Electronics Value Chain Management - EVCM !

Global Value Chain in Electronics Industry!

Recently I came across the concepts of “Global Value Chain”, “Electronic Value Chain Management (E.V.C.M.)” & “Value Chain Modularity”. Till now I have had heard about simple good old Michael Porter’s Value Chain. What could this word “Modularity” possibly mean? Started surfing in net for some material which would be little easier for me to understand. I wonder, where would I possibly have gone if there was no “Google”! Ran though some really interesting articles. Whatever I understood I am sharing with you & will try to make it as simple as possible.

 

Electronic Hardware Industry is one of the most crucial goods producing sector, generating greater revenue than any other industry and gives employment opportunity to a huge base of skilled human resources. The electronics manufacturing industry enhances the output productivity of other industries as well, adding value to the other industry value chain. As a result it is entitled as the “Propulsive Sector”. Thousands of odd companies from different countries contribute to the industry on day to day basis. Even a single product can contain work carried out by ten different firms in multiple countries.

 

There are mainly 3 major players in the industry – the Lead Companies (Contract givers), the Contract Manufacturers, and the Platform Providers (the Software Firms). They all the interdependent for their sheer existence and growth. There are many hitches and death traps for the Electronics firms to overcome. The developed countries get better facilities, whereas the developing countries struggle harder to sustain in this highly competitive market scenario. 

 

In the developing countries the electronics firms uses 4 strategies to overcome these limitations.

(1) global expansion though acquisition of declining brands (emerging multinationals);

(2) separation of branded product divisions from contract manufacturing (original design manufacturing (ODM) spinoffs);

(3) successful mixing of contract manufacturing and branded products (platform brands) for contractors with customers not in the electronic hardware business; and

(4) the founding of factory-less product firms that rely on global value chains for a range of inputs, including production (emerging factory-less start-ups).

 

Strategic Action Plan could be, Attract FDI from component manufacturers, Form joint ventures with component manufacturers, Manufacture under license, Move away from contract manufacturing to ODM and OBM, Establish Design Services, Establish Support Industries, Establish a Branding Strategy (Via subsidiaries, Via links with buyers).

 

For further studies please refer the below mentioned .pdf materials. These are very enriching and indepth informative research papers.

 

http://www.unescap.org/tid/projects/sasme_s4b.pdf http://unstats.un.org/unsd/trade/s_geneva2011/refdocs/RDs/GVC%20in%20Electronics%20Industry%20%28Sturgeon%20-%20Sep%202010%29.pdf
http://elibrary.worldbank.org/content/workingpaper/10.1596/1813-9450-5417
http://spectrum.ieee.org/webinar/1705632

Present & Future of Electronics Industry in India!

It all started sometime around 1965 in India. India's giant leap towards the Electronics Industry. It was an era of Radios, Black & White TV, Calculators and other Audio Products. Then came the era of Color Television. It was the year 1982 when Indian Government took initiative to import more number of Color TV sets to make it possible for the Indian citizens to enjoy the direct broadcast of Asian Games happening in New Delhi. Then slowly but gradually came Telephone and Computers.

In the last decade the electronics industry has seen a rapid and healthy growth. With a steady increase in demand the Industry Gurus are predicting a lucrative market of US$ 400 billion (INR 21,66,000 Crores) by 2020. And the most booming sector among electronic industry would be the Consumer Electronic Goods segment. Indian electronic industry has showed us an excellent growth from INR 54 billion (2007-2008) to INR 79.48 billion (2011-2012). Indian electronic industry mainly manufacture and exports components for foreign companies. The total demand of global electronics hardware production is US$ 1.7 trillion (INR 92,05,500 Crores) and Indian electronic industry caters to only 1.3% of this huge global demand. Indian Consumer Electronics and Durable industry is now worth INR 340 billion and caters to the global demand exporting components for Display Technologies, Entertainment Electronics, Optical Storage Device, Passive Components, Electro-mechanical components, Telecom Equipments, Transmission & Signalling Equipments, Semiconductor Designing and Electronic Manufacturing Services.

With such an present scenario, India acting as a thriving market for mobile phones. Every month about 2 million Indians start using mobile phones. Telecom industry alone is penetrating the total Indian electronics industry at a brisk rate of 10%. Other than Telecom, Auto Electronics, Consumer Electronics, Industrial Electronics and Medical Electronics sectors are also showing high and steady growth. The industry analysts are now predicting a market of more than US$ 150 million for Indian electronics industry.

The present Indian electronics industry market and the growth is alluring the global players. Companies like Solectron, Flextronics, Jabil, Nokia, Elcoteq have come forward to invest in Indian market. Even Korean Electronics Giants like LG & Samsung have committed to establish manufacturing facilities in Indian territory. Total 50 Electronics Manufacturing Services & Original Design Manufacturers providers are operating in India, both global player like Solectron, Flextronics as well as Indian players like Deltron, TVS Electronics, Sahasra etc.

