Television Industry

Indian Television Industry: A Strategic Analysis*
Seema Gupta1
Abstract The Indian Television industry is going through turbulent transformation. Companies are relooking at their strategies and are desperate for growth. The entrenched position of the Indian market leaders in CTVs like Videocon, BPL and Onida has been challenged by the MNCs such as LG, AIWA, Akai, Panasonic, Samsung, Sony, Philips and Sharp; some in a perceptible way and others threatening to do so. The changing environment demands fresh thinking to gain the cutting edge advantage. This paper attempts to look at the various macro and micro environmental factors operating in the industry using the model of strategic analysis by George Day, i.e. to analyse the bargaining power of buyers and suppliers, the threat of new entrants, threat of substitutes, intensity of rivalry, impact of technological changes, growth and volatility of the market and the influence of government and regulatory interventions. These variables affecting the industry have been categorised as favourable or adverse depending on the influence on the profitability of the industry. Some strategic initiatives, which can be adopted, to leverage the favourable forces and prevent the adverse ones have been identified.
1.
INTRODUCTION AND OVERVIEW
In the last five years colour television industry (CTV) has witnessed drastic changes in the intensity of competition. Exchange schemes, free gifts, price offs, prizes, deferred payment schemes and other incentives as promotional tools have been deployed by the players, which certainly have made the market, vibrant and pulsating. A major factor contributing to the growth has been availability of consumer financing schemes. Concomitantly, the industry has been
*
1
witnessing a new scenario with a new market profile. The entrenched position of the Indian market leaders in CTVs like Videocon, BPL and Onida has been challenged by MNCs such as LG, Samsung, Sony, Philips, AIWA, Akai, Panasonic, Sansui and Sharp; some in a perceptible way, others threatening to do so. The industry is going through turbulent transformation. Companies are relooking at their strategies and are desperate for growth. This paper attempts to analyse the various macro and micro
Received June 23, 2006, Revised August 17, 2006 The author acknowledges the anonymous reviewer for valuable comments. Visiting Faculty (Marketing), Indian Institute of Management, Bangalore Email: seemag@iimb.ernet.in
196
Vilakshan, XIMB Journal of Management
environmental factors operating in the industry to provide a basis for devising strategy.
2. INDUSTR Y PERFORMANCE
The performance of the Consumer Electronics industry comprising television, audio equipment, DVD, VCR has been analysed from 1998-99 to 200203 (Exhibit 1). Important performance indices such as Debt-Equity ratio (D/E), Return on Net Worth (RONW) (Post tax), Net Sales/Total Assets and Operating Profit/Net Sales are as depicted in charts 1-4. Chart 1 depicts the declining trend of D/E till 2001, but rising trend thereafter, showing that the industry is shouldering an increasing debt burden. This may be because of the need to pump more funds for aggressive marketing. RONW (Post tax) as depicted in chart 2, has increased from 7.3 in 1998-99 to 10.2 in 2001 but plummeted to 7.6% in 2001-02 and became 3.3 in 2002-03. Profit margins of all the players have decreased due to falling prices and increasing marketing and R&D costs. This indicates that the industry, in general, is in a state of turbulence and there are fluctuations in financial performance driven by changes in competition and consumer centric promotions. In chart 3, the ratio of Operating profit/Net Sales exhibits the fluctuating pattern over the years with drop to an all time low of 4.4 in 2002-03. This indicates increasing pressure on bottom line due to heightened competition. Chart 4 shows a more or less stable Net Sales/ Total Assets (Asset
Turnover ratio) hovering between 1.091.22. This indicates that there is relatively stable utilisation of assets (CMIEFinancial aggregates, 2004; CMIECorporate sector, 2004). These four indices taken together show that the consumer electronics industry is passing through a difficult phase from year 2000 onwards, characterised by increasing debt, erosion of net worth, declining profits and low asset utilisation. The industry is undergoing changes in the levels of competition and hence there are fluctuations in financial performance. The entry of MNCs in the market has given rise to aggressive marketing and thus eroding the profitability of wellentrenched Indian players. Given the turbulence in the environment there is a need for an in-depth analysis to decipher the impact of various factors.
3. INDUSTR Y ANALYSIS- 5 FORCES MODEL
Michael Porters Five Forces Model provides a robust and time-tested framework for analysing any industry, reflected in the strength of the five forces (industry competitors, potential entrants, threat of substitutes, power of buyers and power of suppliers). The collective strength of the five forces determines the ultimate profit potential in an industry, where profit is measured in terms of long term returns on capital invested (Porter, 1980). The elements of each of the above forces and the extent and /or effect of each element in the context of the television industry have been analysed and enumerated below.
Gupta, Indian Television Industry...
197
Porters framework, however, does not address three important variablesGovernment and Regulatory Interventions, Technological Changes, and Growth and Volatility of Market Demand. These variables have been included in the model proposed by George Day (Day, 1990), which evolved from Porters model and have been analysed in this study (Exhibit 2).
3.1 Degree of Rivalry
Degree of rivalry denotes the intensity of competition within the industry. LG is the market leader with 26% market share followed by Samsung and Onida (Exhibit 3). Although LG is the market leader, its average realisation is lower than the industry average due to competitive pricing. India is one of the biggest global markets for LG, therefore its strategies are much more aggressive to ensure huge growth. On the other hand, Samsung is far stronger than LG globally, and while India is a key market, there is no crushing need to ensure immediate big growth numbers. The company expects the Indian arm to contribute 10% of the total worldwide turnover by 2010. According to Crisil, the company has been growing at CAGR of 24% between 2001 and 2004.The Company sells a large portion of its wares on a cash-and-carry basis, and has a return on capital employed of 43%. Despite being big in size, the company is operating in a tough market, which explains why it has a net profit margin of only 5%. Videocon, another major player has managed to hold its own in the midst
of the onslaught from the Korean majors, though profits have suffered. Other large Indian companies in the top of the list are Mirc Electronics. While Mirc Electronics is managing to hold its share by adopting value for money strategy, BPL is facing tough time, experiencing drastic decline in market share. Sony, Philips, Akai, Sansui, Aiwa, Toshiba and now Hyundai are the other foreign brands in the market. The industry is based on numbers game and companies will have to maintain a fine balance between catering to lifestyle requirements and meeting the needs of average consumer. The sales value of the top six CTV players (Exhibit 3) has increased more than proportionately to the corresponding increase in their market shares. Although the top players have drastically reduced prices, they have gained more volume due to increasing market size and higher penetration levels, coupled with conscious shift towards flat colour televisions (FCTVs). 3.1.1 Competitor Analysis A detailed analysis of some of the major players is done below:
LG ELECTRONICS
LG Electronics rightly understood the consumer motivations to create magnetic products, price them strategically, position them sharply and keep making the magnetism more potent. Having understood the finer differences in consumer motivations, it opted for sharparrow reasons-to-buy differentiation over the blanket-all approach taken by
198
most of the other players. It is an aggressive marketer. It focuses on low and medium price products.
SAMSUNG
Initially the strategy of Samsung in India was to create premium image by emphasising global brand. After facing stiff competition from another Korean major- LG, Samsung also started playing price game. In 2004 it reverted back to its premium positioning, although it resulted in some loss of market share. In line with the Global Digital Initiative of the Parent Company, Samsung India is seeking to acquire digital leadership in India by introducing its digital ready televisions like the 40" LCD Projection TV, 43" Projection TV and the Plano series of Flat Colour televisions.
ONIDA (MIRC ELECTRONICS)
its own envelope on obsolescence, much like Intel has been doing in its own industry. The strategy is aimed at further broad basing the product offering of the company, which has largely dominated the top-end of the television market, across multiple market segments. Besides understanding the strategy adopted by different players, several other factors- industry growth, concentration and balance, corporate stakes, fixed cost, and product differences need to be analysed to determine the extent of rivalry between the existing players.
VIDEOCON
Its popular devil ad although had engendered a strong emotional pull towards the brand, technologically it represented no advancement. The company plugged the gap by touting its digital technology. Like Videocon, it has also been able to hold its market share. The world-class quality of Onida has enabled the company to make a breakthrough on the export front. Onida is a leading brand in Gulf market and also exports its models to Africa, Bangladesh, Sri Lanka and Nepal. It has technical tieup with the Japan Victor Company, better known as JVC. So focused is Onida on positioning itself on the premium, hightech plank that it is even planning to push
Videocon has always been a price player and has an image of a low price brand. This entails providing more features at a given price vis--vis competitors. It has taken over multinational brands to cater to unserved segments, like Sansui- to flank the flagship brand Videocon in the low to mid priced segment, essentially to fight against brands like BPL, Philips, Onida and taken over Akai- tail end brand for brands like Aiwa. Videocon is one of the largest manufacturers of television and its components in India and thus has advantages of economies of scale and low cost due to indigenisation. It has the widest distribution network in India with more than 5000 dealers in the major cities. It also has a strong base in the semi-urban and rural markets. Due to its multi-brand strategy, it has at present multiple brands at the same price
199
