Consumer Durables Industry Analysis

Consumer durable goods consist of products that are often expensive for the average household, and that are usually expected to last for two or three years. These goods are often purchased as gifts on a seasonal basis or for special occasions. The category includes but is not limited to: recreational goods, sporting equipment, toys and hobby goods, jewelry, watches, kitchenware and other durable household goods with long product life. White goods such as washing machines, refrigerators and coffee machines, as well as brown goods such as DVD players, televisions and stereos are often grouped into this category. India being the second fastest growing economy with a huge consumer class has resulted in consumer durables as one of the fastest growing industries in India. The rural market is growing faster than the urban markets, although the penetration level in rural area is much lower. The rising income levels, doubleincome families and increasing consumer awareness are the main growth drivers of this industry.

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. Governments both at Centre and States view this sector only as source of Revenue generation. Over the last twenty years the consumer durables industry has become more and more commercialized. Marketing and advertising have targeted the middle to upper income groups that have the disposable income to purchase durable goods and luxury items. Extremely thin margins and increased global competition are forcing consumer durables distributors to adopt new strategies for survival. This requires careful planning and coordination between the film industry, advertisement agencies, merchandisers and the whole supply chain.

Acknowledgement

We would like to express our special thanks of gratitude to our Professor/Mentor (Mrs. Kavita Kulkarni) as well as to our Director Sir Dr. B. Karunakar, who gave us an opportunity to do this wonderful project of Industry Analysis on Consumer Durables Sector. This project helped us in increasing our knowledge about The Consumer Durable Sector and also helped us in understanding the market current scenario and future trends of the same. We take this opportunity to express my profound gratitude and deep regards to Mrs. Kavita Kulkarni for her exemplary guidance, monitoring and constant encouragement throughout the course of this thesis. We would also like to express my gratitude towards industry persons for their kind cooperation, encouragement and for giving me such attention and time which help me in completion of this project. Our thanks and appreciations also go to our colleague in developing the project and people who have willingly helped me out with their abilities.

The report studies the consumer durables industry in India. The consumer durables market is divided into two segments – consumer electronics, also known as the brown goods (television, digital camera, audio-video systems, computers, electronic accessories, etc) and consumer appliances or the white goods (air conditioners, refrigerators, microwave ovens, other household appliances, etc.). The report covers the market trend, market structure, market share, SWOT analysis, PESTLE analysis, competitor analysis of various companies that are being analyzed. The companies that are being analyzed are Samsung, LG, Micromax, Nikon and Sony. But post liberalization much foreign company have entered into Indian market dethroning the Indian player and dominating Indian market, the major categories in the market TV, refrigerator, air conditioner and washing machine.

India being the second largest growing economy with huge consumer class has resulted in consumer durables as the fastest growing industries in India LG, SAMSUNG the two Korean companies has been maintaining the lead in the industries with LG being leader in almost all the categories .The rural market is growing faster than the urban market, although the penetration level is much lower .The TV segment is expected to the largest contributing segment to the overall growth the industry. The rising income levels double-income families and consumer awareness are the main growth drivers of the industries. Consumer durables major LG Electronics India Pvt Ltd (LGEIL) will invest nearly Rs500crore in India this year in research and development, brand-building and other marketing initiatives.

The company, having a turnover of Rs 9,500crore and market share of 26 per cent, is investing Rs 360crore on brandbuilding and other marketing initiatives and around Rs140crore on research and development, besides launching new platforms in information technology and related areas. The sector is characterized by strong growth trends in all domains – from rise in affordability factor of Indian population, increased penetration and exponential growth of rural markets, policy support in terms of FDI, to large scale investment plans by corporate. The consumer durables sector is set for an upward graph with numerous opportunities for those involved in it.

Implementation of ITA-I under WTO
India has been successfully promoting reforms in all the constituents of the Internet, Communication and Entertainment sector. Being a signatory to the Information Technology Agreement (ITA-I) of the World Trade Organization and with effect from March 1, 2005 the customs duty on all the specified 217 items has been eliminated. Industrial Licensing has been virtually abolished in the Electronics and Information Technology sector except for manufacturing electronic aerospace and defence equipment. There is no reservation for public sector enterprises in the Electronics and Information Technology industry and private sector investment is welcome in every area.

Foreign Investment Policy
A foreign company can start operations in India by registration of its company under the Indian Companies Act 1956. Foreign equity in such Indian companies can be up to 100 per cent. At the time of registration it is necessary to have project details, local partner (if any), structure of the company, its management structure and shareholding pattern. Registration is a kind of formality and it takes about two weeks. It can forge strategic tie up with an Indian partner.

A joint venture entails the advantages of established contracts, financial support and distribution-marketing network of the Indian partner. Approval of foreign investments is through either automatic route or Government approval.

Foreign Trade Policy
In general, all Electronics and IT products are freely importable, with the exception of some defence related items. All Electronics and IT products, in general, are freely exportable, with the exception of a small negative list which includes items such as high power microwave tubes, high end super computer and data processing security equipment. Export Promotion Capital Goods scheme (EPCG) allows import of capital goods on payment of 5 per cent customs duty. The export obligation under EPCG Scheme can also be fulfilled by the supply of Information Technology Agreement (ITA-1) items to the DTA provided the realization is in free foreign exchange.

SEZ Scheme
Special Economic Zone (SEZ) is a specifically delineated duty free enclave and shall be deemed to be foreign territory for the purposes of trade operations and duties and tariffs. SEZ unit may import/procure from the DTA without payment of duty all types of goods and services, including capital goods, whether new or second hand, required by it for its activities or in connection therewith, provided they are not prohibited items of imports. The units shall also be permitted to import goods required for the approved activity, including capital goods, free of cost or on loan from clients. SEZ unit may, on the basis of a firm contract between the parties, source the capital goods from a domestic/foreign leasing company. SEZ unit shall be a positive Net Foreign Exchange earner. Net Foreign Exchange Earning (NFE)
shall be calculated cumulatively for a period of five years from the commencement of production.

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