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LOVELY PROFESSIONAL UNIVERSITY

Topic: - Videocon Consumer Electronics & Home Course No:-MGT 511 Course Title: - Business Environment Section: - RQ206 Submitted to:MR. Sunil Budhiraja

Submitted by: Gyan Prakash Roll No.:- A24 Reg No: - 11011236

History:
 Videocon is an Indian multinational with interests in Consumer Electronics, Home Appliances, Colour Picture Tube Glass, DTH, Mobile Phones and Oil & Gas.  Videocon was founded in 1987 by Nandlal Madhavlal Dhoot. At that time it used to manufacture TV and Washing Machine.  In 1989-90, Videocon started manufacturing Home Entertainment Systems, Electric Motors & AC. Videocon entered Refrigerators and coolers segment in 1991.  In1995, Videocon started manufacturing Glass shells for CRT and in 1996 it ventured into Kitchen appliances and crude oil segment.  In 1998, Videocon started manufacturing Compressors & Compressor Motors. In the year 2000, Videocon took over Philips Color TV Plant.  In 2005, Videocon took over 3 plants of Electrolux India and acquired Thomson CPT. Today; it has evolved into a giant conglomerate with annual revenues of over U$4.1 billion.  The Videocon group emerges as a USD 2.5 Billion global conglomerate continuing to set trends in every sphere of its activities from a conference room sized assembly line in1979.  Headquarter : Aurangabad, Maharashtra , India  Revenue:
127.565 billion (US$2.3 billion)(2011)

 After the acquisition of Thomson in 2005, Videocon has emerged as one of the third largest Colour Picture tube manufacturers in the world.  The group has 17 manufacturing sites in India and 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 formats CPT.  Videocon is one of the largest consumer electronic and home appliance companies in India. New logo. Unveiled on 2nd July, 2009  Major Achievements of Videocon Industries Ltd:  The largest panel production facility in the world under one roof providing very high economies of scale

 One of the world's largest and most respected CRT glass manufacturers  One of the few companies in the world to convert sand to TV  One of the largest and most acknowledged CPT manufacturer in the world  Manufactured India's first rust-free Washing Machine

Issues and challenges
    Poor customer retention People perception Technology up gradation rapid in market Competition with other brands

PESTEL Analysis
Political Factors
 Political factors are basically include areas such as tax policy, labour law, environmental law, trade restrictions, tariffs, and political stability.  Labour unions effects a lot the production  Resolution to reduce emission of carbon footprints in the atmosphere  Allows automatic approval for foreign equity investment up to 100% in the electronic sector.  Videocon’s facing trade barriers by politically, it is difficult expand Brand product one country to another.  Government has imposed anti-dumping duty on imported color picture tubes from china, Malaysia, Thailand and Korea after it found that products from these countries were exported to India below their normal value impacting the domestic industry.  Government is putting a lot emphasis on easy availability of credit which is supported by various economic policies California is banning plasma screen televisions 58 inches or smaller as they consume lot of electricity with this becoming law a lot of countries in the world will also implement it so Videocon should to come out with plasma TVs in synchronise with their current R and D strategy of go green and electricity economic products.

Economic Factors
 Economic factors include economic growth, interest rates, exchange rates and the inflation rate. These factors have major impacts on how businesses operate and make decisions.  Growth of retail sector – expected to reach 16% by 2011-12 from 4% in FY07

 Availability of finance  High investments are needed in the consumer durables.  Economic reforms by the government –higher purchasing power like increase in FDI level and NREGA schemes 6th pay commission are leading to higher purchasing power among masses.  Emergence of organized retail market with large players like Croma, next, reliance digital etc – leading to lower prices and higher varieties  61 % of total urban income comes from households —earning between US$ 1,493 and US$ 9,955 a year.  World economy now is in bad shape because of recession that why it also facing inflation rate problem in the market.  Rise in organised retail will set the growth pace of the Indian consumer durables industry. According to a working paper released by the Indian Council for Research on International Economic Relations, organised retail which constituted a mere four percent of the retail sector in FY07 is likely to grow at 45-50% per annum and quadruple its share in the total retail pie 16% by 2011-2012.

Social Factors
 Social factors include the cultural aspects and include health consciousness, population

       

growth rate, age distribution, career attitudes and emphasis on safety. Trends in social factors affect the demand for a company's products and how that company operates. Disposable Income roughly doubled since 1985 Changing perception of luxury to necessity A trend of urbanization In rural areas there are poor infrastructural facilities like availability of electricity Highly growing consumer durable market & Demand of the consumer durables is seasonal and cyclic Convenience and comfort are becoming a need for the urban Indian citizens. This leads to increase in sales of consumer durables in the urban India. The perception of these products is shifting from luxury to necessity. Sales are maximum during festival season McKinsey’s prediction that if India grows at the same rate, it will climb from its position as the 12th largest consumer market to being 5th largest consumer market by 2025

Technological Factors
 Technological factors include technological aspects such as R&D activity, automation, technology incentives and the rate of technological change.  Improved electricity consumption  Higher quality products  Technological is changing at a very fast rate & Technology is becoming cheaper  They giving more consideration on Research and Development and open innovation that's why they invested 497.3 billion yen on R&D last year.

