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3. A consumer does not spend too much time in making his/her decision when it comes to buying a
FMCG product.
4. Advertising and suggestions of friends and neighbours usually play a major role for trial of new
FMCG products.
5. FMCG products come in wide range and often cater to necessities, comfort and luxury items. Since
FMCG products cover such a wide range, they often cater to the entire population. Hence price and
income elasticity of demand varies across products and consumer
INDUSTRY CLASSIFICATION:The FMCG industry is characterised by low margins. The FMCG segment can be classified under two
segments
A: Premium segment:- Premium segment covers mostly to higher / upper class which is not price
sensitive but brand conscious.
B: Popular segment:- The popular or mass segment consists of consumers belonging to the semiurban or rural areas who are not brand conscious.Products sold in the popular segment have lower
prices than premium segment.
PEST ANALYSIS:Pestel analysis is a tool to understand the environment in which business operates, & the opportunities
& threats that lie within it. By understanding the environment in which it operates, it can take
advantage of the opportunities & minimizing the threats. Specifically PESTEL analysis is useful tool
for understanding risks associated with markets growth or decline, & directing business to grow.
P Political factors
E Economic factors
S Socio-cultural factors
T Tecnological factors
A PEST analysis is a measurement tool, looking at all the external factors of the organization. It is
often used within a strategic SWOT analysis (strength, weaknesses, opportunities & threats analysis).
Taxation policy : Tax policy of government will affect the price of inputs & it ultimately affect the
prices of final products & it will directly affect the sale of product.
Government intervenes : This indicates that at what level the government intervences in the economy.
If the government intervence is more sometimes it helps the organization at large extent.
Subsidies : The subsidies which are provided by government to different organisation at different
level also help it to grow at faster rate & helps the organisation in reducing the finance which is to be
funded from outside & it directly reduces interest amount paid in favour of fund raised from outside.
Trading policies : This indicates the policies related to import & export of goods and services from
different nations. If the policies are favourable more goods & services will be imported & exported, &
on the other hand if policies are unfavourable it will restricts the import & export.
Labour law : Labour law also affect the organisation, for example- child labour, a child below 14 year
of age can not work In factory or any hazardious place.
ECONOMIC FACTORS
Interest rates : Interest rate directly affect the cost of capital, if the interest rate is higher the cost of
capital will increase & if it is lower then cost of capital will be lower. This directly affect the profit of
the organization & its growth.
Tax charges : If the tax charged by the government is lower then it will reduce the product price & if
it is higher then it will increase the prices of the products.
Exchange rates : This shows that what is the exchange rate or foreign currency rate. If exchange rate
is higher more amount is paid on import of goods & if it lowers less amount is to be paid & on the
other hand if it is higher the amount received will be more & if it is lower the amount received will be
low.
National income : National income is important factor as if affect the growth of the organisation. If
per capita income is more the amount spend will be more & if it will be lower the amount spent will
be less.
Economic growth : Economic growth is important factor in the development of the organization. If
economy grows at a higher speed it will directly affect the growth of the organization.
Inflation rate : Inflation means the rise in the value of all the product in the economy, if inflation rate
is higher the cost of products will be higher & if inflation rate is lower the cost of product will be
lower. This directly affect the growth of the organization.
Distribution of income : This shows that how income is distributed in the ecconomy. It directly affect
the purchasing power of the buyers. And ultimately leads to increase or decrease in the consumption
level of the products.
Changes in life style : Change in life style also leads to increase or decrease in the demand for
different commodities. For example- presently LCD & LED TVs have replaced Digital displayed TV
set, this shows that the changes in life style of consumers.
Consumerism : This indicates that a large number of options are available while purchasing of goods
to consumers, so the choice becomes easy & quality products can be choose by consumers. So while
purchasing a consumer have different choices to select product according to his needs.
Education levels : Education is one of the most important factor which influence the buying power of
consumer, while selecting a particular good a consumer should know all its features so it can
differentiate them with another products.
