The rules of the game in the CTV market have taken a U turn in 1995 when Kabir Mulchandani of Baron international started hitting the then brand leaders Videocon and BPL through full page ads, mind boggling discount schemes and down to earth prices. At its peak his pet brand Akai had a market share of 17 per cent. At this point of time, tech savvy Korean companies with deep pockets and enormous staying power – Samsung and LG – spoiled the show for all Indian manufacturers in the top end of the market. With LG and Samsung increasing their product portfolio to over 35 variants, local players too had to follow suit (BPL, Videocon, Onida, barely had 12 – 14 CTV models then). The top end of the market thus got over crowded with endless sleek models having a stunning variety of digital options offering comfort to the consumer. Meanwhile the government brought down the customs duty on the color picture tubes to 25 per cent. Digital technology, tough competition and an increasingly rational tariff have led to a significant fall in the CTV prices across the board. Capacity additions by local players, meanwhile led to situations where they too caught the elusive customer through steep, and at times un-remunerative price cuts. Due to the dot com crash, IT meltdown and global economic slowdown the demand for CTVs has not gone up in a big way. Every CTV brand had to be cushioned with an endless list of attractive features to catch the imagination of consumers. There was in the end very little to choose between the brands leading to commoditization of some segments of the business. Aggressive pricing, thus proved to be a crucial differentiating factor. To push up demand the Korean giants have introduced many firsts in the Indian market, and in the process rewritten many of the rules.
The competition thus, flared up to really hot levels where every dealer is crying foul. Consider the following facts: dealer margin between 1999 and 2002 are down from 6-7% to 2-3% credit period from 30 days to zero level; inventory value up from Rs 5 – 10 lakh to Rs 15-30 lakh discounts which were fixed at 1 – 3% now vary between 1 – 7% depending on volumes and ability to buy on cash.
For the Korean giants – technology no problem, money no problem, and people no problem when you look at the consolidated Korean performance the figures are really impressive: from Rs 1000 crore in 1998 to over Rs 5,000 crore in 2003 (Business today estimates) – at a time when sales growth in every consumer durable category was somewhat sluggish. Both have supported their brands, with powerful ad budgets. LG’s Rs 130 crore and Samsung’s Rs 82 crore. The high decibel advertising during the recent world Cup have pushed their market shares to highly respectable levels: LG 18.6% , Samsung 16% followed by Onida, Videocon and BPL. Along with the relentless communications through catchy ads, the Koreans kept the market guessing through regular product launches; Samsung launched 14 new models in the high end segment in 2002 and LG increased its 45 models portfolio to over 60 in 2003 (price range from Rs 7000 to just under Rs 2 Lakh). Both the South Korean companies have deep pockets and can afford to grab the market share by offering their new generation CTVs at throw away prices (unlike the Japanese models which are traditionally fairly high priced) Samsung has tried is best to cut down the prices of most of its product – CTVs, ACs, microwave ovens, refrigerators – by setting up assembly lines in India (instead of outsourcing them). In the case of LG, volumes and technology support from the per cent have done the trick. Both companies are market driven in the sense that they know what keeps the Indian consumer smiling – affordable price, excellent quality, latest technology, efficient after sale services and a top of the line hot selling brand.
Source: Strategic Management