point. This has led to a state of diffused positioning for its brands. It has also led to a cannibalisation of sales among these brands. The flagship brand Videocon has lost market share due to the presence of Sansui in the same segment. Because of reduction in import duties on CPT the cost advantage of Videocon is also on the decline. Hence it is facing rough weather and also trying to boost exports. 3.1.2 Industry Growth The industry has been witnessing robust demand; fuelled by revival in economy, increase in individual disposable income and liberal incentive schemes by banks and financial institutions. The demand for CTV grew at 15% during 1985-89 but witnessed a slump from 1990-94. With the entry of MNCs and thereby aggressive marketing, the period between 1995-96 to 1999-00 saw a surge in growth rate to 29%. Thereafter the market has been growing but at a decreasing rate due to increasing penetration and near saturation in urban households (Exhibit 4). This is in spite of the fact that CTV penetration in India is as low as 23%, more so in rural markets and hence has potential for growth (Exhibit 5). According to the Francis Kanoi report CTV in India in 2010, the possible demand for CTVs in India in 2010 is likely to be at least 18.2 mn or 12 mn in the worst scenario. This figure is not very far from that in Europe with a market size of 30 mn sets and China at 24 mn sets as of 1999. It has been further predicted that if power ceases to be an impediment in the growth of CTV market, especially in the rural
sectors, a GDP growth of 7% could take the CTV demand in 2010 to 20 million. The report also assumes that economic expansion will lead to increase in prosperity levels down the income strata and the technological advances in transmission, reception etc. will compel replacement (Financial Express, 2001). The entry of Star TV, Zee TV, BBC, CNN among a host of other private channels has given choice to the consumer. Proliferation of niche as well as mass entertainment channels has led to the purchase of multiple television sets per household. World cup and cricket tournaments are key drivers in the increase of CTV sales. Host of cricket tournaments like Series with Australia and Pakistan, Mini World Cup, World Cup are a major attraction for cricket crazy India and companies are tapping this opportunity by sponsoring cricket related events and running promotions around them. 3.1.3 Concentration and Balance The Herfindahl Index of concentration is 0.092 for the year 2002-03, which means that the market share is dispersed and there is low concentration. Hence many rivals none of whom has a significant market share characterise the industry. (The index takes values between 0 and 1, where 0 indicates no concentration at all and 1 indicates monopoly) This means that the industry is not disciplined and has high degree of rivalry (CMIEIndustry: Market size & shares, 2004).
200
3.1.4
Corporate Stakes
In the year 2002-03, the gross fixed assets of consumer electronics industry were Rs. 5994.3 cr, net worth Rs. 2823.7 cr and capital employed Rs. 6077.6 cr. Thus corporate stakes in the consumer electronics industry are quite substantial (CMIE- Corporate sector, 2004; CMIEIndustry Financial aggregates & ratios, 2004). 3.1.5 Fixed Cost and Value Added The television industry is highly capitalintensive due to the requirement of technology and costly components like picture tubes. The fixed cost as a proportion of value added is quite significant and had gone down from 45% in 1998-99 to 37% in 2000-01 but again increased to 45.4% in 2002-03 (Exhibit 6). For the purpose of analysis, Fixed Charges have been taken as (Employee Cost + Interest + Depreciation). Value Added has been defined as (Net Sales- Cost of Material- Cost of Power & Fuel). The value addition is slowly increasing due to decreasing costs of input material and higher sales realisation due to aggressive marketing. But at the same time Depreciation doubled in 2002-03 from 2001-02, which is the major reason for increase in the fixed cost as a proportion of value added. Selling costs have increased drastically from Rs567 cr in 1998-99 to Rs1518 cr in 2002-03. (CMIEIndustry: Financial Aggregates & Ratios, 2004).
3.1.6 Product Differences & Brand Identity In a competitive environment substantial investments in brand building becomes a necessary condition for survival as it is the value and perceptions related to the brand that act as differentiators. Onida launched 14 TV sets named Candy with coloured cabinets. The product is essentially customised for the 12-25 year olds who are increasingly looking out for personalised products to cater to their tastes. BPL launched a convergence TV under the name BPL digital that combined the Internet and cellular services with the televisions traditional features. LG introduced Golden Eye series, incorporating advanced technology. While Sony and Samsung have managed to create premium image, LG offered compelling reasons to purchase. Onida and BPL have laid emphasis on quality and innovation and Videocon has been perceived as value for money brand. Akai, Aiwa, Sansui, Philips have the image of providing good bargain to the consumers.
3.2 Threat of Entry
Threat of entry is determined by the entry barriers, which act to prevent new firms from entering the industry. A lower entry barrier makes it difficult for the existing producers to remain profitable for long. When profits increase, additional firms will enter the market to take advantage of the high profit levels and over time drive down profits of all firms in the industry. When profits decrease, some
201
firms will exit the market, thus restoring the market equilibrium. Barriers to entry arise from several sources: 3.2.1 Access to Distribution Channels A strong distribution network is absolutely essential to compete in this industry. Not only does it guarantee a country wide reach for a companys products but is also necessary for providing good after sales service. LG Electronics sells in 1800 towns and cities with a population of 1,00,000 and above. Samsung also has a widespread service network, which includes 123 exclusive service centres and 200 distributors in any town with more than 1 lakh population. All BPL dealers are linked via VSAT nodes, ensuring online availability of information on inventory status and sales movement. Videocon has implemented ERP system, which helps in integrating the manufacturing, marketing, procurement and distribution services with the corporate office. BPLs distribution network is a combination of 37 C&FAs, 33 Branch Offices, above 300 Service Centres with 400 sales personnel across product groups working to reach over 2500 dealers and distributors. Distribution hence is difficult and costly as established firms dominate distribution. Large incentives are required to gain entry into the distribution channels and further gain recommendation to retailers from the dealers. As exhibit 7 shows, market leaders LG and Samsung have highest
sales per dealer and hence gain crucial competitive advantage over their rivals. 3.2.2 Brand Salience With little product differentiation and parity products, it is imperative that distinct images are created in the minds of consumers through positioning and brand building. MNCs have been able to compress the cost of brand building by amortising the cost of sponsoring international events across a larger footprint straddling multiple countries. LG sponsored ICC World Cup 2003 along with Pepsi and Hero Honda and got tremendous mileage in terms of increased sales and brand building. Similarly Samsung sponsored the Indo-Pak series in 2004. Domestic players are constrained in their brand building due to not being global in their operations. 3.2.3 Capital Investment Economies of Scale and
Television industry is capital intensive and players have made huge investments in putting up state of the art manufacturing facilities. Sony India had a production capacity of 300,000 CTV sets with capacity utilisation of 66%. But since the demand for its products in India was much less than the plant capacity, Sony finally closed down its plant. Samsung is investing $4 mn to expand its CTV manufacturing capacity at Noida to 800,000 units per year. The existing capacity of the plant is around 600,000 units. Other players like Videocon, Mirc
202
Electronics, LG have also set up manufacturing facilities in India. The market players need sales volume to achieve economies of scale, which is difficult because of large number of competitors. Apart from investments in manufacturing the industry requires huge working capital to manage inventories. Supply chain management and inventory management thus becoming crucial to determining profitability. With regard to sourcing funds, MNCs are better placed than their Indian counterparts as they manage to get funds from their parent companies at low rates of interest. Huge capital requirement thus can act as barrier to entry.
3.3 Threat of Substitutes
A. THE UPGRADERS This segment of buyers has upgraded from Black and White TV to Colour television. This segment is by far the largest in the Indian TV market and constitutes approximately 62% of the market. The principal reason behind the up gradation is the C&S (cable and satellite) boom that has hit India and the increasing coverage of major sports events like cricket tournaments and Olympics. The consumer in this segment usually goes for active information search. This segment normally builds its product knowledge from advertising and other product communication that it gets exposed to & the dealer. This segment also normally shows a distinct preference for multi brand outlets and the primary reason for this is to compare brands and process relative and unbiased information. Interestingly, the 14 CTV, which is primarily positioned as a second purchase, is a big favourite with this segment. 14CTV which accounted for 20 per cent of the total CTV demand in 200506, is expected to witness a gradual decline to 10-12 per cent of total sales by 2010-11 (Exhibit 8). Demand would come from buyers upgrading from B/W sets to CTVs; commercial enterprises & shops; and multiple CTV set purchasers. However the extent of price reduction by industry players would depend on the market leader-LG-, which dominates sales in this segment. Vis-vis the 20 and 21 CCTVs, the 14 CTV has a loyal following,
In Porters model, substitute products refer to products in other industries. Internet though emerging as an infotainment medium is very low in penetration. Moreover the industry has responded to the future threat by introducing a TV that can provide functions of the Internet along with regular features, e.g., BPL digital that includes Internet and cellular facilities.
3.4 Buyer Power
The power of buyers is the impact that consumers can have on a producing industry. Buyer power influences the prices that a firm can charge. The television market can be broadly segmented into following categories (Project Report, 2002):
203
which is expected to continue, though at a slower pace (CRIS INFAC, 2006). Certain attributes that are common across segments are evaluated and are cable TV compatibility, number of channels, sound system and fully operational remote. Some of the influencers that act as clinchers are discount offers, deals, tradein offers and instalment offers. B. FIRST TIME BUYERS This constitutes people who are purchasing a colour television for the first time. They comprise 18 per cent of the market. They primarily belong to nuclear families. The structure of these families is either DINK (double income and no kids) or SINK (single income and no kids). The other section that makes up this segment is the bachelors living alone for the purpose of jobs or higher studies. The fixed or planned budget and the compatibility with the small establishment are two major factors that drive the nature and direction of information search in this segment. In this situation, the wide screen models are mostly out of the consideration set of the purchasers in this segment. The role of the wife in the information processing and decision-making stages is a significant characteristic of this segment. There is preference for technically intensive data that come from a professional source and not necessarily a blind preference for personal data sources. Interestingly, the technical, largely feature and benefit based evaluation gets interspersed with
