharashtra:
Videocon Group, a consumer electronics giant, isplanning to set up a 500MW power plant in itshomeland, Maharashtra. It also expectsto achieve financial closure for its Gujarat-based1,200MW power plant by end-March. The financialclosure for the first phase of600MW has been achieved; the second phases
financial closure is getting completed. The company islooking into the land availability issue and other issueslike coal transportation
y Discovery ofhigh-quality netoilpay:The BM-C-30 offshore block in the Campos Basin ofBrazil, owned by a consortium of which VideoconIndustries and Bharat Petroleum Corporation (BPCL)are part through their units, has discovered Morethan 90 feet of high-quality net oil pay while drilling theWahoo-2 or Wahoo North well in the region. The
Wahoo North well is located five miles to the north anddown-dip from the original Wahoo discovery well, whichhad encountered oil in 2008.Anadarko also expects todrill two to four additional exploration wells in theRovuma Basin this year.
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y Videocon planspan Indiapresence:
Leading conglomerate Videocon, has forayed into
mobile handset space, it plans to achieve a pan-Indiapresence by end of February and roll out 15 moremodels of handsets in two months in addition toexploring the option of coming out with 3-G handsets.
y Opportunities in Oiland Gas:
Videocon plans to expand its activities in the oil andgas sector. It has recently bid for block in Egypt and isalso exploring opportunities in the CIS block and otherpotential countries.The company is alsohoping to be successful in the New Expl-oration and Licensing Policy V (NELP V) for which ithas already submitted bids.
y Acquisition of Daewoo Electronics:
The company has been chosen as the preferredbidder to acquire South Koreas third largestelectronics manufacturer Daewoo Electronics from itscreditors, who presently hold 97 per cent of thecompany. This acquisition would allow it to strengthen
its presence in key markets including The US,Korea,Japan and the EU.The acquisition would also result inderiving value out of synergies from back end due tobetter cost efficiencies.
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y Expansion Plans:
Videocon plans to enter the insurance sector, a growth
area for the Indian economy.The company is in talkswith three French multinational insurance companiesfor a possible joint venture for the same. The Ind-ian economy is growing at a very healthy rate of over 8per cent per annum.Traditionally consumer durableshave grown at least three times the GDP growthrate.The company expects the domestic market to growat least 20 per cent per annum.With the wide product
range, an extensive distribution network and strongbrand equity it isn well positioned to lead the growth inthis industry.The organised retail industry is one of thefastest growing segments in the economy. Large Indianand Multinational players are making their presencefelt.The companys integration strategy and global scalehas enabled it to supply consumer electronics and
home appliances products in India to organisedretail chains such as Reliance Retail,PantaloonRetail and international brands such as Wal-Mart BestBuy etc. which would ensure a regular off-take ofproducts.The company plans to further leverage on thisstrategy.
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Type Public (BSE: 511389)
Industry ConglomerateFounded 1979
Founder(s) Nandlal Madhavlal Dhoot
HeadquartersAurangabad, Maharashtra,
India
Key people
Venugopal Dhoot
(Chairman)K. R. Kim
(CEO)
Products
Consumer Electronics
Home AppliancesComponents
Office Automation
Mobile phonesWireless
Internet
Petroleum
Satellite television
Power
Revenue US$4 billi n (2010)[1]
N t in m US$276 milli n (2010)[1]
Empl s 5 000 (2010)[1]
W bsit Vid n. m
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Corporate profile:The Videocon group has an annual
turnover of S$ 4.1 billion, making
it one of the largest consumer
electronic and home appliancecompanies in India. Since 1998, it
has expanded its operations
globally, especially in the Middle
East.Today the group operates
through six key sectors:
Consumer electronics : In India
the group sells consumer productslike
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y Display industry and itscomponents:
After the acquisition of Thomson in 2005, Videocon
has emerged as one of the largest Colour Picture
tube manufacturers in the world. It has plants in
Mexico, Italy, Poland and China and manufactures a
range of high-tech products such as slim CPT, extra
slim CPT and High Definition 16:9 format CPT.
y DTH:
In 2009, Videocon launched its DTH product, called
'd2h'. As a pioneering offer in the IndianDTH market,
Videocon offered LCD & TVs with built-in DTHsatellite receiver with sizes 19" to 32". This concept in
the DTH service is relatively new in the presence of
other players like ZEE tv's Dishtv, Tata Sky, Air tel
Digital Tv and Reliance's BIG TV providing only the
set top box.
Telecommunication:Videocon Telecommunication Ltd has license for
mobile service operations across India. It launched its
services on 7 March 2010 in Mumbai.
