. Introduction

3.1 PRODUCT PROFILE
A washing machine is a domestic appliance powered by a fractional horsepower (FHP) electric motor to wash clothes and household linen and dry clothes. The capacity of the washing machine is determined by the weight of the dry clothes it can wash at a time and is expressed in kgs.
3.2. SEGMENTATION: Washing machines can be segmented on the following bases:
3.2.1. Functions- Washing machines can be classified as washers, semi automatic and fully automatic machine on the basis of their functions.
* Washers: Washers are simple machines, which wash clothes but do not dry them. They are minimal in functions and are mainly manufactured in unorganized sector. These are single tub machines and are very low in price. These machines are becoming obsolete in the urban areas due to their inefficiency in performing certain functions.
* Semi automatic or Twin tub: These machines have two tubs, washing tank and drying tank. They perform more function than the washers but the sequencing and duration of each stage of the process like washing, rinsing and drying operations have to be controlled manually. Clothes need to be physically transferred from one tub to the other.
* Fully automatic: These are compact machines in which clothes are washed and dried automatically in a single drum. Depending upon the type of fabric and total weight of the clothes the wash combination is selected and the wash cycle is carried out automatically. Fully automatic washing machines require a continuous stream of water for operating smoothly. Fully automatic washing machines can be further categorized based on the way the clothes are loaded in the machine.
3.2.2. Loading System:
* Top Loading: In these types of machines, clothes are loaded from top. The advantage offered is that clothes can be added or removed from the machine even when washing is in process. Majority of the machines available today fall in this category.
* Front loading: In these machines, clothes are loaded from the front. They are supposed to be superior in temperate climates, and are typically used in tumble washing machines. Among the domestic manufacturers IFB and Electrolux are the only one's with front-loading option.
* Fuzzy Logic: These are the most advanced machines, which work on the principle of fuzzy logic. They sense the type of fabric and the dirt content on clothes and adjust the intensity of washing action accordingly. These washing machines require a continuous stream of water for operating smoothly.
3.2.3. Washing Action
* Pulsator wash: The rotation of the motor driven impeller generates pulses which create strong turbulence in water, helping the detergent solution to penetrate deep into the fabric. Pulsator wash is absolutely harmless to clothes as water is used to brush against them.
* Agitator wash: This kind of washing action is somewhat akin to washing by hands since the agitator rubs against the clothes like a brush.
* Tumble wash: The steel drum into which the clothes are loaded rotates clockwise and then anti clockwise. Thus, the detergent gets to mix evenly ensuring a thorough wash. This action is considered most efficient in temperate climate.
3.3. COMPANY PROFILE

LG group had entered the Indian market in April, 1997, with three products - colour televisions, refrigerators and washing machines.
South Korean white goods giant LG electronics has begun exports from its Indian manufacturing base. The company has began shipment of air conditioners, washing machines, refrigerators and micro wave ovens to the Maldives, recently, while shipment to the Middle East and some other countries in the South Asian region would begin soon. The rural market accounts for 30% of its sales and it hopes to increase it to 50%.

3.3.1. Production: LG was importing the fully automatic washing machines in 1997. By mid 1998 it established its own facility at Noida.

3.3.2. Financial Results: In 1998 the company sold 49000 washing machines (four fifth semi automatic). The company reports to have grown by 192% in terms of turnover during the first four months of the year ,the best performance indicator was that the company’s growth in collection terms was 211% over the same period in 1998. The company claims to have stood third after BPL and Videocon in terms of overall revenue. The company has grown by 205% in terms of overall sales with, 45% in the frost free refrigerator segment, 62% in the fully automatic washing machine segment.
Market share also gone up from 5.4% to 12.25% in semi automatic washing machine segment, up from 3.6% to 4.2% in the fully automatic washing machine segment. The 12 month target for 1999 is 650 crore, up 35% from the 1998 sales.

