CHAPTER-1 INTRODUCTION

1) Objectives and scope of the study:1) To know about the market size and market structure of Air conditioner industry. 2) To know the factors influencing customer buying behavior. 3) Marketing strategies of LG and Samsung. 4) SWOT analysis of air conditioner industry.

2) Methodology of research:-

 Secondary information was collected through secondary sources like Newspapers, Internet, magazines etc. Primary information was collected through: (1) Personal visit to the companies.(LG and Samsung) (2) Questionnaires forwarded to the consumers for studying their buying behavior. SAMPLE SIZE: 125 HOUSEHOLD SECTORS 125 INDUSTRIAL SECTORS The samples represent Households in the urban Ahmedabad including its suburbs. The sample consisted of offices and business centers in the urban Ahmedabad.

3) History:In the past, people tried various methods to cool the air around them. Earlier, in India the method to cool the air was to hang wet grass mats over windows so as to convert the air coming from outside into cool air. Earlier in the textile industries the atomized sprays of water were used simultaneously humidification and cooling. Early in 19th century Willis carrier devised the due point control air conditioning system based on the principle that cooled air reaches saturation and loses moisture through condensation. With its development carrier initiated scientific air conditioning design. In 1902 Dr. Willis Haviland Carrier invented and registered the patent for a water cooler concept air conditioning. After that the air conditioner market is jumped as more and more people and companies convinced about the comfort of an air conditioner (AC). The extremely hot summers have grown the demand for air conditioners and the industry is experiencing a significant change. The first, fully air conditioned office building is the Milam Building in San Antonio, Texas, built in 1920s. Very important development came in the 1930s with the introduction of Freon Refrigerants, which are still used in air conditioning systems today.

4) Introduction and Growth of Air-conditioner Market

Earlier in India, air conditioners were extremely costly and out of the reach of the common man. The high cost of power was primarily because of subsidized or free electricity being provided to some sections of the society. However, with the thrust on power

generation and infrastructure development, the government and industry will take major steps in energy generation and distribution. The Indian air conditioner sector is to grow at least 25 percent a year over the next three years. The global firms such as LG, Samsung, Hitachi and local company Voltas limited are forecast to sell more percent of air conditioner in future. South Koreas LG Electronics, the worlds largest market of air conditioners, also has leading market share of 41.1%. About two-third of air conditioner sales come from seven cities in India where summer temperatures regularly cross 40

degrees Celsius. MNCs with an intention of building clear identities for their respective companies and brands are eating into the market share of dominant players like Carrier Aircon (in room ACs). Rising competition has forced companies like Blue Star (leaders in central ACs) and Voltas Ltd into restructuring. Though the industry is still dominated by the unorganized segment, the gap between the two has narrowed down on account of the reduction of excise duties. International players have seized this opportunity to gain at the cost of smaller players. Improved technology, reduction in excise duties from a 110% to 65% and prices slide by about 8-10 per cent has reflected into higher growth rates, especially in room ACs. LG which also sells television, fridges, washing machines, microwave ovens and mobile phones in India is targeting sales in 2005 is 500000 air conditioners. Another interesting aspect for the air conditioner is huge growth anticipated in two basic industries health care and entertainment. For a population of one billion people, the health care system needs to be completely revamped and the requirement for health care in terms of hospitals and clinics is bound to keep growing. This requires air conditioning not only for cooling, but also for the quality of air. This has now become a benchmark where air conditioners are being used to truly condition air through purification technologies besides cooling. There is also a boom in the entertainment industry. With changes in life style and opening up of pubs, bars, restaurant, and hotels all over the country, there is a huge demand for air conditioning. The trend of nuclear families going out for the entertainment is increasing. Earlier joint families believed in giving company themselves within the family at home. Now in the case of the nuclear families, people want to go out to be entertained. This industry will also see continuous demand of air conditioner in all capacities.

CHAPTER 2 MAJOR INPUTS AND OUTPUTS

The principle of air conditioning is simple. On compression, air or gas (commonly Freon) gets heated up and when this hot gas is cooled, it becomes liquid. When this liquid is released with pressure, it evaporates absorbing the heat from the immediate surroundings. Again this gas is compressed and the cycle is repeated over and again. In practice, the liquid gas is expanded in the tubes of airhandling unit. When air is blown over these tubes by fans, it gets cool. This air is blown into the room to be air-conditioned and the warm air from the room is drawn into the air handling unit for cooling, completing the cycle.

COMPRESSOR
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Its function is to compress the Freon gas every time it is recycled after cooling by expanding. The expanded gas is taken back into the compressor. This is a closed circuit and the connecting pipes should be absolutely leak proof.

CONDENSER
The heat-compressed gas from the compressor is sent into the condensers for cooling. The condenser consists of a number of tubes enclosed in a leak proof enclosure. Water is circuited through the tubes to cool the hot compressed gas surrounding them. The gas on cooling becomes liquid, the water absorbing the heat. This warm water is pumped to a cooling tower for cooling the ambient temperature before re-cycling.

CHILLERS
The chillers are used for chilling water. Liquid gas expanded in a set of tubes producing the chilling effect. Over this tube, water is passed. The water gets chilled. This chilled water is pumped to various air-handling units in a large building.

COOLING TOWERS
The water, which has absorbed the heat in the condensers, is cooled in the cooling tower. Cooling towers are installed outdoors, where there is free circulation of air, usually a top of the building. Warm water is spread on a lowered enclosure and collected in a though at the bottom. In this process, the warm water is cooled to the ambient temperature. There are two types of cooling towers. In one type, there is no forced air for cooling, but this type requires a large area. The other type is called forced draught (or forced air) cooling tower, where there is fan forcing the air through the falling water, this type it saves space.

AIR HANDLING UNIT

Air handling unit consists of a rectangular sheet metal enclosure. On one side of this enclosure, there are set of tubes and a

floor filter. On the top of this enclosure, there are rectangular openings through which ducting is connected. Inside the enclosure, there is a centrifugal fan, which draws air over the filter and blows into the ducts. As explained earlier, in direct expansion air handling units, liquid gas is made top expand in the tubes of air handling units producing the cooling effect. In the chilled water system, the chilled water is circulated in the tubes of air handling units. Air from the room is drawn the filter and tubes which are cold, and blown into the room through the duct. The filter eliminates any dust coming from the room.

CHAPTER 3 SWOT ANALYSIS OF AC INDUSTRY

Strengths of Air conditioning industry:(1) AC Industry has good capacity for innovation. (2) Industry is very conscious about its social services like development of the various models of AC as per the climatic conditions of a particular region at very competitive prices. (3) High product differentiation across the different segment and also in different companies.

(4) AC industry provides high quality products and so it leads to high customer satisfaction. (5) Good after sales services are provided by most of the AC companies. (6) AC industry has good sales and distribution channel.

Weaknesses of Air-Conditioning industry:(1) Exports of finished A/C units from the country have been negligible in the past. This is due to a variety of factors. The prime reason being the lack of competitiveness on the price front when compared to products from other countries (especially from south East Asia) an Indian madeproducts cost twice as much as the ones available abroad small volumes in the domestic market prevent Indian manufactures from achieving economies of scale which are needed to cut costs. (2) Another factor which has become increasingly important is the coolant used in Indian made ACs countries in the developed world such as USA have banned the use of Chloro-flouride carbons (CFC) in 1995. While local Industry has adequate time for a changeover. They would severely hamper exports. (3) Overall industry sales depend on certain corporate sector like government. The demand for room ACs mainly comes from institutions with corporate accounting for 80% of it. The government which accounted for 70% of the industrial purchases, has shown a declining tend in recent times. This kind of disproportionately higher dependence

on the corporate sector implies that the prevailing industrial climate exerts a strong influence on the total demand. (4) Low capacity utilization is also a weakness for AC industry. The industry has still not utilized its full production capacity (In the year 1997-98 it was only 50%). (5) Unlike other consumer durables ACs are required period maintenance. (6) Demand for room our conditioners is fairly price sensitive.