aesthetic considerations like shape, etc. because of the influencing role that the wife plays in the decision making process. Hence, important differentiating factors in this segment are: shape; colour of the cabinet; size of the speakers; position of speakers and other accessories. Although price plays an important part in the decision making process, discounts and trade-ins do not enjoy as much popularity with this segment as with the previous one. The inclusion of a warranty contract or the promise of after sales service do not play a very important role in the decision making process. Brand loyalty is not very high as loyalty is more to the technology and its rapid development and up gradation (implying rapid obsolescence of existing technology) than to any single brand. This implies that the brand claiming to offer the latest and most consumer friendly technology will be preferred more. C. MULTIPLE SET PURCHASERS This segment represents those people that are purchasing more than one set and are looking for specific need gaps to fill. They comprise the lowest share of the market in terms of volume with just 8% being commanded. The family demographics of this segment are mostly joint families and full nests. The principal reason behind most of the purchases is an increasing family size and desire to own a personal TV set. The credibility of the dealer is not high at all in this segment and the company sources of information with a
204
high technical content are mostly preferred. Price is not the most important criterion for purchase decision-making. This segment was more prone to purchase from the grey market till 1995, as they wanted to purchase foreign brands that were not available through popular channels at that time. However, this characteristic has changed over time and these people patronise the foreign labels appreciably. Warranty and after sales service do not play an important part in this segment. D. REPLACEMENT PURCHASERS This segment usually trades in its old CTV for the new models. It forms around 12% of the market and holds immense potential in the future. The expansion of innovative technology and cable compatibility has thrown the old sets, with their eight programmable channels, completely out of favour. This segment also shows a keen interest in the grey market and is not completely against the idea of purchasing a feature-laden brand from the unorganised market. Neither the price of the set nor the offers of warranty periods and promotional sops, is an important criterion. With increasing disposable incomes and the introduction of new models and declining prices, replacement demand has surged over the years. Replacement demand is expected to account for 55-57 per cent of total CTV sales by 2010-11. With increased penetration levels of CTVs in semi-urban as well as rural areas, the growth in the number of first time CTV purchasers
would be lower in these areas, as compared to the growth in replacement demand (CRIS INFAC, 2006). Buyer power is influenced by various factors as follows: 3.4.1 Buyer Concentration The industry is akin to consumer durables whose end users are fragmented. Hence buyers do not have any specific influence on producers. 3.4.2 Buyer Switching Cost The cost incurred by consumer in switching from one television brand to another is practically zero. Brand loyalty is low. Hence the companies cannot rest on their laurels and have to be on their tenterhooks to retain the customers. 3.4.3 Price Sensitivity Market is highly price conscious and promotion driven. With the onslaught of Akais major price cuts and promotional schemes, this market has now become a promotion driven one. To successfully compete in this industry, even premium players like Sony, LG have had to come up with schemes. LG and Philips have been the most aggressive amongst industry leaders as far as pricing is concerned and hence their realisation shave been lower than industry average. Industry leaders like LG focus on lowmedium priced CTV, while Samsung has moved gradually towards higher priced CTVs (Exhibit 9). The domestic high-end CTV prices will follow the global price trend of declining prices. However, the
205
prices of domestic products would be higher than those of global products due to negligible demand in the domestic market and hence most likely to be met through imports. Exhibit 10 indicates that the market is highly price sensitive as the demand has increased with fall in prices.
3.5 Supplier Power
excess capacity in the domestic market. Samtel Colour, LG Hotline and JCT Electronics are the major domestic CPT manufacturers (Exhibit 11). The picture tube industry is both technology and capital-intensive industry. Samtel India imports technology from Mitsubishi and JCTE from Hitachi. Uptron had collaboration with Toshiba. BPL has entered into a strategic alliance with Toshiba Corporation of Japan to manufacture pure flat picture tubes for the first time in India. Philips Electronics and LG Electronics have formed a joint venture to become a global giant with almost $6 bn sales (CIER, 2002). Hence manufacturers are dependent on suppliers for important components and hence suppliers enjoy high bargaining power. Many manufacturers have integrated backwards to gain cost advantage over their competitors. At the same time bulk orders in raw material procurement fetch more discounts, which gives the larger players an advantage over their smaller counterparts. The CPT, the most critical component in a CTV has no alternate use and therefore, the CPT industry is solely dependent on CTV players, mainly domestic and partly exports. Hence larger players like LG, Samsung and Mirc etc. are able to negotiate better deals unlike other players.
Suppliers bargaining power influences the cost and quality of input material. Higher supplier power raises the input cost, thereby reducing the industry profitability. The most critical component in manufacturing television is the picture tube. It constitutes around 50% of the cost of television. While Black and White picture tubes are made in India, many manufacturers still need to import colour picture tubes. The other important components include electronic circuit boards, tuners, high-tension transformers and moulded plastic casings. The demand for colour picture tubes (CPT) has been rising steadily. But at the same time owing to customs and import liberalisation, they had to face competition from imports during 1993-1997. A sharp reduction in import duty from 85% to 40% between 1994-96 and further down to 20% by 2004 was announced to gear the manufacturers of picture tubes to face competition from foreign players. As a result of spurt in demand in 1990s, the CPT manufacturers expanded capacities, which resulted in
206
4.
INDUSTR Y ANALYSIS- GOVERNMENT AND REGULATORY INTERVENTIONS
The role of the government as the supraenvironment for business, creating the rules for competition is crucial. It creates boundaries within which the industry must operate. Following its policy of liberalisation, the Indian government completely delicensed the television sector in November 1996. In the year 2004, custom duty on television sets was reduced from 25% to 20% and the Special Additional duty of 4% was dispensed with. Reduction in customs duty is unlikely to affect the industry in a major way because a substantial chunk of the industrys products is manufactured in India. The key benefit will be to the brand owners with high-end models that are primarily imported. Abatement rate on CTV has been hiked from 35% to 40%. Excise duty on CTV was brought down from 18% to 16% in 2001 whereas on B&W TV it has been hiked from 4% to 8%. Companies may benefit marginally from increase in excise duty on B&W TVs to 8%, as they would now be able to claim CENVAT credit for the excise paid on raw materials. Hence so long as the industry is vigilant against large scale dumping of television sets from countries like China, these measures are largely positive for the industry in bringing down the cost. The customs duty and excise duty on components has been reduced to 20% and 16% respectively. But this is unlikely to be major benefit because of the relatively
low import content in most products (except high-end products) but will benefit MNCs more as they rely more on imports. Colour picture tube players are taken aback due to recent rollback in customs duty in glass parts. Glass parts are being used in manufacturing picture tubes. Imports of glass parts were levied with a uniform 20% basic customs duty. Following the Free Trade Agreement with Thailand, the import duty on CPT and CTV was fixed at 10% and for its inputs glass parts the duty was 20%. In the process there is a lopsided duty structure wherein the import duty on inputs are higher than the output, which is not conducive for domestic manufacture/ value addition. Except Sony, all major domestic colour TV manufacturers like Samsung, LG and Videocon source their requirements from Samtel. Thus the duty structure favours brands like Aiwa, Sansui and also the top-end CTV models, which are imported. Hence Indian players like Onida, BPL, Videocon are at a disadvantageous position vis--vis their multinational counterparts. Industry wants that there should be customs duty differential of 5% between CTV, colour picture tube and colour glass parts to encourage value addition. Industry also wants that excise duty on non-dual use components of B&W TV i.e. B&W picture tube, B&W glass shell, B&W deflection yoke and mechanical tuner should be reduced from 16% to 8%, i.e. at par with B&W TV.
207
5.
INDUSTRY ANALYSIS- TECHNOLOGICAL CHANGES
The manufacturing of electronic items relate mainly to assembly line operations. Since this is a technology driven industry, companies need to constantly improvise, innovate and customise their products. Coloured cabinets, headphones, 3-D 360 degree sound technology and e-mail TV, plasma TV and golden eye technology are just a few examples. Till now, TV makers have played with one or more of the three elements of a TVpicture, sound, features- on an analog signal. So one had a sharper picture with Philips Powerchip, flatter screens in plasma TV, increased channels in hyperband, programme summary on screen, cordless headphones, top dome speakers and Nicam stereo sound inputs. Digital gives marketers a fresh platform to play with all of these features. The promotion strategies and product features of a majority of the players have emphasised more and more on the latest technology factors. All the players whether domestic or multinational are introducing technologically advanced and feature rich products. Salora International launched high-end televisions under brand name Promax which had 250-programme memory, 250 personal preference channels and a video lock to block undesirable content. Sony (Wega series) enjoys good brand equity, mainly because of its Trinitron picture tube. Samsung flat TV models are equipped with the 100 Hz scan, which
