Videocon
Encyclopedia
Videocon is an industrial conglomerate
with interests all over the world, and is a Indian multinational company. The group has 17 manufacturing sites in India
and plants in China
, Poland
, Italy
and Mexico
. It is also the third largest picture tube
manufacturer in the world. The group is a USD 4 billion global conglomerate.
companies in India. Since 1998, it has expanded its operations globally, especially in the Middle East
.
Today the group operates through six key sectors:
The Brand Trust Report
, 2011 has ranked Videcon as the 42nd most trusted brand in India among the top 300 brands.
In India after LG entering into market Videocon was not able to stand in market with such a tough Competitor and it has seen a down fall in profits and faced a huge loss.
s.
Videocon has ever since launched a no. of Innovative handsets ranging from Basic Colour FM phones to High End Android Devices. And in February 2011, Videocon Mobile Phones launched the revolutionary concept of ZERO paise per second with pre-bundled simcards of Videocon mobile services along with 7 of its Handset Models.
Glass manufacturers in the world, operating in Mexico, Italy, Poland and China..
'. As a pioneering offer in the India
n DTH
market, Videocon offered LCD & TVs with built-in DTH
satellite
receiver with sizes 19" to 42". This concept in the DTH service is relatively new in the presence of other players like ZEE tv's Dishtv, Tata Sky, Air tel Digital Tv and Reliance's BIG TV providing only the set top box.
.
Cost cutting – Videocon was better positioned to shift the activities to low-cost locations and also it could integrate the operations with the glass panel facility in India with the CPT manufacturing facilities acquired from Thomson S.A. Videocon wanted to leverage its position in the existing parts of the business and this acquisition would give it a strong negotiation position and could reduce impact of glass pricing volatility. Videocon could also reduce the costs by upgrading and improving the existing production lines.
Vertical Integration – The acquisition helped Videocon in vertically integrating its existing glass-shell business where it had been enjoying substantially high margins. Videocon’s glass division had the largest glass shell plant in a single location. This gave the company an unrivalled advantage in terms of economies of scale and a leadership position in the glass shell industry. The acquisition also gave Videocon a ready-market for its glass business and it was part of Videocon’s long-term strategy to have a global vertically-integrated manufacturing facility.
Rationalization of Product Profile – Videocon modified its product profile to cater to the changing market needs like moving away from very large size picture tubes to smaller ones.
Apart from the overall strategy Videocon also had a plan on the technological front. It wanted to improve the setup for the production line and line speed post-merger. Its focus was to increase sales while reducing the costs and thereby improving the productivity of the existing line. The company also wanted to foray in a big way into LCD panels back-end assembly . On the sales front the company wanted to leverage on the existing clients of Thomson and build relation as a preferred supplier to maximise sales. Also, Videocon could benefit from OEM CTV business with the help of Videocon’s CTV division, invest for new models and introduction of new technologies.
, and Tubes to Videocon, Thomson divested from the audio/video accessories business which was the last unit of its consumer electronics business. The need to divest are quite evident from the losses that it incurred in these businesses particularly that the unit that it sold off to Videocon, the Optical Modules activity, and the Audio/Video & Accessories businesses which totalled around €749 million for 2005. Moreover Thomson had done some acquisitions that were in line with boosting their revenues in the following years.
, Philips
, Samsung
and Matsushita
, Daewoo
and several Chinese manufacturers but finally managed to close the deal. The deal catapulted Videocon into the No. 3 slot in the global pecking order for CPTs. An official of Videocon said on the deal "The word is out in the world that India and Indian companies are not just a good bet by themselves, but also a hedge against China.“
Price pressures similar to those in the past(-8 to -12%),capacity reduction over a period of two years, a gradual shift to newer technologies like True Flat and good amount of growth for LCD makers.
The second scenario is a more aggressive one in term of trends predicted. It assumes that the switch to TrueFlat would be faster, more overcapacity, more competition from LCD manufacturers and rising price strategy pressures in general. The second scenario obviously requires an industrial strategy which is more adapted to the environment.
However even if the second scenario arises,Videocon believes there is an opportunity in the CRT business. Though it is very obvious that in the developed markets of the western world the demand is shifting towards the flat panel side(FPD it is expected to contribute 70% of TV market in these regions),in the emerging markets like BRIC CRT still holds fort. CRT holds a dominant 70% share in these markets. When translated into number of units the demand is more than 100 million units. As Videocon is primarily based in these countries, it hopes to harness the value of the Thomson acquisition in the coming years.
The Thomson plant has not turned around in Mexico as well and in fact production has been reduced over there.In Poland,the situation is more promising and Videocon hopes that plant over there will get in black in the very near future. However the surprise has been in the Chinese market .Despite facing a highly competitive market Videocon has managed to turn a plant around while the other is on its way. In China Videocon is adopting a different strategy for manufacturing CTVs as the local players dominate the market .It plans to supply these players by taking advantage of low-cost nature of mainland(the number targeted by it about 6 million CPTs).