Opportunities of Air-Conditioning Industry:(1) Higher cost growth of disposable income. (2) The demand for AC is generally restricted to major cities and towns eight cities which for neatly 65% of the total household demand so the total market is not penetrated. So intensive market penetration can be the biggest opportunity for AC industry. (3) As future growth of AC industry is dependent largely on user industries like software telecom, Hotels, Food processing etc there is a good opportunity for expending area of operation in these sectors. (4) Service and maintenance contract income is emerging as a sustention source of income for the leading player s in the country.

Threats of Air-Conditioning Industry:(1) The air conditioning (AC) sector (Rs30bn) is considered a luxury industry therefore subjected to high duty structure. This has obviously affected industry growth. (2) Industrial and economic slowdown is also a threat for the AC industry. (3) (4) The AC industry is also facing a threat from tight money supply. Early monsoon has become a major threat for the industry.

(5) Erratic power supply is the main reason why demand is unlikely to pick up in the rural areas in the short and medium term. (6) The industry has traditionally been a high margin area but of late margin have come under pressure due to increased competition with few orders. Manufactures are undercutting each other to gram installation contracts. (7) Competition also comes from an altogether different product dessert coolers widely used in central and north am India in the future earnings will also be driven by demand for consumer 10

durables in general thus AC industry has also substitution product in future (product to product generic substitution).

threat from the substitution and

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CHAPTER 4 TRENDS IN INDIAN AIR CONDITIONER MARKET

(1) Government sector has been a major player of ACs in the past; but its share is likely to decline with the increasing demand from household sector. (2) The demand of AC has been a movement towards more value added models with the number of people setting up homeoffices likely to increase in future, the demand for aesthetically superior models, especially split ACs is expected to rise. (3) With a drop in room ACs prices, facilitated by a reduction in excise duties, combined with the heat factor, ACs has come to be accepted as utility item than a luxury one in many household, the share of household sector has been increasing as compared with the commercial and institutional sector in the total AC category. (4) Because of above 3rd point the market share would be shrinkage of the unorganized sector. This may not have the technical wherewithal to incorporate value-added features in their ACs.

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(5) Excise has been an important factor in this industry, which has influenced the demand substantially. The excise rates had been very high earlier (because of the perception of the air conditioner as a luxury product), but have gradually been reduced. There has been a progressive reduction in duties on air conditioners since the 1991 budget. The reduction of excise down to 60% led to increased collections by the government by 13% in absolute terms due to higher sales volumes. Broadly, it is estimated that a decrease of 1% in excise duty leads to an increase in demand by 2%. Hence, the cut in excise duties from 60% to 40% led to an increase in demand from 190,000 to 340,000 units. The chellaiah committee has recommended an excise duly level of 20% by 1997-98. Hence, a further cut in duties down to 20% (as recommended) will lead to an increased demand for air conditioners from 340,000 units to about 450,000 units on its own strength.

The Indian AC industry will experience transformations over the next few years because of the following facts: The CAGR of the industry in the last 10 years has been 19%, which is amongst the highest in the manufacturing sector; The penetration level of AC in India is just around one percent; and The Indian market is concentrated with the top seven cities accounting for 66 percent of the market,

Considering these characteristics and the fact that even if the AC industry continues to grow t the same pace for the next five years, the market size would increase to about three times the present size. Hence, the Indian AC industry as we see today is set to change in many ways and at a very rapid rate in the next two years. The change can be attributed to the following factors: The perception of an air conditioner is changing from a luxury product to a necessity. This is also reflected in the change in duty structure in the recent Union Budget for the AC industry. The lifestyle of the urban population is changing leading to an increasing number of AC affording homes; The Indian consumer is not shy anymore of spending on himself on comfort; More affordable prices and easy finance options available of buying a product; and The increased competition shall constantly raise the level of offerings to a new level at a very rapid pace.

Hence, Indian market size is set to break the critical barrier of one million units, which would then act as a catalyst for the rapid 13

increase of the market size. Looking at the world markets, it can be believed that the following critical areas are set to change in the coming few years.

Increase in the residential segment:With the changing lifestyles in urban India, and the increasing prosperity to buy amongst the Indian middle class, there will be a rapid increase in the contribution of the residential sector to the total market. As of now the residential sector contribute to more than 50 percent of the total market and in other countries it will going to increase by 75 80 percent in the next three years. Change in the distribution system:

With the increase in the residential segment, the distribution of the companies would have to change and the focus for the same would shift from sales & service counters to multi brand multi product counters. Change in the target segment:

Till now, AC was perceived to be a luxury product and buying was confined to section A class of consumers. With the prices coming down and AC becoming to necessity, the target group would change considerably and the product will move down to the sec bladder. Also the geographic spread of the sale of AC would increase due to the increasing sale in the smaller towns.

Increase in the usage of splits:The Indian consumer has experienced usage of AC for a long time and he is ready for the next level of usage experience in air conditioning, which is the split AC. The split category has reached a critical mass today. It has created a spiral of continuous acceleration, which includes decrease in prices, and expansion to the split usage and market. The contribution of the splits in the Indian market is over 25 percent as compared to 98 percent in Japan and 70 80 percent in china and this trend will continue for a long time though window would continue to dominate the market in the coming few years.

Energy labeling and other regulation:Energy labeling is a widely used standard across the world for various appliances. Energy labeling entails the sticking of an energy label where it is clearly visible on the product. It gives critical information as to how energy efficient the product is and gives a 14

rating to each of the product. This after testing energy labeling is issued by word recognized institutes after testing of the products in the labs. Because of the independent nature of the tests done the manufacturer has no control on the results. With energy labeling the customer is assured to the authentic information and he can make his purchase based on the perfect information.

Products:Due to above changes in the overall macro conditions of the AC market we shall see massive changes in the product itself. The products would have to: Be more energy efficient. The energy labels would directly reflect this and it will become the reason for selecting or rejecting the particular brand. The product would have to provide value for money as the buyer would be increasingly looking at the functional aspect of the AC rather than buying it to satisfy his status requirements; and There would be an increasing segment, which looks at AC as an expression on their shelves. This group would be created to by products, which are distinctive futuristic and high on technology. This group would be willing to pay a premium price if the product satisfies their need for being different from the crowd.

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Technology:With the Indian market set to break the critical barrier of one million units, the industry should see technology being imported from the MNCs at a rapid rate. The first major changes would be reflected in the changes in the regulations and hence the need for more efficient and econ friendly products. We would see more advanced technologies like, PAM.AC, scroll compressors, silver neno technology etc coming into the Indian market.

Interdependence of the consumer products:With life in the fast lane, there is an increasing need for the products to be more networked and digitally active with the increasing convergence of the mobile with telephone and internet, the need for the networked products is going to increase. Once the prices are in affordable range which should take a few years from now we shall see rapid advances in this field which would allow consumers to operate their appliances, home and their appliances, home and their lives from anywhere to give them the desired level of comfort.

Change in the office usage air conditioning:Just as the residential user is moving up the ladder to the next level of air conditioning, so would the office users move up to the next level. We see the office segment moving from simple room AC products to the ducted split systems as has been in the Middle East markets for the last three years. This trend would continue and we would also see more of central air conditioning systems like chillers and set frees in the office segment. All things considered, we are in for some interesting times in the AC industry and the players with technology, speed and ability to quickly adapt to the rapidly changing trends shall emerge as the winners in this industry.

