Indian Consumer Durable Industry

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Dissertation Report


Growth Strategies
LG Electronics (India)

Submitted By

P Hari Krishnan
Roll no: 41109
MBA (IB) - Marketing

for the partial fulfilment of

MBA-IB (2007-09)

Executive Summary

The first of the 3 part dissertation series on “Growth Strategies of LG Electronics India” presents a picture of the consumer durables industry in India. The consumer Durables industry consists of durable goods and appliances for domestic use such as televisions, refrigerators, air conditioners and washing machines. The consumer durables industry can be broadly classified into two segments: Consumer Electronics and Consumer Appliances. Consumer Appliances can be further categorised into Brown Goods and White Goods. The study plays a significant role in understanding the reasons for LG’s entry into India, its marketing strategies, growth strategies and finally, reasons why it is the No 1 brand in India in the consumer durables industry.

The report speaks extensively on the spurt in consumer demand in the last 5 years due to a large middle class population, rapid growth in disposable income, changing socio-economic conditions & favourable economic conditions.

Several key trends are driving growth in the sector

Income growth and availability of financing
• Disposable income levels are rising and consumer financing has become easier Increased affordability of products
• Advanced technology and increasing competition are narrowing the price gap and the once expensive appliances are becoming cheaper Increasing share of organised retail
• Urban and rural markets are growing at the annual rates of 7%–10% and 25%, respectively, with organized retail expected to garner a 10% share by 2010 from a mere 3% share at present Entry of heavyweight retail players is increasing competition • Competitive evolution of organised retail due to the entry of heavyweight players like Croma, E Zone and Reliance Digital is stimulating the demand through exposure to experiences. Increasing appreciation of the Rupee

• Raw materials constituting almost 75% of the costs are mostly imported and will now be cheaper

These conditions have created major opportunities for Indian companies and MNCs to tap into this market. Consumer durable is now one of the fastest growing industries in India; industry sales were valued at Rs 24,000 Cr in 2007-08 and over 10 million units in volume terms. A recent study by McKinsey pointed out that India's consumer goods market, already among the top ten in the world, could touch $400 billion by 2010, making it one of the five largest in the world.

The consumer durables sector has been witnessing significant growth in recent years, helped by several drivers such as technological improvements, falling prices due to competition, aggressive marketing and declining import tariffs. The industry is represented by major international and local players such as LG, Samsung, Whirlpool,BPL, Videocon, Voltas, Blue Star, MIRC Electronics etc. MNC's major target is the growing middle class of India. They offer superior technology to consumers whereas the Indian companies compete on the basis of firm grasp of the local market, their well-acknowledged brands, and hold over wide distribution network. However, the penetration level of the consumer durables is still low in India. The market share of MNCs in consumer durables sector presently stands at 65%. LG & SAMSUNG the two Korean companies has been maintaining the lead in the industries with LG being leader in almost all the categories. Two out of every five televisions or refrigerators sold and one out of every two washing machines sold in the country are made by the two Korean conglomerates. The intense competition for increasing market share has forced players to compete with wafer thin margins. This has forced companies to regij their marketing strategies with major white good manufacturers now...
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