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MNCs: Slogging their Indian peers - Views on News from Equitymaster
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  • Aug 7, 2000

    MNCs: Slogging their Indian peers

    Survival of the ‘fittest’ would be the guiding principle in the Indian consumer durable industry. By fittest we mean product innovation, customers focus, brand building and sound manufacturing facilities. The Indian companies are learning it in a hard way, as their market share figures are plunging, be it in television, refrigerator, audio systems, home theatres or microwaves.

    Multinationals including LG, Samsung, Electrolux, Whirlpool and Sony have cornered their Indian counterpart across the segments. With their strong ability to renovate their models, the market shares of the foreign companies are showing an uptrend. While the overall market share of the Indian companies in the colour television segment has dropped from 48% in FY98 to 35% in FY00, the market share of the multinationals has gone up from 52% in FY98 to 65% in FY00. Samsung, for example, has sold one million colour television sets in FY00, thus becoming the first multinational company to cross this magical figure. Within one year the company has notched a 15% market share in the colour television and 10% in the frost-free refrigerator segment. It has targeted a turnover of US $ 1 bn for FY01, with substantial investment plans in the future to enhance the manufacturing facilities.

    Even in the refrigerator segment, we see companies’ like Electrolux, LG and Samsung outperforming the Indian companies. This is also happening in the air conditioners, microwaves as well. However, in the frost-free refrigerator segment, BPL, the Indian consumer durable major, is the market leader.

    Why is this happening? Where are the Indian companies lagging? The answer is the inability to cater to the niche segments (gone are the days of mass marketing!) and the lack of upgraded manufacturing facilities. While the Indian companies are focusing to improve their efficiency, the multinationals have moved a leap ahead. LG Electronics is already marketing and selling its products through the Internet and has started networking its dealers. Samsung through its ‘Sampoorna’ scheme has made in-roads into the rural market, which incidentally has received tremendous response. Not all Indian companies are lagging behind. BPL, for example, has been able to introduce new products across the board gaining market share each year.

    India’s television penetration is lower, if not the lowest, in the world. To put things in perspective, on an average, we sell about 6 m televisions in India (organised), out of which 3 million are black and white models. Rural India accounts for 70% of the Indian population and has enough potential to absorb products across the range. This is where the wealth lies. Knowing this, some Indian companies are focusing on setting up customized franchisee networks to cater individual customer preferences across the country. Realisations have gone down due to under pricing by the multinationals. Survival, indeed has now become a toughest task!



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