With profit margins down thanks to increased costs arising from a depreciating rupee and volatile raw material prices, manufacturers of consumer durable items like televisions and refrigerators are reworking their business strategies, focusing on factors that boost efficiency.
“Margins are under pressure and companies are resorting to measures like value-engineering, which means producing the same product at a lower cost,” said Suresh Khanna, secretary general at Consumer Electronics Appliances Manufacturers’ Association (CAEMA).
Profit margins are under tremendous pressure,” Ravinder Zutshi, deputy managing director at Samsung India said. The company is trying to improve margins through measures like product engineering and launching higher value products such as laptops and LED televisions. “High value products also offer slightly better margins,” Zutshi said.
Last month, the company launched a new category of LED (light emitting diode) televisions that have clearer resolution and picture quality than both plasma and LCDs and are priced upwards of Rs 1.25 lakh for a 40-inch screen. For a similar screen size, LED sets sell at 30 per cent more than LCDs. The company aims to sell about 60,000 LED televisions by the end of 2009.
“Margins are under pressure for everyone. We reduced prices last year when raw material prices dropped, but now again the cost of materials like copper has gone up and we can’t pass it on due to competitive reasons,” Pranay Dabhai, chief operating officer of the Indian unit of Chinese consumer durables firm Haier told Hindustan Times. “A buyer does not mind paying if we provide a better efficiency model with value-added features.”