reduces flickering of the screen and visibility of scanning lines. These are also equipped with game mode, a child lock and a sleep timer. LG Flatron models have features like PIP-2 tuner and woofer with 350 watts and 3 graphic games. Another model that the company is launching has swing speakers, advanced multi window PIP, a digital virtual Dolby, a PC and teletext. BPL has also launched flat TV models under sub brand name matrix which have all the features that come with systems of this range. Philips India has launched 29 inch TV incorporating its pioneering digital natural motion technology and priced it higher than industry levels following the strategy of low market share but high revenues. Hence the market players are investing in R&d and improving technology on a constant basis to offer innovative products. In the fiscal 2004-05, the market for high-end televisions witnessed a phenomenal growth over 2003-04, though the market base still remains very small. The market for projection TVs is estimated at 13, 500 units followed by plasma TVs and LCD TVs at 6, 700 and 2, 850 units respectively. The projection TV market is highly competitive. At present, Sony leads the projection TV segment with sales of 4,000 units in 2004-05. LG occupies the second position with sales of 3000 units. Samsung and Philips closely follow with sales of 2,500 and 2,200 units respectively. Onida and Toshiba are then other major players in this segment. LG is the leader in plasma TV segment with a market share of 30 per cent, followed by Samsung
208
at 22 per cent. LG and Samsung have been engaged in competition for numero uno position for LCD TV, which has also been growing significantly. For the next few years, the markets for high-end televisions will continue to grow phenomenally and it is estimated that by the end of 2007 the market for high-end TVs would cross 100,000 units milestone. In view of the higher technical nature of television and rising expectations of consumers in general, marketers now need to strengthen the service network since there is a paucity of service facilities and consumer dissonance is built around service facilities. Most Indian consumers are techno phobic and are uncomfortable with instruction manuals. Thus assurance of comprehensive service to these consumers is a strategy that a number of these marketers use effectively to sell.
6. GROWTH AND VOLA TILITY OF MARKET
The last few years have seen a quantitative and qualitative change in TV technology and software. With the advent of several local and foreign satellite channels, demand for CTVs has seen a rise. Exhibit 12 shows the increase in sales value for CTVs over the years. Aggressive and innovative marketing strategies and technological advances have led to strong brand differentiation and prices. In the process the industry has evolved with products available at different price points at all levels. This process was also facilitated by growth in production in the organised segment and domestic availability of multinational brands due
to lowering of import duties and other liberal measures. The television industry appears to have two clearly differentiated segments. The MNCs have an edge over their Indian counterparts in terms of technology, aggressive marketing strategy, economies of scale in branding through international events and associations combined with a steady flow of capital. The sale of TVs also tends to be event driven. During the Cricket World Cup in 1999, CTV sales recorded a phenomenal rise of 40-50% after which the industry has grown at around 10-12%. Rural market is expected to grow by 25% compared to expected growth of 7-10% for urban area. One of the notable developments have been that the rate of growth in production has been more in terms of quantity or in volume terms rather than the growth in value terms. This has happened because of the constantly falling prices over the years due to competition among major players, aggressive marketing strategies and declining import tariffs. With penetration levels being deplorably low, the industry is focusing on semi urban and rural segment for scaling up demand. For basic models, the market is reaching saturation limit in urban market, and hence value addition, differentiation and superior and new product introduction only can bring high growth in urban areas. Exhibit 13 indicates market segmentation region wise. Despite the robust volume growth expected over medium to long term, the profitability of CTV players is likely to remain strained. The reduction in raw
209
material costs, the declining CPT prices and chassis costs will be partially offset by the increase in selling costs resulting from the intense competition.
7. CONCLUSION
The variables affecting the industry with regard to each of the five forces have been categorized as favourable or adverse (Exhibit 14). Favourable variables have the potential to improve profitability, while adverse variables reduce profitability of the industry. Some strategic initiatives, which could be adopted to leverage the favourable forces and protect themselves from the adverse ones, are as follows: R&D and Marketing will have to work closely together. R&D will have to play a role in cost innovation, which can cut component cost and raise performance. The number of defectives has to be reduced at negligible levels. The quest should be to do even better. Each assembly line can be made to compete with the other. Vital to the spread out is the re-haul of distribution network. Home appliances have necessitated separate dealers, many of them specialists. For sharper focus on all categories individually, the market has to be opened wider. Brand building will be important, so as to ensure brand preference. Marketers will have to strategise to
pull the consumer up the value escalator. A good fraction of sales if come from high margin products as flat TVs and projection TVs would improve profitability of companies. Sharply differentiated products with effective communication on a continuous basis would be the key for future. Challenge lies in creating higher order universal benefits and sensitising the larger audiences to it. LG and Samsung are likely to retain top positions Buyers are easily swayed by costs, which are also verified by the presence of large number of product offerings. Focus would be on providing value for money to the consumer, with more brands in the economy segment. The challenge before marketers is to span out, and address a wider set of needs. They will have to identify segments not addressed by them so far and also introduce low price-point products aimed at rural markets. For instance, LG has launched Cineplus, a low priced TV to compliment its brand Sampoorna in the same category. Besides catering to the cost conscious segment, marketers need to segment the market on the basis of psychographics, which will help in inducing brand loyalty through lifestyle and experiential marketing. LG has attempted it by sponsoring ICC Cricket World Cup 2003.
210
Marketers need to generate demand and let dealers service it, rather than shunting products down the distribution system. This will require close consumer proximity. The industry has a number of players but there will be shakeout triggered by ever increasing intensity of competition. Some of the national brands may exit the market within few years. Unorganised CTV brands like Oscar, Weston and Texla have almost exited the market. Rural consumers will play an increasingly important role and that sales from these markets are expected to exceed 75% of the industrys total turnover in future. CTV companies need to launch low priced models and tap the switch over of black and white TV buyers to colour televisions. The rationalisation of sales tax and additional excise levies has made black and white sets highly unviable. CTV companies need to price competitively and get into organized distribution in rural and semi-urban markets. Companies operating in higher end segments will have to challenge commoditisation. Market shares are expected to consolidate. Leading players like LG and Samsung are likely to continue to occupy the top slots, competition is expected to intensify among the players vying for third to sixth slotMirc, Videocon, Philips and Sansui. The recent entry of players like
Hyundai and Haier is not expected to affect significantly the market shares of leading players. The increase in disposable incomes, more number of households above the threshold income, declining prices, shortened replacement cycle and the demand for multiple TV, all these factors are expected to sustain the growth momentum at 10-12 per cent during 20067 to 2010-11. The demand for 21-inch and 29-inch CTVs is likely to be robust. Despite the projected growth momentum in sales volume, sales value growth is expected to remain low at 4.5 per cent. But the price reductions will be lower than have been in the past and the sales volume will be high. Average realisation is likely to go down as prices of 21-inch and 29-inch Flat CTV should decline in future. There is a likelihood of the 21-inch FCTVs being cannibalised by the 29inch FCTVs by 2009-10 when the price differential between the two segments is expected to reach Rs 5000-6000. Market leaders like LG, Samsung, Mirc and Videocon would be future beneficiaries since their current product prices are lower than industry average (CRIS INFAC, 2006). The demand for FCTV will rise as has been the trend since 2001 (Exhibit 15). The share of 21-inch and 29-inch FCTV is likely to increase to 75-80
211
percent of total CTV sales by 2010-11. Players like, Samsung, LG, Sony and Mirc who are focusing on these categories and pricing them competitively are expected to gain in the long term. The reducing price differential, the prime reason for the shift to FCTVs is expected to narrow further, almost wiping out the market for the 20-inch and 21-inch conventional CTVs by 2010-11. Regional and small players like Crown, Salora, Texla, Oscar and Beltek who sell primarily conventional and small sized CTVs are expected to lose further. If LG continues with its aggressive marketing and distribution, it is likely to retain the top slot with market share of 25-30 per cent. Although LG commands a clear lead, further fast paced growth in market share would be restricted a s the industry players like Samsung, Onida, Videocon, Philips and Sony would probably move towards similar pricing and product mixes. Lead players like Samsung and Onida differ on market shares by mere 350-400 basis points, hence the situation between the two is likely to remain competitive. Entry of new players like TCL, Haier, and Hyundai etc will intensify competition but such players will
have to establish their presence through a robust distribution network, which can only be built over a period of time (CRIS INFAC, 2006).
REFERENCES
Centre for Industrial and Economic Research (CIER) and INTECOS (2002), Market Forecast and Indicators: emerging market in India 20022012, New Delhi: Industrial TechnoEconomic Services P Ltd, pp 798 Centre for Monitoring Indian Economy (CMIE), (April 2004), Corporate Sector Centre for Monitoring Indian Economy (CMIE), (May 2004), Industry: Financial Aggregates and Ratios Centre for Monitoring Indian Economy (CMIE), (July 2004), Industry: Market size and shares CRIS INFAC Colour Television Annual Review (2006), CRISIL Product & Services: www.crisinfac.com Day, G.S. (1990), Market Driven Strategy: Process for Creating Value, The Free Press: NY, pp 110123, Financial Express, Mumbai, May 2001 Porter, M.E. (1980), Competitive Strategy: Techniques for Analyzing Industries and Competitors, The free Press: NY, pp 129-130 Project Report (2002) on Analysis of Colour Television Industry submitted by students of MICA in partial fulfillment of the requirements of Strategic Marketing course ISI Emerging Markets: www.securities.com India Infoline: www.indiainfoline.com
212
EXHIBIT 1 Consumer Electronics Industry Performance
Chart 1: Debt/Equity
2 1.5 1 0.5 0 Debt/Equity
1.19
1.18
1.14
1.35
1.64
1998-99
1999-2000
2000-01 Years
2001-02
2002-03
Chart 2: PAT/Net Worth