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Videocon Industries:
Innovativeness 94.1
Quality & Depth of
Management
87.0
Financial Performance 101.0
Ethics & Transparency 101.0
Quality of Products &
Services
83.0
Talent
Management/People
Practices
88.0
Global Competitiveness 87.0
Total Score 641.1
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Roleoflocalgovernment in theacquired units:
y
ITALY
:
The LCD television segment is one of the fastest interms of growth rate in Italy. The compounded growthrate is projected to be around 70% in the next fewyears. Videocon in partnership with the localgovernment is going for a Greenfield venture in thissegment. The Italian central government is giving a euro
180 million grant whereas the regional authorities aregiving a 40 million grant. Videocon would itself pitch inwith about euro 300 million whereas bank loans wouldprovide a further 700 million.
y CHINA:
In the Thomson plant located in China the localChinese Government is the minority shareholder.
y Mexico:
When Videocon acquired Thomsons CPT business, it
also gained control of Thomsons Mexican plants.
However Videocon Industries has a view that it would
expand in the country only if the government gives itenough incentives. Videocon is demanding a 25-30%
cash benefits from the authorities who are currently
ready to give only about 20%.
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MajorAchievementsofVideocon IndustriesLtd:
The largest panel production facility in the world underone roof providing very high economies of scale.
One of the world's largest and most respected CRTglass manufacturers.
Firing the largest furnace of its kind in the world with atank size of 3300 sq ft.
One of the few companies in the world to convert sandto TV.
One of the largest and most acknowledged CPTmanufacturer in the world .
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1YearComparative Graph:
Videocon Industries
BSE SENSEX
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Sectoroutlook:
There has been strong competition between the major
MNCs like Samsung, LG, and Sony. LG Electronics
India Ltd. has announced its extension plan in 2006.
The company is going to invest $250 million in India by
2011 and is planning to establish a manufacturing
facility in Pune. TCL Corporation is also planning to
establish a $22 million manufacturing facility in India.
The Indian companies like Videocon Industries
and Onida are also planning to expand. Videocon has
acquired Electrolux brand in India. Also, with the
acquisition of Thomson Displays by Videocon in
Poland, China, and Mexico, the company is marking
its international presence.
Customer, Corporate and Videocon :
y Corporate Overview :
TheVideocon Group is committed to create a better quality oflife for people and furthering the interests of society, by being
a responsible corporate citizen.
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y Creating Happiness :
We will bring happiness into every home, offering high quality
consumer durables at affordable prices, spreading the culture
of convenience, entertainment and comfort, far and wide.y Achieving Progress :
We will pursue innovative technologies in the fields of
Electronics and Energy, create products and services that will
improve the quality of life, realize the goals of the world
community and protect the environment.
y
S
ustaining Growth :We will be a source of pride to our business associates by
ensuring mutual prosperity and growth through the
implementation of forward-looking corporate strategies,
aimed at identifying opportunities and responding
intelligently to the dynamics of change.
y Pursuing Excellence :
We will provide a conducive environment for enabling ouremployees to develop their potential and make a significant
contribution to the Group's success.In 1985, through a technical tie-up withToshiba
Corporation of Japan, Videocon International
Limited launched India's first world class Color Television.
Today, Videocon InternationalLtd., the flagship company of
the Videocon Group, is India's leading manufacturer ofConsumer Electronic
products. Fired by a passion for innovation, Videocon has kept
pace with the changing face of technology, constantly upgrading
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its manufacturing facilities to incorporate advanced technology
and high standards of quality into its product range, right
across the spectrum.
AMBITIONS and TECHNOLOGIES :
y Technology with a Heart :
Committed to giving the consumer the best the
world has to offer, Videocon has developed near
zero wastage technology which helps reduce
manufacturing costs by optimizing material
inputs. Coupled with quality-consciousness at
every stage, the consumer benefits enormously by
getting premium products at affordable prices.
The company currently manufactures Colour TVs,
Black & White TVs and Audio products. At itsmodern plant at Chitegaon and Aurangabad, the
Company has also undertaken complete backward
integration to manufacture all critical and
important components of its products, such as
Electronic Tuners, FBTs, ATDMs and Deflection
Yokes, thereby reducing costs, ensuring quality
control and becoming vertically integrated. It hasset up a unit at Gandhinagar in Gujarat for
manufacturing Black & White TV picture Tubes.y The Sound of Excellence:
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Videocon produces a sophisticated range of
Home Audio Systems, Stereo Radio, Recorders
and Personal Stereos, as well as thecontemporary international range of Kenwood
Digital Hi Fi Systems.
y First with the Best:
Continuous upgradation and indigenous
manufacturing has been and continues to be an
integral part of the company's philosophy.
Perceived as an innovator in its field, Videocon
has notched up many exciting firsts, by exploring
the world's most advanced technologies. InColour TVs, Videocon was the first Indian
Company to introduce Picture-In-Picture, Turbo
Sound, Surround Sound, Larger Screen Sizes, the
Full Flat Square Tube, Bazooka technology and
the Freedom series.