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CHAPTER 5 MAJOR PLAYERS

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[1] Blue star:Blue star is offering a wide range in both the window and split air conditioner otary compressors. The air conditioners conform to very high quality standards with each component carefully selected to offer excellent cooling performance at peak ambient conditions. The company has plan to launch split ACs in various category to cater mainly to light commercial segments and corporate. The thrust area of the company would continue to be the corporate and commercial segment and the marketing program is designed accordingly ten sectional campaigns would include brand building and product specific activities and employee media (TV/Newspaper), outdoors like hoardings and other field promotional activities. The year on year growth in split ACs is approximately 75 percent and most of it comes form its focus areas-corporate and commercial segments. The windows AC export also registered an impressive growth. The company is sourcing reciprocating compressors locally and rotary compressors from Japan. The mix of reciprocating and rotary compressors this year is expected to be 40-60.

[2] Carrier:carriers range of window ACs come with features such as large LCD remote control, room temperature indicator powerful cooling, law noise level, advanced dry mode algorithm control sleep mode, auto off timer, auto fan speed, filter cleaning indicator, reliable NEMB motors and easy accessible filters condenser coils on the back of the celesta air condition have gold fins that prevent it against corrosion the four stages of filtration process the air in the second stage. Persimmon catching filter traps and kills bacteria, in the third stage. An electrostatic filter traps minute part ides of smoks as well as the suspended particulate matter present in the air, and in the fourth stage an active carbon filter takes care of the various ad ours in the room environment.

[3] Hitachi:Hitachi has launched one of the smallest split air conditioners range. Hitachi atom, the Hitachi Atom split ACs is two third the size of the conventional split ACs and is a blend of two technologies lambda and power saving technologies. This gives powerful efficient and economical performance to extreme and varied Indian climatic condition. Hitachi Atom, which incorporates the Lambda Coil Technology, enables super efficient cooling even at extreme temperatures. This

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advanced technology allows for a higher surface area of the heat exchanger in a very compact size, resulting in overall high cooling capacity. The range is able to deliver then required cooling requirement, consuming lesser power and has energy efficiency ratio (EER) of over 10, which makes it one of the most efficient ACs in the market. The name Atom is derived from its two traits-very small, very powerful. Hitachi split air conditioners also incorporate the patented Auto Climate Technology (ACT), which provides intelligent environment control based on the geographical location, weather conditions and time of the day. Hitachi Atom can be programmed for over 100 cities across India. The Kaimin technology enables user to adjust the temperature automatically through the night to suit individual needs. The AC can be programmed to increase the temperature progressively by 10 degree centigrade per hour, to a maximum of four hours. The new range of air conditioners saves up to 45 percent on power. The power index enables the user to track his electricity on the control panel, telling him the relative power that he is consuming at a particular setting. The window AC incorporates the patented XHE Technology, which increases the cooling capacity and reduces power consumption by more than

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100 watts. The AC comes with high capacity, high efficiency compressors and performs effortlessly even at extreme climatic conditions. Each AC is designed to perform even at 520 degree centigrade. Moreover, every AC undergoes more than 30 reliability tests to ensure trouble-free performance throughout the life of the AC. In line with its global technology, Hitachi Atom also offers international styling with a full flat blind grille. This prevents dust collection and can be easily cleaned. The window AC provides information on critical performance parameters through an innovative center and attractive grille. With new product like Hitachi Atom, the company has a target to increase its market share to about 20 percent over the next two years.

[4] Kenstar:Kenstar is one of the major players in the Indian AC market and offers wide range of ACs in both the window and split AC segments. In the window AC segment, the company offers eight models in capacities ranging from 0.75T to 2.0T. The prices range from Rs.13990 for a 0.75T AC to Rs 20990 for a 2.0T AC. Models available are both manual and electronic. In the split AC segment, the company offers seven models in capacities of 1.0T and 2.0T and is available in the price range of Rs 23990 to Rs. 31990. All the models are cordless.

[5] LG:LG has launched a premium range of air conditioners called Whisen range. The range has been developed with the realization that the market is not homogenous and that every consumer has a different needs to be catered to. The Whisen range showcases Intele, Plasma Oxy, twin power system, 3- way surround cool window air conditioners is ideally suited to match the sophisticated interiors. The range is equipped with features such as tele

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control, oxygen generator, and energy efficient compressors that allow minimum power consumption and higher cooling efficiency. The Whisen air conditioners are available in 1, 1.5, 2 and 3 tones capacities at prices ranging between Rs. 23000 to Rs. 66000. The ACs with tele control feature can be operated from anywhere with a pre-programmed telephone number with specific codes to initiate different functions. The oxygen generator feature increases the level oxygen in enclosed rooms, thereby facilitating the comfort of fresh and healthy air. The Whisen range also includes the twin power cooling system (TPS), which is equipped with twin compressors that can be put to use depending upon the room occupancy. The 3-way window air conditioner is an IT AC with 3D air flow technology, made possible because of a unique blower. The range also offers features like dual control and noise suppression technology. The Whisen range of air conditioner is expected to contribute 10 percent of overall AC sales of LG, and by the end of the season the range is expected to contribute 22 to 25 percent. The companys feature projection for this category is around 35 percent of the overall AC sales.

[6] Onida:The major achievement of onida in 2003 includes setting up of a solid network in its key priority markets and establishment of brand category association. For which the company has spent considerable resources in advertising last year. Also, the recall value among the companys target group has shown significant increase and share of mind has increased significantly for the company in this category. In 2004, the company is launching a new window and split model of 1.5T capacity, which has been designed specifically for the Indian conditions, wherein the company has used higher BTU compressors with high EER and tested at 52 degree centigrade. It is capable of handling voltage fluctuation, and features unique sine wave design for better air throw angle coverage, extra zinc coating for corrosion resistance, higher grade

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steel if thicker gauge, full function LCD remote with sleep mode and 24-hour timer and L-shaped condenser coil with large surface area for better cooling efficiency. For the 1.5 T split AC model, certain additional features have been added-extra insulation for prevention of sweating in indoor unit in addition to hydrophilic coating for the evaporator, special hinges for increasing air discharge angle to the maximum extent of 0-90 degrees, high BTU rotary compressor with high EER (10), rugged outdoor unit with 23 row L-shaped condenser coil, and a sleek and compact indoor unit equipped with a full function LCD remote. The company plans to pursue an aggressive strategy in the split AC segment this year, both in terms of penetration and pricing. The company plans to consolidate on the groundwork last year by focusing on critical markets and critical products with focused advertising and aggressive pricing. It is targeting achievements of threshold market shares in these key markets, with an aim to improve its share in the seven key cities. The campaign will be across multiple media and the total budget for the season is pegged at Rs. 3 crore. Special impetus would be given to press with focus on driving secondary. This year the company will offer only rotary ACs segments.

[7] Samsung:Samsung has launched its new sleek hurricane series of window air conditioners incorporating Silver Nano Technology. The compact hurricane series of window ACs are available in 1.5 T capacities (with remote version being available). A unique feature of the Samsung Hurricane series is the three-stage filter in the air conditioner\s, which has special coating of silver on the last stage. The hurricane series air conditioners are available at Rs. 18,500 and Rs. 20,000. The Samsung air conditioners come equipped with a tropical rotary compressor, conditioned to perform even at ambient temperature of 52 degree

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Celsius; turbo function, which makes the ACs operate under full power for 30 minutes leading to quick change of temperature; as well as 3 row cooling coil for quick cooling, low power consumption, and less load on compressor. Samsung India is also launching the new G series of split air conditioner (3 models) in the popular 1.5 T and 2.0 T capacity model comes with Samsungs patented Bionizer air purifying system, which rejuvenates and gives a feeling of freshness because of anions it produces. The new Samsung split air conditioners also come with Nano Silver technology and Bio Filters to give bacteria free, pure, and healthy air, 5-step heat exchanger for more efficient and effective cooling. The G series are priced in the range of Rs. 35,990 to 48,990.