PAT/Net Worth 15 10 5 0 -5 1998-99 1999-2000 2000-01 Years 2001-02 -3.3 2002-03 7.3 10.3 10.2 7.6
Chart 3: Operating Profit/Net Sales

Operating profit/ Net Sales 10 5 0 1998-99 19992000 2000-01 2001-02 2002-03 Years 6.6 7.8
6.4
7.2 4.4
Chart 4: Net Sales/Total Assets

Net sales/Total Assets 1.3 1.2 1.1 1 1.27 1.16
1.22 1.09 1.13
1998-99
19992000
2000-01 2001-02 2002-03 Years
213
EXHIBIT 2 Industry Analysis Model
Threat of New entrants Government &Regulatory Intervention Bargaining power of suppliers Technological Changes Bargaining power of buyers
Inter-firm rivalry
Threat of substitutes Growth & Volatility of Market (Source: Day, G S, 1990, Market-Driven Strategy: Process for creating Value, Free Press: NY)
EXHIBIT 3 Realisation and Sales Value Market Share (2005-06)

Lead Players LG Samsung Onida Videocon Philips Sony Industry Average Average Realisation 8690 9237 9234 8190 9163 15439 8814 Market share 26.4 15.1 11.0 7.9 7.4 9.4 100
Source: CRIS INFAC Colour Television Annual Review, 2006, CRISIL Product & Services
EXHIBIT 4 CTV Industry Demand over the years

Period 1985 to 1989 1990 to 1994 1995-96 to 1999-00 2001-02 to 2004-05 2004-05 to 2005-06 Growth Rate (%) 15.0 3.0 29.0 11.0 7.1
214
EXHIBIT 5 Penetration of CTVs (per 1000 households)

Urban 1992-93 1995-96 1999 2003-04 Target 2008 16.0 21.2 23.5 Rural 1.6 2.6 2.9
Composite-110 Composite 225
(Source: Economic Times 28 April 2001: NCAER for first two rows, ORG-MARG for third row and ISI Emerging Markets for last two rows; figures not strictly comparable)
EXHIBIT 6 Cost Structure of Television Industry

1998-99 Net Sales Raw Material & Stores Power & Fuel Wages & Salaries Interest Depreciation Value added Fixed Charges FC/VA Selling Costs 7885.0 5907.9 55.2 276.9 358.9 217.2 1921.9 853.0 44.4 567.0 1999-00 8783.4 6562.5 55.0 298.3 407.1 209.0 2165.9 914.4 42.2 614.6 2000-01 10809.2 7974.0 59.9 359.0 434.5 240.9 2775.3 1034.4 37.3 1130.9 2001-02 10947.3 7723.2 60.4 360.9 512.4 313.8 3163.7 1187.1 37.5 1096.9
(Rs Crore) 2002-03 12472.8 8934.4 82.3 403.9 535.1 629.6 3456.1 1568.6 45.4 1517.7
(Source: CMIE Industry: Financial Aggregates & Ratios May 2004)
EXHIBIT 7 Dealer Efficiency of key CTV Players (2004-05)

Players LG Samsung Onida Videocon Sansui Sony Philips Sales per Dealer 1182 809 547 391 379 372 305 Type 14 20 21 25 29
EXHIBIT 8 Size Variation

Share (%) 21 33 42 2 2
(Source: Centre for Industrial and Economic Research (CIER) and INTECOS (2002), Market Forecast and Indicators: emerging market in India 2002-2012)
215
EXHIBIT 9 Player-wise focus on Price

Low LG Samsung Onida Videocon Sansui Philips Sony Y Y Y Y Medium Y Y Y Y Y Y Y High Y Y
EXHIBIT 10 CTVs: Price vs Demand

Nominal Price* (Rs) 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 12,200 10,000 9000 8500 8000 7500 Demand (million units) 5.1 5.4 7.3 6.7 7.8 8.4
*Nominal Price is the street price of 21 CTVs Source: CRIS INFAC Colour Television Annual Review, 2006, CRISIL Product & Services
EXHIBIT 11 Trends in Market Shares: 1997-2001

Television Picture Tubes 1998-99 Samtel Color L G Hotline CPT BPL Display Devices JCT Electronics Hotline Teletube & Components Samtel (India) Prakash Industries Rama Vision Bestavision Electronics Import Herfindahl Index of Concentration 32.95 17.85 7.62 13.08 2.70 5.35 4.79 2.42 1.29 9.93 0.170 1999-00 30.59 17.75 11.51 19.05 2.02 3.55 3.09 2.05 0.50 9.89 0.178 2000-01 29.71 20.05 13.07 18.37 2.06 2.79 2.47 1.87 0.15 9.44 0.181 (per cent) 2001-0 31.62 20.26 17.91 11.26 3.20 2.97 2.50 1.68 0.16 8.45 0.189
Source: CMIE, Industry: Market Size & Shares, August 2003)
EXHIBIT 12 Sales Value for Television including Spares & Kits

Year 2000-01 2001-02 2002-03 2003-04 2004-05 Sales Value 7500.0 7500.0 8000.0 8500.00 9000.00 (Source: CMIE, Industry: Market Size & Shares, Feb 2006)
(Rs. Crore)
216
EXHIBIT 13 Market Segmentation

Segment North East West South Rural Urban Share (%) 28 17 29 26 40 60
(Source: Centre for Industrial and Economic Research (CIER) and INTECOS (2002), Market Forecast and Indicators: emerging market in India 2002-2012)
EXHIBIT 14
Forces acting on Industry Degree of Rivalry Favourable Healthy growth rate High brand identity Adverse Fragmented industry High fixed cost/ value added High Corporate stakes Limited access to distribution channels Liberalization Low switching cost High price sensitivity High input costs Technology driven supplies
Threat of Entry
Low economies of scale Brand salience High capital investment Unique infotainment Fragmented buyers Reduction in import duty Feasible backward integration
Threat of Substitutes Buyer Power Supplier Power
EXHIBIT 15 CTV Industry Composition- Conventional CTVs v/s Flat CTVs

Conventional CTVs (per cent) 2001-02 2002-03 2003-04 2004-05 2005-06 97.3 92.4 85.9 71.4 53.1 Flat CTVs (per cent) 2.7 7.6 14.1 28.6 46.9
Perspective
Organisational Life Cycle: Leadership Roles and Competencies*