 Home theatres - High-end models and HTIB Models & Other forms of TV technology are emerging (LCD, Plasma, LED, 3D) Cosmetic design and new out look to the TVs.  Manufacturing of components for CTV, Refrigerators and Air conditioners  Efforts to reduce power consumption of all its final products  Internet makes it easy to collect and analyse customer feedback

Environmental Factors
 Environmental factors include ecological and environmental aspects such as weather, climate, and climate change, which may especially affect industries such as tourism, farming, and insurance.  Changes in leaving of standards of a person  Entry of global companies into the Indian market, advanced technologies, both in product and production process have developed.  Few global companies have setup R &D centers in India  Major global players like Samsung, LG, Onida any many of other companies have setup their manufacturing units in India

Legal Factors
 Legal factors include discrimination law, consumer law, antitrust law, employment law, and health and safety law. These factors can affect how a company operates, its costs, and the demand for its products.  Legal provision relating to environmental and sound pollution  Ensure a balanced transition to open trade at minimal risk to the Indian economy and local industry.  Legal requirement is very strong because of each country have their own low and order. Under of law they always following country right, which existing Consumer law, Employment law, health and safety law etc.

Porter’s Five Force Model : Threat to Entry  Entering market isn’t very easy. One of the most important features needed is a good distribution system which isn’t something that can be developed overnight.  The brand plays an important role in influencing the purchase decision. For a new company then entering this market, not having a recognized brand name is a threat to entry.  Rivalry among existing firms

 There is strong competition among the current players. The main players are LG, Samsung, Onida, Videocon, Philips, and Sansui.  This increased competition has ensured that advertising costs are an integral part of the players’ total cost.  It is expected that realizations will fall with increased competition.  Bargaining Power of Buyers  The TV market today is a consumer’s market where the consumer has the upper hand with him having the power of choosing from a variety if brands.  This bargaining power of the buyer has forced the players to offer credit facilities on sale, to provide lower EMIs and excellent after-sales service.  The intense dealer competition also benefits the consumer in terms of prices and offers available.  Threat of Substitutes  For a television, the substitute can only be a functional substitute  The functional use of a television is to watch programs, live events etc. This today can also be done on a computer  Theaters too can be a substitute to watching movies at home

 Determinant of supplier power  Cost of switching supplier  Presence of substitute input  Importance of volume to supplier

SWOT Analysis
Strength
       Backward integration Diversified goods portfolio across Consumer Durables Sector Multi brand strategy Global company Videocon has a much wider variety of TV sizes than other competing companies High TV quality index compared to competing firms Overall price position cheaper than competing firms

Weakness
      Image of low to medium cost company Significantly less advertising than competing firms Diversification into too many sectors Not much international recognition Too much rebranding/ changing of positioning Weak sales and service network

Opportunity
 India is big consumer durables market and growing at 10 to 15 %.  Lifestyle of people has been change very much so there is demand for premium products.  Consumer durable market will become $158 billion by 2015.  Overall number of rural households estimated to grow from 135 million in 2001-02 to 153 million in 2009-10

Threats
    Stiff competition from MNCs like LG, Samsung, SONY. Cheaply available of Chinese products. Virtually not able to establish the products for online sales and marketing. Local brands available in the market.

Recommendation:
         Improve after sale service Need to focus more on promotion of CTV Establish better relationship with dealers and retailers Focus on Technology Up gradation Enhance brand reputation Open exclusive showrooms Relationship marketing through improved sales support Organize demonstrations and exhibitions Videocon is still not able to create a brand name in the international market so the company should increase its marketing budget for making its presence felt in the international market

References:

 http://www.moneycontrol.com/financials/videoconindustries/profit-loss/VLF#VLF  http://www.moneycontrol.com/financials/videoconindustries/balancesheet/VLF#VLF  http://www.kotaksecurities.com/stock-market-news/equity/5013/VideoconIndustries-Ltd.-cash-flow/14060139.00  http://profit.ndtv.com/news/earnings/article-videocon-q3-net-plunges-99-per-centto-rs-1-crore-317972  http://www.moneycontrol.com/financials/videoconindustries/results/yearly/VLF  http://en.wikipedia.org/wiki/Videocon

Reasons why selecting this company
 Electronics Company Videocon today reported a whopping 98.79 per cent fall in net

profit at Rs. 1.04 crore for the third quarter ended December, 2012 due to huge finance cost. The company had posted net profit of Rs. 86.42 crore for the same period a year ago.  The total income from operations of the company declined by marginally at Rs. 3,082.63 crore during the reported quarter from Rs. 3,087.99 crore it posted in corresponding period a year ago, the company said in a filing to the Bombay Stock Exchange (BSE).

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