[8] Videocon:Videocon offers one of the widest ranges of room air conditioners in the domestic market, with 13 models in the window air conditioners segment and 12 models in the split air conditioners segment. Apart from this, the company also offers six models of window air conditioners and three models of window air conditioner and three models of split air conditioners that are fitted with heat pump and can be used in all seasons. The range also covers unit from 0.8 T and 2.0 T in the window air conditioner segment and 1.0 T and 3.5 T in the split air conditioners segment, which includes cassette and tower models. The RSP of Videocon air conditioners are the benefits of ionized air. Today, the company offers six models of window AC and 12 models of split AC fitted with ionizers. Ionizers not only nullify the harmful effects of positive ions (which are pollutants and micro-organism), but also recharge the air negative ions, which have rejuvenating, refreshing, and recharged effect on the users. In terms of advertising, the media chosen includes unconventional mediums like homepage advertisement, jukebox and promotion on board with jet Airways, along with traditional mediums like press, cinema hall, TV

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commercials, etc. Shahrukh Khan, Ricky Ponting, and Steven Fleming are the brand ambassadors for the companys product range. The companys achievements in 2003 include two worldwide patents for the Quadra Heat Exchanger technology. Exports have been growing briskly and Videocon is now OEM supplier to many leading brand in Middle East. The company has successfully set up a plant at Oman and is supplying ACs to many brands that were previously buying from China and other developed AC manufacturing centers. Currently, the company is sourcing air conditioner compressors from Kirloskar Copeland Ltd. and Tecumseh in India. Matsushita, Mitsubishi, Hitachi, Toshiba, and Sanyo are suppliers for rotary compressors from their plants worldwide. Currently, about 83 percent of Videocon air conditioners production constitutes rotary compressors and 17 percent reciprocating compressors. The companys marketing strategy focuses on dealer friendly policies, which will continue to be an integral part of its marketing strategy. Today, the company is reaching out to entire length and breadth of the country with representation in each and segment of the market.

[9] Voltas:Established in 1954, Voltas is Indias premier air-conditioning and engineering services provider. It offers engineering solutions for a wide spectrum of industries in areas such as heating, ventilation and air-conditioning, refrigeration, climate control, textile machinery, machine tools, mining and construction, materials handling, water management, building management systems, pollution control and chemicals. The companys strengths lie in the design and manufacture of industrial equipment, the management and execution of airconditioning and public work projects, the procurement, installation and servicing of technology based systems, and in begins a representative of global technology leaders.

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In order to target the middle-income group, Voltas has launched a new range of air conditioners in the 0.6T, 0.8T, and 1.25T capacities. The company is also upgrading its current range of ACs to match the growing requirements of the customers. Specially targeted at the commercial segment, the company has also launched the new slim line in 1.5T variant and ductables ranging from 1.5T and 8.5T. The range of high sensible cooling ACs called sensicool for the telecom sectors adds to the widest offerings of air conditioners by Voltas. These ACs are perfect for small telephone exchanges, telecommunication centers, computers rooms, offices, medical laboratories, and other places where heat load is due to the heat generated mainly from the equipment/appliances being used and a steady inside temperature must be maintained.

[10] Whirlpool:Whirlpool has made rapid in-roads into the air conditioner segment. The company has built a strong distribution channel in a relatively short period of time. Whirlpool has been able to demonstrate both to the trade and to the consumer that the company is a committed and a serious player in this market. The focus of the company has been on selected markets, while delivering base line support to the rest of the country. About 40 percent of Whirlpool AC sales come from metros. Whirlpool offers a range of five windows ACs in 1.0T, 1.5T, and 2.0T capacities and two split ACs in 1.5T and 2.0T capacities. The split ACs are new models being introduced this year. The company has already launched the cool blast offer for the season where the consumers can get an attractive Philips DVD-Karaoke player by paying only Rs. 1,000/- more than the MRP on the companys ACs. Air conditioners will be supported through the Whirlpool master brand campaign on TV, which will raise awareness about Whirlpool air conditioners. In addition, there will be a press campaign for air conditioners to communicate the Whirlpool AC positioning. Whirlpool imports all its compressor requirements. All its ACs except Magicool 200M equipped with rotary compressors.

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CHAPTER-6 COMPARITIVE ANALYSIS OF LG AND SAMSUNG

Particular Branch offices in India Employees

LG 42 64,000

Samsung 22 123,000

LG Electronics
LG Electronics, Inc. (Korea Stock Exchange: 06657. KS.), headquartered in Seoul, South Korea, was established in 1958 and has grown into a global force in Electronics, Information and 26

communications products, with annual total revenues of US $30 billion. With more than 64,000 employees working in 75 overseas subsidiaries and marketing units around the world, LG Electronics is comprised of four main business companies including Digital Display, Digital Media, Digital Appliance, and Mobile Communications. LG Electronics is fast becoming the leader of the global home appliances industry, ranking No. 1 in sales of air conditioners, microwave ovens and canister vacuum cleaners. LG Electronics was the first company to commercialize a full line of Web-enabled home network appliances including refrigerators, washing machines, microwave ovens and air conditioners, and is increasingly seen as a leader in premium appliances, including the TV refrigerator. LGs goal worldwide is to create and enable the intelligent networking of digital products that will make consumers lives better than ever. LG Electronics (LGE) is a manufacturer of electronic appliances and devices. Its products include kitchen appliances, home entertainment products, communications devices, and electronic components. The company is headquartered in Seoul, South Korea. For fiscal 2003, LGE generated revenues of $16.8 billion, a 9.2% decrease over the previous years revenues of %18.6 billion. Net income also increased by 94.4% from $285.4 million in 2002 to $554.8 million in 2003.

Business Description:LGE is a manufacturer of electronic appliances and devices for a range of purposes. Its operations are split into three segments: Digital appliance, digital display and media, and telecommunication equipment and handset. The digital appliance segment produces general home appliances. Products include microwave ovens, vacuum cleaners, air conditioners, washing machines, and refrigerators. Digital appliance products are manufactured in Korea, China, India, Thailand, the UK, Vietnam, turkey, and Mexico. The companys digital display and media business is involved in the production of multimedia and display products, as well as core components. These include televisions, sound systems, and security devices such as cameras, computer products, motors, and compressors, the segments products are mainly manufactured in Korea, China, India, Thailand, the UK, Vietnam, turkey, Mexico, Indonesia, Poland, Kazakhstan, Egypt, Brazil, and Vietnam.

