2.case Studies

CONTENT
Page No. Introduction Air Conditioner Manufacturing Unit 1: Mumbai, Maharashtra Air Conditioner Manufacturing Unit 2: Mumbai, Maharashtra Refrigerator Manufacturing Unit 3: NOIDA, Uttar Pradesh Refrigerator Manufacturing Unit 4: Aurangabad , Maharashtra Washing Machine Manufacturing Unit 5: Gurgaon, Haryana Washing Machine Manufacturing Unit 6: NOIDA, Uttar Pradesh Microwave Oven Manufacturing Unit 7: NOIDA, Uttar Pradesh Microwave Oven Manufacturing Unit 8: Mumbai, Maharashtra Vacuum Cleaner Manufacturing Unit 9: Mumbai, Maharashtra Vacuum Cleaner Manufacturing Unit 10: NOIDA, Uttar Pradesh Study Team 1 2-12 13-26 27-32 33-39 40-46 47-49 50-55 56-58 59-63 64-67 68
Case Study Report
Productivity and Competitiveness of Light Electrical Industry in India
Diagnostic Case Studies

Introduction A case study is one of several ways of doing research whether it is social science related or even economic related. It is an intensive study of a single group, incident, community or sector. Rather than using samples and following a rigid protocol to examine limited number of variables, case study methods involve an in-depth, longitudinal examination of a single instance or event: a case. They provide a systematic way of looking at events, problems, analyzing issues, and reporting the results. This Report contains ten diagnostic case studies of large home appliance manufacturing units that produce Refrigerators, Air Conditioners, Washing Machines, Microwave Ovens and Vacuum Cleaners selected from different parts of India. The aim of these case studies is to understand the operation of units in these product segments and figure out the factors that are critical to boost productivity and competitiveness of the units. The case studies presented in this report cover various aspects of the manufacturing units such as unit profile, its background, the products manufactured, infrastructure and manpower issues, quality related policies SWOT analysis of the units, technology related issues etc. Product Categories and Manufacturing Units Studied Product Category Air Conditioner Manufacturing Unit Manufacturing Unit 1: Mumbai , Maharashtra Manufacturing Unit 2: Mumbai, Maharashtra Manufacturing Unit 3: NOIDA, Uttar Pradesh Manufacturing Unit 4: Aurangabad , Maharashtra Manufacturing Unit 5: Gurgaon, Haryana Manufacturing Unit 6: NOIDA, Uttar Pradesh Manufacturing Unit 7: NOIDA, Uttar Pradesh Manufacturing Unit 8: Mumbai, Maharashtra Manufacturing Unit 9: Mumbai, Maharashtra Manufacturing Unit 10: NOIDA, Uttar Pradesh
Refrigerators
Washing Machines
Microwave Ovens
Vacuum Cleaners
National Productivity Council
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Case Study Report
Manufacturing Unit 1: Mumbai, Maharashtra Product Category: Air Conditioner

Company Background This company was set up in 1954 in Bombay as a joint venture between on Indian company and a foreign multinational company. In 1956, the company became a public limited company In the 1960s, it started manufacturing air-conditioning and refrigeration equipment. Gradually, it became a leading player in the Indian AC market. In 1963, the company established its first factory at Bombay to manufacture ACs and refrigeration equipment. In 1964, a plant was setup to manufacture compressors, condensers, chillers, and ancillaries. The range of products was gradually widened to include other engineering, electrical, and agricultural equipment. In 1978, a wholly-owned subsidiary of the company, was set up to handle international electro-mechanical and electrical power projects. Even in the refrigeration market the company did reasonably well. Anticipating high growth in the retail refrigerator market, company invested heavily in the business between 1994 and 1997. However, in 1996-97, the market shrunk by around 9%. Also, it had diversified into several unrelated businesses like pesticides, furniture, granites, etc., in the period. By the mid 1990s, the management of these businesses proved to be difficult and some of them became a drag on the balance sheet. These factors led the company to register its first loss in 1996-97. It is one of the leading air-conditioning and engineering companies in India. The company offers engineering solutions for a wide spectrum of industries in areas such as heating, ventilation, air conditioning, refrigeration, electro-mechanical projects, textile machinery, machine tools, mining and construction equipment, materials handling, water management, building management systems, indoor air quality and chemicals. In March 2006, the company announced plans to invest about Rs.200 million in brandbuilding and another Rs.60 million in expanding its distribution network in the retail AC market for the year 2006-2007. With this investment, the company aimed to capture 20% market share in the Indian retail AC market by fiscal 2007. It also announced plans to start production of ACs at its new plant at Uttaranchal, a location which allowed the company to claim some tax exemptions. National Productivity Council Page2
Case Study Report
Subsequently, the company embarked on a major restructuring exercise. It was decided that the company would concentrate primarily on its air-conditioning and engineering businesses. Some of its unrelated businesses were sold off. The company also reduced its manpower. These measures proved successful in making the company profitable again. After the successful turnaround, the company tried to improve its operating margins which had contracted owing to intense competition. For this, it began an exercise to identify avenues for future growth in its businesses. The company identified electromechanical projects and the retail AC market as potential growth drivers. In 2001, formulated the 'Big Bang' strategy aimed at becoming the market leader in the retail AC segment by 2004. By 2006, the company was second in the retail AC market and its electromechanical division was the fastest growing and the highest revenue earning division in the company. The company's other divisions like chemical trading and engineering products and services - textile machinery, mining and construction, machine tools, material handling (forklift trucks), were also doing well. Overall, the company was in a position to benefit from the huge opportunities that were coming its way and it expected future growth rates to remain high. Products Air conditioners Water coolers Water dispenser Commercial refrigerators Businesses Electro-mechanical & Refrigeration Electrical, Mechanical & HVAC Solutions (Intl) Cooling Appliances Mining & Construction Equipment Materials Handling Machine Tools Textile machinery Big bang strategy The Big Bang strategy aimed to revitalize every facet of the AC business - product, channel, systems, service, costs, and brand. The high profit margins that the company had enjoyed until the early 1990s had become a thing of the past, due to the price war National Productivity Council Page3
Case Study Report
unleashed by the MNCs. Therefore, in order to improve margins, the company either had to increase prices or reduce costs. While the former was not really an option owing to intense competition, the company set out to secure economies of scale. However, this meant that it would have to sell in large volumes. The restructuring process began with the formation of a core management team. Each business of the company was first analyzed to determine whether it was viable. For this analysis, the company evaluated the business on market size, growth potential, and strength of the competition. Then, it assessed whether the company had the necessary competence to compete successfully against the competition on critical success factors in the particular business. When a business did not fare well in the evaluation, it was identified to be sold. The restructuring exercise also involved reorganization of the companys businesses around their core competencies of air conditioning and engineering - two businesses which, according to company sources, had yielded the most sustainable growth for many years. Another priority for the top management was to stabilize the cash flow position of the company. For this, the company's idle assets were either leased or were sold off to help finance the restructuring. For example, in 1998, the company sold a part of its unutilized real estate and realized Rs. 560 million... The turnaround efforts of the company took three years to bear fruit. From a loss of Rs. 119 million in 1998-99, the company recorded an operating profit of Rs. 69 million in 2000. The company offered a dividend of 12 per cent in 2000. Though its turnaround efforts had begun to show results, it still had to address the issue of low operating margins, which were at less than five per cent. Going by market shares, the 'Big Bang' strategy was a success. Rising incomes and availability of cheap consumer credit was expected to fuel the demand for ACs in India. The low penetration of ACs in India indicated that there was immense potential for growth. Scores For Best Innovation In a survey conducted during April 2008 by Business Week and BCG, the company was ranked as the 6th most innovative group in the world. The product innovation, is a breakthrough improvement in the familiar Freezer-on-Wheels which keeps ice cream frozen while being cycled through the streets by vendors. The freezer developed is longer National Productivity Council Page4
Case Study Report
lasting than the existing product due to the elimination of corrosion which is rampant in other brands available in the market; is more economical, lighter in weight and easier to pedal, and keeps ice cream frozen longer when disconnected from the power source while in use on the streets. Operations Operations have been organized into four independent business-specific clusters. Each of these has its own facilities for market coverage and service to customers. 3 core competencies 1. Electro-Mechanical Projects & Services Electrical, Mechanical, HVAC & Refrigeration Solutions Electrical, Mechanical & HVAC Solutions (International) Water Management & Treatment 2. Engineering products & Services Textile Machinery Mining & Construction Equipment Machine Tools Materials Handling Solutions 3. Unitary Cooling Products for Comfort & Commercial Use Cooling Appliances Commercial Refrigeration
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The Electromechanical Business Electromechanical division delivered solutions in several areas. It operated in India as well as in several markets, either independently or through joint ventures. This division had been very successful all through and contributed significantly to the company's profits. Over the years, the company had executed a number of electro-mechanical projects at several overseas. The units, which won several awards for its export performance, maintained good relations with several international consultants. The Unitary Cooling Business Other area of focus was the unitary cooling products business consisting of commercial refrigerator business, water cooling business, retail refrigerator business, and most importantly, the room air-conditioning (RAC) business. National Productivity Council Page6
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Management Key Challenges To encourage and stimulate up gradation from HVAC to integrated MEP in various segments To establish the company in India as premier integrated MEP provider (as proven internationally) To actively convert HVAC opportunities into MEP opportunities while sustaining/growing market share in HVAC To leverage existing leadership/credibility in cold storage towards head start in emerging cold chain sector To focus on jobs with larger scale and integrated scope To expand role as equipment provider for HVAC contractors, esp. for smaller scale projects. Growth Plan 2010-2011 After previous phases Management of phase (1997-2002) Embarking on growth(2003-2006) Commenced a new phase Making organic growth self-sustaining (Organic growth to contribute 75% of TO) The Company's Strengths To design and manufacture industrial equipment Management and execution of air conditioning and public works projects Sourcing, installation and servicing of technology-based systems Representation of global technology leaders, serving diverse industrial sectors and applications. Corporate Management Challenges Ahead To increase the rate of consolidated growth towards CAGR of 35-40% top line and 50-60% bottom line To sustain business-wise growth, and their contributions to top and bottom lines To increase productivity and efficiency in all businesses, towards better profitability National Productivity Council Page7
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Manage scaling-up of businesses Manage Risks Implement effectively inorganic plans Current Scenario Serving various sectors of Indian industry and economy For over 50 years Executed projects in over 30 countries worldwide ISO 9001: 2000 in all core capabilities Twelve Months Performance ended 31st March 2008 Turnover of Rs.30861 Mn. (USD 722 Mn.) Operating profit of Rs.2778 Mn. (USD 65 Mn.) Net profit of Rs.2084 Mn. (USD 49 Mn.) Financial Valuations As per the latest information of the companys statistics over the previous years are as follows: (Rs. Crores) Mar04 Mar05 Mar06 Mar07 Mar08 Sales Operating profit Interest Gross profit 1329.94 1441.43 1904.18 2450.78 3086.17 32.76 1.80 50.23 44.49 3.86 63.10 100.73 1.40 128.97 108.68 -0.47 167.44 250.87 2.65 291.23 CAGR (2003-04 to 2007-08) 23.42 66.35 10.15 55.17
As per the previous years sales has increased from Rs.1329.94 crores in the financial year 2003-2004 to Rs.3086.17 crores in the year 2008 at a compound annual growth rate of 23.42 percent. The Operating profit has also been increasing at a high rate from Rs.108.68 crores in 2006-07 to Rs.250.87 crores in 2007-08. Gross profit also showed an improvement over the years and increased to Rs.291.23 crores in 2007-08 with a CAGR of 55.17% during 2003-04 to 2007-08.
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Financial Ratios: Profitability Ratios Mar04 Mar05 Mar06 Mar07 Mar08 1.85 3.09 5.47 4.91 8.33 0.81 2.34 4.87 4.40 7.88 3.01 3.56 3.75 7.54 6.74 2.43 3.81 5.30 5.34 6.29 9.69 22.44 36.66 31.33 33.59 20.65 26.05 29.19 48.87 38.70
Operating Margin (%) Gross profit Margin (%) Net profit Margin (%) Adjusted cash margin (%) Adjusted return on net Worth (%) Reported return on net Worth (%)
Labour Productivity Ratios Mar04 Sales (Rs. Crores) Employee expenses (Rs. Crores) Labour Productivity Ratio 1329.94 126.19 10.53 Mar05 1441.43 144.35 9.98 Mar06 1904.18 176.23 10.81 Mar07 2450.78 239.97 10.21 Mar08 3086.17 276.85 11.15
Labour Productivity Ratio for company has been calculated as sales per unit of labour expense labour. Productivity is increasing which means that output per labour expense is more which is a good indicator as a company performance. Capital Productivity Ratio Mar04 Sales Net fixed assets Capital productivity ratio Capital productivity growth 1329.94 149.17 8.92 Mar05 1441.43 111.26 12.96 45.31 Mar06 1904.18 163.48 11.65 -10.09 Mar07 2450.78 160.09 15.31 31.43 Mar08 3086.17 189.84 16.26 6.19
Source: Estimated from Balance sheet figures
Leverage Ratios Mar04 Long term debt / Equity Total debt/equity Owners fund as % of total source Fixed assets turnover ratio 0.08 0.44 69.42 5.24 Mar05 0.21 0.54 64.52 5.82 Mar06 0.16 0.29 77.02 7015 Mar07 0.07 0.21 82.25 10.53 Mar08 0.03 0.08 91.86 12.13 Page9
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Fixed asset turnover indicates to what extent assets are contributing towards sales. Ratio is increasing from 10.53 to 12.13 this means that fixed assets are contributing to 12.13 towards sales. This ratio is increasing over the year which is good indicator for company. Long term solvency Company is financially sound as it is financed mostly through internal funds that are reserves and surplus. Reserves are constantly increasing over the years. Mar04 Mar05 Mar06 Mar07 Mar08 155.95 160.46 208.35 347.68 505.25 Liquidity Ratios Mar04 Mar05 Mar06 Mar07 Mar08 1.16 1.24 1.14 1.18 1.11 0.98 1.08 1.08 1.08 1.07 0.85 0.85 0.73 0.68 0.66 8.43 6.01 6.37 5.08 5.06
Reserve and surplus (Rs. Crores)
Current ratio Current ratio (inc. st loans) Quick ratio Inventory turnover ratio
Current ratio indicates the margin of safety to the current creditors. High ratio is an indicator of idle fund, inefficient use of fund and excessive dependence on long term funds. Since the ratio is declining over the years this mean that the fund is being used up properly. Generally a high current ratio may not necessary be in a position to meet its obligation, due to improper distribution of current assets. Here ratio is 1.11 which are good for company. Inventory turnover ratio indicates numbers. of times the stock of finished goods is turned over as sales or replaced. a high ITR indicates efficient management of inventory because more frequently the stock are sold the lesser amount of money is required to finance the inventory .so company was maintaining high ITR in 2004 of about 8.43% which has declined over the years to 5.06% in 2008. Possible reasons for slowdown in ITR may be lack of liquidity in consumer hand due to which industrial production is low as compare to previous year because of this stock has started piling up showing low ITR.
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Short Term Liquidity (Rs. Crores) Mar04 Current asset loan and advances Less: Current Liabilities provision Total net current assets Short term liquidity 751.82 647.64 104.18 13.85 Mar05 898.33 727.06 171.27 19.06 Mar06 984.24 866.68 117.56 11.94 Mar07 1287.29 1091.68 195.56 15.19 Mar08 1580.15 1421.59 158.56 10.03
Short term liquidity is assessed by proportion of net current asset to total assets. Short term liquidity has fallen from 13.85 in March 04 to 10.03 in March 2008 .This can be attributed to two factors that is composition of cash is increasing over the years in current assets and higher percentage of current liabilities as well which has increased from Rs. 647.64 crores in March 2004 to Rs.1421.59 crores in March 2008. Summary The company is one of the leading air-conditioning and engineering companies in India. The company offers engineering solutions in areas such as heating, ventilation and air conditioning, refrigeration, electro-mechanical projects, textile machinery, machine tools, mining and construction equipment, materials handling, water management, building management systems, indoor air quality and chemicals.
The company turnover is of Rs. 30861 Mn. (USD 722 Mn.) with operating profit of Rs 2778 Mn. (USD 65 Mn.)And net profit of Rs.2084 Mn. (USD 49 Mn.)
Despite of paying good dividend to its shareholders company is also maintaining good account of its retained earnings.
Company strength lies in the design and manufacture of industrial equipment, management and execution of air conditioning, sourcing of public works projects , installation and servicing of technology-based systems, representation of global technology leaders and serving diverse industrial sectors and applications. National Productivity Council Page11
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The company with the big bang strategy to revitalize every facet of AC business product channel, systems, service, cost and brand. Within 3 years it recorded an operating profit of Rs 69 million in 2000 as compared to loss of Rs.119 million in 1998-99. It used to offer dividend of 12% in 2000 which increased to 135% in 2008.
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Manufacturing Unit 2: Mumbai, Maharashtra Product Category: Air Conditioner