Manu Parashar1
Abstract Life cycle metaphor has been extensively used to describe the birth, growth, maturity and eventual decline of organisations. The life cycle model identified in this paper has four stages - inception, growth, maturity and elaboration\renewal. In each of these stages organisational priorities are different. Leadership roles and competencies need to evolve to match organisational priorities in each of the evolutionary stages. These priorities lead to different leadership roles for each stage. Four roles are identified: entrepreneur, coordinator, integrator and visionary. Competencies are attached with each of these roles. The competencies are divided into strategic\ transformational and operational competencies. A leadership development approach to developing these competencies is suggested. The main contribution of this work is to link literature from organisational life cycle, leadership competencies and leadership development streams. The framework developed here would be especially useful in fast evolving organisations. Given that competencies have a learned element, leadership development can play a major role in helping organisations to have effective leadership in evolving conditions.
1.
INTRODUCTION
The notion that in different stages of organisation different types of leadership is required has been around for some time. Chandler (1962) identified two types of leadership that are required in different stages of organisation growth. He called the type required in the beginning of an organisation life as empire building and the type required in the latter part of the organisations life as organisation building. In the first type the emphasis was on growth, getting resources to grow
* 1.
and on creativity. The second type was focused around building structures, processes and systems that would ensure long term survival of the organisation. A useful metaphor that has been used in literature has been that of organisational life cycle (OLC). A number of authors have used this metaphor (Ichak, 1979; Mintzberg, 1973; Gailbraith, 1982; Greiner, 1972; Quinn and Cameron, 1983; Smith et. al. 1985; Mintzberg, 1984; Cameron and Whetten, 1981) to describe the birth, growth, maturity and eventual
Received July 10, 2006 Fellowship (Doctoral) Student, Indian Institute of Management, Bangalore, India, e-mail: parasharm04@iimb.ernet.in
218
decline of organisations. The basic features of these models have been changes that occur in organisations in a pattern of developmental stages; these stages happen sequentially; have a unidirectional progression not easily reversed and involve a wide range of organisational processes and activities (Quinn and Cameron, 1983). The roles and competencies expected of the leadership in these developmental stages would be different depending on the needs of the organisation. OLC conceptualizations to a certain extent have been used to determine organisations structures and leadership roles that organisations need at each evolutionary stage. However, this literature has not been translated into implementable implications for organisations. This paper seeks to achieve an integration between the OLC\ leadership roles literature and the competency literature, which would be further integrated to the leadership development literature. Competencies by definition have a learned component to them and are amenable to leadership development. The framework of competencies developed for each evolutionary stage would be of great importance to fast evolving organisations. This is extremely important in the current context where OLCs are getting shorter. For example Google Inc. launched in 1998 with $100000 capital (http:// www.google.com/intl/en/corporate/ history.html) in less than 8 years has risen to a market capitalization of $128 billion (NASDAQ on 30/01/2006 share price quoted at $426.82).
This paper would survey representative literature on the topic of organisational life cycle (OLC) and develop an understanding of the needs of the organisation in each of the stages. On the basis of these organisation needs the roles and competencies of leadership required to fulfil these needs would be developed. The outcome of this exercise would be a leadership development programme based on the leadership roles and competencies required in each of the developmental stages. The leadership development literature looks at largely two ways of leadership development, through training or through experience. Yukl (2002) speaks of three distinct ways of developing leadership competencies. These are leadership training, developmental activities and self help activities (Yukl, 2002). This framework would be used to develop a leadership development programme for various stages in the life-cycle of an organisation.
2. ORGANISATIONAL LIFE CYCLE
There are multiple models of organisational life cycle. Adizes (1979) laid out seven stages of organisational development. These were courtship stage; infant organisation; go-go stage; adolescent stage; prime stage; mature stage and aristocratic stage. He suggested a constellation of four roles that would result in effective management at each stage. These were production role (produce results on the basis of goals); administrative role (timely and appropriate decision making);
Parashar, Organisational Life ...
219
entrepreneurial role (adaptation through creativity and risk taking) and integration role (team building role). The roles were presented as a constellation (PAEI). The roles that dominated in any stage had capital letters. In the early stages production and entrepreneurial roles dominated and in the latter stages the administrator and integration roles. Mintzberg (1973) spoke of three stages of development in any organisation. The first stage is the inception stage where the entrepreneurial mode characterized by active search for new opportunities dominates. The second stage is the growth phase where the analyst plays a major role in strategy making and the focus is on systematic decision making and integration. The last stage is maturity where the adaptive mode (science of muddling through as Mintzberg puts it) dominates. Smith et al (1985) also used a three stage model comprising inception, high growth and maturity. They looked at the priorities that the top management would have at each of these stages. At inception and maturity the technical priority (concern with efficiency and goal achievement) is important. The organisational coordination priority (concern with building organisational synergies) dominates in the high growth phase and political support priority (maintaining personal power and support) is important at the maturity stage. Another interesting model of organisational life cycle is from Gailbraith
(1982). This is a five stage model comprising the stages of prototyping, model shop, start-up natural growth and strategic manoeuvring. For leadership roles sports metaphor is used. The roles are quarterback, player\coach, coach, manager and strategist respectively. Greiner (1972) also came up with a five stage model comprising creativity (focus on creating products and markets), directive (sustaining growth through directive leadership), delegation (decentralized structure for continued growth), coordination (formal systems to achieve coordination) and collaboration (inter-personal and team management). Quinn and Cameron (1983) after reviewing nine models of organisation developed a four stage model of organisational life cycle. The first stage was creativity and entrepreneurship where the focus was on marshalling resources, creating an ideology and forming an ecological niche. In the second stage the collectivity stage focus was on building high commitment and cohesion and on face to face communication and informal structures. The formalization and control stage comprised putting procedure and policies in place, increasing conservatism and reduced flexibility. The last stage was elaboration of structure where decentralization, domain expansion and renewed adaptability are key elements. Mintzberg (1984) used a model comprising four stages. The four stages are stage of
220
formation; stage of development, stage of maturity and stage of decline. The major difference from Quinn and Cameron is the last stage, Mintzberg sees it as the stage of decline while the Quinn and Cameron see it as a stage of renewal. Miller and Friesen (1984) after an extensive review postulate five stages birth, growth, maturity, revival and decline. However, the characteristics of their decline stage are very similar to maturity. An organisation after maturity will either go into decline or will attempt a revival. Overall if you closely look at the models presented above then the life cycle models broadly have four stages. The first stage is the inception stage that is characterised by entrepreneurial activity with the firm trying to find its ecological niche. The second phase is the phase of rapid growth where attendant problems administration and coordination come in. In the maturity phase the focus shifts to developing efficiencies, building synergies and integration of strategies and systems. The last stage the author chooses to characterize as the renewal\elaboration stage where the organisation looks for new opportunities and monitors the external environment to renew itself. These four stages will be used to decipher organisational priorities at each of these stages. These priorities will then translate into leadership imperatives. These imperatives would then be translated into roles that leadership needs to play and the competencies it needs to deploy.
3.
ORGANISATIONAL LIFE CYCLE: ORGANISATIONAL PRIORITIES & LEADERSHIP ROLES
Organisational priorities would differ at every stage in the organisational life cycle. Leadership roles would vary as per the organisational priority at that moment. Leadership role is said to emerge from the total organisational characteristics (Moqvist, 2002) which would vary in different stages of the organisation. In the inception stage the key priorities would be creativity and entrepreneurship (Quinn & Cameron, 1983; Adizes, 1979); creating products & markets (Greiner, 1972), acquisition of resources (Quinn & Cameron, 1983) and effiency (Smith et al 1985). The leadership here has to be extremely creative as well as has very little slack available to it. Also required is a risk taking and ability to explore new productmarket spaces. Some of the roles suggested in the literature are: Entrepreneur (Mintzberg, 1973, Adizes, 1979); Key Player (Gailbraith, 1982) and Producer (Adizes, 1979). In summary the role here is clearly that of an entrepreneur. In the high growth stage the organisation would be growing at a rapid pace and would require increasing amounts of formalization and centralization. Processes and systems hitherto not needed would need to be put in place. The key organisational priorities would be coordination (Smith et. al. 1985); commitment and cohesion (Quinn & Cameron, 1983), systematic decision
221
making (Mintzberg, 1973) and administration (Adizes, 1979). Here coordination between continuing on the path of growth and developing an efficient organisation would be required. Some of the roles defined in the literature are: Enterpreneur-Administrator (Adizes, 1979); Coach (Gailbraith, 1982) and Planner (Mintzberg, 1973). In sum, the role seems to be that of a coordinator. In the maturity stage the growth slows down, the firm starts to operate in a very competitive market and the slack disappears (Smith et al, 1985). The focus then turns to efficiency. The key organisational prioties at this point are: Integration (Adizes, 1979; Greiner, 1972); efficiency through planning and control (Smith et al, 1985) and administration (Adizes, 1979). The leadership role here is to deliver efficiency by integrating various systems, processes and strategies to discover synergies. The roles that the literature describes in this stage are: Administrator-Integrator (Adizes, 1979) and Strategist\ manager (Gailbraith, 1982). Overall, the role here is that of an integrator. In the renewal stage the firm faces crisis of survival. Growth slows down or starts to decline. The organisational priorities at this stage are: Domain expansion, renewed adaptability, environment monitoring (Quinn & Cameron, 1983) and innovation (Miller and Friesen, 1984). The challenge here is of two kinds, to be able to maintain the current business and run it efficiently while looking for new
opportunities. This is the time for change. The leadership role required here is that of a change agent and a strategist. The overall role is that of a visionary who can handle the ambiguity of this phase and provide forward looking vision.
4. ORGANISATIONAL LIFE CYCLE: LEADERSHIP COMPETENCIES
Competencies consist of knowledge, skills and other behavioural dispositions necessary to reach desired standards of job performance, and these are developed through formal education and training or informal work experience (Nybo, 2004). Organisations can also have competencies in terms of abilities or capabilities. If a competency view of leadership is taken, leadership becomes a wholly learned skill (Kroek et al, 2004). This brings leadership development to the centre of leadership in organisations. Competencies can be then matched to leadership roles and programmes put in place to develop them. This is where this paper seeks to contribute. There is a lot of literature on leadership competencies. However the challenge is to identify competencies that will allow the leadership to play the role required in each stage of organisational development. Competencies both in the technical area and leadership competencies are seen as important ingredients of leadership (Moqvist, 2002). The leadership competencies identified by Moqvist (2002) are communication ability, delegation
222
ability, technical competence, managing customer relations, dealing with customer expectations and formulating a vision. Buene and Tubbs (2004) identified the following as the most important global leadership competencies: communication skills, motivation to learn, flexibility, open-mindedness, respect for others, and sensitivity. De Vries (2005) identifies twelve leadership competencies including: visioning, empowering, energizing, designing and aligning, rewarding and feedback, teambuilding, outside orientation, tenacity, global mindset, and emotional intelligence. He has also included resilience to stress and life balance as competencies (De Vries, 2005). Scholtes (1999) identified six leadership competencies including, thinking systems and leading systems, understanding variability, leading learning, understanding human behaviour, interactions and interdependencies and giving the organisation direction and focus. Krejci and Malin (1997) identified the following competencies: effective communication, effective conflict resolution, accurate problem diagnosis, systems thinking, personal power, effective group dynamics, change agency, overcome oppressed group behaviours, decision making\ reframing, articulation and enactment and impact. There have been attempts at grouping competencies to make them more useful in varied organisational situations. Lado and Wilson (1994) grouped organisational
competencies into managerial, input based, visionary and output based competencies. In an organisational setting 3M has looked specifically at leadership competencies grouping them into visionary, essential and fundamental competencies (Alldredge and Nilan, 2000). However, this classification does not take into consideration the fact that organisations are continuously evolving. Here, the attempt would be look at a simpler way of classifying competencies and then overlaying them on evolutionary stages. Looking at Allredge and Nilans (2000) classification, the competencies can basically be compressed into two categories: Strategic\ transformational: Competencies that drive high level organisational priorities. These priorities emerge out of the outlined strategic vision of the organisation. Operational: These are competencies that drive operational efficiencies of the organisation.
For effective leadership to exist in an organisation, competencies need to be built in both these categories. An attempt has been made to identify competencies for each of the stage of organisational development. These are the divided into the two categories of strategic\ transformational and operational. These competencies have been short-listed on the basis of leadership roles and organisational priorities (see Table 1).
223
Table 1: Leadership roles and competencies