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Global and national digital leader in electronics, LG Electronics continues its gold on the global and national air conditioner market with a record sale of 10,120,000 units in 2004. According to research survey conducted by Fuji Economy Research Institute, Fuji Keizai Co, Ltd, 51,620,000 units of air conditioners was sold globally in 2004 with LG Electronics making 19.7% of the recorded sales from 18.4% in 2003. This means that LG produced one out of five air conditioners bought in 2004. The result indicted that LG global market share has consistently rise since 2000 with a sale of 4.1 million unites and there after doubled it in 2003 with 8 million units. LG Electronics plan to grow various markets commenced with establishment of production facility in China in 1995, India (1997), Brazil 2001 and Nigeria in 2003. LG also dominates the Chinese, Indian and Nigerian markets, maintaining the highest market share. A 2004 survey of the consumer electronics market in the country showed that LG recorded 15% market penetration against 5% recorded in 2003. LG Electronics currently operates eight-production facility globally with an assembly plant and a commercial Air Conditioners showroom in Nigeria. This unprecedented success is founded on LGs patented technologies. LGs Gold Fin practical application and semi-permanent heat exchanger were both first in 1999. LG also made famous such technological breakthroughs as the 5mm tube of heat exchanger in 2001 and the MPS (Multi Power System) in 2004, which acts an air cooler in the summer and a heat pump in the winter. The company also introduced the 3-dimensional air cooling system in 2000 another world first. LG complemented its pioneering effort with artistic design elements, adding renditions of world famous pieces by Van Gogh and Sisley among others on the front panel of its art cool air conditioner. The ART COOL air conditioner was introduced in the countries in 2003. In December 2004, LG achieved a new milestone, successfully reducing the production time of one air conditioner unit to 10 seconds, and that of one compressor to 5 seconds. This represents a 1.5 second improvement over the year before, which may seem insignificant but 1.5 seconds

28

makes a momentous difference in considering the entire production line. David Park, Head of Overseas Sales and Marketing of Digital Appliance Company of LG said, The speed of production has improved by 10 seconds, which means production capacity has improved by 31% over 2003. LGs unique ability to combine globalization and localization strategies has partly made this unprecedented emergence possible, as it enables the company to adapt to the needs of customers, recognizing regional, cultural, and religious differences. David Park said, We will expand markets in the new area of Commercial Air Conditioners (CAC), utilizing our strong global sales network in Residential Air Conditioners (RAC) and our role as a technology leader. We are planning to increase the number of local sales engineers to fortify our CAC networks and invest more heavily in R&D. I am confident that our solid base in RAC will help us to maintain our leadership role, this time tin the new field of CAC. We thus intend to finally cement our leadership position and become the number one air conditioner brand in both categories by 2010.

Global Success:LG has experienced success worldwide with its appliances. It is the number on manufacturer of air conditioners as well as microwave ovens in the world, according to LGs market research, and it appliances are sold in North and South America, and Asia. LGs strategy for global success has been to think globally but act locally. Developing unique marketing campaigns for each region and establishing an LG presence in those regions to directly interact with consumers in the target markets has been a key to the companys success. LG Electronics has identified the corporate segment as an assured channel to bolster sales of durable major had signed up with major banks earlier this year to provide air conditioning to their infrastructure including their ATMs. It is currently servicing UTI, IDBI, and SBI.

29

The RAC industry is growing at 20 per cent compounded annual growth rate and 22-25 per cent annually. The industry sold 11lakh units in the calendar year 2004 and is expected to sell 14 lakh units in 2005. LG holds around 34 percent market share in this industry. It sold four lakh units in 2004, and expects to sell 2.5 lakh in 2005. We have set a target of 40 percent market share next year, which will further contribute Rs 1,200 crore to the offers of LG Electronics, Mr Bajaj added. The company has set dual marketing strategy for 2005, which would include providing value for money and asking money for value. The former would target the economy segment while the latter would address the high-end segment. The marketing expenses lined up for next year is around Rs 50 crore, of which 70 per cent will be spent on mass media and the rest will be spent on below-the-line activities. Earlier, air conditioners were a luxury; today it is more like a necessity. Moreover, till last year, raw material prices dwindled, and the benefit was passed on the consumer, and hence the industry witnessed constant growth. However, this year prices of raw materials such as steel soared up, and these prices cannot support that kind of growth, and hence the modest target, pointed out Mr Bajaj. LGs RAC division has around 2,000 dealers distributing across the country. The company will add 400 more next year.

Samsung Electronics
Samsung India is a leading provider of high tech information technology, telecom, consumer electronics and home appliances products in the country. Samsung Electronics., Co Ltd. is a global leader in semi-conductor, telecommunication, digital media and digital convergence technologies with 2004 parent company sales of US$ 55.2 billion and net income of US$ 10.3 billion. Employing approximately 123,000 people in 93 offices in 48 countries, the company consists of five main business units: Digital Appliance Business, Digital Media Business, LCD business, Semiconductor Business and Telecommunication Network Business. Recognized as one of the fastest growing brands, Samsung Electronics is the worlds 30

largest producer of colour monitors, colour TVs, memory chips and TFT-LCDs. Digital Technology Leader, Samsung India plans to strengthen its Home Appliances business this year and has chalked out an aggressive strategy to achieve the same. Over 45 new models of Home Appliances - 31 new frost free refrigerator models, 8 Air conditioner models and washing machines with Silver NanoTM technology are being launched by the Company in the country. The Company is also in the process of strengthening its Home Appliance channel and S&S network for Air conditioners this Year. While the Home Appliance channel is being expanded by over 20%, the S&S channel for ACs is being trebled this Year. Samsung India is the hub for Samsungs South West Asia Regional operations. The South West Asia Regional Headquarters looks after the Samsung business in Nepal, Sri Lanka, Bangladesh, Maldives and Bhutan besides India. Samsung India which commenced its operations in India in December 1995, today enjoys a sales turnover of over US$ 1Bn in just a decade of operations in the country. Headquartered in New Delhi, Samsung India has a network of 19 Branch Offices located all over the country. The Samsung manufacturing complex housing manufacturing facilities for Colour Televisions, Colour Monitors, Refrigerators and Washing Machines is located at Noida, near Delhi. Samsung Made in India products like Colour Televisions, Colour Monitors and Refrigerators are being exported to Middle East, CIS and SAARC countries from its Noida manufacturing complex. Samsung India currently employs over 1600 employees, with around 18% of its employees working in Research & Development. Announcing the Companys plans for Home Appliances this year, stated Mr. Ravinder Zutshi, Director (Sales & Marketing), Samsung India, We are aiming at an over 40% growth in Home appliances this Year. The major driver for this growth will be our new home appliances range with Silver nano technology that is being launched in the country. Samsung plans to double the sale of air conditioners in the country this Year and expects to achieve an over 50% growth in refrigerator and microwave oven product categories. We expect to consolidate our position at the No. 2 Slot in Air conditioners this year and are expecting to achieve a leadership position in frost-free refrigerators by the year 2006 stated Mr. Zutshi. Samsung aims to attain the Premium Brand position in the Indian home appliances market by the end of the year. Samsung India today announced the commencement of exports of Made in India refrigerators to Africa, Middle East and CIS countries. Refrigerator is the second product category in its Consumer Electronics and Home Appliances portfolio that is being

31

exported from India, in addition to Colour televisions. The Company plans to export refrigerators to SAARC countries in the near future as well. We plan to export fifty thousand frost-free refrigerators in various capacities ranging from 180 L to 380L this Year stated Mr. Zutshi. The Company also plans to export 100,000 Colour televisions from its Noida facility this Year. Samsung has ambitious plans laid out for Andhra Pradesh in 2005. Highlighting Samsung Indias plans for Andhra Pradesh, stated Mr. Zutshi, We are targeting a growth of over 70% in AP this Year and expect to achieve a turnover of Rs. 250 corers from our Consumer Electronics and Home Appliances business in the state. This growth will primarily be driven by Flat TVs, ACs and refrigerators. To enhance our brand image here, we plan to set up 5 new Samsung Digital Homes / Plazas in AP this Year. Samsung plazas in Vizag and Vijaywada will be set up next month itself. Samsung India plans to double its existing network of Samsung Digital Homes and Plazas in the country this Year. In order to promote its refrigerator sales, Samsung is currently running an innovative, scratch-card based promotion Jeet Lo Dil on an All India basis. The promotion entitles a customer to an assured gift with every Samsung refrigerator purchase till 31st May 2005.Gifts worth Rs 4.5 corers are being given away as part of this Promotion. Samsung India is working with and contributing to the development of the domestic component industry in the country. The Company is working with its partners to improve their product quality and processes. Thus, Samsung vendors are sent to different Samsung subsidiaries to meet the Samsung overseas vendors in order to benchmark their own processes. Samsung is also training its vendors on eco-partnership so that the components manufactured by them are eco friendly as per ROHS norms. The Samsung Brand shop network complements the over 8500 retail points for Samsung products located across the length and breadth of the country. Samsung plans to continue enhancing its penetration levels in the country to reach out to more and more Indian consumers. Samsung strongly believes that business has a defining role in building communities, and the Samsung Digitally Hope program, is in keeping with the same spirit. Samsung Digital Hope represents Samsungs long-term commitment to the people of India and its belief in the power of technology to improve the lives of the Indian people.