Company Background The company established in the year 1943. It is Indias largest central air-Conditioning company. The company provides Professional electronic equipment and industrial products by world renowned manufacturers. Their six Business Groups provide a range of high technology products and value-added services as well as turnkey engineering solutions, catering to most industry segments. With an experience of more than 50 years in building solutions around the products represented, they have set up a market base in the country for many Global Corporations. Their most important asset is the intellectual prowess of their employees, who are in line with the advancements in the field of technology. They believe in constantly upgrading their knowledge and skills to innovate and add value to their services. They offer value addition in the form of consultative selling, need identification and configuring the right solution for the customer, preinstallation support, installation and commissioning, and after-sales service. They also derive benefits from the strengths of the company as a whole, like sound financial health of operations, national network of offices, a well defined value system, and organizational culture. The unit is India's largest air-conditioning and commercial refrigeration company, has been providing expert cooling solutions for over six decades. It provides with the finest and most comprehensive range of services, to take care of air-conditioning system. With experience and expertise, optimize system and ensure maximum energy efficiency, perfect air distribution and provide superior indoor air quality. Very often, customers tend to believe that maintaining air-conditioning systems needs no great expertise, and in case of a breakdown, any local AC repair technician can repair it. But while local technicians might be an easy option, they don't have the kind of extensive knowledge required on the science of cooling. They lack adequate understanding of indoor air quality, airside management and energy efficiency. Neither do they know the designs and circuits well enough for them to optimize system periodically, nor do they have the infrastructure and resources necessary to handle the system, in case of eventualities. In National Productivity Council Page13
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fact, relying on them can only cause inconvenience, apart from potential loss of business and productivity. On the other hand, experts and customer focused professionals periodically check the entire system, repair and replace the necessary parts and calibrate the system for perfect air distribution and balancing. The company provides end-to-end solutions in the field of air-conditioning and commercial refrigeration as a Manufacturer Contractor After-sales service provider Another business interest is distribution and maintenance of professional electronics and industrial systems Specialist organization, deliberately tuned to satisfy the needs of corporate, commercial and institutional customers Differentiated products and expert solutions As market leaders, it often sets the standards for products, practices and services Has successfully adapted itself to leverage on opportunities in emerging segments Total turnover (Rs crore) Net Profit (Rs crore) Market Capitalization (Rs crore) Employees (No.) Manufacturing Plants (No.) products manufactured (No.) Products Central Air-conditioning Screw Chillers Scroll Chillers Double Skin Air Handling Units Fan Coil Units Packaged Acs Long Distance Piping Packaged ACs National Productivity Council Page14 2270 174 4275 2500 5 Over 250 models in 25 product lines
Case Study Report
Hiper Packaged ACs Hisen Packaged ACs Ducted Splits Vrf Systems Room Air conditioners Window Air conditioners Split Air conditioners Cassette Air conditioners Verticool Split ACs Concealed Split ACs Commercial Refrigeration Deep Freezers Ice Machines Water Coolers Flexi Water Coolers Bottle Coolers Milk Coolers Bottled Water Dispensers Cold Storages Modular Cold Rooms Refrigeration Units PUF Insulated Panels Ripening Chambers Specialty Cooling Products Process Chillers Telepacs Precision Control Packaged Acs Bulk Milk Coolers Mortuary Chambers
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Lines of Business It operates in three lines of Central Air-conditioning Systems, where it design, engineer, manufacture, Install central air-conditioning plants, packaged air conditioners and ducted, Split air conditioners, catering to IT&ITES, retail malls, multiplexes, hospitals etc. Cooling Products: This segment company offer contemporary window and split Air conditioners and also manufacture commercial refrigeration products where it cater to the industrial, commercial and hospitality sectors. Professional Electronics and Industrial Systems: under this segment THE COMPANY acts as an exclusive distributorship for many internationally renowned Manufacturers of hi-tech professional electronic equipment and services. Products offered ranges from analytical instruments, data communication Products, Medical Electronics, Material Testing and Test and Measuring Instruments. The Company has four manufacturing facilities located in India. The company has a total workforce of 2000 employees and has Network of 23 offices. Building Services Contract value(%) Air conditioning Electrical Plumbing 50 40 10
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Business model used in various products Business Central Air-conditioning Packaged Air-conditioning Telecom Shelter Air-conditioning Room Air conditioners Cold Chain products and systems AC&R Service Professional Electronics & Industrial Systems Business Model Manufacturer; Contractor; After-sales service provider Manufacturing and Marketing through channel partners; After-sales service provider Manufacturing and Marketing; After-sales service provider Manufacturing and Marketing through channel partners ,After-sales service provider Manufacturing and Marketing through channel partners; After-sales service provider Standard Services; Value added service products, Revamp and upgrades Value added reseller; System integrator; Agency operations Target Segments Business Central Air-conditioning Packaged Air-conditioning Telecom Shelter Air-conditioning Room Air conditioners Small/Medium Cold Chain products and systems AC&R Service Professional Electronics & Industrial Systems Target Segments Infrastructure; IT/ITES; Office Complexes; Retail; Healthcare; Hospitality Retail; Medium Corporate and Commercial establishments Telecom service providers; Passive infrastructure providers Corporate and Commercial establishments; High-end Residential Agriculture; Ice Cream; Hospitality; Supermarkets; Processed Foods; Pharma Installed base of customers Manufacturing; Defense; Industrial; Healthcare; Banking
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Growth Drivers Business Central Air-conditioning Packaged Air-conditioning Telecom Shelter Air-conditioning Room Air conditioners Expansion of small/medium Cold Chain products and systems AC&R Service Growth Drivers Construction boom and huge investments in infrastructure development Construction boom; expansion of medium corporate and commercial establishments Expansion of telecom network Corporate and commercial establishments Retail boom; Govt focus on developing cold chain infrastructure; sharp growth in i t d d i d t Installed base growth in all fthedDivisions of the Company; emphasis on energy efficiency and indoor air quality; replacement market; Professional Electronics & Industrial Systems Business Objectives All air-conditioning and refrigeration systems, like any other machine, depreciate with time. And if not properly maintained, they progressively lose efficiency, consume more power, and drain your profits. Without regular maintenance an air conditioner looses its original efficiency steadily every passing year. It is common knowledge that these inefficiencies accelerate in the absence of adequate monitoring and maintenance and causes a lot of inconvenience. One can recover most of that lost efficiency through regular maintenance. Studies show that with regular tune-ups a unit will maintain up to 95% of its original efficiency. This means that the cost of a periodic tune -up is recovered very quickly in savings on monthly power bill and reduced running and repair costs. In case of a commercial construction, air-conditioning does not form a major part of the total project cost. However, the importance of proper functioning remains strong. Therefore, rather than pricing, institutional investors typically focus on the vendors track record, quality and delivery. Moreover, despite being the largest and established player in the industry, it does not charge a premium and operates at 10% EBITDA. For an institutional investor, saving on funds, by allotting the project to new /small player is not National Productivity Council Page18 Industrial and economic boom
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worth the execution risk. Hence established and large players will continue to get preference over their smaller/new counterparts in institutional projects. These days almost all offices are air-conditioned. The objective is to give comfortable and dust free environment for the people working in the office. Studies on office productivity have revealed that people working in air-conditioned spaces are able to work more efficiently resulting in more productivity. The office environment has to offer optimum and uniform temperature, correct humidity and sound levels while ensuring right air movement. Fresh air is a pre-requisite as it is an important factor for the well being of the occupants. The company is a pioneer in the field of HVAC in India, has done a number of Offices air-conditioning projects in India and abroad. The system design expertise can help to go for low and cost effective investments. Whether it is a small office or a big multi storey building, the company has got the right product mix from Windows to Splits to Ductable and Central air-conditioning. The company understands the need for providing the right quantity of fresh air. In the absence of adequate fresh air, occupants in the office start feeling giddy and develop "headaches", and a sense of "nausea" sets in resulting in low level of alertness. Persistence of this problem for a long time leads to lesser productivity. This is termed as a "sick building syndrome. Engineers from the company also ensure the offices air-conditioned are provided with ambience for maximum productivity. The company has the largest pool of qualified and trained air-conditioning and refrigeration engineers. Company has a wide network of channel partners all over India and across the globe to meet customer requirements. We understand the geography and have complete knowledge of the application and customer profiles. Advantages
TRAINED PERSONNEL: Engineers and technicians are intensively trained to handle the costly, sophisticated air-conditioning equipment.