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y Global Ambition:
Looking beyond India, Videocon is now a global
player, acknowledged by the world. It is the firstIndian company to win the prestigious CE
approval for exporting its Colour TV to Europe.
Videocon is now entering world market with its
operations in the Middle East, Europe, Indonesia
and South Africa. Videocon Narmada Glass (VNG): a division of
Videocon International Ltd., has the distinction
of having set up India's first plant for the
manufacture of Glass Shells for Color Television
Picture Tubes, in technical collaboration withTechneglas Inc., USA (formerly known as OI-NEG
TV Products Inc., USA), world leader in Glass
Shell Technology. The projects in 1990, when the
then Prime Minister of India, the late Shri Rajiv
Gandhi, laid the foundation stone for the project.
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ANALYSISAnd FINDINGS
COMPARISON WITH OTHER COMPANIES
REF
RIGER
ATOR
INDU
STRY
ATA
GLA
NCEy Refrigerators are being manufactured in India for the last
four decades.
y Till early nineties only direct cool refrigerators were used in
India.
y Videocon introduced frost-free refrigerators in 1991.
In 2005-06 the market was as follows
Segment Price % Market
Share
Direct Cooling Low 85%Frost Free 35-40% more than DC 15%
0
0.20.4
0.6
0.8
1
Price % Mkt.
Share
Direct
ooling
Direct ooling
Frost Free
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SUCCESS STORIES:
y The Heights of Success
VNG has some remarkable achievements to its credit,
starting with the successful absorption of sophisticated
technology from Techneglas Inc., USA. The CTV Glass
Shells manufactured by VNG are at par with international
standards and the Color Picture Tubes made with VNG
glass have already received VDE approval. The facilities
include a state-of-the-art Tool Room and Mould Shop to
manufacture and maintain its mould requirements.
Having initially successfully established its 20V, 19V and
13V CTV glass parts, VNG has now developed the 20V 2R
the latest models.
y APicture Perfect Future:
Till 1994, Indian manufacturers of CTV Picture Tubes
were importing Glass Shells. VNG's production has
replaced these imports, thereby saving almost Rs.200
crores of precious foreign exchange every year.
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VNG has now surpassed the norms of performance
guaranteed by the collaborator, Techneglas Inc., U.S.A.
and is operating the plant with 150% capacity utilization - with efficiencies exceeding international standards.
Where fields of sugarcane grow tall and proud. Where
bushes of cotton bud blooms. Where tourists flock to the
world-famous caves of Ajanta and Ellora.
Where India's NO.1 Consumer Electronics and Home
Appliances take shape, to take millions of Indians into a
better, brighter future.
This is Marathwada, India, where the Dhoot family
launched Videocon International Limited in 1984, with
the avowed purpose of producing world-class Colour
Television through a technical tie-up with Toshiba
Corporation of Japan. Within a decade, Videocon
emerged as India's leading brand of both Colour and
Black & White Televisions and continues to dominate this
highly competitive market.
The leader innovates. The leader forges ahead. The leader
breaks new ground. Harnessing the advanced technology,
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relentlessly pursuing quality to achieve various
international standards of Quality Control Breaking
through, time and again, with innovative products for abetter life.
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New Product Line
Introduce CCTVs as it has the demand in several areaslike restaurants, airport, railways stations,banks,
hospitals, shopping malls, company offices.
Alifestyle statement
People do not see the television as a mere electronic
device providing sight & sound. It has now become an
entertainment experience and a lifestyle statement that
people are willing to pay for. Since consumers are ready
to shell out money for a lavish entertainment experience,
there is today no limit to the number facilities that atelevision can envision of offering. From in built
recording to internet facilities to supreme sound etc. The
opportunity for this industry lies in coming up with new
features to the conventional CTV. There is therefore lot of
scope for growth and innovation.
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Industrial Strategy:
1.Consider improvement in production lines set-up:
investments, line speed up / mergers? Target is toincrease output and decrease product costs byincreasing productivity of existing lines
2.This will reduce manpower and overheads per picturetube by 30% that will be redeployed on new activitiesin the sites (new technologies)
3.Improve the furnace output in the Poland Glassfactory by making some changes into furnacesincluding electrical boosting. Consider increasingcapacity through one more furnace.
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4.t is envisaged that 100m will be invested in the next 2years for this purpose
5.Expand into LCD panels back-end assembly (from buying LCD arrays from big suppliers like LG, SDI,CMO, AUO, Sharp)
Cost Strategy:
1.Leverage the strong base of Videocons glass business:Thomson-Videocon partnership will have a very strongnegotiation position and can reduce impact of glasspricing volatility
2.Reduce production cost by upgrading and improvingthe production lines. Thomson-Videocon partnership
will have its own base of additional 4 million units CTV(other than India)3.Necessary to rationalize R & D efforts, necessary to
make its cost below 1.5% of sales
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Product Development:
1.i-TV web enabled TV at the price of 13,900 withexchange offer for an older version.