Law affect social behaviour : Different laws are made by the government to safe guard the rights of
consumers. For example- Consumer protection act, this law indicates that a consumer can file a case
against a seller if he finds that he is cheated.
TECHNOLOGICAL FACTORS
Advancement in technology : New technology helps in economising the scale of production, this
means that new technology helps in increasing the level of production, & reducing the costs of inputs,
& maximising the level of profits.
Discoveries & innovation : Advancement in technology will leads to discoveries & innovations &
further improvements in technology so as to improve perfections in the production process.
Competitive forces : Advancement in technology will also leads to competition in the markets, more
quality products will be provided to consumers to cover a large number of market.
Automation : Change in technology will leads to automation, this means that with new technology
labour required is less as machines are automatic. All the works are done automatically by the
machines as earlier it is labour oriented. Now all the work is machine oriented.
Obselete rate : Day-by-day new inventions are made so the rate of obselete is higher, as in Computer
LAPTOPS have replaced the PC. This shows that the technology becomes obselete very fast.
Research & development : This department plays a vital role in the development of the organization.
As this department always do research that what are the demand of the markets & how to make
advancements so the organization can survive in the competitive world.
LG PEST ANALYSIS
LG controls 114 local subsidiaries all over the world .The are 82000 people work for this
company. LG accept as true that technological innovation is the only way to achieve the
market. So its delivery latest technology to the customer.
MACROENVIRONMENT
Main external and out of control factor that influence an organization decision making and
change the performance and strategies The major factor are
1. Political factor
2. Ecomnomic factor
3. Social factor
4. Technical factor
Political Analysis:
LG Electronics is the intercontinental Company which has a range of industrialized Units
and sources. The company focus the international market for his product .the political
environment nothing but how the law and government taxation policy influence an
organization .There is a lot of political interaction has integrated in this business and it has
operated between the political and legal factors. This factor may increase the cost of factor
some time it decrease the product cost. The LG electronics facing lots of problem while its
production and exporting goods to the overseas.
Economic Analysis:
LG has a very big competitive market in world and it have constant development in their
innovation in electronics equipment , secondary products, planned process of LG etc.. it
have leads to sell goods to other countries . The LG contribute the world wide stock market
and money market also. The LG have well and strong economic source and it has capable
of introduce some new technology to the electronic market. LG leads the electronics market
with enormous technology and economic resource. The below the table shows the financial
highlight of LG electronics. The sale of the company is constantly increase the last seven
year it possible by the good economic status
Technological Analysis:
The LG has more technology shock towards its electronics product. In every manufactured
goods in LG they improve their technology and they became a first world exporter of the
country. The LG has a huge technology like LCD, plasma TV, Games and, Laptops,Videos,
CDMA Mobile phones with a number of features. The challenger cant beat its clear imagery
their technology towards its innovation of product. The 3D Plasma TV , Camera with
massive features like clear images and slide activities, high battery etc..
The LG introduce lots of new technology to the digital world such as This business group
has entitled more quality product and services to the customer. it has introduced lot of
technology in every business group of product. Recently the LG has introduced 3k model of
Camera which has lot facilities and clear images. It is a exiting product to the market. and
also the company has introduced more innovative product like 3D products, professional
cameras, Blue ray Disk, increasing network services etc.. The LG has lead its technology
and it introduce number of products with exclusive features to the market.
Socio-cultural Analysis:
LG Corp has introduced the number of product to the different customer into the society.
Mainly it has introduced for easy usage with several option of different user. It has
introduced to the delighting product to the customer. The LG product such as laptop, various
electrical products, mobile devices, ipod, ipad, financial services, network system etc. So it
has changing life style of the LG user. LG increase its ethical standard contributes in
Research and development and health of the organisation. It also leads to image of the
country.
COSTLEADERSHIP ??
Coordination for Competitiveness later in the paper for more details). This is particularly
critical for a perishable product such as liquid milk.