PRIORITY SERVICE: All customers who opt for our annual service solutions are offered priority service, so that your calls get attended quicker and the system is up faster.
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PREVENTIVE CHECKS: Under all service solutions, they offer preventive maintenance checks which help in identifying problems early, preventing costly down times.
GENUINE SPARES: By opting for service solution, they assure of genuine spares that will go a long way in ensuring high uptime for your system.
EXTENDED LIFE: Genuine Spares and regular maintenance help in extending the life of system. SEASONAL SETTINGS: In summer, everyone would prefer lower temperatures and when the climate is cold one often feel the need to change their settings to higher temperatures. Before the onset of a season, engineers calibrate the air-conditioning system to suit.
So, protecting expensive and technologically advanced air-conditioning equipment from damage is as important as ones initial investment. Their air-conditioning experts periodically check the entire system, repair and replace the necessary parts and calibrate the system for perfect air distribution and balancing. Thus it provides with the finest and most comprehensive range of Service Solutions. The company is Indias largest central air conditioned company with a 30% market share. Central air condition market is driven by the commercial and office space addition. Emergence of organized retail & multiplexes, strong growth in hospitality industry, hospitals, financial services, IT-ITES centers and other commercial constructions is expected to keep the commercial construction market buoyant for the next 5-7 years. Indias Rs32bn central air-conditioning market is likely to grow at over 20% CAGR till 2012. In addition, the introduction of MEP (Mechanical, Electrical and Plumbing), as a bundled product in the country and commercial refrigeration, would create a new market of Rs151 billion and 80 billion respectively. Thus, the total addressable market size for is likely to be around Rs458bn, fourteen times the size of the current market size of Rs32bn. Domestic market focused, Scalable business model The company has an attractive business model, a domestic market-focused and with high cash generation. The company generates 95% of its revenue from the domestic market and National Productivity Council Page20
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has always been focused on the bottom line than on the top line. The company has consciously avoided focusing on the consumer durable segment of the room airconditioner market that is characterized by stiff competition and low margins. Instead, it has focused on high-margin segments like institutional central air-conditioning, commercial refrigeration, cold storage equipment and telecommunication; the company is a leading player across these segments with operating margins at over 10%. Going forward, the company is powered by a strong and scalable business model, is all set to capitalize on the opportunities in the domestic market and record robust growth. Competitive Advantage The company is in an enviable position to capture the growth in the various segments. A track record of over 50 years in executing large air-conditioning projects, Provision for end-to-end solutions i.e. designing, manufacturing, and contracting, Strong project management skills with ability to execute projects across multiple sites, Strong after sales support and services, Established relationships with large customers, with around 40% of the new orders being repeat orders. Competitive Advantages Technical Competence Credentials of over six decades Vast pool of talented engineers Turnkey solutions Energy Efficient and differentiated products Wide network and reach Strong Relationships with national/repeat customers Domain expertise Increase in margins can be attributed to Scale Product Mix Value Engineering Procurement Efficiency Customs Duty Reduction
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Higher Price Realisation due to differentiated products, value-added offerings and brand equity Selectively pursuing high margin projects Himachal Plant Tax benefits Low interest costs due to lean balance sheet, sound working capital management and low borrowings Tight control on operating expenses (Headcount up by only 30%, while Total Income has nearly tripled in the last four years
Human resource management Take pride in employing the largest pool of talented engineers in the country Two-thirds of employees are white collared Over 1500 engineers/professionals Attrition under control at less than 15% Grooming, mentoring, training and development of the employee Customised management development programmes for senior managers Growth agenda Aggressively grow core businesses of central air conditioning and commercial refrigeration Retain market leadership Enter building electrification business Grow integrated MEP contracting business Pursue inorganic growth opportunities Financial valuations: Comparison over the previous year (Rs. Crores) CAGR
(2003-04 to 2007-08)
Mar04 Mar05 Mar06 Mar07 Sales Operating profit Interest Gross profit 697.46 39.79 1.82 56.57 920.77 1174.56 1601.28 57.85 3.21 64.79 86.68 5.72 85.02 116.91 9.55 113.49
Mar08 2233.04 234.49 7.56 263.98
33.77 55.81 42.76 46.98
A look at the performance of the company reveals that the sales of the company have increased from 697.46 in 2004 to 2233.04 in 2008 and the Compound annual growth rates National Productivity Council Page22
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show an increment in the sales by 33.77% for the period from 2003-04 to 2007-08 and significant operating profit increase from 39.79 in march 2004 to 234.49 in march 2008. Gross profit showed an increase from 113.49 in mar07 to 263.98 in mar08. Financial Ratios: Profitability Ratios Mar04 Mar05 Mar06 Mar07 Mar08 Operating Margin (%) Gross profit Margin (%) Net profit Margin (%) Adjusted cash margin (%) Adjusted return on net Worth (%) Reported return on net Worth (%) 6.18 4.74 4.61 5.18 21.11 25.85 6.39 5.04 4.23 5.46 26.39 27.12 7.48 6.11 4.14 5.83 31.11 28.79 7.08 5.77 4.43 5.70 33.44 33.72 10.07 9.08 7.80 7.09 51.85 66.32
Leverage Ratios Mar04 Mar05 Mar06 Mar07 Mar08 Long term debt / Equity Total debt/equity Owners fund as % of total source Fixed assets turnover ratio 0.01 0.01 0.29 0.23 0.10 0.25 0.43 0.41 0.13 90.70 79.96 69.52 70.55 87.83 5.13 5.84 6.25 7.39 8.62
Fixed asset turnover indicates to what extent assets are contributing towards sales. Ratio is increasing from 7.39 to 8.62 this means that fixed assets are contributing to 8.62 towards sales. This ratio is increasing over the year which is good indicator for company.
Long term solvency Company is financially sound as the debt is decreasing and company is financed mostly through internal funds that are reserves and surplus. Reserves is constantly increasing over the years. Mar04 Reserve And surplus (Rs. Crores) 112.19 Mar05 130.79 Mar06 155.09 Mar07 195.34 Mar08 245.92
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Liquidity Ratios Mar04 Current ratio Current ratio (inc. st loans) Quick ratio Inventory turnover ratio 1.34 1.21 0.95 9.12 Mar05 1.33 1.06 0.96 8.98 Mar06 1.38 1.20 0.94 7.83 Mar07 1.39 1.19 0.97 8.49 Mar08 1.16 1.07 0.84 8.13
Current ratio indicates the margin of safety to the current creditors. High ratio is an indicator of idle fund, inefficient use of fund and excessive dependence on long term funds. Since the ratio is declining over the years this mean that the fund is being used up properly. Generally a high current ratio may not necessary be in a position to meet its obligation, due to improper distribution of current assets. Here ratio is 1.16 which are good for company. Short term liquidity Mar04 Current asset loan and Advances Less: Current Liabilities & provision Total net current assets short term liquidity 268.06 199.59 68.46 0.25 Mar05 369.83 277.57 92.25 0.25 Mar06 481.70 349.42 132.28 0.27 (Rs. Crores) Mar07 Mar08 629.02 1017.39 451.04 177.98 0.28 879.12 138.27 0.13
Source: Estimated from Balance sheet figures Short term liquidity is assessed by proportion of net current asset to total assets. short term liquidity has fallen from 0.25 in March 2004 to 0.13.in March 2008. This can be attributed to two factors that is composition of cash is increasing over the years in current assets and higher percentage of current liabilities. Productivity Analysis: Labour Productivity Mar04 Mar05 Mar06 Mar07 Mar08 697.46 920.77 1174.56 1601.28 2233.04 88.27 13.30 4.56 122.86 13.03 -2.03 154.40 14.46 10.97
Sales (Rs. Crores) Employee expenses 59.61 72.37 (Rs. Crores) Labour Productivity Ratio 11.70 12.72 Labour productivity growth 8.72 Source: Estimated from Balance sheet figures
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Labour productivity ratio for company has been calculated as sales per unit of labour expense. Productivity is increasing which means that value of output per labour cost is increasing but at a slow rate. Capital Productivity Ratio Mar04 Mar05 Mar06 Mar07 Mar08 697.46 920.77 1174.56 1601.28 2233.04 97.14 12.09 1.00 114.44 13.99 15.71 138.10 16.16 15.51
Sales (Rs. Crores) Net fixed assets (Rs. 58.44 76.94 Crores) Capital productivity ratio 11.93 11.97 Capital productivity 0.3 growth Source: Estimated from Balance sheet figures
Total Factor Productivity Mar04 Mar05 Mar06 Mar07 Mar08 Sales (Rs. Crores) Sales growth Labour productivity growth Capital productivity growth Total factor productivity growth Summary The company is Indias largest air conditioning manufacturing company. The company is an end to end solution provider in the field of air conditioning and commercial refrigeration as a manufacturer, contractor, after sales service provider. Company is having a turnover of Rs 2270 crores with net profit of Rs.174 crores and market capitalization of Rs 4275 crores with 2500 employees. It operates in three lines of business i.e. cooling products, professional electronics, industrial system and medical electronic, material testing and test and measuring instruments. The company strength lies in its trained personnel, priority service, preventive checks, genuine spares, extended life and seasonal settings. Their competitive advantage lies in technical competitive, credential of over 6 decades with vast pool of talented engineers and energy efficient and differentiated products. 697.46 920.77 1174.56 1601.28 2233.04 32.02 8.72 0.3 23.00 27.56 4.56 1.00 22.00 36.33 -2.03 15.71 22.65 39.45 10.97 15.51 12.97
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Short term liquidity has fallen which indicates that composition of cash is increasing over the years in current assets and percentage increase in current liabilities has also increased. Company has started retaining more and as a result dividend payout ratio is falling.
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Manufacturing Unit 3: NOIDA, Uttar Pradesh Product Category: Refrigerators