One most crucial and significant reason for the internationally acclaimed player to get interested to start manufacturing plants in India is "HUMAN RESOURCE". India is saturated with highly educated and unemployed human resources. Both skilled and unskilled employees are waiting to get an opportunity to grab on. Labor cost for manufacturing electronics goods and services in India is about 30-40% cheaper than the same in US or Western Europe.

So one conclusion I can draw without much hesitation is that, the day is not so far, when Indian Electronics Industry will be poised in the pinnacle of the global scenario and India will be the Epicenter of the global electronics industry.

Webliography:
http://www.assocham.org/prels/shownews-archive.php?id=3458
http://www.cci.in/pdf/surveys_reports/electronics-industry.pdf
http://www.ventureoutsource.com/contract-manufacturing/top-10-ems-odm-reviews-and-ratings/

Philips Electronics India Limited - Potential Solutions!

As a student of Brand Management, Strategic Marketing and Global Brand Strategy, I would suggest the Management of Philips to first go for an qualitative interview (better to have Focus Group interview) with their loyal set of Indian customers, if any. Through this they must try to find out the top 4-5 values which drives those loyal customers to buy Philips products. What they feel, perceive and if there is any sense of Pride for having a Philips product in their daily routine etc. Even what they would love to have from Philips and how/where they want to see Philips in the future etc as well. This will give them the idea about the theme or concept they need to push and emphasize upon more and more via all their Integrated Marketing Communication.

Secondly they need to prudently divide the Indian Consumer Electronics Market into precisely distinguished segments. considering each of Demographic, Economic, Technological and Social parameters and their effects on the customer's buying behavior. After that they will have to prudently realign their product range and brands with those segments. It will give them clearer picture and better idea about the theme they should go for each product range and will be able to hit the precise target segment of customers. A particular segment or class of customers like to a particular type and level of ads for almost every product available on planet earth. Different segment of customers understands and attuned to a particular type of communication. It is the work of the marketing and branding manager to hone that very language (using IMC) to communicate with the target customers. Phillips as a global brand have to know what communication language or tone their customer wants to hear and start speaking in that manner.

Why Philips has gone for one single advertisement for all product line and for every segment of Indian Market is a matter which I fail to understand. When I see Sony ads, I see different ads for different segments or class of brand. People who have the money and capability to buy a prestige and class brand will never be convinced and awed with the same type of ad which captures the middle class or lower strata of customers. Even the ads should be shrewdly differentiated for Urban buyers and Rural buyers. And not all Indians are Tech Savvy and Research Scholars to understand the depth and awe of the innovation Philips using in its product. It is either the glamor quotient or the bare functionality that matters the most. Philips with its consumer durable electronic goods cannot expect that kind of super tech savvy costumers altogether which Apple Inc. might be enjoying.

So simply dangling the carrot of Innovation in front of vast customer base of Indian market is not going to do any good, until you know what your customer really wants to eat!

Philips Electronics India Limited - Actual Problems!

As they write in their Strategic Focus agenda, as quoted from

http://www.sec.gov/Archives/edgar/data/313216/000095012310015062/u08188exv15wxby.htm

"Meeting people’s needs with “sense and simplicity”
 

People’s needs form the starting point for everything we do. By tracking trends in society and obtaining fundamental insights into the issues people face in their daily lives, we are able to identify opportunities for innovative solutions that meet their needs and aspirations.

Our “sense and simplicity” brand promise expresses a commitment to put people at the center of our thinking, to eliminate unnecessary complexity and to deliver the meaningful benefits of technology. Our adoption of Net Promoter Score (NPS), which measures people’s willingness to recommend a company/product to a friend or colleague, shows how we are doing in this respect."

They are not doing it on a localized basis. When a brand goes global, they target more and more local markets. Their main intention remains, to reach out to more diverse customers with different cultural and social buying behaviors. To do that they need to customize their brand according to the local requirements/demand. As the marketing Gurus say "Think Globally, Act Locally" - the mighty Glocal concept!

Which seems the Philips management is not very keen to work on for their brands marketed in India. What kind of add on values they have to provide to cater the Indian customers or what sort of advertisements they should come up with to attract new customers and to retain the brand image in the existing customer's mind, are some of the very crucial points which they seem to be not so inclined to.

Though they have mentioned in their official website that -

"Philips Electronics India Limited,... is the leading Health and Well-being company. Today, Philips is a simpler and more focused company with global leadership positions in key markets of Healthcare, Lighting and Consumer Lifestyle, addressing people’s Health and well-being needs and aspirations as its overarching theme."

"As one of the nation's most well-known and well-loved brands, Philips is a part of practically every Indian's life... Philips products find use in virtually every aspect of an individual’s daily life 24X7 - at home, at work, on the move and at rest. Philips stands as a source of easy to use, trendy and innovative internationally acclaimed products with superior design and technology that enhance the quality of consumers' professional and personal lives."

