Diversification Strategy Essay

The Videocon groups core aras of personal credit disembowel are consumer electronics and home appliances. They have recently diversified into areas such as DTH, power, oil exploration and telecommunication.Consumer electronicsIn India the group sells consumer products handle colour televisions, process machines, air conditi wholenessrs, refrigerators, microwave ovens and many other home appliances, through a multi-brand schema with the largest sales and service network in India.4Mobile phonesIn November 2009, Videocon launched its impudently line of mobile phones.5 Videocon has ever since launched a number of ripe handsets ranging from basic color FM phones to high-end Android devices. And in February 2011, Videocon Mobile Phones launched the new theory of ZERO paise per siemens with pre-bundled SIM cards of Videocon mobile services on with 7 of its handset models.Colour picture tube screwballVideocon is one of the largest cathode-ray tube glass manu positionurers in t he human, operating in Mexico, Italy, Poland and China.Oil and bollocksAn important asset for the group is its Ravva oil field with one of the last(a) operating be in the world producing 50,000 barrels of oil per day.6DTH main article Videocon d2hIn 2009, Videocon launched its DTH product, called d2h. As a pioneering offer in the Indian DTH market, Videocon offered LCD & TVs with built-in DTH satellite receiver with sizes 19 to 42. This concept in the DTH service is relatively new in the presence of other players analogous ZEE TVs Dishtv, Tata Sky, Air tel Digital TV and Reliances BIG TV providing only the set fleet box.TelecommunicationVideocon Telecommunications Limited has license for mobile service operations across India. It launched its services on 7 April 2010 in Mumbai.Acquisition of Thomson SAVideocon through its all told Owned Offshore Subsidiary acquired the Color Picture Tube (CPT) businesses from Thomson S.A having manufacturing facilities in Poland, Italy, Mex ico and China along with support research and development facilities.Acquisition preceptThe learnedness came at a time when Thomson was facing a turn back in demand in developed markets for television with CPTs and was moving much(prenominal) towards Flat-screen and Plasma Television. However, Videocon saw an opportunity in the emerging countries for CPTs and hence pursued with the acquisition. Besides, the acquisition gave Videocon, the access to advanced technology giving the company chequer oer an R&D facility in Agnani, Italy. The major reasons rat this acquisition were7Cost cutting Videocon was calculateter positioned to shift the activities to low-cost locations and likewise it could integrate the operations with the glass panel facility in India with the CPT manufacturing facilities acquired from Thomson S.A. Videocon valued to leverage its position in the existing parts of the business and this acquisition would give it a strong negotiation position and could red uce move of glass pricing volatility. Videocon could in like manner reduce the costs by upgrading and alter the existing production lines.Vertical Integration The acquisition helped Videocon in vertically integrating its existing glass-shell business where it had been enjoying substantially high margins.8 Videocons glass division had the largest glass shell ground in a iodine location. This gave the company an unrivaled vantage in terms of economies of scale and a leadership position in the glass shell constancy. The acquisition to a fault gave Videocon a ready-market for its glass business and it was part of Videocons long-term strategy to have a global vertically-integrated manufacturing facility.Rationalization of Product Profile Videocon modified its product profile to cater to the changing market needs like moving away from very large size picture tubes to little ones.9Apart from the overall strategy Videocon also had a plan on the technological front. It treasured t o improve the setup for the production line and line speed post-merger. Its focus was to increase sales while reducing the costs and on that pointby improving the productivity of the existing line. The company also indirect requested to foray in a big way into LCD panels back-end concourse . On the sales front the company wanted to leverage on the existing clients of Thomson and build relation as a preferred provider to maximise sales. Also, Videocon could benefit from OEM CTV business with the help of Videocons CTV division, invest for new models and introduction of new technologies.10Thomsons perspectiveIn 2004 Thomson planned ingress into the high-growth digital media and technology business. Also, Thomson wanted to exit consumer and electronics businesses as they were incurring authoritative losses. After sale of its TV business to Chinese group TCL, and Tubes to Videocon, Thomson divested from the strait/video accessories business which was the last unit of its consumer e lectronics business. The need to divest are quite evident from the losses that it incurred in these businesses particularly that the unit that it inter intensify off to Videocon, the Optical Modules activity, and the Audio/Video & Accessories businesses which totalled around 749 one thousand million for 2005. just Thomson had done some acquisitions that were in line with boosting their revenues in the following years. 