32

CHAPTER 7 AC INDUSTRY IN BUSINESS ENVIORNMENT

Social Impact:Substantially low levels of penetration coupled with the growing disposable incomes will ensure greater share of wallet for the consumer durables industry. The changing lifestyles of the consumers will generate demand and need for this products. The new markets and the resultant demands will be strong influencers on this industry. With enhanced possibility of better and easy cross border talks with the suppliers worldwide the range of offerings has gone up while the cost in coming down. The narrowing gap between the branded and non branded ACs has lead to the push in sales. The growing demand or split ACs is one of the significant trends in the Indian AC market. The split AC segment accounts for 70 to 80 33

percent of the world wide AC market and this trend is fast catching up in India as well. The split AC segment is expected to contribute 30 percent to total AC sales in India in 2004 compared to the growth in split ACs the demand for window ACs growing at a slower pace but as a whole the segment continues to dominate the overall AC market in India.

Driving Forces of Air-Conditioner Industry:-

[1] Income levels:The increase in affordability levels and the high amount temperature experience in the summer months especially in the northern and western parts of the country have pushed the sales of AC. [2] Price:Demand for room air conditioner is fairly price sensitive for demands from households to spur prices have to come down significantly. A study conducted by IMRB points to a potential of 0.35 million units for unit price at 18000 though a 0.75TR unit is available at these prices their efficacy under Indian conditions is doubtful ideally. Prices should full by another 20.25% bringing a 1.5TR air conditioner on par with a CTV priced at around RS18000. On the other hand demand for central air conditioner systems are broadly price insensitive .This is so because the number of players in the segment is limited (due to infrastructure and personnel equipments) and profit margins lower than those in room ACs. [3] Reduction in Excise Duty:With a drop in RAC prices, facilitated by a reduction in excise duties combined with the heat factor, ACs has come to be accepted as utility item than a luxury one in many household. [4] Availability of Finance:One-way of making price sensitive consumers spend is to expand hire purchase schemes in the country. Hear India has made substantial studies in the 90s. Firstly, there has been a marked change in the attitude in favor of taking loans for purchasing household items. Secondly, the easy availability of consumer finance from banks and other financial institutions would induce purchases during inflationary times. Companies like Carrier Aircon, Voltas,

34

Feddrs Llyod and Godrej GE have introduced zero interest installment schemes as an option for its customers. [5] The narrowing gap:The narrowing gap between the branded and non-branded ACs has also been responsible for the push in sales.

[6] Environment:India is a country situated in the tropical zone with the weather being warm to hot in most parts of the country. With surroundings in most of our urban centers becoming increasingly polluted and awareness as regards the benefits of working in a controlled environment on the rise, the demand for ACs can only grow. [7] Opening up of the market/easy access to multi optional Inputs:With enhanced possibility of better and easy cross border talks with the suppliers worldwide, the range of offerings has gone up while the cost is coming down. [8] Entry of New players:With the number of players increasing, there has been more action throughout the year and the industry has a buzz around it with constant high pitch communication from the industry to the consumer. [9] Economic Growth:The performance of the economy, in general, also has an influence over the Air conditioner sales. In a high growth economy, rising profits would induce the infrastructure and commercial sector to go in for air conditioning system. The consumer electronics and durable industry is important in national economy as it contributes more than 5.5% to the index of industrial production. In a developing country consumer electronics industry has an important role to play in the socio-economical development of the society.

35

Technological Impact:-

The refrigerator industry is highly competitive which implies a high premium in quality of the product manufacturers of refrigerators have in general improved the quality of the product especially the reliability of the compressor in so for as new technology is concerned the concept of frost free refrigerators has been gaining popularity non CFC (Non Chlore-fluro carbons) refrigerators are being manufactured in the country but because of their high initial cost the demand is sluggish. As regards air conditioners the split air conditioning is becoming more popular with export orders form abroad manufacturers are also being encouraged to adopt environment friendly technology like, production of non CFM (Non chlore-fluro carbons) based air conditioners technologically the Indian window air conditioner industry has come a long way and is now at per with international level the earlier noise levels of 68 db are now down to 58 db for air conditioners using reciprocating compressors and even lower for those fitted with rotary compressors the energy efficiency ratio (EER) now being offered is 0.09 kw hr/tone compared with earlier figures of 1.2 kw hr/tone import of capital goods for the manufacture of non CFC refrigerator and air conditioners are being allowed duty free.

36

CHAPTER-8 DATA ANALYSIS

HOUSEHOLD SECTOR
A survey of 125 household in the urban and suburban areas of Ahmedabad was done and the following observations were made; [1] Household equipments used by families:-

100.00% 90.00% 80.00% 70.00%

% of Family

60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00%

DV D TV Co m pu te r Fr id ge ay er sy ste m ic ot he rs W av e o pl CD

M icr

Equipment used

37

M us

Equipments TV Fridge CD player DVD Computer Micro Wave Music system others

% of Family 98.60 96 45.60 36.80 61.60 32.80 42.40 20.80

Almost all the families have TV and Fridge. Very few families have Micro Wave oven at their home. [2] Have AC or Not:-

42%

58%

yes

no

Response

% of Families

38

yes No

58.4 41.6

Approximately 58 percent of families have an AC in their home and 42 percent of families do not use the AC in their Home.

[3] Number of ACs used:-

60.00% 50.00% 40.00% % of Family 30.00% 20.00% 10.00% 0.00% 1 2 3 4 5 or more

No. of AC

No. of AC 1 2 3 4 5 or more

% of People 56.16 31.50 6.85 2.74 2.74

39

In the household sector people almost used 1 or 2 ACs and do not prefer to use more than 2 ACs.

[4] No. of years for which the AC is used:-

45 40 35
% of Families

30 25 20 15 10 5 0 1 to 2 3 to 4 5 to 6
no of years

7 to 8

more than 8

No. of Years 1 to 2 3 to 4 5 to 6 7 to 8 more than 8

% of People 42.46 28.77 13.69 8.22 6.85

Around 70 percent of families used an AC for less than 4 years and 30 percent of families used an AC for more than 4 years.

40

[5] Type of ACs used:-

22.36%

77.64%

Split ACs

Windows Acs

Type of AC Split ACs Windows ACs

% of Families 22.36 77.64

A figure shows that people still prefer the window AC than the Split AC.

41

[6] Reasons for buying an AC:-

45.00% 40.00%
% of Families

35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% Necessity Status Symbol
Reasons

Both

Reasons Necessity Status Symbol Both

% of Families 34.25 24.66 41.09

Most of the people purchase an AC for both the purposes i.e. for necessity and status symbol.