3.3.3. Distribution: LG sells in 1800 towns and cities with a population of 1 lakh persons and above. It also intends to reach as many as 50000 plus towns. The company has 40 distributors and 2000 dealers and plans to increase the no to 100 dealers and 3000 dealers. Branch offices at the end of every month have just the 40% of the requirements of the next month, with the rest being replenished by 15th.
LG gives no promotion schemes to the dealers as it wants the consumer oriented thinking do the job. It just banks upon the consumer pull and does not let its pricing power be diminished by the retail trade which could easily be tempted to give discounts. Normally in case of schemes the shops bait customers on price by sacrificing their own margins and availing the sales volume scheme money from the companies. LG also does not allow much credit to the dealers, which saves it the capital and also incentives the dealers to make intelligent demand projections and move the products fast of the shelves.

3.3.4. Investment: The $73-BILLION LG group of South Korea has decided to invest Rs 1,025 crore in India in two phases over the next two years. So far it has invested $50million in its operation in India. The company will invest Rs 525 crore in the first phase for setting up a project to manufacture air-conditioners, colour televisions and washing machines at Noida in Uttar Pradesh. The company plans to invest another Rs 500 crore in the second phase as part of its expansion project by 2000.
As far as financing of Indian projects goes, the company is open to raising capital from the financial institutions in India in the form of term loans, apart from putting its own capital in the projects

3.3.5. Segmentation and Marketing strategy: It has segmented the market on the ‘reason to buy ‘ basis . The fully automatic washing machine was called the Chaos+3 a water punch that detangles clothes before washing them efficiently. The advertising was straight and simple. The company believes in value marketing and will not sacrifice value for keeping the price low or large volumes.

3.3.6. Supplies: The plant keeps no more than 15-20 days of imported parts.

3.4 THE REVIEW OF LITERATURE
Washing machines made their mark in the Indian market in the eighties. Videocon was the first company in India to introduce washing machines. Over the years, it has remained a market leader, with a overall market share of 35%, by adopting flexible strategies, which are modified as and when the need arises. Initially, the challenge was to wean away homemakers from their traditional methods of washing clothes. But then, owing to high prices, the market appeared to be limited only to upper income urban households.
The 1990s saw a change in the socio-economic scene in the country. Rapid economic growth, increase in the number of working women, changing lifestyles and higher aspirational levels with exposure to satellite television and easy consumer finance meant that demand for consumer goods rose phenomenally.
Sales of semi-automatics outstrip those that in the fully automatic segment. This has been due to a variety of factors, price being one of them as semiautomatic washing machines are cheaper than the fully automatic ones. The semi-automatic varieties are in the range of Rs 4,000 to Rs 8,000, fully automatics for Rs 13,000 to Rs18,000 and new generation fuzzy logic machines come for above Rs18,000. Moreover fully automatic machines require continuous water supply (for each wash cycle, the water is changed 2-3 times), which is a rarity in most Indian cities.
However the fully automatic machine seems to be gaining market share on the back of a growing demand for fully automatic machines. As shown in table 1.1 ,while semi-automatic washing machines formed about 65% of the market share at the time of the study conducted by Orient Paper Industries Ltd. (OPIL) and LG Electronics of Korea it was predicted that its share would fall to 30% in the year 2005.
Year Production('000s) Fully Auto % Semi Auto %
1994 450 30 70
1995 600 35 65
1998 1030 55 45
2000 1490 55 45
2002 1970 61 39
Table 2.1: Production Estimates analysis carried by OPIL and LG Electronics
Source: Saket Industrial Digest
Type %
Top Load (twin tub) semi-automatic 79.5
Top Load fully automatic 14.8
Front Load 5.7
Table 2.2: Washing machines sales by type
Source: CIER

3.5. KEY ISSUES AND TRENDS
3.5.1. Key Issues

3.5.1.1. Customer servicing
A business area, which assumes much importance in this sector, is that of customer servicing. The word ‘customer’ will include both the external (i.e the customer to whom the company sells the products) as well as the ‘internal’ customer which is nothing but the dealer – an important constituent of the value chain.
In order to distinguish one’s offerings from that of the others, firms are trying to add more value-added services in their product portfolio.
New entrant LG Electronics has decided to give a strong push to strengthening its service network. A string of consumer promos like free service weeks, annual maintenance plans, loyalty programs, special offers to last year buyers and honeymoon packages for newly wedded couples are in the pipeline.
Samsung, on the other hand, has gone hi-tech in order to please its customers. Each Samsung service center has been made on-line to its head office in Delhi, which in turn is linked to its headquarters in Seoul. A software keeps a comprehensive record of all service calls attended—customer history, nature of the complaint, time taken to respond, spare parts used etc.
Electrolux AG has developed an electronic mail handling system to channel customer responses to the area of the group best equipped to deal with any query. Electrolux now has a via medium to communicate with their customers, know which products they like, what problems they have. From now on, it will be the customers who would drive product development.