Financial Strategy: AMULs finance strategy is driven primarily by its desire to be selfreliant and thus depend on internally generated resources for funding its growth and
development. This choice was motivated by the relatively underdeveloped financial markets
with limited access to funds, and the reluctance to depend on Government support and thus
be obliged to cede control to bureaucracy. AMULs financial strategy may thus be
characterized by two elements: (a) retention of surplus to fund growth and development, and
(b) limited/ no credit, i.e., all transactions are essentially cash only. For example, payment for
milk procured by village societies is in cash and within 12 hours of procurement (most,
however, pay at the same time as the receipt of milk). Similarly, no dispatches of finished
products are made without advance payment from distributors etc. This was particularly
important, given the limited liquidity position of farmer/suppliers and the absence of banking
facilities in rural India. This strategy strongly helped AMUL implement its own vision of
growth and development. It is important to mention that many of the above approaches were
at variance with industry practices of both domestic and MNC competitors of AMUL.
BCG MATRIX
BCG matrix is a framework created by Boston Consulting Group to evaluate the strategic
position of the business brand portfolio and its potential. It classifies business portfolio into
four categories based on industry attractiveness (growth rate of that industry)
and competitive position (relative market share). These two dimensions reveal likely
profitability of the business portfolio in terms of cash needed to support that unit and cash
generated by it. The general purpose of the analysis is to help understand, which brands
the firm should invest in and which ones should be divested.
Relative market share. One of the dimensions used to evaluate business portfolio is
relative market share. Higher corporates market share results in higher cash returns. This is
because a firm that produces more, benefits from higher economies of scale and experience
curve, which results in higher profits. Nonetheless, it is worth to note that some firms may
experience the same benefits with lower production outputs and lower market share.
Market growth rate. High market growth rate means higher earnings and
sometimes profits but it also consumes lots of cash, which is used as investment to
stimulate further growth. Therefore, business units that operate in rapid growth
industries are cash users and are worth investing in only when they are expected to
grow or maintain market share in the future.
There are four quadrants into which firms brands are classified:
Dogs. Dogs hold low market share compared to competitors and operate in a slowly
growing market. In general, they are not worth investing in because they generate
low or negative cash returns. But this is not always the truth. Some dogs may be
profitable for long period of time, they may provide synergies for other brands or
SBUs or simple act as a defense to counter competitors moves. Therefore, it is
always important to perform deeper analysis of each brand or SBU to make sure
they
are
not
worth
investing
in
or
have
to
be
divested.
Easy to perform;
Growth-share analysis has been heavily criticized for its oversimplification and lack
of useful application. Following are the main limitations of the analysis:
Business can only be classified to four quadrants. It can be confusing to classify an SBU that
falls right in the middle.
It does not define what market is. Businesses can be classified as cash cows, while they
are actually dogs, or vice versa.
Does not include other external factors that may change the situation completely.
Market share and industry growth are not the only factors of profitability. Besides, high
market share does not necessarily mean high profits.
It denies that synergies between different units exist. Dogs can be as important as cash
cows to businesses if it helps to achieve competitive advantage for the rest of the company.
Guarantee Act (NREGA) programme. These measures have helped in reducing poverty in rural
India and given a boost to rural purchasing power.
Hence rural demand is set to rise with rising incomes and greater awareness of brands.
Urban trends
With rise in disposable incomes, mid- and high-income consumers in urban areas have shifted
their purchasing trend from essential to premium products. In response, firms have started
enhancing their premium products portfolio. Indian and multinational FMCG players are
leveraging India as a strategic sourcing hub for cost-competitive product development and
manufacturing to cater to international markets.
Top Companies
According to the study conducted by AC Nielsen, 62 of the top 100 brands are owned by MNCs,
and the balance by Indian companies. Fifteen companies own these 62 brands, and 27 of these
are owned by Hindustan UniLever.
The top ten India FMCG brands are:
1.Hindustan
Unilever
2.
ITC
(Indian
Tobacco
3.
Nestl
4.
GCMMF
5.
Dabur
6.
Asian
Paints
7.
Cadbury
8.
Britannia
9.
Procter
&
Gamble
Hygiene
and
10. Marico Industries
Health
Ltd.