Company Background The company is a wholly owned subsidiary of the foreign company estiblised in 1997 in Greater Noida, Uttar Pradesh and is a market leader in consumer durables and recognized as a leading technology innovator in the information technology and mobile communications business. It is the acknowledged trendsetter for the consumer durable industry in India with the fastest ever nationwide reach, latest global technology and Product innovation. One of the most formidable brands, and has an impressive portfolio of Consumer Electronics, Home Appliances, GSM mobile phones and IT products. The trend of beating industry norms started with the fastest ever-nationwide launch by in a period of 4 and 1/2 months with the commencement of operations in May 1997. The company set up a state-of-the art manufacturing facility at Greater Noida, in 1998, with an investment of Rs 500 Crores. This facility manufactured Colour Televisions, Washing Machines, Air-Conditioners and Microwave Ovens. During the year 2001, it commenced the home production for its eco-friendly Refrigerators and established its assembly line for its PC Monitors at its Greater Noida manufacturing unit. The beginning of 2003 saw the roll out of the first locally manufactured Direct Cool Refrigerator from the plant at Greater Noida. In 2004, its second Greenfield manufacturing unit setup in Pune, Maharashtra. The facility manufactures LCD TV, GSM Phones, Color Televisions, Air Conditioners, Refrigerators, Microwave Ovens Color Monitors.
Both the Indian manufacturing units has been designed with the latest technologies at par with international standards and are one of the most Eco-friendly units amongst manufacturing plants in the world. The company was able to craft out in ten years, a premium brand positioning in the Indian market and is today the most preferred brand in the segment. Of the total investment of Rs.9 billion in 2008 Rs. 4 billion invested in setting up a DVD writer manufacturing facility at Pune. This facility will be first of its kind in India and the second largest in Asia. The remaining amount would be used for expanding the Pune plant which produced most of product range. The success in India, announced a major expansion at the second production unit at Rajangaon. It proved to be National Productivity Council Page27
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an edge over other players in terms of production and subsequent market share. By the end of 2003, the company has emerged as the market leader in consumer electronics and home appliances. Innovative and customer friendly products, along with competitive pricing and vast distribution network enabled the company to become market leader in its business. By the end of 2004, the company had more than 50 million customers and its turnover was more than Rs. 65 billion The company planned to invest Rs. 1.3 billion into R&D in India by 2010. The company aimed to increase its revenues from US$ 2 billion (approximately) in 2004 to US$ 10 billion by 2010. In 2007 the company had the turnover of US $1.7billion, the company plans to increase the turnover to US $2.5 billion by 2010. The company presently has 3429 employees. Amongst these, 2094 employees are involved in manufacturing and 1335 employees are involved in non-manufacturing activities for the company. The domestic market is the largest for the company electronics as they mainly involve sales within the country and very meager amount is involved in exports. Company leadership across categories
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Business Areas & Main Products Consumer Electronics: LCD TV, Plasma Display, Display Panel, Color Television, Home Theatre System, Music system, DVD Recorder/Player, MP3 & MP4 Player Home Appliances: Room Air Conditioner, Commercial Air Conditioner, Refrigerator, Washing Machine, Dishwasher, Microwave, Vacuum Cleaner Computer Products: Laptop, Personal Computer, LCD monitor, CRT monitor, Optical Storage Devices Mobile Phone : Premium trend setter phone, Camera Phone, Music Phone, Color Screen GSM Handset Business Model of the Company Product line: Since its initial years in India, the company has focused on bringing out new models regularly in its product range. In its first year of operation in India, the company launched 70 models across a range of products. In 1997, it introduced its Golden Eye Technology TV, which had a light sensitive natural algorithm 'eye.' The companysconcern for health of customers was its unique selling proposition (USP) in the Indian consumer durables market. Similarly, it positioned its refrigerators as the 'preserve nutrition system' refrigerators. In 1998, the company launched air conditioners as Health Air ACs. Price: Initially, when it entered the Indian market, its products were priced high. This was because it had to import products in the absence of a manufacturing facility in India. Thus, its products were priced as high as Japanese products. According to some analysts, this strategy was adopted to make local consumers feel that the products were by no means inferior to Japanese products in performance or in quality. However, in 1998, the company launched 'Sampoorna,' a low priced TV aimed at rural consumers. Pricing Strategies: When it started its operations in 1997, it sold products that were imported. Hence, its products were priced high and were equivalent to other foreign products. Since the Indian customers wanted the best products at reasonable prices, it started introducing quality products in the economy range. In the first few years after its National Productivity Council Page29
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entry, the company did not get into price wars. Unlike other players, it did not offer any exchange schemes or discounts. 'No scheme, no gimmick, great products and honest prices.' Promotion: The company gave immense importance to its promotion and advertising activities. In 2004, the company spent nearly Rs. 1.3 billion (5% of its revenues) towards advertising. Analysts commented that promotion and advertising of its durables segment were similar to that of an FMCG company. Unlike many Indian brands which advertised seasonally the company advertised all round the year. Product Innovation: The company believed in holding the interest of its customers by bringing out new products regularly. In its first year of operations, it launched 70 models across a range of products. In 2001, it launched 45 new models across its entire product range and in 2002 it launched 60 new models. It customized product for Indian markets. Before developing products, it conducted market research to ensure that its products met local requirements. HR Practices : The company invests a huge amount in its Human resource practices, which include providing bonus to the company ranging from 1% to 1.4%. The company does not have any union, therefore there have never been any strikes in the organization. The company has incorporated an Employee Brand Award, where the highest performing employee is provided a gift by the top management. Financial Analysis Corporate Snapshot The company is a manufacturer of electronic appliances and devices. Its product range includes kitchen appliances, home entertainment products, communication devices, and electronic components.
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Financial Performance
Strategies adopted by the company healthy working environment fast execution is key to success transparent and fast communication updated market knowledge and demographics win-win relationship with the trade partners customer is the king proportionate share with market that is 70% market and 30% office
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SWOT Analysis Strengths Enhancing customer value with innovation and design Delivering superior returns to shareholders Developing the best in class organization Strong R&D Opportunity Align strategy for growth and ROIC Portfolio management Align and upgrade environment for future Threats Higher import duties on raw material Cheap imports from Singapore, China and other Asian countries Summary Innovative marketing-it was the first brand to enter cricket in big way by sponsoring 1999 world cup and followed it up in 2003 as well. Regional distribution model that resulted in quicker rotation of stock and better penetration on B, C and D class markets Focus on Research and Development Commissioned contract manufacturing Mohali, Kolkata, and Bhopal for CTVs Weakness Price sensitiveness of the Indian customer One of the last MNC entered in India
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Manufacturing Unit 4: Aurangabad, Maharashtra Product Category: Refrigerators