However Videocon Industries has a view that it would expand in the country only if the government gives it enough incentives. Videocon is demanding a 25-30% cash benefits from the government of Mexico.
(GE) to bid for its century-old appliances division
, which it has put up for sale.
Conglomerate (company)
A conglomerate is a combination of two or more corporations engaged in entirely different businesses that fall under one corporate structure , usually involving a parent company and several subsidiaries. Often, a conglomerate is a multi-industry company...
with interests all over the world, and is a Indian multinational company. The group has 17 manufacturing sites in India
India
India , officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world...
and plants in China
China
Chinese civilization may refer to:* China for more general discussion of the country.* Chinese culture* Greater China, the transnational community of ethnic Chinese.* History of China* Sinosphere, the area historically affected by Chinese culture...
, Poland
Poland
Poland , officially the Republic of Poland , is a country in Central Europe bordered by Germany to the west; the Czech Republic and Slovakia to the south; Ukraine, Belarus and Lithuania to the east; and the Baltic Sea and Kaliningrad Oblast, a Russian exclave, to the north...
, Italy
Italy
Italy , officially the Italian Republic languages]] under the European Charter for Regional or Minority Languages. In each of these, Italy's official name is as follows:;;;;;;;;), is a unitary parliamentary republic in South-Central Europe. To the north it borders France, Switzerland, Austria and...
and Mexico
Mexico
The United Mexican States , commonly known as Mexico , is a federal constitutional republic in North America. It is bordered on the north by the United States; on the south and west by the Pacific Ocean; on the southeast by Guatemala, Belize, and the Caribbean Sea; and on the east by the Gulf of...
. It is also the third largest picture tube
Picture tube
Picture Tube may refer to:Electronics*cathode ray tube, a common component of electronics such as televisions and other displaysGraphics...
manufacturer in the world. The group is a USD 4 billion global conglomerate.
Corporate profile
The Videocon group has an annual turnover of 4 billion USD, making it the largest consumer electronic and home applianceHome appliance
Home appliances are electrical/mechanical machines which accomplish some household functions, such as cooking or cleaning. Home appliances can be classified into:*Major appliances, or White goods*Small appliances, or Brown goods...
companies in India. Since 1998, it has expanded its operations globally, especially in the Middle East
Middle East
The Middle East is a region that encompasses Western Asia and Northern Africa. It is often used as a synonym for Near East, in opposition to Far East...
.
Today the group operates through six key sectors:
The Brand Trust Report
The Brand Trust Report
The Brand Trust Report, India Study, 2011 is published by Trust Research Advisory . The book is a result of a syndicated primary research on Brand Trust that generated 10,00,000 data points and 16,000 unique brands from over 10,000 hours of fieldwork conducted in 9 cities TRA’s study partners in...
, 2011 has ranked Videcon as the 42nd most trusted brand in India among the top 300 brands.
Consumer electronics
In India the group sells 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.In India after LG entering into market Videocon was not able to stand in market with such a tough Competitor and it has seen a down fall in profits and faced a huge loss.
Mobile Phones
In November 2009 Videocon launched its new line of Mobile PhoneMobile phone
A mobile phone is a device which can make and receive telephone calls over a radio link whilst moving around a wide geographic area. It does so by connecting to a cellular network provided by a mobile network operator...
s.
Videocon has ever since launched a no. of Innovative handsets ranging from Basic Colour FM phones to High End Android Devices. And in February 2011, Videocon Mobile Phones launched the revolutionary concept of ZERO paise per second with pre-bundled simcards of Videocon mobile services along with 7 of its Handset Models.
Colour picture tube glass
Videocon is one of the largest CPTCPT
CPT or Cpt may stand for:* Captain , a rank or title* CBS Paramount Television, a former TV branch of CBS now known as CBS Television Studios* Certified Penetration Tester, a penetration testing certification offered by the IACRB...
Glass manufacturers in the world, operating in Mexico, Italy, Poland and China..
Oil and Gas
An important asset for the group is its Ravva oil field with one of the lowest operating costs in the world producing 50,000 barrels of oil per day.DTH
In 2009, Videocon launched its DTH product, called 'd2hVideocon d2h
Videocon d2h is one of the largest Indian pay TV provider, providing direct broadcast satellite service—including satellite television, audio programming, and interactive television services—to commercial and residential customers in India...