Inception Characteristics Growth Processes Inconsistent but Rapid Positive Slowing improving (Smith (Smith et al, 1985) et al, 1985) Informal (Adizes, 1979 Moderately formal; (Smith et al, 1985) systems & procedures (Smith et al, 1985) S l o w i n g \ Declining High Growth Maturity R e n e w a l \ Elaboration
Very Formal; C o n s e r v a t i v e planning & (Miller and control (Smith et Friesen, 1984) al, 1985) Status Quo seekers (Adizes, 1979) Bureaucratic (Miller and Friesen, 1984; Adizes, 1979) Domain expansion, renewed adaptability, environment monitoring (Quinn & Cameron, 1983), Innovation (Miller and Friesen, 1984)
People Structure
Generalists (Smith Specialists (Smith et S t r a t e g i s t s \ et al, 1985) al, 1985) planners (Smith et al, 1985) No formal Centralised formal D e c e n t r a l i s e d structure (Smith et (Smith et al, 1985) formal (Smith et al, 1985; Miller and al, 1985) Friesen, 1984) Creativity & entrepreneurship (Quinn & Cameron, 1983; Adizes, 1979); creating products & markets (Greiner, 1972), acquisition of resources (Quinn & Cameron, 1983), effiency (Smith et al 1985) Entrepreneur (Mintzberg, 1973, Adizes, 1979); Key Player(Gailbraith, 1982) ; Producer (Adizes, 1979) Coordination (Smith et. al. 1985); commitment and cohesion (Quinn & Cameron, 1983), systematic decision making (Mintzberg, 1973); administration (Adizes, 1979) Integration (Adizes, 1979; Greiner, 1972); efficiency t h r o u g h planning & control (Smith et al, 1985); administration (Adizes, 1979)
Organisational Priorities
Leadership Roles
EnterpreneurAdministrator (Adizes, 1979); Coach(Gailbraith, 1982); Planner (Mintzberg, 1973)
AdministratorIntegrator (Adizes, 1979), Strategist\ manager (Gailbraith, 1982)
Change agent; strategist
224
Synthesised Leadership Role Leadership Competencies Strategic\ Transformational
Entrepreneur
Co-ordinator
Integrator
Visionary
Risk taking, opportunity spotting
Team building, empowering
Systems thinking; understanding interactions and interdependencies Conflict resolution
Political savvy vision, risk taking, change agency Problem diagnosis
Operational
Resource mobilisation, technical competence
Delegation, designing systems and processes, effective group dynamics
Inception: Strategic\ transformational: Risk taking, opportunity spotting, Operational: Resource mobilisation, technical competence Growth: Strategic\ transformational: Team building, empowering, Operational: Delegation, designing systems and processes, effective group dynamics Maturity: Strategic\ transformational: Conflict resolution, systems thinking Operational: Understanding interactions and interdependencies Elaboration\Renewal: Strategic\ transformational: Political savvy, vision, risk taking, change agency Operational: Problem diagnosis
These competencies are the ones that any leadership development programme should seek to address. These leadership competencies, if inculcated, could result in superior and effective performance for organisations. The next section looks at the various leadership development paradigms in operation today.
5. LEADERSHIP DEVELOPMENT
Leadership has been defined differently over a period of time. In the recent years Kotter (1990) has sought to differentiate it from management by defining it as something that is aimed at generating change by developing a vision of the future and strategies for making requisite changes to fulfil the vision. Communicating, explaining vision and motivating\inspiring people are seen as key ingredients. Yukl (2002) provides a broader definition. It is seen as a process of influencing others to understand and agree about what needs to be done and how it can be done effectively, and the process of facilitating individual and
225
collective efforts to accomplish shared objectives (Yukl, 2002:7). Leadership development has many dimensions to it. If we strictly stay with Yukls definition of leadership as an influencing process, things like interpersonal intelligence (Gardner, 1999) become important. The interpersonal intelligence consists of social skills and social awareness (Zacarro, 2002). This is where the difference between leader development and leadership development comes in. In case of leader development the emphasis is on knowledge, skills and abilities associated with formal leadership roles (Day, 2001). While in leadership development emphasis is on building and using interpersonal competence (Day, 2001). Dixon (1993) says that leadership development involves building the capacity for groups of people to learn their way out of problems that could not have been predicted. Day (2001) in keeping with the social view of leadership as an influencing process puts the emphasis on building and using inter-personal competencies as far as leadership development is concerned. There are various views on the way leadership development should be done. Research suggests that successful performance in most forms of work endevours can be attributed to experience and coaching, rather than simply to inborn talent or early life experiences (Conger, 2004:137). Experience is seen as an important contributor to leadership development. Pernick, (2002) believes that
as far as possible leadership development should occur on the job not away from it. Feedback (Smither et. al., 2005) , 360 degree review (Conger, 2004); stretch goals (Kerr and Landauer, 2004), group coaching (De Vries, 2005), experience (Kerr, 2004), action learning (Fulmer and Wagner, 1999) are seen as some of the important on job components of leadership development. Day (2001) sees the following as the key inputs to leadership development: 360 degree feedback, coaching, mentoring, networks, job assignments, and action learning. McCall (2004) sees only a limited role for training. In his conceptualization, experience leads to leadership development depending on individual competency. Training is just a way to build on experience by reflecting and making better sense of experience, substituting experience that is not easily available, and providing experiences not available online (McCall, 2004). This is an important view because it provides a clear role for training in leadership development. Yukl (2002) after an extensive literature review summarized leadership development methods into three types: Formal Training comprising behaviour role modelling, case discussion, simulation and management games Developmental activities variety of tasks & assignments, multisource feedback, challenging assignments, job rotation, action learning, mentoring and coaching
226
Self Help activities like practitioner books, video tapes and interactive computer programmes.
The role of experiential development programmes is seen as the most important (eg. Day 2001; Pernick, 2002). Training is seen as a backup to on the job development to provide experiences that an organisation cannot easily provide (McCall, 2004). The next section specifically looks at these leadership development techniques in the context of a fast evolving organisation. An approach to leadership development is put in place.
6. ORGANISATIONAL LIFE CYCLES A N D LEADERSHIP DEVELOPMENT
There are many topics that could advance our knowledge of leadership development, but one of the most intriguing is whether managers and executives can develop a leadership capacity for great versatility in style or approach. In other words, can managers vary their leadership styles significantly given changing circumstances? Or is leadership style such a product of personality and ingrained behaviours that variations in style are confined to incremental changes? (Conger, 2004) However, there is some evidence that Leadership Development programmes have a positive impact on competencies (Krejci and Malin, 1997). The other big problem is that the organisation is itself in a state of evolution. To simplify things let us consider an organisation that is in a single line of business that is evolving. Now the problem is that the organisation cannot provide online experiences for leadership roles required in the subsequent stages. This just leaves out the options of formal training and self help activities as the mainstay for leadership development. The only option open for the organisation for live experiences is to outplace employees to companies that are going through the next phase of organisational development or do an inter-company coaching or mentorship programme. The menu that an evolving organisation can use for leadership development is as follows: Formal Training: Simulation of consequent life stages, Management Games, behaviour role modelling,
Fulmer and Wagner (1999) believe that leadership development should have a clear link to organisational strategy and priorities. This is of great importance as far as different life stages of the organisation is concerned. Fulmer (1997) sees leadership development making the move from being an unique event to being an ongoing process. Fiedler and Macaulay (1998) as also Fiedler (1972) have propounded that leadership situation keeps on changing and leadership training needs to reflect that. There are two problems with the leadership development approach using organisational life cycles. The one big challenge that is would be faced in the process of leadership development for different lifecycle stages in the organisation would be that of making people effortlessly change from one set of roles to another. Conger (2004) has grappled with the same dilemma:
227
appreciation of role and competencies required at various stages of organisational development Developmental Activities: Outplacement to organisations which are experiencing subsequent stages of development, inter-company coaching or mentorship programme Self-Help: Exposure to case studies, appreciation of role and competencies required at various stages of organisational development.
experience. Some of it can be lab experience like simulation, but real life experience would be required. This is where the challenge for organisations lies. A composite developmental programme will have to be put in place. Training could be the base of this developmental programme. However, some radical solutions like inter-company mentoring or even outplacement in companies in the subsequent stages of evolution will be required. Live online experience makes for strong learning. This would be especially required in organisations that are evolving at a fast pace.
7. CONCLUSION
The job of leadership development in an organisation that is evolving is quite tough. The organisational leadership would find it tough to adjust from one stage to the other stage. Competencies that would be valuable in one stage may turn out to be of little use in subsequent stages. Also the leadership has to develop an appreciation for roles and competencies required in each subsequent stage and show flexibility of approach. However, behaviours tend to get ingrained due to their success in any one stage. The leadership then has to unlearn for the next evolutionary stage and relearn new ways of doing things. Training in itself may not be enough to learn new competencies or change behaviours. At best training can inculcate an appreciation for changing requirement as far as leadership is concerned. It can provide a tool kit, however usage of the tool kit is not guaranteed. A change in behaviours and learning of new competencies would require online
The approach to leadership development through organisational lifecycles has led to important insights. First, leadership roles have been synthesised for each of the evolutionary stages based on organisational priorities. This is an important step for leadership development in fast evolving organisations. Leadership roles provide a basis for developing a leadership development plan that is focussed. Second and the most important contribution of this paper is in the area of identifying competencies that go with each of the leadership roles and organisational priorities in each of the evolutionary stages. Competencies can be developed through a variety of training programmes and online job experiences. This makes them an important factor for leadership development in an organisation. There is an increasing focus
228
on competency based approach to jobs and roles in organisations (Alldredge and Nilan, 2000; Nybo, 2004). The identification of both strategic\ transformational and operational competencies extends the application to leadership in fast evolving organisations. Third, the integration of the insights from the OLC, leadership roles and competencies with the actual process of leadership development leads to interesting conclusions. There is an appreciation that leadership development in an evolving organisation is a tough task because behaviours have been ingrained through feedback in people. This happens because of positive feedback from success attributed to certain competencies and behaviours. These have to be unlearned before fresh learning can take place. Fourth, a composite development programme needs to be put in place to develop leadership along with the evolutionary phases. Dependence on just training might not be enough. A mix of training initiatives that include simulation and management games that give an appreciation of evolutionary phases along with developmental initiatives that achieve strong online experience has to be put in place. The challenge is to develop leadership through providing them with experiences that can help them develop competencies to play the roles required in the next stage of development. Overall, in this paper, an integration of diverse fields of literature is achieved, thus providing important insights for
organisations. The implications of these insights are brought out with recommendations for organisations in the area of leadership development.
REFERENCES
Adizes, Ichak., (1979), Organizational passages: Diagnosing and treating life cycle problems of organizations. Organizational Dynamics. Summer, 3-27 Alldredge, M., and K. Nilan., (2000), 3Ms Leadership Competency Model: An Internally Developed Solution. Human Resource Management. 39(2 & 3), 133-145. Bueno, C. M., & Tubbs, S. L., (2004), Identifying global leadership competencies: An exploratory study. The Journal of American Academy of Business, September: 80-88. Cameron Kim S. and Whetten David A., (1981), Perceptions of organizational effectiveness over organizational life cycles. Administrative Science Quarterly. 26, 525544. Chandler, Alfred D., (1962), Strategy and Structure: Chapters in the history of Industrial Enterprise. Cambridge: MIT Press Conger, Jay., (2004), Developing leadership capability: Whats inside the black box? Academy of Management Executive. 18(3), 136-139. Day, David V., (2001), Leadership Development: A review in context. Leadership Quarterly 11(4), 581-613. Dixon, N. M., (1993), Developing managers for the learning organization. Human Resource Management Review. 3, 243-254. Fiedler, F. E., (1972), The effects of leadership training and experience: A contingency
229
model interpretation. Administrative Science Quarterly. 453-470. Fiedler, Fred E. and Macaulay, Jennifer L., (1998), The leadership situation: A missing factor in selecting and training managers. Human Resource Management Review. 8(4), 335-350. Fulmer, R. M., and Wagner, S., (1999), Leadership: Lessons from the best. Training and Development, March: 29-32. Fulmer, Robert M., (1997), The evolving paradigm of leadership development. Organizational Dynamics. Spring, 59-73. Gailbraith, Jay., (1982), The stages of growth. Journal of Business Strategy. Gardner, Howard., (1999), Intelligence Reframed: multiple intelligences for the 21st century. New York: Basic Books. Greiner Larry E., (1972), Evolution and revolution as organizations grow. Harvard Business Review. July-August, 37-47 Kerr Steven., (2004), Introduction: Preparing people to lead. Academy of Management Executive. 18(2), 118-120. Kerr, Steven and Landauer, Steffen., (2004), Using stretch goals to promote organizational effectiveness and personal growth: General Electric and Goldman Sachs. Academy of Management Executive. 18(4), 134-139. Kets de Vries, Manfred F. R., (2005), Leadership group coaching in action: The Zen of creating high performance teams. Academy of Management Executive. 12(1), 62-78. Kotter John P., (1990), What leaders really do? Harvard Business Review. December, 85-92 Krejci, J. W., & Malin, Shelly, (1997), Impact of leadership development on competencies. Nursing Economics, 15(5): 235-242.
Kroeck, K.G., Lowe, K.B. and Brown, K., (2004), The Assessment of Leadership in The Nature of Leadership (Eds: J. Antonakis, A.T. Cianciolo and R. Sternberg ). Thousand Oaks: Sage Publishing. Lado, A., and Wilson, M., (1994), Human Resource Systems And Sustained Competitive Advantage: A Competency Based Perspective. Academy of Management Review. 19(4), 708-709. McCall Jr., Morgan W., (2004), Leadership Development through experience. Academy of management Executive. 18(3), 127-130. Miller, Danny and Friesen, Peter H., (1984), A longitudinal study of the corporate life cycle. Management Science. 30(10), 1161-1183. Mintzberg, Henry., (1973), Strategy making in three modes. California Management Review. Mintzberg, Henry., (1984), Power and Organization Life Cycles. Academy of Management Review. 9(2), 207-224. Moqvist, Louise., (2002), The competency dimension of leadership: A study of top managers in Swedish public administration. Competency management in the public sector (eds: Sylvia Horton, Annie Hondeghem and David Farnham). Amsterdam: IOS Press. Nyb, G., (2004), Personnel development for dissolving jobs: towards a competency-based approach? International Journal of Human Resource Management. 15(3), 549564. Pernick, R., (2002), Creating a leadership development program: Nine essential tasks. Public Management, August: 9-17. Quinn, Robert E. and Cameron, Kim., (1983), Organizational life cycles and shifting criteria of effectiveness: Some preliminary evidence. Management Science. 29(1), 33-53.
230
Scholtes, Peter R., (1999), The new competencies of leadership. Total quality management. 10(4), 5704-5710. Smith, Ken G., Terence, Mitchell R. and Summer, Charles E., (1985), Top level management priorities in different stages of organization life cycle. Academy of Management Journal. 28(4), 799-820. Smither, James W., London, Manuel and Reilly, Richard, R., (2005), Does performance
improve following multisource feedback? Personnel Psychology. 58, 33-66. Yukl, Gary., (2002), Leadership in Organizations. Delhi: Pearson Education. Zaccaro, S. J., (2002), Organizational leadership and social intelligence. In Riggio, R. E., Murphy, S. E. & Pirozzolo, F. J. (Eds.) Multiple intelligences and leadership. Mahwah, Lawrence Erlbaum Associates.

