Videocon set for operational rejig

Videocon may merge some of its factories to improve efficiencies and boost sales in a bid to gain an upper hand on competitors Samsung, Whirlpool and LG.

"The factories need consolidation and control as they operate independently with different human resource (HR) and logistic policies. The segmented operations cannot have power and focus on quality," K R Kim, vice-chairman and CEO (global operations), Videocon, who steered LG to market leadership in his earlier stint, told Business Standard.

The segmented production capacities and lack of focussed approach has hindered Videocon in the race against new multinational entrants in the domestic consumer durable space, he said.

The Aurangabad-based company may consider merger or closure of some of its 10 units after studying the tax benefits and synergies.

"It will take time as the company has invested in setting up capacities in tax benefit zones. There is not only an efficiency problem but also tax and legal obligations," Kim said.

The company aims to grow its overseas business by more than three-fold in three years by developing new brands to achieve sales of $1 billion. It expects to grow about 20 per cent each year.

Videocon also aims to improve quality control and implement a common HR and administrative policy to boost efficiencies by at least 50 per cent. It plans to name a quality control officer on the national level to ensure quality across all functions and units.

The fresh investments in research and technology, manpower and testing equipment would be another move towards stepping up its productivity. The induction of new technology is critical for Videocon to introduce premium brands in the domestic as well as in international markets.

"The R&D will allow us to introduce localised products and effectively source good components, thus enabling to substitute expensive imported components with domestic components. We will also need good technology to introduce premium quality of products."

Videocon is grappling with maintaining its market share in the domestic consumer durable market as multinationals have dominated the trade in the last few years.

The Videocon brand is percieved to be a mass brand with more appeal in the rural markets. Kim plans to form a clear cut distribution strategy by appointing regional business heads for each of the four regions in the country who will be responsible for distribution policies of brands in the respective markets.

The former managing director of LG Electronics is also mapping a similar strategy for Videocon's global foray. Ajay Kapila, an ex-LG head of sales and marketing, who was working with Dubai-based consumer durable retailer Jumbo Electronics, has been roped in to head the Dubai operations.

Another former Panama-based South Korean LG employee has been asked to move from Brazil to steer Videocon's operations in Panama.

India is also expected to see a similar picture with a number of ex-LG India employees touted to join Kim's team.

Being tight lipped about the Indian names, Kim said, "I want to pick up good people with experience in particular markets for the global operations. In India, we need quality as well as discipline. I will not disturb the exiting LG team but recruit former employees who have trained under me."