[7] Brands of AC use:-

42

2 5 .0 0 % 2 0 .0 0 %
% of Families

1 5 .0 0 % 1 0 .0 0 % 5 .0 0 % 0 .0 0 % LG Voltas Hitachi Bluestar Samsung Kenstar Assembled Carrier Others

B ra n d s o f A C s

Brands of ACs LG Samsung Bluestar Kenstar Hitachi Assembled Carrier Voltas Others

% of Families 24.53 17.92 16.04 3.77 14.15 3.77 4.72 11.32 3.77

LG is preferred by most households while assembled ones are least preferred. [8] Satisfaction level from the Current brand of AC:-

43

50.00% 45.00% 40.00% 35.00%

% of Families

30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00%

Completely Somewhat Neither Somewhat completely Satisfied Satisfied Satisfied nor dissatisfied dissatisfied dissatisfied
Level of Satisfaction

Satisfaction level Completely Satisfied Somewhat Satisfied Neither Satisfied nor dissatisfied Somewhat dissatisfied completely dissatisfied

% of Families 45.21 19.18 21.91 13.70 0

Most probably peoples are satisfied with their current brand of AC and nobody is completely dissatisfied from it.

[9] Rank to the factors which are influenced the decision of Purchase of an AC:-

44

Rank Different Factors Advertise Sales promotion schemes Brand Family Friends After sales service Installment facilities Price Warranty 1 12 2 19 8 1 0 3 21 3 2 7 8 12 5 3 5 2 14 12 3 9 7 14 3 3 4 5 12 11 4 5 5 7 5 3 10 13 9 13 5 7 19 4 4 7 9 7 1 11 6 8 7 6 12 5 15 11 2 5 7 7 11 2 10 10 13 12 2 2 8 7 7 4 11 15 10 6 4 4 9 7 3 1 11 23 4 9 4 8

The above data shows that the highest factor influencing the purchasing decision of an AC is Price and the second is Brand. The lowest factor is the influence of friends for purchase of an AC.

[10] Decision makers for purchase an AC in the families:-

5 0 .00 % 4 5 .00 % 4 0 .00 % 3 5 .00 % 3 0 .00 % 2 5 .00 % 2 0 .00 % 1 5 .00 % 1 0 .00 % 5 .00 % 0 .00 % Yo u rse lf Pa re n ts C h ild re n
De c is ion m a k e rs

% of Families

Sp o u se

O th e r

45

Decision makers Yourself Parents Children Spouse Other

% of Families 47.95 24.66 0 20.55 6.85

Respondent himself is the decision maker in most of the families sometimes parents and spouse takes this decisio.

[11] Monthly income of family having AC:-

35% 30%
% of Families

25% 20% 15% 10% 5% 0% <10,000 1000015000 1500020000 Monthly income 2000025000 >25000

Monthly income <10,000 10000-15000 15000-20000

% of Families 0% 13.70% 27.40%

46

20000-25000 >25000

32.88% 26.02%

There is clear indication that less than 10000 Rs of income can not afford an AC. Families whose monthly income is more than 15,000 constitute 85%of AC holders.

[12] The reasons for not having an AC:-

35.00% 30.00%
% of Families

25.00% 20.00% 15.00% 10.00% 5.00% 0.00% High price of Heavy Acs electricity cost no need Heavy maintainance cost

Reasons

Reasons High price of ACs Heavy electricity cost no need Heavy maintenance cost

% of Families 33.33% 30.56% 23.61% 12.50%

47

More than 63% of families give the reason of high price and heavy electricity cost for not buying an AC.

[13] Planning to purchase an AC in near future:-

40.00% 35.00%
% of Families

30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% Yes No Particular Can't Say

Particular Yes No Can't Say

% of Families 36.54 34.6 28.84

Highest no of respondents have planning to purchase an AC but there is very little difference in the respondents have no plan to purchase and AC.

48

[14] Intention to buy an AC within certain time:-

45.00% 40.00% 35.00%

% of Families

30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% < 6 Months 6 - 12 Months 1 - 3 Years 3 - 5 Years Time period

Time period < 6 Months 6 - 12 Months 1 - 3 Years 3 - 5 Years

% of Families 4.76 28.57 42.86 23.81

The highest number of Families wants to purchase an AC within 1 to 3 years. Lowest numbers of families are less than 6 months.

[15] Preference for Brands of ACs:-

49

35.00% 30.00% 25.00%

% of Families

20.00% 15.00% 10.00% 5.00% 0.00% LG Samsung Voltas Carrier Worlpool Hitachi Kenstar Bluestar Brands of ACs

Brands of AC LG Samsung Voltas Carrier Worlpool Hitachi Kenstar Bluestar

% of Families 30.77 25 13.46 7.69 7.69 5.77 5.77 3.85

The highest preference of the families is for LG and the lowest preference is for Bluestar. [16] How the people got the Information about various brands and Features:-

50

35.00% 30.00% 25.00%

% of Families

20.00% 15.00% 10.00% 5.00% 0.00% A dv. In TV E xibition Hordings Radio Slid show Newspapers S ource s of Inform a tion

Particular Adv. In TV Exhibitions Hoardings Radio Slid show Newspapers

% of Families 33.04 20.18 5.50 8.26 2.75 30.27

Most of the Families got the information from TV and Newspapers and very few families are got from Slide show and Radios. [17] How will consumer like to get the AC?

51

40.00% 35.00% 30.00%

% of Families

25.00% 20.00% 15.00% 10.00% 5.00% 0.00% By procuring loan By installment Outright Purchase On lease On Rent

Particular By procuring loan By installment Outright Purchase On lease On Rent

% of Families 32.08 35.85 26.42 3.77 1.88

The data show that majority of Families purchased an AC by installment but rent is the least preferred mode of acquiring AC.

[18] Monthly income of Families not having an AC:-

52

40.00% 35.00% 30.00%

% of Families

25.00% 20.00% 15.00% 10.00% 5.00% 0.00% < 10000 10000 15000 15000 20000 Monthly Income 20000 25000 >25000

Monthly income % of Families < 10000 26.92 10000 - 15000 36.54 15000 - 20000 17.31 20000 - 25000 9.62 >25000 9.62

Monthly incomes of the majority of Families are less than 15,000 who do not have AC.

INDUSTRIAL SECTOR INDUSTRIAL SECTOR

[1] Do you use an AC?

53

% of Firms uses ACs

28.80%

71.20%

Yes

No

Particular Yes No

% of Organization 71.20% 28.80%

More than 70 percent of the organizations are using an AC. It shows that the AC becomes necessity for them.

[2] No. of ACs uses by them:50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0%

% of Organisation

No. of ACs 1 2 3

4 No. of AC

% of Organization 50 30.68 5 65.68and 7

more

54

4 5 6 7 and more

3.41 2.27 2.27 5.68

There are 80 percent of organizations using 1 to 2 ACs. 20 percent organization uses more than 3 ACs.

[3] Years for using an AC:-

60 50 % of Organisation 40 30 20 10 0 1 to 2 3 to 4 5 to 6 Ye ars 7 to 8 More then 8

Years 1 to 2 3 to 4 5 to 6 7 to 8 More then 8

% of Organizations 50.56 22.47 16.85 4.49 5.63

55

There are 50% organizations are using ACs for 1-2 years. There are approximately 6% organizations which are using ACs for more than 8 years.

[4] Type of ACs used:-

Type of AC use

Types of AC
Window, 43.62%

Split Window

% of Organization 56.38 43.62

Split, 56.38%

This shows that the split ACs are favorite in the industrial Sector but the window ACs also uses by many organizations.

