An Assignment on Konka Group Company Limited.

An Emerging
Chiness MNC.

Prepared For:
Taposh Kumar Roy Cousre Instractor of International Business
Studies. A Faculty member of ULAB School of Business.

Prepared By:
S. M Mahmud ……. Id– 07201101
Amir Buksh………...Id-073011003

Date of Submission:
22nd December 2010.
 Table of Content

i. Executive Summary……………………………………………………………….1
1. Background of Konka………………………………………………………..……2
2. SWOT analysis……………………………………………………………………4
3. Problem Findings………………………………………………………………….4
4. Problem Statement………………………………………………………………...5
a. Brand Equity…………………………………………………………………..5
b. Excess Capacity……………………………………………………………….5
c. Grey Market…………………………………………………………………...5
d. Imported Goods…………………………………………………………….…5
e. Price War……………………………………………………………………..6
5. Recommendation for Konka………………………………..……………………..6
a. Reacting to change……………………………...………………………..……6
b. Anticipating to Change………………………………………………………..6
c. Leading the change……………………………………………………………6
i. Brand Equity………………………………………………………6
ii. Price War………………………………………………………….6
iii. Global Expansion………………………………………………….7
6. Implementation…….……………………………………………………………...7
7. Conclusion………………………………………………………………………...8
 Executive Summary

At First I would like to Thanks our honorable International Business course teacher Taposh
Kumar Roy to give us the opportunity to study on Konka an emerging Chiness MNC. In
this report we describe about the Konka Group Company LTD. And find out the Problem
that Konka is facing in CTV domestic and Global market like Brand Equity, Price War,
Excess Capacity and few more. After that we give a statement about the Problem, why they
are happening in Domestic and Global market. Then we give Konka Group Co LTD to
enter on a Leading Chang Posture Recommendation where we show how Konka could
overcome those problems. We are emphasizing on Global Expansion. As they have full
support and facility to expand globally. Where Chiness Govt. Domestic Banks are helping
with Billion of Yuan for global expansion. Later in the report we show the whole
documents in broad description.

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Emerging Chiness MSC, KONKA GROUP COMPANY LIMITED.

1.Background of Konka
Konka the China number one Color Television manufacturer. Konka Group Company ltd was built
in 1979 and came to joint venture in Mainland China. August 1991 Konka reorganized as a Sino-
Foreign Join Stock Company. 1992 it obtained listing on the Shenzhen stock exchange with an
initial offer of 20 million A group share and 10 million B group share. B group share were for the
foreign investors. In 1995-1996 Konka acquired 27.44% stack of Akai Electric Company. Konka
have a giant product line of Color TV, video recorder, compact disk player and recorders, digital
video disks, audio equipment, telephone, home appliance, fax machines and cellular handset.
Although CTV attributed 90% of profit share to Konka. Asia is the largest CTV manufacturer with
an output about 76 million sets and among them 60% of Konka’s Global production. China CTV
market in term of volume sales is second only to the US. China faced an over-capacity
manufacturing. By taking Japanese, German and Us technology China Domestic manufacturer
built up a 100 different product line. At that moment companies started to cut up costs. Successful
companies like Konka were offered fiscal incentives and access to loans from domestic
commercial banks, to take over ailing firms and increase its capacity. Govt. imposes price range
for 21 inch and 25 inch CTV. In 1989 Konka started as a export oriented venture with 85% of its
production earmarked under the SEZ’s Joint venture laws for export. Most of the export was made
with Kong Wah. After sometime Konka concentrate on domestic Chiness market. Which grew
rapidly in 1990. Konka’s margin in OEM export market was low 3-4% compared to healthy 10-
15% in direct sale to the Domestic Chiness market. In 1994-1995 Konka made a rapid growth in
chiness market by a series of acquiring in Mainland market. Konka made a turn over of 2.18
billion Yuan in 1993 to 8.57 billion Yuan in 1998. It seems they have an average annual compound
growth rate of 31.5%, and have an increased production volume of 1.3 million to 4.77 in 1998 with
a cumulative annual growth rate of 38%. Targeting to manufacturing 6.5 million CTV sets in 1999.
Konka started its accusation strategy in 1993 by taking 60% stake in Heliongijiang based
Mudanjing Television Factory. The Bank of China granted a pre-initial loan of 3.8 Billion Yuan
(US $458) in 1997-1998, 4.2 Billion in 1998-1999 and 1999-2000 up to 5 Billion Yuan to Konka
for Domestic and Overseas Expansion. Konka’s efforts in promoting its brand internationally