Television Industry

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Television Industry

Uploaded by

Copyright:

Available Formats

Indian Television Industry: A Strategic Analysis*

INTRODUCTION AND OVERVIEW

Vilakshan, XIMB Journal of Management

Gupta, Indian Television Industry...

Vilakshan, XIMB Journal of Management

Gupta, Indian Television Industry...

Vilakshan, XIMB Journal of Management

Gupta, Indian Television Industry...

Vilakshan, XIMB Journal of Management

Gupta, Indian Television Industry...

Vilakshan, XIMB Journal of Management

Gupta, Indian Television Industry...

Vilakshan, XIMB Journal of Management

INDUSTR Y ANALYSIS- GOVERNMENT AND REGULATORY INTERVENTIONS

Gupta, Indian Television Industry...

INDUSTRY ANALYSIS- TECHNOLOGICAL CHANGES

Vilakshan, XIMB Journal of Management

Gupta, Indian Television Industry...

Vilakshan, XIMB Journal of Management

Gupta, Indian Television Industry...

Vilakshan, XIMB Journal of Management

EXHIBIT 1 Consumer Electronics Industry Performance

Chart 2: PAT/Net Worth

Chart 3: Operating Profit/Net Sales

Chart 4: Net Sales/Total Assets

1.22 1.09 1.13

2000-01 2001-02 2002-03 Years

Gupta, Indian Television Industry...

EXHIBIT 2 Industry Analysis Model

EXHIBIT 3 Realisation and Sales Value Market Share (2005-06)

EXHIBIT 4 CTV Industry Demand over the years

Vilakshan, XIMB Journal of Management

EXHIBIT 5 Penetration of CTVs (per 1000 households)

Composite-110 Composite 225

EXHIBIT 6 Cost Structure of Television Industry

(Source: CMIE Industry: Financial Aggregates & Ratios May 2004)

EXHIBIT 7 Dealer Efficiency of key CTV Players (2004-05)

EXHIBIT 8 Size Variation

Gupta, Indian Television Industry...

EXHIBIT 9 Player-wise focus on Price

EXHIBIT 10 CTVs: Price vs Demand

EXHIBIT 11 Trends in Market Shares: 1997-2001

Source: CMIE, Industry: Market Size & Shares, August 2003)

EXHIBIT 12 Sales Value for Television including Spares & Kits

Vilakshan, XIMB Journal of Management

EXHIBIT 13 Market Segmentation

Threat of Substitutes Buyer Power Supplier Power

EXHIBIT 15 CTV Industry Composition- Conventional CTVs v/s Flat CTVs

Organisational Life Cycle: Leadership Roles and Competencies*

Vilakshan, XIMB Journal of Management

Parashar, Organisational Life ...

Vilakshan, XIMB Journal of Management

ORGANISATIONAL LIFE CYCLE: ORGANISATIONAL PRIORITIES & LEADERSHIP ROLES

Parashar, Organisational Life ...

Vilakshan, XIMB Journal of Management

Parashar, Organisational Life ...

Table 1: Leadership roles and competencies

EnterpreneurAdministrator (Adizes, 1979); Coach(Gailbraith, 1982); Planner (Mintzberg, 1973)

AdministratorIntegrator (Adizes, 1979), Strategist\ manager (Gailbraith, 1982)

Change agent; strategist

Vilakshan, XIMB Journal of Management

Synthesised Leadership Role Leadership Competencies Strategic\ Transformational

Risk taking, opportunity spotting