[5] Reasons for buy an AC:-

56

50 45 % of Organisation 40 35 30 25 20 15 10 5 0

Necessity

Status symbol
Reasons

Both

Reasons Necessity Status symbol Both

% of Organizations 49.44 25.84 24.72

Around 50% organizations feel AC is a necessity. 25% of organizations purchase AC for both the purposes.

[6] Brands of ACs they use:-

57

25
% of organisations

20 15 10 5 Samsung Hitachi Assembled Voltas LG Carrier Kenstar Bluestar Other 0

Brands of AC

Brands of AC LG Samsung Carrier Kenstar Bluestar Voltas Hitachi Assembled Other

% of organisations 22.31 14.05 14.05 2.48 12.4 9.92 9.9 12.4 2.57

In the industrial sector LG is the most preferred brand in the segment of ACs. Kenstar is the least preferred brand in AC.

[7] Satisfaction level for the current brand of AC:-

58

40 35
% of Organisations

30 25 20 15 10 5 0
Completely satisfied somewhat satisfied Neither somewhat satisfied nor dissatisfied dissatisfied completely dissatisfied

Satisfaction level

Satisfaction level Completely satisfied somewhat satisfied Neither satisfied nor dissatisfied somewhat dissatisfied completely dissatisfied

% of Organizations 38.2 22.47 19.1 14.61 5.62

Most of the organizations are satisfied with the current brand but there are around 20% organizations which are dissatisfied with the current brand of AC.

[8] How did you got the AC?

59

45 40
% of Organisations

35 30 25 20 15 10 5 0 By procuring loan On lease By installment On rent By outright purchase

Particular By procuring loan On lease By installment On rent By outright purchase

% of Organizations 23.08 6.59 21.98 5.49 42.86

Highest no. of organizations has AC by outright purchase and very less organization has it on rent.

[9] Reason for not having an AC:-

60

40 35
% of Organisations

30 25 20 15 10 5 0
High price of Heavy Heavy AC electricity cost maintenance cost No need lack of appropreate infrastructure

Reasons

Reasons High price of AC Heavy electricity cost Heavy maintenance cost No need lack of appropriate infrastructure

% of organizations 40 30 8 22 0

Highest no of organizations give high price for not having an AC and the second highest reason is heavy electricity cost given by the organizations.

[10] Plan to purchase an AC in future:-

61

37 36
% of Organisations

35 34 33 32 31 30 29 28 27 Yes No Can't say

Particular Yes No Can't say

% of organizations 33.33 36.11 30.56

There are more than 65% of organizations which do not have planned to purchase an AC or they cant say anything about it.

[11] Intention to buy an AC within certain time:-

62

50 45 40 35 30 25 20 15 10 5 0

% of Organisations

< 6 Months

6-12 Months

1-3 Years

3-5 Years

Time period

Time period < 6 Months 6-12 Months 1-3 Years 3-5 Years

% of organizations 0 31.25 18.75 50

There are 50% of organizations think to purchase an AC after three years.

[12] Preference for the brands of AC:-

63

30 25
% of organisations

20 15 10 5
LG Voltas Samsung Assembled Vediocon Carrier Kenstar Hitachi Onida

Brands of ACs

Brands of AC LG Samsung Carrier Kenstar Hitachi Voltas Assembled Onida Vediocon

% of organizations 29.41 20.59 5.88 5.88 14.71 8.82 5.88 5.88 2.94

Hear also there is more preferred brand in the industrial sector is LG. the second is Samsung and the third is Hitachi.

[13] 35 How people got the Information about various brands And Features in industrial sector:30
% of organisations

25 20 15 10 5 0 Adv. In TV Radio Exhibition Slid show Hordings Newspapers

64

Sources of Information Adv. In TV Radio Exhibition Slid show Hoardings Newspapers

% of organizations 34.78 2.9 18.84 0 11.59 31.88

Most of the industrial people like to get the information from TV and Newspapers. Slid show is not preferred by anybody.

[14] How will you get an AC?

40 35 % of organisations 30 25 20 15 10 5 0 By procuring loan By installment outright purchase on lease On rent

Particular By procuring loan By installment outright purchase

% of organizations 28.71 37.14 20

65

on lease On rent

5.71 11.43

Most of the organizations want to get an AC by installment and by procuring loan. Very less want to get it on lease.

CHAPTER-9 RESEARCH FINDINGS

The followings are the findings based on an informal discussion with respondents as well as dealers, met during the course of information gathering. 66

Traditionally, ACs have been considered to be Luxury appliance, and therefore, the demand for ACs have either come from the institutional segment or from affluent homes in the top metropolitan cities of India. Thats no longer the case. While easy and attractive finance options have make ACs more affordable, companies are also going that extra mile to make ACs a must-have appliance in more and more middle class Indian homes. Consumers are constantly trying to raise their standard of living and are willing to spend money on residential ACs. Growth in disposable income and the easy availability of credit is encouraging consumers to purchase ACs. Now, every year the proportion of heat is increasing so more and more houses and offices are opting for split or window ACs. As their demand shoot up, manufactures are come out with improved and value added ACs. AC market is dominated by three major players LG, Samsung, Voltas. LG is a market leader with a market share of 41.1%. Samsung has consolidated its number two position with a market share of 16%. Voltas got number three position with 10% of market share. The share of unorganized sector in AC market has come down sharply in last couple of years, because of the price of branded AC and unbranded AC is narrowed down and with branded players providing good after sales service and support, the consumers prefers to buy branded ACs. The growing demand for split ACs is one of the significant trends in the Indian Ac market.

Majority of AC sales come from seven cities in India where summer temperatures raggedly cross 40 degrees Celsius. Another interesting aspect for the AC is the huge growth anticipated in two basic industries health care and entertainment. For the population of one billion people, the health care system needs to be completely revamped and the requirements for the health care in terms of hospitals and clinics are bound to keep growing. This requires air conditioning not only for cooling, but also for the quality of air. There is also boom in the entertainment industry. With the changes in life style and opening up of Pubs, Bars, Restaurant, and hotels all over the country, there is a huge demand for ACs.

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CHAPTER-10 RECOMMENDATIONS

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Due to the changes in the overall macro conditions of the AC market, products gave to be change significantly. The products would have to: Be more energy efficient. This would directly be reflected by the energy labels and it will become the reason for selecting or rejecting the particular brand. The product has to provide value for money as the buyer would be increasingly looking at the functional aspect of the AC rather than buying it to satisfy his status requirements. There is no option available on colour aspect of AC. There should be wide range of colour of AC which is suitable for the different colours of house and offices. People require small size of ACs so in future the companies have to develop new technology and make small size of AC. The major factor which is affecting the purchase of an AC is Price, so the price should be affordable to the people. To survive in this fast growing industry, players have to adapt themselves to the changing technology and rapidly changing trends.

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CHAPTER-11 CONCLUSION & BIBLIOGRAPHY

CONCLUSION
Indias competitive AC sector is poised to grow at least 25 percent a year over the next three years on the back of strong demand, duly cuts and rising incomes. Finance schemes increasing sales. are playing a very important role in

AC demand has been a movement towards more value-added models. With the number of people setting up home-offices likely to increase in future, the demand for aesthetically superior models, especially split ACs is expected to rise. If there is a scope of more than one washing machine, TV, and refrigerator at each house, there is a scope for two or three ACs in each house. Every company is trying to improve its service infrastructure and reduce the price of ACs.

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BIBLIOGRAPHY
MAGAZINES: TV Veopar Journal Business Week Business Standards

BOOKS: Philip Kotler, Marketing Management Eleventh edition

WEBSITES: www.indiainfoline.com www.domain-b.com www.lgelectronics.com www.samsungelectronics.com www.google.com

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