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began in late 1995, when it set up a subsidiary in Australia to market CTV it named Konka Pacific
Pty ltd and made a market share of 5% CTV market at that moment although Industry Analyst
thought that Konka will soon Double up that market share. The Low price strategy compare to
competing models and 3 years warranty rather 1 year warranty are the key strategy for Konka.
Now they have 130 retailers around Australia. Konka also planned to introduce the HDTV in
Australia. From 1998 to 1999 Konka share was 10,000 to 40,000 sets. Konka entered into the
toughest and most complicated US market in 1998. They set a highly achievable sales target of
around 2.5 lakh CTV in the first year operation. They provide replacement warranty to the
consumers within 1 year. Within a year Konka become the 1 of the top 1o CTV brands in USA by
achieving annual sales of 1 million CTV sets. Konka also brought DTV and HDTV in US market
in 1999 and offer a lower price than any other company in US. Currently Konka plans to set up an
assembly unit at Tijuana in Mexico. Konka set up Konka India with an investment of 50 corers and
70% equity stakes. At first Konka captured the Northern India. They imported sets through OEM
arrangement and it’s the first overseas assembly plant was on the anvil in 2000. With the after
sales service staff they manage a sales volume ratio of 1 in every 2000 units sold, advertising
budget 40 corers and a expected sales turn over of 300 cores. Average Monthly sales were about
11,000 units till 1999.
The Low Price and warranty strategy made Konka as the best selling CTV Brand in China. Konka
has succeed in getting an initial toehold in many foreign markets. With the financial assistance
from domestic banks and financial institution Konka helps them to rapidly overseas growth.

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2. SWOT Analysis of Konka Group.

Strength Weakness
x Government Backed and Planned x Brand Equity
x Economies of Scale & Cheap Labor x Lack of innovation
x Domestic Brand value & market share * Technology
x Low Price – International market * Product Design & features
penetration. x Excess Capacity

Opportunity Threats
x Untapped rural market x Price war
x Overseas financing through Govt. x Grey market & imported goods
bank x Locally import tariff
x Huge export market x Deflation leads to higher real rate of
x Technology Shift Interest

3.Problems in Konka Group.

Though Konka is the one of the Market leader in China mainland
market, they have some problems to face. Like every other company is facing in China. MNCs like
Konka’s problem are stated below
1. Brand Equity
2. Excess Capacity
3. Grey Market
4. Imported Goods
5. Price War.

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4.Problem Statements.

4.1.Brand Equity.
As Konka is Chiness Company they have a negative Brand equity. Because
the Chiness product are less adorable than any other originated product. As they made a
product in low price they have to consider the price. And that’s because they provide a long
time service and also replacement warranty. In local market Konka face Brand Equity
Problems, although the high import duties 55%, 40% of mainland CTV sets were either
smuggled or legally imported. The Imported CTV qualities were better compare to chiness
CTV. Grey Market also create problem in Branding CTV in China. Wherever Konka goes for a
global expansion they have to consider the quality in term of Brand Equity.

4.2.Excess Capacity:
Konka Face an excess capacity. Excess Capacity means, when a firm could
potentially supply to the market but the demand of that product is below. Not only Konka but
almost every company at that moment faces the same problem.

4.3.Grey Market:
Almost each and every company in China face Grey Market problem. The
existence of grey market of counterfeits and fake product it become impossible for the firms to
do Brand Marketing.