'. As a pioneering offer in the India
India
India , officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world...
n DTH
DTH
DTH may refer to:* The Daily Tar Heel, a student newspaper at the University of North Carolina at Chapel Hill* Dance Theatre of Harlem, New York City* Danmarks Tekniske Højskole, a previous name for the Technical University of Denmark...
market, Videocon offered LCD & TVs with built-in DTH
DTH
DTH may refer to:* The Daily Tar Heel, a student newspaper at the University of North Carolina at Chapel Hill* Dance Theatre of Harlem, New York City* Danmarks Tekniske Højskole, a previous name for the Technical University of Denmark...
satellite
Satellite
In the context of spaceflight, a satellite is an object which has been placed into orbit by human endeavour. Such objects are sometimes called artificial satellites to distinguish them from natural satellites such as the Moon....
receiver with sizes 19" to 42". This concept in the DTH service is relatively new in the presence of other players like ZEE tv's Dishtv, Tata Sky, Air tel Digital Tv and Reliance's BIG TV providing only the set top box.
Telecommunication
Videocon Telecommunications Limited has license for mobile service operations across India. It launched its services on 7 April 2010 in MumbaiMumbai
Mumbai , formerly known as Bombay in English, is the capital of the Indian state of Maharashtra. It is the most populous city in India, and the fourth most populous city in the world, with a total metropolitan area population of approximately 20.5 million...
.
Acquisition of Thomson SA
Videocon through its Wholly Owned Offshore Subsidiary acquired the Color Picture Tube (CPT) businesses from Thomson S.A having manufacturing facilities in Poland, Italy, Mexico and China along with support research and development facilities.Acquisition Rationale
The acquisition came at a time when Thomson was facing a fall in demand in developed markets for television with CPTs and was moving more towards Flat-screen and Plasma Television. However, Videocon saw an opportunity in the emerging countries for CPTs and hence pursued with the acquisition. Besides, the acquisition gave Videocon, the access to advanced technology giving the company control over an R&D facility in Agnani, Italy. The major reasons behind this acquisition . wereCost cutting – Videocon was better positioned to shift the activities to low-cost locations and also it could integrate the operations with the glass panel facility in India with the CPT manufacturing facilities acquired from Thomson S.A. Videocon wanted to leverage its position in the existing parts of the business and this acquisition would give it a strong negotiation position and could reduce impact of glass pricing volatility. Videocon could also reduce the costs by upgrading and improving the existing production lines.
Vertical Integration – The acquisition helped Videocon in vertically integrating its existing glass-shell business where it had been enjoying substantially high margins. Videocon’s glass division had the largest glass shell plant in a single location. This gave the company an unrivalled advantage in terms of economies of scale and a leadership position in the glass shell industry. The acquisition also gave Videocon a ready-market for its glass business and it was part of Videocon’s long-term strategy to have a global vertically-integrated manufacturing facility.
Rationalization of Product Profile – Videocon modified its product profile to cater to the changing market needs like moving away from very large size picture tubes to smaller ones.
Apart from the overall strategy Videocon also had a plan on the technological front. It wanted to improve the setup for the production line and line speed post-merger. Its focus was to increase sales while reducing the costs and thereby improving the productivity of the existing line. The company also wanted to foray in a big way into LCD panels back-end assembly . On the sales front the company wanted to leverage on the existing clients of Thomson and build relation as a preferred supplier to maximise sales. Also, Videocon could benefit from OEM CTV business with the help of Videocon’s CTV division, invest for new models and introduction of new technologies.
Thomson’s perspective
In 2004 Thomson planned entry into the high-growth digital media and technology business. Also, Thomson wanted to exit consumer and electronics businesses as they were incurring significant losses. After sale of its TV business to Chinese group TCLTCL
TCL or Tcl may mean:* Biochemistry** TCL * Companies** TCL Corporation, a Chinese electronics company** Twin City Lines, former public transit via streetcar in Minneapolis*Computer languages...
, and Tubes to Videocon, Thomson divested from the audio/video accessories business which was the last unit of its consumer electronics business. The need to divest are quite evident from the losses that it incurred in these businesses particularly that the unit that it sold off to Videocon, the Optical Modules activity, and the Audio/Video & Accessories businesses which totalled around €749 million for 2005. Moreover Thomson had done some acquisitions that were in line with boosting their revenues in the following years.
Other Competitors for the Acquisition
When Videocon entered the race for the colour picture tubes manufacturing capacity of Thomson SA in November 2004, there were 16 other bidders. Videocon stood slim chances given the fact that it had to battle it out with players like LGLG
LG may refer to:*LG Corp., a South Korean electronics and petrochemicals conglomerate*LG Electronics, an affiliate of the South Korean LG Group which produces electronic products* Lawrence Graham, a London headquartered firm of business lawyers...
, Philips
Philips
Koninklijke Philips Electronics N.V. , more commonly known as Philips, is a multinational Dutch electronics company....
, Samsung
Samsung
The Samsung Group is a South Korean multinational conglomerate corporation headquartered in Samsung Town, Seoul, South Korea...
and Matsushita
Matsushita
Matsushita is a Japanese place name and surname which means "below the pine tree" and may refer to:-Companies:*Matsushita Electric Industrial, now Panasonic Corporation, a multinational electronics corporation based in Kadoma, Japan...