Company Background The company was incorporated in 1986 and is engaged in the manufacturing of consumer electronics, colour picture tube and home appliances. The company is also engaged in oil and gas exploration business. Its products include colour televisions, washing machines, air conditioners, refrigerators, microwave ovens, colour picture tubes and color picture tube glass. The company primarily operates in Asia and Europe. It is headquartered in Aurangabad, Maharashtra. In India, the company has eleven manufacturing facilities. The manufacturing facilities produce a complete range of consumer electronics, home appliances and critical components such as compressors, etc. It is the only manufacturer of glass panels in India. The facility at Bharuch is largest in the world at a single location and the third largest overall. The company is one of the major CRT manufacturers globally, with plants in Poland, China and Mexico. It assembles air conditioners in Oman and CTVs in Italy. The company has emerged as one of the largest colour picture tube (CPT) manufacturer in the world. It has been able to keep a track of consumer needs and continuously upgrade the products with innovative consumer friendly features. Product line The company is a manufacturer of consumer electronics. The company's key products and services include the following: Products: Colour televisions Washing machines Multimedia speakers Air Conditioners Refrigerators Microwave ovens Color picture tubes Clolor picture tubes glass Services Oil and gas exploration. Page33
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Business Model of the Company The company is engaged in manufacturing of electronic products. It is also involved in oil and gas exploration business. In the consumer durables segment, the company offers products such as televisions, DVD players, multimedia speakers, washing machines, refrigerators, microwave ovens, and air conditioners. Consumer Electronics, Home Appliances & Compressor manufacturing in India The company enjoy a pre-eminent position in terms of sales and customer satisfaction in many of our consumer products like Colour Televisions, Washing Machines, Air Conditioners, Refrigerators, Microwave ovens and many other home appliances, selling them through a Multi-Brand strategy with the largest sales and service network in India. Refrigerator manufacturing is further supported by our in house compressor manufacturing technology in Bangalore. Display Industry and Its Components The company has emerged as one of the largest Colour Picture tube manufacturers in the world operating in Mexico, Italy, Poland and China, continuing to lead through new innovative technologies like slim CPT, extra slim CPT and High Definition 16:9 format CPT. Colour Picture Tube Glass The company is one of the largest CPT Glass manufacturers in the world with a high level of experience and technical expertise operating through Poland and India. The company will leverage on this synergy after the Thomson acquisition to internally source glass for its CPT manufacturing increasing efficiencies and lowering costs. The Company History
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Company in identity crisis Till 2005, the company individual businesses had clear identities. It started in 1984 as a branded manufacturer of consumer durables. In 1995, it ventured into contract manufacturing and then, oil. The consumer electronics and oil businesses were separate entities, with separate balance sheets. Things changed in 2005, when the company merged its oil subsidiary, into the flagship. Now, it has a balance sheet that has the combined numbers of both consumer electronics as well as oil. It is clear that this was primarily done to use oil revenues to shore up the sagging consumer electronics business. This move has raised questions about whether the company is trying out too many things. An indication of market sentiment can be got from the fact that its market cap of Rs 9,855 crore is less than even its estimated sales (put out by domestic brokerages) of Rs 11,444 crore in FY06 (it has an October-September financial calendar). The company argues that while the oil business is highly profitable, it doesnt have the wherewithal to ramp up significantly. Consumer durables are definitely not as profitable as oil and gas. However, a fall in oil prices will impact the bottom line hugely especially as the sector has fixed costs. The company appears to be straddling two distinct businesses at the same time contract manufacturing and branded electronics. They have separate rules of engagement. Which is why, increasingly, the serious players in one business dont dabble in the other. So, branded electronics biggies focus more on distribution, brand building and new product development; and are now preferring to leave the manufacturing part to contract manufacturers. By attempting to be a big player in both branded electronics and contract manufacturing, The company is almost questioning an accepted (and equally successful) practice.
The challenges, therefore, are not to be scoffed at, especially in the global arena. Considering this the company has to grow at 59.55 per cent annualized over the next four years to become as big as the fifth largest global appliances player.
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Facts and figures 75.77 per cent decline in net profit of Rs 249.49 crore in the December quarter of FY'08 foreign exchange loss of Rs 21.13 crore Total income from operations deceased to Rs 2,074.67 crore in the first quarter from Rs 2,362.16 crore in the corresponding previous year. Profitability Ratios Leverage Ratios Mar ' 01 Mar ' 02 Sep ' 05 Long term debt / Equity Total debt/equity Owners fund as % of total source Fixed assets turnover ratio 12.87 12.87 7.21 7.21 -0.84 -0.84 0.82 0.89 52.74 52.74 Sep ' 06 1.14 1.23 44.82 44.82 Sep ' 07 0.83 0.95 51.25 51.25
Fixed asset turnover indicates to what extent assets are contributing towards sales. Ratio is increasing from 44.82 to 51.25 this means that fixed assets are contributing to 51.25 towards sales. This ratio is increasing over the year which is good indicator for company. Long Term Solvency Company is financially sound as it is financed mostly through internal funds that are reserves and surplus. Reserves are constantly increasing over the years.
Reserve and surplus (Rs. Crores)
Mar ' 01 0.63
Mar ' 02 Sep ' 05 -20.37 3,420.56
Sep ' 06 3,847.63
Sep ' 07 5,357.91
Liquidity Ratios Mar ' 01 Mar ' 02 Sep ' 05 Current ratio Current ratio (inc. st loans) Quick ratio Inventory turnover ratio 1.62 1.62 1.62 1.59 1.59 1.32 60.96 5.02 3.17 4.03 6.49 Sep ' 06 4.04 2.43 2.81 5.83 Sep ' 07 3.18 1.76 2.15 6.25
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Short term liquidity is assessed by proportion of net current asset to total assets. Short term liquidity has fallen from 38.38 in March 2001 to 68.56 in Sept.2007. This can be attributed to two factors that is composition of cash is increasing over the years in current assets and higher percentage of current liabilities as well which has increased from Rs. 54.76 crores in March 2001 to Rs. 3526 in Sept.2007. Short Term Liquidity Mar ' 01 Mar ' 02 Sep ' 05 Sep ' 06 Sep ' 07 Current asset loan and advances Less: Current Liabilities $ provision Total net current assets (Rs. Crores) Short term liquidity 142.66 87.90 54.76 38.38 186.72 4,449.32 4,425.46 5,142.49 117.26 885.44 1,095.51 1,616.44
69.46 3,563.88 3,329.96 3,526.05 37.20 80.10 75.24 68.56
Source: Estimated from Balance sheet figures Productivity Analysis Labour Productivity Ratios Mar ' 01 2,282.84 17.21 132.65 Mar ' 02 5,653.83 49.53 114.15 Sep ' 05 7,609.77 97.11 78.36 Sep ' 06 Sep ' 07 8,691.75 10,115.99 108.44 80.15 112.92 89.58
Sales Employee expenses Labour Productivity ratio
Source: Estimated from Balance sheet figures Labour productivity ratio for company can be calculated as sales per unit of labour expense. The company productivity is increasing from Sept. 2005 which means that value of output per labour cost is more which is a good indicator for company performance. Capital Productivity Ratio Mar ' 01 Sales Net fixed assets Capital productivity ratio 2,282.84 124.66 18.31 Mar ' 02 5,653.83 111.32 50.78 Sep ' 05 7,609.77 2,340.00 3.25 Sep ' 06 8,691.75 3,356.27 2.58 Sep ' 07 10,115.99 4,652.98 2.17
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Capital productivity ratio has been calculated sales per unit of net fixed assets. Companys capital productivity is decreasing tremendously over the past few years as a result of substantial investments and requisitions of other companies. SWOT Analysis Strengths Synergy with Eastern Europe Focus on R&D Opportunities Opportunities in Oil and Gas Acquisition of Daewoo Electronics The company plans to enter in insurance sector Summary Synergy with Eastern Europe The strategic acquisition of a manufacturing facility in Poland has provided the company with a fully integrated facility as well as experienced manpower. Being cheaper than other EU nations, Poland also acts as a low cost manufacturing base for the company in the EU.An additional benefit accruing to the company is the scope offered by the Poland plant for expansion into other areas. The company plans to optimize its glass sourcing by expanding the plant capacity as well as by using the synergies with other glass factories of videocon, so that it can be at par with the tube capacity. Focus on R&D R&D is an ongoing process for the company, due to the rapid obsolescence of technologies and products witnessed in this industry. The company has three product development centres located at China, India & Italy. It has recently applied for a patent for a low cost production process for the plasma panel manufacturing. In the LCD space, the companies have signed a patent assignment agreement covering 70 patents with a major US corporation. Multinational players are making their presence felt. The companys National Productivity Council Page38 Weakness Less focus on research and development activities in India Product line is too much diversified Less focus on cost rationalization Threats Threat from competitors Cost competitiveness Aggressive brand consciousness among competitors
Case Study Report
integration strategy and global scale has enabled it to supply consumer electronics and home appliances products in India to organized retail chains such as Reliance Retail, Pantaloon Retail and international brands such as Wal-Mart Best Buy etc. which would ensure a regular off-take of products. The company plans to further leverage on this strategy as CTVs for the EU market. It is in the process of setting up an air conditioner assembly line and a plasma panel assembly line to cater to the growing demand of FPD TVs from the EU region. Future Plans Capacity Expansion The company proposes to upgrade the facilities by adding new product lines including Slim Tube, Plasma, LCD and other flat panel displays. In the long term, the company plans to develop into a global sized vertically integrated entity in the display device segment along with CPT Glass manufacturing. This acquisition is in tandem with an increase in its domestic CPT manufacturing capacity to 24 million pieces per annum (presently 17 million pieces) as well as additional capacity of five million pieces per annum. It will help the Group to transform into one of the largest players in the world in integrated manufacturing of CPTs with CPT Glass. The company intends to make investments of over EUR 391.18 million to meet these plans, and will source these funds from domestic or international markets at an appropriate time. In its Italian facility, the company has re-engineered the plant and it now assembles end products. Company always attempts to use the latest and advanced technology in production process. Keeping pace with the technological developments, the company keeps on adding sophisticated equipments with focus on automation to minimize manual intervention in the manufacturing process thereby ensuring quality of the final products. In the coming days company is aiming to achieve development in the following areas through Research & Development:

Manufacturing of components for consumer Electronics Products. Multimedia TV. Plasma Televisions. Launching of New Brands & Sub-brands under Videocon umbrella. Composite Home Entertainment system with internet adaptability. To work on better features, better quality & improved reliability with reduced/low prices.
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Manufacturing Unit 5: Gurgaon, Haryana Product Category: Washing Machines

Company Background This multinational company forayed into the market under a joint venture with an Indian group and established the first manufacturing facility in Pondicherry in the latr 1980s. Later in 1995 acquired a leading Indian company and marked an entry into Indian refrigerator market. This expanded the company's portfolio in the Indian subcontinent to washing machines, refrigerator, microwave ovens and air conditioners. The company is the most recognized brand in home appliances in India and holds a market share of over 25%. The company owns three state-of-the-art manufacturing facilities at Faridabad, Pondicherry and Pune. Each of these manufacturing set-ups features an infrastructure that is witness of the company commitment to consumer interests and advanced technology. In the year ending in March '06, the annual turnover of the company for its Indian enterprise was Rs.1,375 Crores. According to IMRB surveys the company enjoys the status of the single largest refrigerator and second largest washing machine brand in India. The company's brand and image speaks of its commitment to the homemaker from every aspect of its functioning. It has derived its functioning principles out of an undaunted partnership with the homemakers. The products are engineered to suit the requirements of smart, confident and in-control' homemaker who knows what she wants. The product range is designed in a way that it employs unique technology and offers consumer relevant solutions. The competition and the environment in India in 1990s The washing machine market was divided into three segments in the late 1980's: Manual Washers were the biggest sellers. They had neither timer controls nor programming capabilities and no spin-dry function. They were produced by small-scale manufacturers and retailed at around Rs. 3,000. The machines were made sturdier to counter voltage fluctuations and were fitted with plastic tubs to avoid corrosion. The first model was the V-NA-200T, a 3kg capacity semi-automatic washing machine in response to the National Productivity Council Page40
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prevailing habit of scrubbing clothes before they are loaded in the washing machine .Six months later it introduced a fully automatic model in the market. By 1990, sales of VIL washing machine were up to 100,000 units approximately 50% of the forecasted demand in 1990-91. Fully automatic machines, which cost Rs 9,000 in 1990, were affordable to only a tiny segment of the population. Their production initially depended on imported kits, on which high import duties were levied. A joint venture between IFB and Bosch of Germany began marketing fully automatic front-loading washers at approximately the same time that the TVS World Washer was launched. Product line Refrigerators Air conditioners Washing machine Micro wave 100% dryers purafresh Key Factors Innovation: Unique and compelling solutions valued by our customers and aligned to our brands create competitive advantage and differentiated shareholder value. Operational Excellence (OPEX): A methodology for solving problems & continuous improvement of products & processes through pursuit, acquisition, and utilization of knowledge using critical thought and planned experimentation helps us achieve operational excellence. Customer Excellence: Excelling the customer expectation from the company, its brands, products and services are a three-step process. The three steps are: Know a customer, be a customer, Serve a customer. Knowing a customer helps us know who our customers are, how to treat them, how we add value, and what the drivers of brand loyalty are. This information is gathered from the customer's data base history. This way we are better able to customize products for them and recommend the right product to solve problems. Being a customer is important to
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share customer knowledge and insights, drive actions based on customer insights, be passionate about our brands and customer loyalty and provide a positive voice for our brands. We show empathy for customers and seek to resolve their problems by creating consistent customer touch-points, with our endeavor always being to provide unique solutions for the customer. Financial Analysis Corporate Snapshot The companys net sales in India for the period April 2005 -March 2006 stood at Rs. 1274 crores with an operating profit of Rs. 14.57 crores. Company witnessed a growth of 25% (Approx.) in net sales over the same period last year. The company has sustained its leadership position within the global appliance industry, thanks to its innovation led approach and a keen understanding of the customers' needs, a firm commitment to addressing those requirements through companys superb brands, products and services. The company entered India in the late 80s and today has grown to become one of the leading manufacturers and marketers of major home appliances in India. Targeted at the modern Indian woman who sees home appliances as her ally in homemaking, The company believes in providing world-class quality to its consumers. In its endeavour to maintain international standards of quality and style and match the exacting standards of the Indian homemaker, it has successfully become a Perfect partner to the demanding homemaker of today who seeks to nurture herself as well as home & family. The products are stylish, modern and contemporary with elegant looks and reflect the sense of pride homemakers take in choosing them for their homes. Comparison over the previous years Mar ' 04 1,530.91 19.78 36.23 10.97 -2.68 (Rs. Crores) Mar ' 05 Mar ' 06 Mar ' 07 Mar ' 08 1,089.81 1,375.76 1,622.23 1,970.81 -70.57 -5.55 47.24 94.38 24.97 17.99 16.34 20.99 -55.06 -3.42 47.10 81.37 -7.87 -3.00 -0.42 2.55
Sales Operating profit Interest Gross profit EPS(Rs)
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Profitability Ratios Leverage Ratios Mar '04 Mar '05 Mar '06 Long term debt / Equity Total debt/equity Owners fund as % of total source Fixed assets turnover ratio 1.67 2.29 30.42 2.40 4.30 5.15 16.25 1.67 8.23 9.52 9.50 2.05 Mar '07 Mar '08 6.61 10.45 8.73 2.36 3.09 5.25 15.98 2.70
Fixed asset turnover indicates to what extent assets are contributing towards sales. Ratio is increasing from 2.70 to 2.36 this means that fixed assets are contributing to 2.70 towards sales. This ratio is increasing over the year which is good indicator for company. Long Term Solvency Company is not financially sound as its reserves are declining over the years. It has declined tremendously from mar 2004 to mar 2008. Mar' 04 Reserve And surplus (Rs. Crores) 52.71 Mar' 05 -47.09 Mar' 06 -85.19 Mar' 07 -90.50 Mar' 08 -58.19
Liquidity Ratios Mar' 04 Mar' 05 Current ratio Current ratio (inc. st loans) Quick ratio Inventory turnover ratio 1.61 1.04 0.88 12.74 1.36 1.02 0.56 6.10 Mar '06 Mar' 07 Mar' 08 1.20 0.97 0.43 8.33 1.19 0.78 0.40 7.70 1.17 0.93 0.37 6.63
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Short Term Liquidity (Rs. Crores) Mar ' 04 Mar ' 05 Mar ' 06 Mar ' 07 Mar ' 08 Current asset loan and advances Less: Current Liabilities $ provision Total net current assets 568.88 354.23 214.65 547.64 403.07 144.56 513.76 428.80 84.97 16.53 572.48 482.18 90.30 15.77 699.70 598.43 101.27 14.47
Short term liquidity 37.73 26.39 Source: Estimated from Balance sheet figures
Short term liquidity is assessed by proportion of net current asset to total assets. Short term liquidity has fallen from mar07 to mar08 from 15.77 to 14.47 .This can be attributed to two factors that is composition of cash is increasing over the years in current assets and higher percentage of current liabilities as well which has increased from mar07 to mar 08 from 482.18 to 598.43. Productivity Analysis Labour Productivity Ratios Mar ' 04 Mar ' 05 Mar ' 06 Mar ' 07 Mar ' 08 1,530.91 1,089.81 1,375.76 1,622.23 1,970.81 94.50 82.92 92.30 100.07 121.95 16.20 13.14 14.90 16.21 16.16
Sales Employee expenses Labour Productivity ratio
Labour productivity ratio for company can be calculated as sales per unit of labour expense. Productivity is decreasing which means that output from labour less which is not a good indicator for company performance Capital Productivity Ratio Mar ' 04 Sales Net fixed assets Capital productivity ratio 1,530.91 333.16 4.60 Mar ' 05 1,089.81 316.28 3.44 Mar ' 06 1,375.76 297.72 4.62 Mar ' 07 Mar ' 08 1,622.23 278.92 5.82 1,970.81 296.33 6.65
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Capital productivity ratio has been calculated sales per unit of net fixed assets. Capital productivity is increasing over the past year that is a clear indicator that capital productivity is increasing. Total Factor Productivity Analyses Mar ' 04 Mar ' 05 Mar ' 06 Mar ' 07 Mar ' 08 1,530.91 1,089.81 1,375.76 1,622.23 1,970.81 16.20 13.14 14.90 16.21 16.16 4.60 3.44 4.62 5.82 6.65 -28.81 26.24 17.92 21.49 -18.89 -25.22 15.29 13.39 34.30 -21.46 8.79 25.97 -16.85 -0.31 14.26 7.53
Sales Labour productivity ratio Capital productivity ratio Sales growth rate Labour productivity growth rate Capital productivity growth Total factor productivity growth
Source: Estimated from Balance sheet figures All figures are taken in crores Balance sheets have been taken from www.rediffmoneywiz.com
SWOT Analysis Strengths innovation operational excellence customer excellence extensive brand building Opportunities New product development and design centres have been opened in China and India. Strengthening customization of products Weakness Less focus on research and development activities Declining reserves Less focus on cost rationalization
Threats Threat from competitors Cost competitiveness Aggressive brand consciousness among competitors
Critical Success Factors The company is transforming into a completely customer-centered company where the customer lies in the core of every of our functions. This focus has arrived as direct consequence of our core competency of customer excellence. It allows us to build Customer Loyalty. The transformation is made up of five elements:
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Market leadership through customer loyalty Innovation Diversity with inclusion and core competencies Passion for customer excellence Operational excellence The elements of the transformation hold the promise of making the company a growing company and thereby increasing value for our shareholders. The five elements are the basis for describing our strategy internally and guide the development of our plans and initiatives.
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Case Study Report
Manufacturing Unit 6: NOIDA, Uttar Pradesh Product Category: Washing machines

Company Background The in-house production of television sets took off in 1983, with an initial capacity of 20 sets per day. By 1985-86, the company had a full fledged plant running at Mumbai with a capacity of 30 sets per day, that grew to 180 sets per day in 1988. A new plant was set up at Vasai in 1988 for manufacturing Circuit Knocked Down (CKD) sets. The Semi Knocked down (SKD) sets was manufactured. The CKD is the first phase of the assembly process and the SKD the second. The installed capacity of these plants was 1000 or 800 sets per day till 1992. The period 1992-95 was a high growth period for television industry due to liberalization of the economy. Despite this trend in the industry, the plant was only manufacturing 600 sets per day. In 1992, both the plants were merged. By 1995, the two plants were shifted to the new plant located on the outskirts of Mumbai at Wada (Thane). With two shift operations, they started manufacturing 2500 sets per day by 1998. Objective The objective of the company is to build a brand around substance. To communicate simple truths that customers understand. To become a leader in chosen field and become a globally recognized, prestigious company through synergistic business investment, differentiation through innovation, passion through empowerment, cost through economies of scale and world class systems and procedures that bring in delight of stakeholders. To benefit society at large through Innovation, Quality, Productivity, Human Development and Growth, and to generate sustained surpluses, always striving for excellence, within the framework of law, and in nothing but the truth in which we base every action. Washing machine sales volume in India has crossed 1 million marks 1 year ago but it is also a point to be noted there are so many established companies engaged in this market. Therefore, it has to compete with them. For this purpose, company is taking many efforts as the part of their marketing strategy to promote its product.
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Management style and practices The transition of the company from a family-owned business to a professionally managed company has been possible due to the vision of The collaboration with the JVC has contributed to the sense of confidence in their brand. The quality perception among the employees has been very high since the initial days. The product is still considered to be technologically superior. The initial days has seen two different companies manufacturing the product at different locations with different marketing and sales organizations, and even different R&D facilities. The company has been performing better in the South and the West. The merger saw the light of the day in the year 1997. The production was consolidated at the Wada plant (near Mumbai), and NOIDA (near Delhi). The company began focusing on TQM, and ISO 9001 certification. The restructuring included integration of the production and marketing departments. SWOT Analysis Strengths Reasonable pricing Tapping the low profile market Opportunities Brand visibility by sponsorships and events Strengthening customization of products Better positioning Celebrity endorsement Association with events Product line extension Weakness Less focus on research and development activities Less diversified product line Frequent change in advertising Internal management problems Aging customer base Threats competition on price Threat from competitors Cost competitiveness Aggressive brand consciousness among competitors There is intense Companies are focusing on product differentiation
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Financial Valuations Comparison over the previous year (Rs. Crores) CAGR Mar04 Sales Operating profit Interest 1007.49 70.74 6.92 Mar05 Mar06 Mar07 Mar08 1655.06 234.49 7.56
(2003-04 to 200708)
1192.51 1343.21 1650.99 71.52 13.77 86.68 5.72 116.91 9.55
13.21 34.93 2.24
A look at the performance of the company reveals that the sales of the company have increased from Rs.1007.49 crores in 2004 to Rs.1655.06 crores in 2008 and the Compound annual growth rates show an increment in the sales by 13.21% for the period from 200304 to 2007-08 and significant operating profit increase from 70.74 in march 2004 to 234.49 in march 2008. Productivity Analysis Labour Productivity Mar04 Mar05 Sales (Rs. Crores) Employee expenses (Rs. Crores) Labour Productivity Ratio Labour productivity growth 1007.49 1192.51 46.45 21.69 50.47 23.63 8.94 Mar06 Mar07 Mar08 1343.21 1650.99 1655.06 65.93 20.37 -13.78 69.40 23.79 16.77 68.84 24.04 1.06
Labour productivity ratio for company can be calculated as sales per unit of labour expense. In the company productivity is increasing which means that output from labour is increasing but at a slow rate. Capital Productivity Ratio Mar04 Mar05 Mar06 Mar07 Mar08 Sales 1007.49 1192.51 1343.21 1650.99 1655.06 Net fixed assets Capital productivity ratio Capital productivity growth 188.95 5.33 202.57 5.89 10.41 206.75 6.50 10.36 206.05 8.01 23.33 189.74 8.72 8.86
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Case Study Report
Manufacturing Unit 7: NOIDA, Uttar Pradesh Product Category: Microwave Ovens