2.TVs With hard disk to store programs.
3.Wall mounted Flat CTVs at the price of 12,990.
4.Aimed at fulfilling needs of customer who can not buyLCDs but prefer to do away with CTV models whichoccupy space in living rooms.
5.CTVs with inbuilt set top box
6.Tie up with DTH player and provide annual
subscription offer
7.to provide Direct to home services.
8. Bluetooth enabled CTV.
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Consumer Electronics
Videocon brings to you the
best of products from their
Consumer Electronics stable
which includes Plasma TV,
Projection TV, Color TV,
Internet TV and loads of
other masterpieces and
therefore we offer you
Technology for Health and
Pleasure.
Home Appliances
Videocon has ushered in a
revolution making waves in
millions of homes by virtue
of its entire range of state-
of-art Home Appliances.
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INDUSTRYANALYSIS
(REFRIGERATOR INDUSTRY IN INDIA)
THREAT OF ENTRY
Barriers of entry
y Economies of scale:
The players like Godrej, BPL , Whirlpool, Videocon
and Electrolux have achieved economies of scale.
Godrej has a capacity utilization of 75% and the
highest capacity in the industry. This declines their
unit cost of every function of business and enables
them to keep their prices low. This will force the
entrant to come in at a large scale and risk strong
reactions from them or come at a small scale and
accept a cost and price disadvantage.
Godrej also possesses economies of vertical integration
asit manufactures its own compressors, whichconstitutes asubstantial part of the manufacturing cost. The otherplayers like BPL and Videocon who are currently
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outsourcing their compressors also plan to set up theirown manufacturing units for compressors in the longrun.
y Product differentiation:
The companies like Godrej, BPL and Videocon, being
very old players in the Indian market enjoy high brand
awareness and consumer loyalties. These brand names
are associated with trust and reliability in the Indian
market.
The Korean players like LG and Samsung who engaged
in heavy advertising and brand promotion during the
last year have also created a niche for them in the
premium segment. Their brand awareness has grown
tremendously after the recent Cricket World Cup
Tournament, during which they advertised heavily.
These create a barrier to entry by forcing the entrant to
spend heavily to overcome existing consumer loyalties
and to build a brand image.
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y Capital Requirements:
Huge Capital requirements are posed in front of the
new entrant in terms of advertising, product
development, Production facilities, Distribution
channel credit, inventories and for covering up the
start-up losses.
y Access to the distribution channels:
The Indian players like Godrej, Videocon and BPL
which are catering to the mass market have a strong
distribution and dealer network.. They have a presence
in the urban as well as the rural areas. Moreover these
companies have established developed ties with the
channel members over the period of time, which are
hard to break. Whirlpool has also developed a strong
network of 4000 dealers in urban and semi urban
areas in a period of few years. The South Korean
Majors like Samsung and LG have a dealer network of
more than 1500, mainly in urban areas and plan to
expand it in rural and semi urban areas also. This poses
a major threat in front of the new entrant as the
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existing firms already serve the channels and the new
entrant will have to persuade the channels to accept its
product through high margins, promotionalallowances, better credit facilities and advertising
support, which will reduce the profits.
Cost disadvantage independent of scale
y Learning or Experience curve: The old players
like Godrej, BPL, Videocon are high on the experience
curve, as they know the Indian Market well. This
Experience lowers their costs in production,
marketing, and distribution and in other areas of
business, thus giving a cost disadvantage to the new
entrant.
y Government policy: The Government policies of
levying duties on the imported Refrigerators and
refrigerator parts gives an advantage to the Indian
Players and in a way protect them from price
competition in the market with the MNCs.
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y Expected retaliation: The industry as a whole faces
excess capacity and the supply exceeds demand and so
the existing competitors are expected to respond
forcefully to a new entrant. The new entrant will face
competition based on the segment to which it tries to cater
If the company enters in the Direct cool segment
Godrej and Whirlpool will pose the major threat.If the company enters in the Frost free, high capacity
segment (above 300 Ltrs) it will have to face main
competition from LG, Samsung, BPL and Whirlpool.
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VIDEOCON PRODUCTS
1. Colour Televisions
2. Washing Machines
3. Air Conditioners
4. Refrigerators
5. Microwave ovens
6. Mobiles
and many other home appliances, selling them through aMulti-Brand strategy with the largest sales and servicenetwork in India . Videocon Group brands include Akai,Electrolux, Hyundai, Kelvinator, Kenstar, Kenwood,Next, PlanetM, Sansui, Toshibha, Philips (TV Products)
etc.