, Daewoo
Daewoo
Daewoo or the Daewoo Group was a major South Korean chaebol . It was founded on 22 March 1967 as Daewoo Industrial and was dismantled by the Korean government in 1999...
and several Chinese manufacturers but finally managed to close the deal. The deal catapulted Videocon into the No. 3 slot in the global pecking order for CPTs. An official of Videocon said on the deal "The word is out in the world that India and Indian companies are not just a good bet by themselves, but also a hedge against China.“
Pre-merger scenario analysis
CPT industry is affected by many competitive factors such as change in the consumer preferences ,the product offer strategy of retailers, the progress made by alternative technology manufacturers ,capacity adjustment facility of competitors etc. Based on all of these factors there were two scenarios that emerged from the 2005 budget of Videocon. The first scenario is a conservative one. It mainly assumesPrice pressures similar to those in the past(-8 to -12%),capacity reduction over a period of two years, a gradual shift to newer technologies like True Flat and good amount of growth for LCD makers.
The second scenario is a more aggressive one in term of trends predicted. It assumes that the switch to TrueFlat would be faster, more overcapacity, more competition from LCD manufacturers and rising price strategy pressures in general. The second scenario obviously requires an industrial strategy which is more adapted to the environment.
However even if the second scenario arises,Videocon believes there is an opportunity in the CRT business. Though it is very obvious that in the developed markets of the western world the demand is shifting towards the flat panel side(FPD it is expected to contribute 70% of TV market in these regions),in the emerging markets like BRIC CRT still holds fort. CRT holds a dominant 70% share in these markets. When translated into number of units the demand is more than 100 million units. As Videocon is primarily based in these countries, it hopes to harness the value of the Thomson acquisition in the coming years.
Post merger situation (2008)
Videocon has not been able to turn the plant around in Italy still. However it is getting support from the local government(which want to prevent job cuts) in form of grants. The government is in fact trying to set up a Greenfield venture in form of a LCD manufacturing facility in partnership with Videocon. The banks are also supporting Videocon and with help from all these quarters Videocon expects to turn around the plant in Italy.The Thomson plant has not turned around in Mexico as well and in fact production has been reduced over there.In Poland,the situation is more promising and Videocon hopes that plant over there will get in black in the very near future. However the surprise has been in the Chinese market .Despite facing a highly competitive market Videocon has managed to turn a plant around while the other is on its way. In China Videocon is adopting a different strategy for manufacturing CTVs as the local players dominate the market .It plans to supply these players by taking advantage of low-cost nature of mainland(the number targeted by it about 6 million CPTs).
Italy
The LCD television segment is one of the fastest in terms of growth rate in Italy. The compounded growth rate is projected to be around 70% in the next few years. Videocon in partnership with the local government is going for a Greenfield venture in this segment. The Italian central government is giving a euro 180 million grant whereas the regional authorities are giving a 40 million grant. Videocon would itself pitch in with about euro 300 million whereas bank loans would provide a further 700 million.China
In the Thomson plant located in China the local Chinese Government is the minority shareholder.Mexico
When Videocon acquired Thomson’s CPT business, it also gained control of Thomson’s Mexican plants.However Videocon Industries has a view that it would expand in the country only if the government gives it enough incentives. Videocon is demanding a 25-30% cash benefits from the government of Mexico.
Thomson’s exit from Videocon
Thomson is looking to sell out its stake in Videocon (a 10 percent stake via GDRs) and in most likelihood it would be bought by Videocon itself. Thomson would be exiting at a loss as it had acquired the stake at around Rs 400 per share (approximately equal to $10 per share).The deal is expected to happen at current market prices. Videocon’s GDR is currently traded at around $5.06 on the Luxembourg Stock Exchange. On the Bombay stock exchange its trading around Rs 150 against the 52 week high of Rs 868 in Jan 2008. Another point to be noted is that this won’t attract the market regulator’s “creeping acquisition” norm which comes into force once they acquire more than 5% stake,as the deal would be an overseas one.Possible purchase of General Electric's Appliance division
On May 23, 2008, Videocon announced that it is studying an invitation from General ElectricGeneral Electric
General Electric Company , or GE, is an American multinational conglomerate corporation incorporated in Schenectady, New York and headquartered in Fairfield, Connecticut, United States...
(GE) to bid for its century-old appliances division
GE Consumer & Industrial
GE Consumer & Industrial is a subsidiary of General Electric headquartered in Louisville, Kentucky at Appliance Park. GE Consumer & Industrial is one of the largest suppliers of appliances in the world. It was created in January 2004 when GE Consumer Products merged with GE Industrial Systems...
, which it has put up for sale.