Philips is present in India for over 75 years. They have more than 4,500 employees pan India.  They have an excellent distribution and post-sales service network spread all over India. But yet they are failed to hold their place in the customers Awareness Set and Consideration Set.

When we go to buy any flat screen/ LCD/ LED TV in any shop, in most cases we don't even keep Philips as our consideration set. We all watch the Philips TV Ads, but none of us get really impressed by the word innovation in their ads. For us the words innovation and TV gives away brands like Sony, Samsung, LG, Panasonic, etc.

For me, it seems that the Philips management is not being able to convey the message (be it innovation or any other value proposition) to the end customers in a convincing, persuasive manner to get hold of a place in the customer's decision set.

For further reading -

http://www.dnaindia.com/money/interview_philips-will-invest-strongly-in-r-and-d-marketing-in-india_1282533
http://www.dnaindia.com/money/interview_philips-will-invest-strongly-in-r-and-d-marketing-in-india_1282533

Philips Electronics India Limited - Current Scenario!

Most of us know about the brand Philips Electronics India Limited. Some of us know bit more about their present business and marketing scenario and the issues they are facing. Here I will be sharing my take on the issues with their marketing and branding strategies in India and the potential solutions.

Let me first give you a little statistics about the global market situation of Royal Philips Electronics and it's close competitors. This is the list of top 12 Electronics and Electronic Equipment companies in the world by their revenue [as per Yr2007 data]

Siemens ($106bn)
Samsung Electronics ($106bn)
Hitachi ($98bn)
LG Electronics ($82bn)
Panasonic ($79bn)
Sony Corporation ($78bn)
Toshiba ($67bn)
Hon Hai Precision ($52bn)
Tyco International ($38bn)
Philips ($37bn)
Mitsubishi Electric ($35bn)
Sharp Corporation ($30bn)

Here we can clearly see that Philips is in the 10th stand and just above Mitsubishi Electric. In fact almost standing neck to neck.

Below is the changed scenario in the Yr 2011. See the difference -

Samsung is reigning the industry sitting at the top with a revenue of US$ 133,780.
then at 5th position Hitachi with US$ 112,400
followed by Panasonic with US$ 104,880
Siemens US$ 96,590
Sony US$ 86,640
Toshiba US$ 76,667
LG Electronics US$ 48,230
Mitsubishi US$ 44,800
Sharp Corporation US$ 33,639
and Philips is settled with a revenue of US$ 33,390

As it is pretty evident from the above statistics that Philips is loosing its fight with other electronic industry giants. The Indian scenario is much more worse. The brand Philips in India try to position themselves as a prominent leader in consumer electronics goods segment. In their own words, "Today, Philips is a simpler and more focused company with global leadership positions in key markets of Healthcare, Lighting and Consumer Lifestyle, addressing people’s Health and well-being needs and aspirations as its overarching theme."

But is that the real scenario? Let us see what are the products they have in their portfolio to offer. Television, Home Theatre, Audio, Portable Multimedia, Headphone, Professional Displays, Personal Care and Grooming equipments, Kitchen Equipments (mixer, grinder, juice maker, rice cooker, etc), Lights, Notebooks, Mobile phones etc.

For further readings -
http://www.moneycontrol.com/news/business/philips-india-forays-into-water-purifier-business_279221.html
 http://www.sec.gov/Archives/edgar/data/313216/000095012310015062/u08188exv15wxby.htm

Thousand Sales Promotions < One Interesting Advertisement

In today's world it is really rare to find a brand which has no competitor and are the lone ruler of that market. Globalization and Consumerism has made it more competitive. 

Any brand to succeed in this highly competitive market need to have a significantly high band awareness and equally higher brand relevance. Sales Promotions and Offers and other tactics will help the brand to boost up its sales for a certain period of time. But definitely they cannot go on spending money & other resources on throwing freebies to the customers. Especially if we analyze those customers buying behavior, we can see that, out of 10 customers around 4 customers might be the loyal customer of that brand. Rest of them might have bought that brand just for the freebie or the other push offers or discounts. For them this brand has less brand value, it is rather a product or a me too brand - which is nothing but just another option. Once the company closes the freebies or the offers, 3 out of that 6 customers might switch to some other brand who is offering something else free.

So we as a brand manager need to work on the brand awareness and the customer delight. I personally would rather concentrate on the consumers or the end users delight. Because not always the customers are the end users. If the users are happy with our product then they will compel the customers to pay and buy the brand. In kids products, kids and moms will be the hit audience. For home usage products the mother or the wife are the ultimate decision makers. The pestering power of these end users is the main driver for the customer behaviors.

In this globalized market of Gen Y customers we have no other strong ammunition except "Interesting and Engaging Advertisement". One single mind and attention capturing ad could be more effective and efficient than a thousand promotional tactics. If the awareness is higher then it will be much more easier for the marketing team to compliment the effort with some level of promotion approaches. One Visual image could say a thousand words. Sometime it says beyond the obvious.

An excellent example of such ad could be the below attached one:


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