4.4.Imported Goods:
Konka face problem for imported goods. Although 55% import duty foreign
Branded products came to China through Smuggled or legal procedure. And also Foreign Bran d
CTV Sets are marketed by the subsidies of the MNCs that have established assembly units in Chin.
Sony, and Sanyo together boast production capacity of close to 5 million units in China.

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 4.5.Price War:
Konka face Price war in its domestic market as well as in foreign market. They
provide low price products compare to other Branded products. In the case we found that Konka
give a low price product, for an example Konka provide US$3000 for 32” wide LCD HDTV where
other company provide US$ 5000 to US$ 10000.

5. Recommendation for Konka.

Konka can go for Posture Recommendation. They might have three different Postures.
5.1 Reacting to change
5.2 Anticipating to Change
5.3 Leading the change.
We go for the Leading the change recommendation. Under Leading the Change recommendation
The Brand Equity, Price war and Global Expansion topic will occur.

5.3.1 Brand Equity:

Konka could make it Brand Equity by providing quality product. Govt. is trying to
make it under control by impose 55% import duty, consumer rights movements a mean to tackle
the scourge of Grey Market. Laws and Propaganda helped Konka to expend their market share as
the grey market shrunk. Also showing documentary in national television about the consumer
rights. And the smuggle of CTV in China market is treating like a simple problem by the existing
company because it is a common to create a Grey Market. Konka could take advantage of Govt.
strategy to build up their Brand Equity.

5.3.2 Price war:

Price is common problem for the CTV Company. The company which will give the lowest
price will lead the market. As Konka is based on a Chiness company they have the advantage to provide
lowest price to the consumers. They have an advantage of labor power that can lower the production cost of
CTV. Man power utilization could be the best strategy for them to compete with the price.

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 5.3.3 Global Expansion for :
Konka could expand globally to overcome the excess capacity problem. They have full
possibility for expansion. Chiness Govt. drew up some plan for expansion of Chiness leading CTV MNCs.
The Ministry of Foreign Trade and Economic Co-operation stared declairing every year a list of industries
that it deemed fit to be promoted in the International Market. Not only MoFTEC but also People’s Bank of
China drew up the Blue Print jointly to help the MNCs to expand globally. In 1997-1998 Bank of China
granted a loan of 3.8 billion, in 1998-1999 a loan of 4.2 Billion and in1999-2000 they slated to give up to 5
billion Yuan. So Konka is getting continues support from Govt. and also from the Domestic Bank, they
have no problem in financial sector for expansion. Konka use a part of this money routed through the
overseas branches of BoC in Australia, Malaysia and Singapore, to finance the expansion of Konka’s
overseas expansion. They also have an advantage of lower the product price to compete with the
International Branded Products. Also they are giving service and replacement warranty to the consumers
which will help them to acquire the market share of the respected country. Konka should improve their
R&D Depertment to discover innovative Technology. For an example they should produce HDTV, DTV,
Home Theater Etc. Cause they have a huge demand in Europe and US market. If they improve their
Technology to invent innovative products they could gain highest market share in foreign market, like in
Australia they have 5% of market share if they have innovative technology they could make 10-15% of
market share. In US they have a huge demand in HDTV, DTV and Home Theater. They could make that
product and lead the US market. They have a strong after Sale-Service staff in India (1 person for 2000
units), they could imply this service all over the world because consumer now a day emphasize in after-sale
services.

6. Implementation:
If Konka goes for a complete global expansion they could be one of the largest global
companies. They have full facilities to expand globally. They have Govt. support, Banks Support,
Labor Support, Better management support and Human Resources Management support; these are
the key element to success in global market.

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6. Conclusion:
As we know Konka has already emerged as the best selling CTV brand in China. Selling under
its own brand and employee in a low price entry strategy, Konka has successes in getting an
initial toehold in many foreign Markets. Our Problem Finding and the Recommendation for
problem will help them to Boost up the Global market. In a Global Market where the
globalization is the word of mouth, overseas expansion is the best way to be the Market leader.