Company Background Milestones The company is a fully owned subsidiary of overseas multinational company. During its tenure of 12 years in the country, the company has won several Product Awards and recognitions across the products Audio Video, Home Appliance, IT and Telecom Product categories. The Corporate Recognitions received by the Company in the recent past include: Product line in home appliances Refrigerator Washing machine Air conditioner Microwave oven Smart oven Business Objective The company is guided by a singular vision: to lead the digital convergence movement. They believe that through technology innovation today, they will find the solutions that need to address the challenges of tomorrow. From technology comes opportunityfor businesses to grow, for citizens in emerging markets to prosper by tapping into the digital economy, and for people to invent new possibilities. Their aim is to develop innovative technologies and efficient processes that create new markets, enrich peoples lives and continue to make the company a trusted market leader. The company, a leading Korean company as well as a symbol of the IT industry, carried out an innovative project to strengthen its global Supply Chain Management (SCM) execution ability, gaining the industrys interest. The company placed its emphasis on the business management scenario of predicting and preparing for future environmental changes and competitiveness, which is one of the survival strategies of an industry with an National Productivity Council Page50
Case Study Report
unpredictable future. The company is aggressively establishing the foundation for enhancing business management speed and efficiency-oriented business management innovations
Financial Analysis Corporate Snapshot The company recorded revenues of KRW57.6 trillion (approximately $56.9 billion) during the fiscal year ended December 2004, an increase of 32.1% over 2003. The operating profit of the company during fiscal 2004 was KRW12 trillion (approximately $11.9 billion) compared to an operating profit of KRW7.2 trillion (approximately $7.1 billion) in fiscal 2003. The net profit was KRW10.8 trillion (approximately $10.7 billion) during fiscal year 2004 compared to KRW6 trillion (approximately $5.9 billion) in 2003.
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Financial Details 2008
In 2007 2007 Financial Overview AMOUNTS IN BILLIONS Net Sales* Total Assets Total Liabilities Total Stockholder's Equity Net Income* (Amounts in billions) WON 161,847.4 284,165.5 180,833.2 103,332.3 12,873.7 DOLLARS 174.2 302.9 192.7 110.1 13.9 EUROS 127.2 205.7 130.9 74.8 10.1
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Case Study Report
SWOT Analysis Strengths Core value: approach market Weakness Approach market through
through technology and design leadership Launching hi-Tech and
technology and design leadership: a slow process Not targeting the mass market Not spreading the brand all over India
contemporary products with zeal and speed Target is not only number driven but also about acquiring and
retaining customers Created a unique brand image for itself as a high end value driven brand Opportunities Indian mass market The high end helps value driven the Threats Durables industry is not in the best Threat from competitors Cost competitiveness Aggressive brand consciousness
proposition market share
increase
The company is well known for its product diversification
among competitors Consumer of its health Due to increased price of inputs and continuing price erosion there is a down trend in the consumer durable market Increased emergence of modern retail chains-a problem for the company as it is investing in building a retail network across the country.
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Critical Success Factors Bringing Cultural Changes: Although the company had no problems in funding and creating the design infrastructure, it faced a more difficult task in convincing the rank and file at the company that design was necessary for survival and growth. Most of the employees were more concerned about costs and volumes than design. "the company was a technology company whose management thinking came out of exporting rice," said Bruce, "There was no design involved. It was all about keeping the price down and outselling the other guy."
Systemic and Process Changes: The company redesigned its systems and processes to improve the design delivery process. First, the company modified its product creation process. The company earlier was an engineering-driven company and there was very little interaction between the company's engineers, marketers, and designers. The designers only took orders from engineers and product planners. However, this arrangement was done away with, and designers began to enjoy as much, if not more, authority as engineers and marketers. Collaboration between different departments became a key aspect of new product development. Financial Valuations Comparison over the previous year (billions Korean won) Mar04 Sales Operating profit Interest Gross profit 81,963 11,761 192 29,010 Mar05 Mar06 Mar07 80,630 7,575 66 25,378 85,426 9,008 70 25,773 98,508 8,973 171 27,627 Mar08 121,294 6,032 56 31,532 CAGR (2003-04 to 2007-08) 10.29 -15.37 -26.51 2.11
A look at the performance of the company reveals that the sales of the company have increased from 81,963 in 2004 to 121,294 in 2008 and the Compound annual growth rates show an increment in the sales by 10.29% for the period from 2003-04 to 2007-08 and significant operating profit decrease from 11,761 in march 2004 to 6,032 in march 2008. Gross profit showed an increase from 29,010 in Mar07 to 31,532 in Mar08.
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Case Study Report
Financial Ratios Profitability Ratios Mar04 Operating Margin (%) Gross profit Margin (%) Productivity Analysis Capital Productivity Ratio Mar04 Mar05 Mar06 Mar07 Mar08 Sales 81,963 80,630 85,426 98,508 121,294 Net fixed assets 69,005 74,462 81,366 93,375 105,301 Capital productivity ratio 1.19 1.08 1.05 1.05 1.15 Capital productivity growth -8.84 -3.04 0.48 9.19 Source: Estimated from Balance sheet figures 14.3% 35.4% Mar05 Mar06 9.4% 31.5% 10.5% 30.2% Mar07 Mar08 9.1% 28% 5.0% 26%
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Case Study Report
Manufacturing Unit 8: Mumbai, Maharashtra Product Category: Microwave Ovens

Company Background In 1993, the company entered into a joint venture with General Electric (GE), US and a joint venture was formed. It went on to manufacture washing machines and air conditioners.. In 1993, The company entered into a manufacturing and marketing alliance with Proctor & Gamble (P&G). A new company was formed, with each company holding 50%, was incorporated. The entire distribution network was transferred to this company and the joint venture was entrusted with the task of marketing both toilet soap and detergents brands. GE exited from the joint venture in 2001 Product line in home appliances Refrigerators Washing machines Air conditioners Micro waves DVD players Objective From high tech engineering solutions to world-class consumer products, the company is an integral part of the lives of millions of Indians. Setting quality benchmarks and redefining customer satisfaction, is their main objective as they enrich lives across boundaries. It is today one of the largest engineering and consumer products company in the country having varied interests from engineering to personal care products. They are also one of the most respected corporate houses known for philanthropy and initiation of labour reforms besides being recognized for values of fair, transparent and ethical dealings. Key Factors/ Variables They offer an entire spectrum of industrial solutions from storage to material handling to process equipment and many, many more.
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Combined Sales - Subsidiaries and Affiliates The Company is one of the largest privately-held diversified industrial corporations in India. The combined Sales (including Excise Duty) of the Company, its subsidiaries and affiliates, during the Fiscal Year ended March 31, 2007, amounted to about Rs. 72,000 million (US$ 1,800 million). Employees 9,700 (including 2,000 in Sales and Service)
Financial Analysis Corporate Snapshot Starting in 2006 the company grown 100 per cent in both the fiscal years, Contributing 20 per cent to the company revenues, the AC market in India currently stands at 1.9 million units, which is slated to reach 2.5 million units by 2008 with the current growth rate of 25 per cent. Majority of this growth is driven by the urban consumers. The company plans to reach out to its customers in smaller towns and cities and to support its customer reach programmed, the company plans to roll out 200 AC Advisor outlets to be located at its dealer premises, on the Internet and in other stores.
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SWOT analysis
Strengths Company has got wide range of branches within the country Wide range of product line The company is having good after sales services The company has there respectable brand name Large consumer base with consumer satisfaction Trained professionals
Weakness Less advertising Emphasis is more on advertising of office automation and prima division The company is focusing many security products at the same time The effective selling schemes are not available like payment on installments
Opportunities Technological upgradation Focus on advertising
Threats Growing competition Brand consciousness among new players
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Case Study Report
Manufacturing Unit 9: Mumbai, Maharashtra Product Category: Vacuum Cleaners