Company)
India
(AMUL)
India
(India)
India
Industries
Care
Younger consumers express the greatest need for speed, not a huge surprise for the
smartphone generation. Datamonitor's 2013 Consumer Survey found that younger consumers
those in the 15-24 year old age group were twice as likely to say that "results are achieved
quickly" has a "very high amount of influence" on their health and beauty product choices than
consumers in the oldest age group, those aged 65 or older. Speed matters, and 2014 will almost
certainly see the introduction of new game-changing timesavers.
Road Ahead
FMCG brands would need to focus on R&D and innovation as a means of growth. Companies
that continue to do well would be the ones that have a culture that promotes using customer
insights to create either the next generation of products or in some cases, new product
categories.
One area that we see global and local FMCG brands investing more in is health and wellness.
Health and wellness is a mega trend shaping consumer preferences and shopping habits and
FMCG brands are listening. Leading global and Indian food and beverage brands have
embraced this trend and are focused on creating new emerging brands in health and wellness.
According to the PwC-FICCI report Winds of change, 2013: the wellness consumer, nutrition
foods, beverages and supplements comprise a INR 145 billion to 150 billion market in India, is
growing at a CAGR of 10 to 12%.
On the other hand, if a big change in price only results in a minor change in
the quantity supplied, the supply curve is steeper and its elasticity would be
less than one.
substitutes for caffeine. Most people are not willing to give up their morning
cup of caffeine no matter what the price. We would say, therefore, that
caffeine is an inelastic product because of its lack of substitutes. Thus, while a
product within an industry is elastic due to the availability of substitutes, the
industry itself tends to be inelastic. Usually, unique goods such as diamonds
are inelastic because they have few if any substitutes.
2. Amount of income available to spend on the good - This factor affecting
demand elasticity refers to the total a person can spend on a particular good
or service. Thus, if the price of a can of Coke goes up from $0.50 to $1 and
income stays the same, the income that is available to spend on coke, which
is $2, is now enough for only two rather than four cans of Coke. In other
words, the consumer is forced to reduce his or her demand of Coke. Thus if
there is an increase in price and no change in the amount of income available
to spend on the good, there will be an elastic reaction in demand; demand will
be sensitive to a change in price if there is no change in income.
3. Time - The third influential factor is time. If the price of cigarettes goes up
$2 per pack, a smoker with very few available substitutes will most likely
continue buying his or her daily cigarettes. This means that tobacco is
inelastic because the change in price will not have a significant influence on
the quantity demanded. However, if that smoker finds that he or she cannot
afford to spend the extra $2 per day and begins to kick the habit over a period
of time, the price elasticity of cigarettes for that consumer becomes elastic in
the long run.
B. Income Elasticity of Demand
In the second factor outlined above, we saw that if price increases while
income stays the same, demand will decrease. It follows, then, that if there is
an increase in income, demand tends to increase as well. The degree to
which an increase in income will cause an increase in demand is called
income elasticity of demand, which can be expressed in the following
equation:
If EDy is greater than one, demand for the item is considered to have a high
income elasticity. If however EDy is less than one, demand is considered to
be income inelastic. Luxury items usually have higher income elasticity
because when people have a higher income, they don't have to forfeit as
much to buy these luxury items. Let's look at an example of a luxury good: air
travel.
Bob has just received a $10,000 increase in his salary, giving him a total of
$80,000 per annum. With this higher purchasing power, he decides that he
can now afford air travel twice a year instead of his previous once a year. With
the following equation we can calculate income demand elasticity:
Income elasticity of demand for Bob's air travel is seven - highly elastic.
With some goods and services, we may actually notice a decrease in demand
as income increases. These are considered goods and services of inferior
quality that will be dropped by a consumer who receives a salary increase. An
example may be the increase in the demand of DVDs as opposed to video
cassettes, which are generally considered to be of lower quality. Products for
which the demand decreases as income increases have an income elasticity
of less than zero. Products that witness no change in demand despite a
change in income usually have an income elasticity of zero - these goods and
services are considered necessities.