11 opposite competitors for the acquisitionWhen Videocon entered the race for the colour picture tubes manufacturing capacity of Thomson SA in November 2004, there were 16 other bidders. Videocon stood slim chances given the fact that it had to battle it let on with players like LG, Philips, Samsung and Matsushita, Daewoo and several Chinese manufacturers but finally managed to close the handle. The screw catapulted Videocon into the No. 3 slot in the global pecking order for CPTs. An authorized of Videocon said on the deal The word is out in the world that Indi a and Indian companies are not just a good bet by themselves, but also a hedge against China. 12Pre-merger scenario analysisCPT industry is affected by many free-enterprise(a) factors such as change in the consumer preferences, the product offer strategy of retailers, the progress made by alternative technology manufacturers, capacity adjustment facility of competitors etc. ground on all of these factors there were two scenarios that emerged from the 2005 bud micturate of Videocon. The first scenario is a conservative one. It mainly assumes Price pressures similar to those in the past(-8 to -12%),capacity reduction over a period of two years, a gradual shift to newer technologies like True Flat and good amount of growth for LCD makers.The second scenario is a more aggressive one in term of trends predicted. It assumes that the flick to TrueFlat would be faster, more overcapacity, more competition from LCD manufacturers and rising charge strategy pressures in general. The second scenario obviously requires an industrial strategy which is more adapted to the environment.However even if the second scenario arises,Videocon believes there is an opportunity in the CRT business. Though it is very obvious that in the developed markets of the western sandwich world the demand is shifting towards the flat panel side(FPD it is expected to bring in 70% of TV market in these regions),in the emerging markets like BRIC CRT still holds fort. CRT holds a dominant 70% share in these markets. When translated into number of units the demand is more than 100 million units. As Videocon is earlier based in these countries, it hopes to harness the value of the Thomson acquisition in the feeler years.citation needed edit Post merger home (2008)Videocon has not been able to turn the kit and boodle around in Italy still. However it is getting support from the local government(which want to prevent job cuts) in row of grants. The government is in fact trying to set up a Greenfi eld venture in form of a LCD manufacturing facility in partnership with Videocon. The banks are also supporting Videocon and with help from all these quarters Videocon expects to turn around the plant in Italy.13 The Thomson plant has not turned around in Mexico as well and in fact production has been reduced over there.In Poland,the situation is more promising and Videocon hopes that plant over there will get in black in the very near future.14However the affect has been in the Chinese market .Despite facing a highly competitive market Videocon has managed to turn a plant around while the other is on its way. In China Videocon is adopting a different strategy for manufacturing CTVs as the local players dominate the market .It plans to supply these players by taking advantage of low-cost nature of mainland(the number targeted by it about 6 million CPTs).15 edit Thomsons exit from VideoconThomson is looking to sell out its stakes in Videocon (a 10 percent stake via GDRs) and in mos t likelihood it would be bought by Videocon itself. Thomson would be exiting at a loss as it had acquired the stake at around Rs 400 per share (approximately equal to $10 per share).The deal is expected to happen at current market prices. Videocons GDR is soon traded at around $5.06 on the Luxembourg Stock Exchange. On the Bombay trite exchange its trading around INR150 against the 52 week high of INR868 in Jan 2008. Another point to be noted is that this wont seduce the market regulators creeping acquisition norm which comes into rage once they acquire more than 5% stake,as the deal would be an overseas. 16