3.5.1.2. Marketing
Branding strategy for the products. Their assiduously built images over the years convey the message of leadership to their customers. Videocon International, for example, has brought about a change in their logo to convey the message of precision, quality and technical edge in all company activities. In their TV ad campaign, Videocon Industries Limited says that they were the first company in India to introduce frost-free refrigerators and fully automatic washing machines. The whole range of consumer durables being produced and sold by the company is described in the belief that consumers for these goods often overlap and they tend to go for the same brand. The strategy clearly is to impress upon the buyers that theirs is the best available.
Lately some companies like Samsung, LG, IFB and Electrolux have thought of sponsoring movies on the Star Movies network. Samsung and IFB, for instance, sponsor the Saturday and Sunday night premieres respectively. Electrolux, on the other hand, is one of the main sponsors for a special package of Oscar awarded movies in the month of February 1999. These moves can be a pointer to the Electrolux management’s strategy of trying to position their products in the ‘elite’ market.

3.5.1.3. Pricing
With both the refrigerator and washing machine sector operating at a capacity utilization rate of around 70% the competition for the share of customer is increasing. As a result of this prices have touched an all time low last year and with new capacities coming up, the trend is expected to continue for some more time.
Prices of semi-automatic machines (80% of the market share) fell by an average of 15% since January 1998. The biggest fall has been noticed in the cases of Godrej-GE (22%) and Videocon (12%). In fact, Videocon has introduced a new model breaking the earlier price barrier of Rs5,000. For the fully-automatic segment, the price fall has been in the range of 6.5% on the average. Unlike the semi-automatics, there is a large variance in the extent of price declines of the various brands.
The rip-off deals have become even more affordable with the help of retail financing. Whirlpool for instance, has started a zero per cent interest scheme, which has helped penetration of washing machines. Godrej-GE has also tied up with Consumer Finance and is planning to do so with SBI-Caps for the same.
This drastic change in the price value equation formed the core of deals in 1998 and is expected to continue into this year.

3.5.1.4. Outlook
Over the last five years, the market for consumer durables has grown tremendously and an important catalyst has been the modern working woman. As disposable income levels rise, thanks partly to the latest Pay Commission report; aspiration levels have also spiraled upwards. Therefore, women who have to take care of both the domestic and professional front are increasingly opting for convenience appliances. The low penetration of washing machines (only 0.5% of all households in the country) is an indication of its potential. However unlike refrigerators, washing machines have remained largely an urban phenomenon. Buying of a washing machine is usually due to typical urban reasons such as shortage of household help and lack of space for drying clothes. Besides working women, other demand drivers are an aging population, which may find it exerting to manually wash clothes.

3.5.1.5. Business strategy
Like any other consumer durable, sales of washing machines is largely dependent on how well a company plans out their marketing strategies which help increase visibility and build a distinct brand image. A commonly used and highly successful marketing strategy is to make available to consumers such product and service features that mark them as different from the rest.
LG Electronics by bringing out a high-technology “Chaos Punch” machine has ensured that clothes do not remain tangled while being washed. Next on line is the ‘Fabricare’ sub-brand, which takes a detour from the earlier technology positioning and tries to address the concerns and sensibilities of a modern woman. Its new ad-line says – “LG Fabricare – Because you should never hurt the ones you love”. Fabricare ensures that not only it cleans all your clothes but also it does it with enough ‘care’ so as not to damage them.
Samsung too has mounted the technology bandwagon and come out with a “Boomerang Pulsator” wash system endorsed by the well-known cricketer Kapil Dev. This helps to create awareness and builds brand equity for the products .