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May 12, 2000


The Rediff Business Special/Neena Haridas

China's Konka steers clear of hardselling, adopts conservative approach in India

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It's now the turn of the Chinese to sweep the Indian white goods mart after the Japanese and the Koreans created a buzz with their superior products here.

No sooner did the Japanese come with their cars, televisions, refrigerators, air-conditioners, music systems and electronic gadgets to India than the Koreans followed carrying a similar arsenal. Korean and Japanese companies like Daewoo, LG Electronics, National Panasonic, Sony, Aiwa and Akai then proceeded to take the markets by a storm.

The Chinese hitherto had only been tickling Indian palates with their fine cuisine, but Konka India is set to change all that. The Beijing-based $2-billion major has caught on to the potential of the Indian market and plans to establish itself as a leader in the white goods segment.

The company plans to toe an aggressive pricing line in the Indian marketplace. Aggressive pricing should not imply hardselling. "There was lot of scepticism when Konka brought its consumer electronics goods to India because Chinese products were not regarded at par with their Japanese counterparts," says R B Tandon, vice-president, Konka India.

"However, we have decided to let our products speak for themselves," he adds.

Konka has not resorted to heavy advertising to bolster its claims. Unlike its Japanese and Korean counterparts, Konka is going slow on promotion.

"There was some advertising when we arrived in the market. We will advertise in a phased manner, depending on the products we launch," says Tandon.

Konka is increasing its reach slowly. First, it brought its colour televisions to the market about seven months ago. In the second phase of the expansion, it entered into a memorandum of understanding with Delhi-based Kaenyx International Limited for marketing its digital video discs, or DVDs, and telephone instruments.

In the current phase, the Chinese major has signed a similar agreement with Delhi-based Airvision India Limited for assembly of washing machines. Konka India's products

"We will launch all these products in the next three to four months. We will introduce fully automatic and semi-automatic washing machines in the 5.2 to 6.1 kg range, as also a slew of telephone instruments and DVDs. However, we are not entering the cellphone market now," says Tandon.

The roll-out plan for the next two years includes 22 models of colour televisions, two models each of digital video disk players and video compact disk players, semi-automatic and automatic washing machines, refrigerators, air-conditioners and microwave ovens.

Besides, the launch of corded and cordless telephone instruments, mobile phones, fax machines and colour computer monitors for the office automation segment are also on cards. This is in addition to the high-end audio systems which it plans to introduce.

"We are expanding gradually, but steadily. We have not entered the market with the inflated vision of the 250 million middle class. Konka has the experience of an even larger market in China. The most important thing for a marketer is to understand how many people have purchasing power. Hence, we have a conservative figure in mind," Tandon says.

With this conservative attitude, Konka managed to sell around 60,000 units of colour television sets till March 2000, accounting for about 7 per cent of the north Indian market.

Says Tandon, "We started off with operations in the northern states and then moved on to the western and eastern regions. As with our product portfolio, our geographical expansion too has been gradual. In the next four months, we will be moving south. The point is we want to be well entrenched in an area before taking up a new region."

Is lack of brand awareness the reason for extreme caution? Explains Tandon, "Well, frankly, we did not enjoy much brand recall when we started operations in India. However, the going has been good so far. Our strategy has been to create brand awareness, which is then followed by efforts to establish the brand."

One of the techniques that the Chinese firm is adopting is to entice the Indian consumer with "affordable" products in the market. Unlike LG, Grundig or Thomson, 'Konka is for everybody'.

"Our product range will span super-premium, premium, popular and economy segments. Initially, the products will be imported from China. Indigenisation will be done at a steady pace ensuring high product quality and global standards. We are going to aggressively market our colour televisions, or CTVs, in the rural and urban markets.

"We believe that a CTV, a refrigerator, a washing machine and a music system are a necessity. We want every middle class home to own each of these products. In fact, we want each household to own more than one CTV. In China there are normally three to four TV sets in each home. This is why our pricing strategy hinges on 'affordability'. For instance, today we offer one of the most inexpensive CTVs in the market: we recently launched a 21-inch TV priced at less than Rs 9,000," adds Tandon.

It is probably this pricing strategy that has paid off for the company, giving it about 7 per cent share of the north Indian market. The share is expected to grow to at least 15 per cent this fiscal in view of the company planning a national distribution system.

When fully operational, the company's Greater Noida plant will have an installed capacity to produce 500,000 units annually in two shifts, Tandon says.

The company plans to invest Rs 5 billion in India over a two-year period starting 1999 and plans to set up a state-of-the-art manufacturing base for exports to European and West Asian markets as well.

"Konka's agenda is to change the Indian mindset so that the upper middle class people keep a 29-inch TV in the sitting room and 21-inch sets in other rooms. Within three years, we will change the Indian habit. India then will be the second largest market after China for Konka.

"This implies that there is a huge untapped market for CTVs in India. We will not have much difficulty in changing the behaviour of customers here. Twenty years ago, China too faced a similar hurdle. We are going to sell the idea of bigger CTVs in India and capture the existing black-and-white TV market for our CTVs," says Tandon.

The television and washing machine segment, which Konka is expected to focus on, is one of the fastest growing markets in India. The total CTV market in India was five million in 1999 and the company expects that it will increase by ten to 20 per cent this year.

This is in sharp contrast to the projections of the Consumer Electronics and Television Manufacturers Association, or CETMA, which feels that the market may see negative growth in the coming year.

However, what do the Korean and Japanese counterparts think of their Chinese competitor? Says a senior official of Korean white goods major Samsung: "It will be a tough ride for Chinese companies to make it big in the white goods market because they do not have an edge in this business. But then India is a very price-sensitive market and this might prove to be a boon for these companies."

The Japanese, however, seemed less bothered by the Chinese foray into Indian territory. Says an official with National Panasonic: "We are known for our expertise in this field and we have been in the business in India for several decades. We don't have to work on brand awareness or brand recall, and I believe competition is always welcome. It makes us work harder and improve our products."

So where does Konka see itself in the next couple of years. "The good thing is that the Indian market is growing rapidly. It will, thus, be much easier for us to establish ourselves here as compared to the players who came earlier. I see ourselves among the top five companies in the next couple of years with a much larger portfolio and much better price offerings," says Tandon.

Konka India is a joint venture with the Konka group of China holding 51 per cent stake, Hotline group of India holding 25 per cent stake, and Wittis group of Hong Kong holding 24 per cent stake in the Rs 500 million equity. The company is expecting sales of Rs 2.5 billion and plans to break even in the first year of operations.

In China, Konka sells seven million CTVs annually and leads the market with 24 per cent share. The company's automated plants can assemble a CTV set in 13 seconds. Konka claims to be a market leader in Australia, New Zealand and Indonesia as well, with a new model of CTV being introduced every third day. It also has manufacturing facilities in Australia, Indonesia, Mexico and the United States.


Konka to 'change Indian mindset' on CTVs

Konka puts off launch of washing machines, telecom equipment to September

Konka sews up grand plans for India's white goods market

Konka to launch Internet-ready and computer TVs in India

India hub for Konka exports to SAARC nations

Konka to launch washing machines, telecom gadgets



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