Company Background This company employed around 5000 salesmen and opened over 400 branches to cater to growing customer demand in India. Within a decade, the company had established itself as the market leader in the Vacuum Cleaner industry. The company acquired reputation for high quality products and excellent customer/dealer relations. The company first launched the Vacuum cleaners in India in 1984 and in 1984 launched the water purifier Aquaguard. The company initially faced lot of problem in marketing its vacuum cleaners. Targeted at the upper middle class families, these products were never considered a priority. Since most of the middle class families could afford a maid, it was a fight between Maid and the Machine. Because of the low interest and since the product benefits needs to be demonstrated to the customers, conventional distribution was not viable. Hence EFL chose the less traveled Direct selling route. The company has also tried to position their sales persons as problem solvers rather than sales officers. Indian vacuum cleaner market is worth around Rs.120 crores and water purifier market is worth around Rs.350 crores. This company is a clear market leader in both these categories with a market share of 85%.Aquaguard water purifier was a clear winner from the company stable . Targeted at the top of SEC households, this brand has effectively positioned itself as a one stop shop for pure water. This brand connects very well with the concern of mothers about the purity of the water at home. Innovative products like water purifier with 'e-Boiling' together with communications clearly telling the benefits of this product has made Aqua guard a " Super Brand". Major problems faced Vacuum cleaners were expensive when it was launched, but the prices have come down sharply which will expand the market. Second problem with vacuum cleaner is the lack of product usage at homes. Most of the vacuum cleaners are lying idle which is bound to create a negative word of mouth.
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Case Study Report
Water purifier may not have the usage problem but the price is still considered as high by the middle class. The company may have to launch some economic brand as a flanker to Aqua guard. Product line Vacuum cleaner Water purifiers Air purifiers Security solutions Industrial solutions Key Factors Starting From the Scratch The company followed the globally 'tried and tested' direct selling route for marketing its products in India, thus becoming one of the first direct selling companies in India. Vacuum cleaners and water purifiers were rather new concepts for Indian consumers, who had till then followed only the traditional methods of cleaning and filtering. Therefore, The company had to first establish the concept of vacuum cleaners and water purifiers in India before it could sell. The company believed that its core strength was its people. It employed dynamic, highly motivated individuals, who projected the image of 'the friendly Financial Analysis Corporate Snapshot Over 7,000 employees Leaders in domestic and industrial Water Purification Systems, Vacuum Cleaners, Air Purifiers & Security Solutions Pioneers in Direct selling - Asia's Largest Direct Sales Organization 6,000 strong Direct Sales Force touches 1.50 million Indian homes, adding 1,500 customers daily Customer family now numbers over 6 million - enduring relationships as "Friends For Life" Operations in over 125 cities & 475 towns across India.
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Expanded channels that reach out to customers to include Over 5,000 strong Dealer Sales Network ,A 58 distributor strong Institutional Sales Network Security Systems Division - one of India's largest system integrators A customer finance scheme, Euro value, for customers to easily obtain the means to Live Healthier Lives A strong service network that backs up sales efforts 4500 company trained technicians who make 20,000 kitchen visits daily Supported by Call Centres, Customer Care Representatives & Mobile Service Vans Aquaguard & Euroclean - Chosen Super brands Ranked among India's Most Admired Consumer Durable Companies Expenditure on R & D as on 2008 Capital - Rs. 2.04 Lakhs Recurring - Rs. 224.94 Lakhs Total - Rs. 226.98 Lakhs Total R&D Expenditure as percentage of total turnover - 0.28% SWOT Analysis Strengths managing the sales effort operational excellence customer excellence extensive brand building good franchising direct sales Opportunities Brand visibility by sponsorships and events Strengthening customization of products Celebrity endorsement Association with events Product line extension Threats Threat from competitors Cost competitiveness Aggressive brand consciousness among competitors Weakness Less focus on research and development activities Less diversified product line New to retail business
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Shift from direct marketing In 1999, the company announced a major policy change that came as a surprise to the Indian corporate world. The company, regarded as the pioneer of direct marketing in India, was planning to focus more on the retailing business in the future. This move was in accordance with the company's plans to increase the visibility of its products. The company planned to make its products available in retail outlets through its dealer network, spread across 2,600 dealers. With this move, the company also planned to increase the sales revenue generated by the retail division. "While the dealer channel contributes 10% to the overall sales turnover of the company, the direct sales route contributes 75%." Critical Success Factors According to company sources, the company not only had the financial strength, but also a strong network of sales executives to push its new products into the market. The company's decision to enter the retail business was primarily the result of its launch of 'Tornado' vacuum cleaners and 'Aquaflo' water purifiers in 1995.
The company had utilized the retail route for this range, mainly to cater to the industrial segment. Over the years, the retail business assumed greater significance and by 1999, around 5% of the company's sales came from the 2500-strong dealer network.
Sr. No. 1 2 3 4 5 6 7 8 9 10
Particulars Sales and Other Income Profit before Depreciation Less: Depreciation Profit before Tax with Extraordinary Items Extraordinary Items Profit before Tax Less: Provision for Current, Fringe Benefit and Deferred Tax Profit after Tax Less: Prior Years' Tax Adjustments (Net) Profit After Tax and Prior Years' Adjustments
2007-08
2006-07
2005-06 6,33,57,03,128 42,37,45,077 8,41,60,633 33,95,84,444 11,98,48,588 21,97,35,856 21,97,35,856
8,13,63,14,903 7,39,98,67,154 49,94,21,237 47,95,68,457 9,43,06,377 9,00,27,767 40,51,14,860 2,67,96,385 37,83,18,475 13,90,22,288 23,92,96,187 2,08,356 23,90,87,831 38,95,40,690 38,95,40,690 14,04,03,806 24,91,36,884 24,91,36,884
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11 12
13 14 15 16 17
Add: Balance brought forward from previous year Amount available for appropriation Appropriations: Interim Dividend Proposed Final Dividend Tax on Dividend Transferred to General Reserve Balance carried to Balance Sheet
18,03,41,686 41,94,29,517 6,39,00,000 4,26,00,000 1,80,99,675 10,00,00,000 19,48,29,842
12,89,86,712 37,81,23,596 6,39,00,000 2,13,00,000 1,25,81,910 10,00,00,000 18,03,41,686
10,47,50,156 32,44,86,012 8,52,00,000 1,19,49,300 9,83,50,000 12,89,86,712
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Case Study Report
Manufacturing Unit 10: NOIDA, Uttar Pradesh Product Category: Vacuum Cleaners
Company Background The company is a leading Manufacturer of Cleaning machines and was incorporated in 1981. During the last 28 years of its existence, the company has carved out a niche for itself in Cleaning Industry. As a business innovator, the company helps clients achieve extraordinary results from its Service, Products, and technology. Clients choose for the impact the company achieve, its commitment to their success, and the straightforward and collaborative way the company work with them. The company is a certified ISO 9001 manufacturing unit. The line of activity, in which company is engaged, is having a very positive trend and the requirements are growing in the fast growing economy and with the increase in awareness towards cleaning in the public life. The companys continuous growth has been made possible by the result of livewire, energetic and focused workforce of more than 75 highly competent professionals who have worked extensively in the areas of :1. Manufacturing of cleaning machines for own Brand and for branding for other established brands and even for exports 2. 3. 4. Manufacturing and installation of specialized cleaning plants Executing contracts, deploying large size Sweeping/Cleaning machines. Manufacture and Trading in specialized Flame Proof and other specialized lights and specialized ceilings for Industrial and other Interior jobs for projects like Airports etc. 5. Import of Industrial Cleaning Machines in Bulk for European Manufacturers and selling through the network partners. Corporate Vision: 'To become Indias leading solution provider Company for Cleaning equipment products and services'. The company is a professionally managed team of hard-core, well-oiled experts from corelated fields of industry, experienced in Cleaning equipments, service and contracts, installed country wide in Government, Semi Govt. Enterprise & other public sector units.
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Organisation Structure: Having a three tier hierarchy from Directors to front level executives. Employing more than 75 professional & technical minds, equipped with etechnology. Network Reach: Owning a dedicated Sales & Services centres in all major capital of Indias states.
Competence: Two decades experience in the business of installing and servicing cleaning equipments in the industry. Customers: Govt. Sector: Indian Army, Navy, Aviation, Railways, and Power Sector etc. Private Sector: Automobile Industry, Steel, Textile, Hospitality, Construction, Realty Industry. Focus: To provide value added products & service and improve customer satisfaction. The company is committed to creating a company where people can build exceptional careers. The company hire innovative people who listen carefully, strive to reach their full potential and help clients do the same. The company encourage rapid and continuous personal and professional growth and have created a foundation for helping our people succeed. The companys merit-based approach to career advancement places the onus of growth upon each individual - offering multiple options and paths for career development Financial Valuations As per the latest information the Comparison of the companys sales data for the year 2004-2008 are as follows: Year 2003-04 2004-05 2005-06 2006-07 2007-08 CAGR (2003-04 to 2007-08) Sales (Rs. Lakhs) 230 250 280 300 290 5.97
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Case Study Report
Sales has increased from Rs. 230 lakhs in the financial year 2003-2004 to Rs. 290 lakhs in the year 2008 at a compound annual growth rate of 5.97 percent. Labour Productivity Ratios Sales (Rs. Lakhs) 230 250 280 300 290 Employee Expenses (Rs. Lakhs) 23 25 28 30 30 Labour Productivity Ratio 10 10 10 10 9.67
Year 2003-04 2004-05 2005-06 2006-07 2007-08
Labour productivity ratio for company has been calculated as value of sales per unit of labour cost. Labour Productivity has remained the same during the entire period. The companys pattern of employment shows that there is increase in contractual employment. Significant numbers of the employees working in the unit are skilled labours. It may be noted that the there is a considerable increase in wages and salaries. Domestic Market Trend The companys market share in Vacuum Cleaner segment is in the range of 11-25% and Domestic sales to total sales have been reported around 26-50%. The company report that competition from the local and foreign players is medium. The unit reported that they are exporting to other countries as well. The manufacturing unit reported that the company is not satisfied with the Government interface with the business. The company is also not happy that Indian Government is not doing much to promote domestic manufacturers as is being done by competing countries.
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Productivity and Competitiveness In the companys view infrastructure in India is considered to be in reasonable and as comparable to the competing countries. India manufacturers lack competitiveness due to the multiplicity of taxes and are complicated tax regime. The company reported that the tax rates in India is quite high while tax rates in competing countries are low and procedures related to taxes are uniform and simple. The cost of production is low in competing countries as compared to India because of the availability of quality raw material with reasonable price along with good infrastructure supported by government policies.
Company was affected by the global financial crisis and reported marginal fall in exports and domestic demand for the product during this period. The company is facing problems in procuring good quality of raw material from domestic market. Pricing of the raw material like plastic, steel etc. in the domestic market are very high and have to be regulated by the monitoring agency so that the domestic market will improve and the prices will become competitive.
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STUDY TEAM
PROJECT ADVISORS 1. Shri. N.C. Vasudevan, IAS Director General 2. Shri. O.P. Joshi Deputy Director General 3. Shri. V.K. Soni OSD (Economic Services & Admin.) STUDY/CORE TEAM Team Leader: Shri. Brijesh Kumar IAS (Rtd) Former Secretary Department of Information Technology, Government of India Dr. K. P. Sunny Group Head (Economic Services) Dr. Jacob John Former UNIDO National Expert 1. Dr. Rajat Sharma Deputy Director (Economic Services) Mr. Deepak Gupta Assistant Director (Economic Services) Mr. Mukesh Prakash Assistant Director (Economic Services) Mr. Prashant Varshney Research Associate Mr. Sanjay Kumar Project Assistant
Project Director:
External Consultant:
Team Members:
2.
3.
4. 5.
Field Survey:
NPC Consultants/Research Associates/ Project Assistants/Indian Council for Market Research Planman Consulting (ICMR)
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Case Study Report

Productivity and Competitiveness of Light Electrical Industry in India

Diagnostic Case Studies

National Productivity Council

Case Study Report

Productivity and Competitiveness of Light Electrical Industry in India

Manufacturing Unit 1: Mumbai, Maharashtra Product Category: Air Conditioner

Case Study Report

Productivity and Competitiveness of Light Electrical Industry in India

Case Study Report

Productivity and Competitiveness of Light Electrical Industry in India

Case Study Report

Productivity and Competitiveness of Light Electrical Industry in India

National Productivity Council

Case Study Report

Productivity and Competitiveness of Light Electrical Industry in India

Case Study Report

Productivity and Competitiveness of Light Electrical Industry in India

Case Study Report

Productivity and Competitiveness of Light Electrical Industry in India

National Productivity Council

Case Study Report

Productivity and Competitiveness of Light Electrical Industry in India

Source: Estimated from Balance sheet figures

National Productivity Council

Case Study Report

Productivity and Competitiveness of Light Electrical Industry in India

Reserve and surplus (Rs. Crores)

National Productivity Council

Case Study Report

Productivity and Competitiveness of Light Electrical Industry in India

Case Study Report

Productivity and Competitiveness of Light Electrical Industry in India

National Productivity Council

Case Study Report

Productivity and Competitiveness of Light Electrical Industry in India

Manufacturing Unit 2: Mumbai, Maharashtra Product Category: Air Conditioner

Case Study Report

Productivity and Competitiveness of Light Electrical Industry in India

Case Study Report

Productivity and Competitiveness of Light Electrical Industry in India

National Productivity Council

Case Study Report

Productivity and Competitiveness of Light Electrical Industry in India

National Productivity Council

Case Study Report

Productivity and Competitiveness of Light Electrical Industry in India

National Productivity Council

Case Study Report

Productivity and Competitiveness of Light Electrical Industry in India

Case Study Report

Productivity and Competitiveness of Light Electrical Industry in India

National Productivity Council

Case Study Report

Productivity and Competitiveness of Light Electrical Industry in India

Case Study Report

Productivity and Competitiveness of Light Electrical Industry in India

National Productivity Council

Case Study Report

Productivity and Competitiveness of Light Electrical Industry in India

Mar08 2233.04 234.49 7.56 263.98